United States Files False Claims Act Complaint Against Drug Maker Teva Pharmaceuticals

BOSTON – The U.S. Attorney’s Office has filed a complaint under the False Claims Act against Teva Pharmaceuticals USA, Inc., and Teva Neuroscience, Inc., the maker of Copaxone, a drug for multiple sclerosis (MS).

The government alleges that Teva conspired with a specialty pharmacy, Advanced Care Scripts, Inc. (ACS), and two purportedly independent foundations, Chronic Disease Fund (CDF) and The Assistance Fund (TAF), to violate the Anti-Kickback Statute and False Claims Act by using the foundations as conduits to subsidize Medicare co-pays for Copaxone, all while steadily raising Copaxone’s price.

When a Medicare beneficiary obtains a prescription drug covered by Medicare Part B or Part D, the beneficiary may be required to make a partial payment, which may take the form of a co-payment, co-insurance, or deductible (collectively “co-pays”). These co-pay obligations may be substantial for expensive medications. Congress included co-pay requirements in these programs, in part, to encourage market forces to serve as a check on health care costs, including the prices that pharmaceutical manufacturers can demand for their drugs. The Anti-Kickback Statute prohibits pharmaceutical companies from offering or paying, directly or indirectly, any remuneration – which includes money or any other thing of value – to induce Medicare patients to purchase the companies’ drugs.

“The government’s complaint today alleges that Teva used ostensibly independent charitable foundations as vehicles to pay hundreds of millions of dollars in kickbacks, all while raising the price of its drug, Copaxone, at a rate over 19 times the rate of inflation,” said Andrew E. Lelling, United States Attorney for the District of Massachusetts. “Teva’s alleged kickbacks undermined the Medicare program’s co-pay structure, which Congress created as a safeguard against inflated drug prices.”

“The Department is committed to stopping pharmaceutical companies from using foundations as conduits to funnel kickbacks to Medicare patients, and to prop up excessive drug costs at the expense of the American taxpayers,” said Acting Assistant Attorney General Ethan P. Davis of the Department of Justice’s Civil Division. “We will continue to root out these unlawful kickback arrangements that undermine the integrity of federal health care programs.”

“Drug manufacturers that offer kickbacks in order to boost profits – as alleged in this case – drive up health care costs for everyone and undermine the public’s trust in the health care system,” said Special Agent in Charge Phillip M. Coyne of the U.S. Department of Health and Human Services, Office of Inspector General. “Our agency, working closely with our law enforcement partners, will continue to thoroughly investigate such corrosive schemes.”

“As alleged, Teva gamed Medicare and tried to deflect attention away from a 329% increase in the cost of its drug by masking kickbacks as charitable contributions,” said Joseph R. Bonavolonta, Special Agent in Charge of the FBI Boston Division. “This case demonstrates the FBI’s ongoing commitment to protect our government programs and the American taxpayers who contribute to them from being victimized by corporations who allegedly pay kickbacks to pad their bottom line.”

The government alleges that, from 2006 through at least 2015, Teva paid the two foundations well over $300 million, not as charity for MS patients generally, but with the intent and understanding that the foundations would use Teva’s money to cover the Medicare co-pays of patients taking Copaxone. During the same period, Teva raised the price of Copaxone from approximately $17,000 per year to over $73,000 per year. Meanwhile, because of Teva’s kickbacks, many Medicare patients (and their doctors) had no reason to consider the drug’s ever-increasing cost.

According to the complaint, Teva effectuated its scheme through ACS, to which Teva referred virtually all Copaxone patients who faced Medicare co-pays for the drug. ACS, in turn, arranged for the patients to obtain Medicare co-pay coverage from the foundations and then reported back to Teva how many Copaxone patients were receiving co-pay coverage from each foundation. At the end of each year, Teva used information from ACS and the foundations to determine how much money each foundation would need to cover the Medicare co-pays of existing Copaxone patients for the following year, and Teva paid each foundation accordingly.

The government further alleges that, after the beginning of a year, when the foundations’ MS funds were often closed to new patients because the foundations had allocated all of their funding to existing patients, ACS would provide periodic reports to Teva on the number of new Copaxone patients awaiting Medicare co-pay assistance. When an ACS report showed a substantial number of Copaxone patients waiting, Teva would multiply the number of waiting patients by the foundation’s average grant amount for Copaxone patients, add the foundation’s administrative fee, and then send a corresponding payment to the foundation. Just before sending the payment, Teva would notify ACS, which then would send a “batch file” of applications for all the waiting Copaxone patients to the foundation so that the foundation would act on those applications as soon as the fund re-opened. In this way, Teva and ACS ensured that Copaxone patients received the vast majority of the co-pay grants the foundations made whenever they re-opened their MS funds with money from Teva.

The government previously entered into settlement agreements with ACS, TAF, and CDF.

U.S. Attorney Lelling, Acting AAG Davis, HHS-OIG SAC Coyne, and FBI Boston SAC Bonavolonta made the announcement today. The matter is being handled by Assistant U.S. Attorneys Gregg Shapiro, Abraham George, and Evan Panich of Lelling’s Affirmative Civil Enforcement Unit and Trial Attorneys Douglas Rosenthal and Nelson Wagner of the Department of Justice’s Civil Division.