June 25, 2020
The Massachusetts U.S. Attorney’s Office announced that it will sue drug manufacturer Regeneron Pharmaceuticals for health care fraud. The False Claims Act complaint alleges that Regeneron paid tens of millions of dollars to induce prescriptions for its drug Eylea. Regeneron’s scheme to use a third-party foundation to hide copay waivers is a growing focus of government prosecutors. Below, we explain what Regeneron did, and why it is illegal.
According to the complaint, the company funneled tens of millions of dollars to a foundation called the Chronic Disease Fund. As a result, the foundation paid the copays for patients of Eylea. Before Regeneron paid these millions, it confirmed that the money would go only to its drugs, and not those of competitors.
Moreover, Regeneron explicitly analyzed the return on investment, or ‘ROI,’ of these alleged donations. Regeneron hired a Xcenda, a division of AmerisourceBergen, to quantify how donations to the foundation would return medicare dollars to Regeneron.
As the slide indicates, Xcenda advised Regeneron to increase the price of Eylea to $1950 per injection. But it that increase required Regeneron to up its foundation funding by 37%. However, even spending more on the foundation, Xcenda advised that the revenue increase would offset the increases foundation payments.
Later, in calculating how much to donate to the foundation, Regeneron financial staff concluded that 2013 donations would result in nearly $200 million in additional sales. They considered this a 465% ROI.
Ordinarily, it is fine for a large pharmaceutical manufacturer to make legitimate donations to a patient assistance foundation. Regeneron’s fraud occurred because the donations were made to increase sales of the drug. As you can see, Regeneron executives precisely calculated the ROI of their alleged donations. The government also alleges they frequently communicated with the foundation to ensure they donated exactly and only the money needed to cover Eylea co-pays.
The government alleges that Regeneron’s conduct violated the anti-kickback statute. Violations of the Anti-Kickback Statute, in turn, cause false claims. We have written an extensive explainer on why copay waiver schemes such as Regeneron’s are illegal.
The Anti-Kickback Statute prohibits medical providers from offering, soliciting, paying, or receiving anything of value in exchange for referrals of Government Health patients. Discounts are a form of kickback under the Anti-Kickback Statute. Therefore, when a provider regularly waives copays in order to make his services seem cheaper to potential customers, he is offering a thing of value and violates the Anti-Kickback Statute.
Moreover, providers and manufacturers often use copay waivers to induce doctors to prescribe their drugs or products instead of cheaper generic competitors. The Anti-Kickback Statute also prohibits offering discounts to induce prescriptions or referrals of your product.
As we noted, the government has been targeting copay waiver schemes that utilize patient assistance foundations.
The government has recently been cracking down on a sophisticated version of this fraud. Large companies help establish independent Patient Assistance Programs. Those charities, in turn, pay co-payments for customers of the company’s product. The government recognizes this as illegal copay waivers and, along with whistleblowers, has obtained millions of dollars in settlements.
Why Copay Waiver Can Be Illegal
Besides Regeneron, other major prosecutions include, Whistleblower Law Collaborative’s case against US WorldMeds LLC. The first successful whistleblower False Claims Act case based on patient assistance fund.
The Regeneron prosecution is a great example of the government’s current focus on chasing down copay waiver fraud involving patient assistance foundations.