The United States Department of Justice (DOJ) recently intervened in a False Claims Act case against Regeneron Pharmaceuticals Inc. Regeneron manufactures and sells Eylea, an anti-vascular endothelial growth factor inhibitor approved to treat neovascular Age-Related Macular Degeneration, among other things. Neovascular Age-Related Macular Degeneration (Wet AMD) is a common, often age-related condition, that impairs a patient’s vision. Eylea is typically administered by physicians in their practice on an outpatient basis, via an injection into the patients’ eyes.
In the complaint, the DOJ alleges that Regeneron fraudulently inflated Medicare reimbursement rates for Eylea by knowingly submitting false average sales price reports to the Centers for Medicare and Medicaid Services (CMS), excluding certain price concessions. The DOJ alleges that Regeneron knowingly failed to report price concessions in the form of credit card processing fees that the company paid to specialty drug distributors, to benefit customers.
In the Complaint, the DOJ notes that Regeneron has paid “hundreds of millions of dollars to subsidize Eylea purchases by reimbursing distributors for credit card processing fees – on the condition that the distributors use these payments to lower the effective price they charged for Eylea to doctors and retina practices using credit cards.” Specifically, the DOJ alleges that from 2012 to 2021, Regeneron’s credit card fee reimbursements for Eylea purchases exceeded $250 million to just one of the distributors.
Regeneron paid these credit card fees so that distributors would accept credit card payments for Eylea while still charging a cash price (often a lower price) so that Regeneron’s customers – often retina and ophthalmic practices – could benefit from credit card rewards for purchases, such as cash back.
Of note, the complaint indicates that Eylea is a “top Medicare expense,” with Medicare Part B paying more than $25 billion for Eylea between 2012 and 2023.
The DOJ is seeking, among other things, treble statutory damages and penalties, a full accounting of revenues (and interest thereon) and costs incurred by Regeneron on Eylea sales to Medicare patients based on the inflated reimbursement rates, and a disgorgement of all profits from Regeneron’s scheme.
“We will not permit pharmaceutical companies to flout price reporting requirements to maintain high drug prices,” said Principal Deputy Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The department is committed to protecting federal health care programs from improper actions by drug companies or others that drive up the cost of those programs at the taxpayers’ expense.”
“The government alleges that Regeneron manipulated Medicare’s drug pricing process, by knowingly failing to report its payment of credit card processing fees as price concessions to its customers,” said Acting U.S. Attorney Joshua S. Levy for the District of Massachusetts. “By doing so, Regeneron greatly inflated the costs of its drug to Medicare over many years and enhanced its revenues. Falsely reported average sales prices cost the Medicare system hundreds of millions of dollars and we will make every effort to prevent such practices.”