Recently, the US Department of Justice (“DOJ”) announced that it has reached an agreement with Patient Services, Inc., (“PSI”), a not-for-profit foundation in Midlothian, Virginia, to resolve alleged False Claims Act (“FCA”) violations involving acting as a conduit and providing kickbacks to Medicare patients by paying patients’ copayments. PSI agreed to pay $3 million to resolve the suit, and to enter into a three-year Integrity Agreement.
The DOJ alleged that PSI coordinated with Insys, Aegerion and Alexion to pay kickbacks to Medicare patients taking drugs manufactured by those companies. The DOJ further alleged that PSI worked with the companies to “design and operate certain funds that funneled money from the companies to patients,” and further that the “schemes minimized the possibility that the companies’ contributions to the funds would go to patients taking competing drugs … and undermined the nature of these contributions as bona fide donations.”
In the alleged scheme with Insys, the DOJ alleged that PSI worked with Insys to create the “Breakthrough Cancer Pain” fund, which was intended to provide copay assistance for Subsys, a sublingual fentanyl formulation. Insys was the only donor to that fund. PSI also allegedly allowed Insys to see the status of each patient it referred to PSI, including whether the patient had received copay assistance. The DOJ further alleged that PSI knew that Insys was referring patients to the fund who did not, in fact, have cancer, “but PSI stated that it would only prevent ‘off-label use … if the Donor wants us to.’”
In the alleged scheme with Aegerion, the DOJ alleged that PSI created a fund for homozygous familial hypercholesterolemia, which can be treated by an Aegerion drug, Juxtapid. Further, the DOJ alleged that Aegerion participated in establishing patient eligibility criteria for copay assistance, and that the fund allowed Aegerion to pay for Medicare patients’ copays to eliminate price sensitivity to physicians and patients.
Finally, in the case of Alexion, the DOJ alleged that PSI created a Complement Mediated Diseases Fund to provide copay assistance to patients with diseases that can be treated by Alexion’s drug Soliris. In addition to copay assistance, the fund also paid other medical expenses for those patients. The DOJ alleged that PSI provided financial assistance from the fund only to patients taking Soliris, and PSI reported to Alexion, confirming which Soliris patients were approved for assistance, as well as details of those payments.
As noted above, as part of the settlement, PSI agreed to a three-year Integrity Agreement with the Department of Health and Human Services Office of Inspector General, requiring PSI to “implement measures designed to ensure that it operates independently and that its arrangement and interactions with pharmaceutical manufacturer donors are compliant with the law.”
Commenting on the settlement, US Attorney Lelling noted “[p]harmaceutical companies cannot use foundations to funnel drug co-payments disguised as routine charitable donations, all to prop up excessive drug prices.”
While patient co-pay charities and patient assistance programs have been scrutinized for some time, it appears that the DOJ is broadening the scope of its attention to include other financial relationships between drug manufacturers and third-party conduits. Pharmaceutical companies should be wary of entering into these relationships without careful compliance review.
Patient Services Inc. also entered into a corporate integrity agreement governing the distribution of charity funds. Which could serve as a model of these charities to compliantly manage their funds.