Jazz, Lund­beck and Alex­ion pay $122M+ to re­solve DoJ claims of us­ing char­i­ties as 'con­duit­s' to stim­u­late use of their drugs

Three drug­mak­ers — Jazz Phar­ma, Lund­beck and Alex­ion — are pay­ing a to­tal $122.6 mil­lion to re­solve al­le­ga­tions that they em­ployed char­i­ta­ble foun­da­tions to help cov­er Medicare out-of-pock­et costs for their own drugs to en­cour­age the use of their own med­i­cines.

An­drew Lelling

The US De­part­ment of Jus­tice has charged the tri­fec­ta as part of a wider probe ac­cus­ing bio­phar­ma com­pa­nies of vi­o­lat­ing the “an­ti-kick­back statute,” which for­bids them from of­fer­ing or pay­ing di­rect­ly or in­di­rect­ly any re­mu­ner­a­tion — in­clud­ing co­pays — to in­duce Medicare or Civil­ian Health and Med­ical Pro­gram (Cham­p­VA) pa­tients to pur­chase the com­pa­ny’s drugs.

The in­ves­ti­ga­tion comes at a time when soar­ing pre­scrip­tion drug prices have sparked pub­lic furor — co­pays, which im­pose a por­tion of the list price of the drug on to the pa­tient, were in­tro­duced by Con­gress to part­ly serve as a check on health care costs. In this case, the trio of com­pa­nies have been al­leged­ly us­ing “in­de­pen­dent” fi­nan­cial as­sis­tance char­i­ties to serve as “con­duits” for the the com­pa­nies to sub­si­dize the co­pays of their own drugs — in ef­fect, il­le­gal­ly pro­mot­ing the use of their treat­ments.

Jazz $JAZZ was ac­cused of im­prop­er­ly en­cour­ag­ing the use of two of its prod­ucts us­ing char­i­ties: its nar­colep­sy drug Xyrem and its painkiller Pri­alt, and has agreed to pay $57 mil­lion to re­solve the gov­ern­ment’s al­le­ga­tions, with­out ad­mit­ting any wrong­do­ing.

  • In 2011, Jazz asked a foun­da­tion to cre­ate a fund that would pay the co­pays of Xyrem Medicare pa­tients and that the foun­da­tion agreed to es­tab­lish a “Nar­colep­sy Fund,” to which Jazz be­came the sole donor, the DoJ al­leged, adding that Jazz made Medicare pa­tients in­el­i­gi­ble for Jazz’s free drug pro­gram and in­stead re­ferred Xyrem Medicare pa­tients to the foun­da­tion. Mean­while, Jazz raised the price of Xyrem by over 150 per­cent from 2011 through the end of the rel­e­vant time pe­ri­od, the DoJ not­ed.
  • Jazz asked the same foun­da­tion to cre­ate a fund os­ten­si­bly to as­sist pa­tients with the co-pays of any se­vere chron­ic pain drugs, but which, in prac­tice, al­most ex­clu­sive­ly paid Pri­alt Medicare co­pays, the DoJ said, adding that short­ly af­ter cre­at­ing the fund, the foun­da­tion al­leged­ly told Jazz that when se­vere chron­ic pain pa­tients seek­ing as­sis­tance with oth­er drugs con­tact­ed the foun­da­tion, it would re­fer them else­where.

Lund­beck was ac­cused of en­gag­ing in a sim­i­lar scheme to in­vig­o­rate sales of its Hunt­ing­ton’s dis­ease drug Xe­nazine, and the Dan­ish drug­mak­er has agreed to fork over $52.6 mil­lion to set­tle the claims.

Lund­beck was the sole donor and made mil­lions in pay­ments to a fund at a foun­da­tion that os­ten­si­bly pro­vid­ed fi­nan­cial sup­port on­ly for pa­tients with Hunt­ing­ton’s dis­ease, but the com­pa­ny re­ferred Xe­nazine pa­tients with oth­er con­di­tions to this foun­da­tion, the DoJ said. In ad­di­tion, Lund­beck does not per­mit Medicare and Cham­p­VA pa­tients to par­tic­i­pate in its free drug pro­gram for Xe­nazine — in­stead, in or­der to in­duce Medicare and Cham­p­VA to pur­chase Xe­nazine, Lund­beck re­ferred fi­nan­cial­ly needy non-Hunt­ing­ton’s Dis­ease Xe­nazine pa­tients to the foun­da­tion, the DoJ al­leged.

Alex­ion $ALXN trig­gered the DoJ’s in­ter­est in re­la­tion to its pricey rare blood dis­or­der drug, Soliris, which costs more than half a mil­lion US dol­lars an­nu­al­ly. The drug­mak­er agreed to pay $13 mil­lion for its al­leged penal­ties.

Alex­ion made do­na­tions to a “Com­ple­ment-Me­di­at­ed Dis­ease” (CMD) fund at a foun­da­tion to pay the Medicare co­pay oblig­a­tions of pa­tients tak­ing Soliris and to in­duce those pa­tients’ pur­chas­es of Soliris know­ing that its price was a bar­ri­er, the DoJ claimed, adding that as the sole donor to the fund, Alex­ion al­leged­ly un­der­stood that the foun­da­tion’s pro­vi­sion of fi­nan­cial as­sis­tance was con­tin­gent on the pa­tient tak­ing Soliris. In ad­di­tion, Alex­ion had a gen­er­al prac­tice of not per­mit­ting Medicare pa­tients to par­tic­i­pate in its free drug pro­gram, in­stead Alex­ion re­ferred Medicare pa­tients pre­scribed Soliris to the foun­da­tion via a re­fer­ral por­tal, the DoJ al­leged.

Over­all, Jazz and Lund­beck were made to al­so sign five-year cor­po­rate in­tegri­ty agree­ments as part of their set­tle­ments, re­quir­ing them to im­ple­ment mea­sures and con­trols to pro­mote in­de­pen­dence from any pa­tient as­sis­tance pro­grams to which they do­nate. Alex­ion did not suf­fer the same fate, since it has al­ready made “sweep­ing and fun­da­men­tal or­ga­ni­za­tion­al changes” to its or­ga­ni­za­tion­al make­up, in­clud­ing hir­ing a new eight-mem­ber ex­ec­u­tive lead­er­ship team and chang­ing half of the mem­bers of its board, the DoJ said.

“This mis­con­duct is wide­spread, and en­force­ment will con­tin­ue un­til phar­ma­ceu­ti­cal com­pa­nies stop cir­cum­vent­ing the an­ti-kick­back laws to ar­ti­fi­cial­ly bol­ster high drug prices, all at the ex­pense of Amer­i­can tax­pay­ers,” said US At­tor­ney An­drew Lelling in a state­ment.

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