DOJ Announces Settlements with Three Pharma Companies Related to Allegations of Co-Pay Assistance Kickbacks Through Conduit Foundations

On April 4, 2019, the Department of Justice (DOJ) announced settlements with three pharmaceutical companies, Jazz Pharmaceuticals plc (Jazz), Lundbeck LLC (Lundbeck), and Alexion Pharmaceuticals (Alexion), related to allegations that the companies made inappropriate payments to patient assistance programs (PAPs) administered by third parties that the companies used as conduits. PAPs provide financial assistance, often in the form of assistance with insurance co-payments, to patients with limited financial means. PAPs may be administered by foundations established by pharmaceutical companies or through independent charitable organizations.

The federal anti-kickback statute prohibits a pharmaceutical company from offering or paying, directly or indirectly, any remuneration, including money or any other thing of value, to induce government healthcare program beneficiaries to select the company’s products. Routine waivers or subsidies of government patients’ co-payments implicate and may violate the anti-kickback statute. According to DOJ’s announcement, Jazz, Lundbeck, and Alexion violated the anti-kickback statute by indirectly subsidizing patient co-payments through inappropriate payments made to third-party PAPs.

The Government’s Allegations

The government alleged that Jazz, among other things, asked a foundation to create a Narcolepsy fund, which was solely funded by Jazz, so that the foundation would pay the co-payments for its product, Xyrem. The government alleged that Jazz knew that the fund almost exclusively provided co-payment assistance for Xyrem, even though it accounted for only a small portion of the narcolepsy market. The foundation also required patients that used products other than Xyrem to obtain denial letters from other assistance programs before receiving help from the fund, while Jazz made Medicare patients ineligible for its free drug program and referred them to the foundation. The government also alleged that Jazz asked the foundation to create another, separate fund to assist patients with co-payments for severe chronic pain drugs; in practice, the fund exclusively paid the Medicare co-payments for Jazz’s pain product, Prialt. According to the government’s allegations, the foundation told Jazz that it referred patients elsewhere if they sought assistance with other drugs. The government also alleged that Jazz was aware that the fund was not on the foundation’s website, which minimized the number of patients seeking assistance for products other than Prialt.

The government alleged that Lundbeck donated to a third-party foundation fund that exclusively provided financial support to patients with Huntington’s Disease. Until 2015, Lundbeck sold the only drug approved to treat certain symptoms associated with Huntington’s, Xenazine. In addition, the government alleged that, even though the foundation provided assistance almost exclusively for Xenazine, Lundbeck referred Xenazine patients with other conditions to the foundation, which then paid Xenazine co-payments for unapproved uses. The government also alleged that Lundbeck’s policy was to not allow Medicare or ChampVA patients to participate in its free drug program for Xenazine, even if the patient met the financially needy criteria, and, instead, referred these patients to the foundation to cover the cost of the drug.

Finally, the government alleged that Alexion was the sole donor to a third-party fund at a foundation which provided co-payment assistance for patients taking Alexion’s product, Soliris, and induced those patients to purchase the product. The price for the product (around $500,000 per year) was allegedly known by Alexion to deter patient purchases. Therefore, Alexion requested that the foundation create a fund to provide financial assistance to Soliris patients. The foundation and Alexion allegedly discussed the coverage, including Alexion’s wish that the fund not cover a patient with an order for anything other than Soliris therapy. In addition, the government alleged that Alexion had a general practice of not allowing Medicare patients to participate in its free drug program, which was available to other financially needy patients, and that Alexion funneled those patients to the foundation through the foundation’s “referral portal” software. The government alleged that the portal was able to report information to Alexion to confirm Soliris patients who were approved for financial assistance from the foundation and detailed the foundation’s payments to them.

To resolve these allegations, the companies agreed to pay a total of $122.6 million. In addition, Jazz and Lundbeck each entered five-year corporate integrity agreements (CIAs) with the Office of Inspector General (OIG). According to the announcement, OIG decided not to require a CIA with Alexion because it put into place “sweeping and fundamental organizational changes” after the alleged misconduct, including hiring a new executive leadership team, changing half of the members of the Board of Directors, and relocating its corporate headquarters, which resulted in a 40% new employee staff.

For questions about the settlements or co-payment assistance activities in general, please contact Jennifer Burgar.