DOJ Hits Three Companies with FCA Settlements for Co-Pay Assistance Kickbacks – Two Companies enter CIA’s

On April 4, 2019, the Department of Justice announced settlements with three different pharmaceutical companies over allegations of paying kickbacks through co-pay assistance foundations. The companies, Jazz Pharmaceuticals plc (Jazz), Lundbeck LLC (Lundbeck), and Alexion Pharmaceuticals (Alexion), agreed to pay a total of $122.6 million to resolve allegations that they violated the False Claims Act (FCA) by illegally paying the Medicare or Civilian Health and Medical Program (ChampVA) copays for their own products through “independent foundations” that merely functioned as conduits.

The article continues, outlining each settlement, including the alleged actions taken by the companies, and the outcome of each settlement, including future responsibilities of the companies.

Jazz

Xyrem

In the settlement involving Jazz, the government alleged that in 2011, the company asked a foundation to create a fund that would pay the copays of a drug it manufactures for narcolepsy, Xyrem, for Medicare patients. The foundation agreed to establish a “Narcolepsy Fund,” to which Jazz was the sole donor. The government further alleges that Jazz knew that despite Xyrem accounting for a small share of the overall narcolepsy drug market, the fund almost exclusively used the company’s donations to pay copays for Xyrem, and that it would only help non-Xyrem patients taking competing products if they obtained a denial letter from another assistance plan.

The government further alleged that, in at the same time this fund was established, Jazz made Medicare patients ineligible for Jazz’s free drug program and instead referred Xyrem Medicare patients to the foundation. This move allowed Jazz to generate revenue from Medicare and induce purchases of the drug, rather than continuing to provide these patients with free drugs. To further increase their profits, Jazz also raised the price of Xyrem by over 150 percent from 2011 through the end of the relevant time period.

Prialt

Jazz also sold Prialt, an injectable medication for severe chronic pain. The government alleged that Jazz asked the same foundation that established the “Narcolepsy Fund” to also create a fund to assist patients with the co-pays of any severe chronic pain drugs. However, in practice, the chronic pain fund almost exclusively paid Prialt Medicare copays. 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. The government alleged that Jazz was also aware that the chronic pain fund did not appear on the foundation’s website, which helped to minimize the number of non-Prialt patients who sought assistance from the fund.

Resolution

For its alleged transgressions as laid out above, Jazz has agreed to pay $57 million and has agreed to enter into a five-year corporate integrity agreement (CIA) with OIG. The CIA requires that Jazz implement controls and monitoring to promote independence from patient assistance programs to which the company donates. Jazz also agreed to implement a risk assessment program and obtain compliance-related certifications from company executives and Board members.

Lundbeck

Xenazine

Lundbeck is the manufacturer of Xenazine, the only previously-approved drug to treat chorea associated with Huntington’s Disease until a generic version came on the market in 2015. In this case, the government alleges that Lundbeck made millions in donations, and was the sole donor, to a fund at a foundation that was supposed to only provide financial support for patients with Huntington’s Disease. However, Lundbeck allegedly referred Xenazine patients with many conditions other than Huntington’s to this foundation, which then paid the Xenazine copays for these unapproved uses from its Huntington’s Disease fund.

The government further alleged that, in June 2014, after the foundation determined that its Huntington’s Disease fund would no longer pay the copays of patients taking Xenazine for non-Huntington’s disease uses, Lundbeck agreed to repurpose some of its prior donations to the Huntington’s Disease fund to a “general fund” at the foundation for the purpose of paying these patients’ Xenazine copays. Lundbeck then made subsequent “unrestricted” payments to the foundation with the understanding that the foundation would use these payments to pay Xenazine copays for these patients.

At the same time, Lundbeck had a policy of not permitting Medicare or ChampVA patients to participate in its free drug program for Xenazine. Instead, in an attempt to to induce purchases of Xenazine and generate revenue from Medicare and ChampVA, Lundbeck allegedly referred financially needy non-Huntington’s Disease Xenazine patients to the foundation, which resulted in claims to Medicare and ChampVA to cover the cost of the drug.

Resolution

Lundbeck has agreed to pay $52.6 million to resolve the government’s allegations, and has entered into a CIA, similar to the Jazz resolution. Lundbeck has also agreed to implement risk assessment programs and obtain compliance-related certifications from company executives and Board members.

Alexion

Soliris

Alexion is the company behind Soliris, a drug indicated for certain uses to treat patients with paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS) during the time period in question. Because of the list price and indicated dosing recommendation, the cost of Soliris can be roughly $500,000 annually. According to the government, Alexion made donations to a “Complement-Mediated Disease” (CMD) fund at a foundation to pay the Medicare copay obligations of patients taking Soliris to induce those patients’ purchases of Soliris. The government alleged that Alexion approached the foundation in January 2010 to ask that it create a fund to provide financial assistance to Soliris patients, including paying patients’ Soliris Medicare copays and other medical expenses. Over the next several months, Alexion and the foundation allegedly discussed the coverage parameters for the fund, including Alexion’s desire that the foundation “not support a patient with any of these [CMD] diagnoses for other reasons tha[n] Soliris therapy.” Alexion allegedly noted internally that it needed to be diligent in letting the foundation know if a patient had stopped taking Soliris so that Alexion’s donations would not be used on patients who were not starting or maintaining Soliris therapy.

The government also alleged that similar to Lundbeck and its coverage of Xenazine, Alexion had a general practice of not permitting Medicare patients to participate in its free drug program, even if those Medicare patients could not afford their copays for Soliris. Instead, Alexion allegedly referred Medicare patients prescribed Soliris to the foundation, through the foundation’s “referral portal” software. The “referral portal” then allegedly reported information back to Alexion confirming those Soliris patients who were approved for copay or other financial assistance from the foundation and detailed the foundation’s payments to them. This process resulted in claims to Medicare to cover the cost of Soliris.

Resolution

Alexion has agreed to pay $13 million to resolve the government’s allegations. Unlike the other two companies, Alexion did not have to enter into a CIA because “it made sweeping and fundamental organizational changes following the bad conduct,” including firing a host of c-suite executives and half of the members of its board of directors.