Two big drug companies, Astellas Pharma US and Amgen Inc., have agreed to pay almost $125 million between them to settle claims brought under the Federal False Claims Act alleging they violated the federal Anti-Kickback Statute by covering patients’ prescription co-pays in order to induce doctors to prescribe their drugs to patients. This is welcome news to all taxpayers.

Most of us are familiar with how medical co-pays work. Our health insurance provider, whether an employer or the state or a federal agency like Medicare, usually requires patients to pay a portion of the cost of doctor visits and any medicine our physicians might prescribe to us. Congress included co-pay requirements in the Medicare system to keep healthcare costs down, to deter people from seeking unnecessary medical care and to prevent drug companies from overcharging for their drugs.

To help offset the costs of co-pays for lower income patients, charitable co-pay foundations were established to accept donations intended to help cover co-pay costs for those who cannot afford them. While drug companies are allowed to make genuine donations to co-pay foundations, they are prohibited from donating money for the purpose of inducing Medicare and/or Medicaid patients to purchase their drugs.

How it Works

Drug companies aren’t crazy about the Medicare and/or Medicaid limits on payments to charitable foundations, as it cuts into the profits for their high-priced, brand-name drugs. To counter the loss in revenue, some drug makers have illegally funneled money to charitable co-pay foundations to cover the cost of co-pays for their expensive, brand-name drugs. While drug companies ostensibly make these appear to be charitable gifts, the real impact is that patients are prescribed pricey, brand name medications often instead of lower-cost generic drugs, which would have worked just as well. This increases government spending, raises overall insurance premiums, and results in higher health care costs for taxpayers.

What They Did

The federal Anti-Kickback Statute, passed by Congress in 1972, prohibits a drug company from covering the cost of co-pays for the purpose of inducing Medicare or Medicaid patients to purchase that company’s drugs. Yet Astellas and Amgen are alleged to have done just that, by conspiring with co-pay foundations to funnel funds almost exclusively to patients taking Astellas or Amgen drugs. According to United States Attorney Andrew E. Lelling, that means the drug companies’ payments to the foundations were not true “donations”, but kickbacks aimed at undermining the structure of the Medicare program and illegally subsidizing the high costs of the companies’ drugs at the expense of American taxpayers.

Astellas sells an androgen receptor inhibitor (ARI) used to treat certain prostate cancers. No other drugs on the market to treat these particular cancers are ARIs. By enticing two different co-pay foundations to set up funds to cover patients taking ARIs but not to cover co-pays for other prostate cancer drugs, Astellas effectively channeled all the money it “donated” at both foundations to patients who would be taking their costly prostate medication. Astellas also promoted the existence of the funds to doctors as an advantage over other prostate cancer drugs in order to persuade medical providers to prescribe its drug over others.

Amgen makes a drug used to treat a certain thyroid disorder. Amgen allegedly enticed a co-pay foundation to create parameters for a fund that would only cover the costs of its drug. “Donations” that Amgen made to the fund far exceeded the costs of providing its drug for free to all indigent patients and Medicare beneficiaries who needed it, resulting in a substantial increase in the number of claims submitted to Medicare for that particular drug.

Hitting Back Hard

As the Federal Bureau of Investigation and Department of Justice were closing in, Astellas and Amgen chose to cut their potential losses. Not only did the companies agree to pay fines totaling nearly $125 million to resolve allegations of engaging in kickback schemes, they each had to enter into five-year corporate integrity agreements with the Office of the Inspector General of the Department of Health and Human Service (OIG) as part of their respective settlements. The corporate integrity agreements require the companies to undergo monitoring of any patient assistance programs to which they donate. Joseph R. Bonavolonta, Special Agent in Charge of FBI’s Boston Division, where the drug makers were sued, said in a statement that “the FBI will aggressively go after drug companies that look to bolster their drug prices by paying illegal kickbacks — whether directly or indirectly — to undermine taxpayer funded healthcare programs, including Medicare.”

To date, the Department of Justice has collected more than $840 million from eight drug companies (United Therapeutics, Pfizer, Actelion, Jazz, Lundbeck, Alexion, Astellas, and Amgen) that allegedly used third-party foundations as kickback vehicles. The U.S. Attorney’s Office for the District of Massachusetts initiated each of these investigations.

Take Action

If you are aware of a drug company, co-pay foundation or other patient assistance program (PAP) that may be potentially defrauding public health insurance programs such as Medicare or Medicaid, you may qualify to serve as a whistleblower. The Federal False Claims Act protects whistleblowers from any type of retaliation for their whistleblowing. Whistleblower cases are filed under seal and remain secret until they are resolved. It is important for medical professionals at every level to be on the lookout for irregularities and fraud, as their first-hand knowledge is what makes a case viable, resulting in critical savings of taxpayer money and patient lives. If allegations you bring to light are successfully prosecuted by the federal government, you may be entitled to a monetary reward. Please contact the lawyers at Baron & Budd or call us at (866) 401-5971 if you would like more information.