A Second Circuit ruling blocking
The US Court of Appeals for the Second Circuit upheld a Department of Health and Human Services advisory opinion that Pfizer’s proposal would violate the Anti-Kickback Statute and thwart Congress’s intent to use copays to control Medicare costs.
The court win for HHS, combined with a broad Department of Justice enforcement push against such drugmaker subsidies, creates a tough regulatory barrier against pharmaceutical companies that seek to partially cover the costs of a medication for patients in federal health-care programs.
“I don’t see a way forward for these programs in federal programs, or a carve out that has been proposed that the HHS is accepting,” said Allison Smith Newsome, an associate with Taft Stettinius & Hollister LLP in Cleveland. “They aren’t going to accept Pfizer waiving the $13,000 copay and then the government having to pay over $200,000.”
The regulatory activity is playing out as lawmakers debate a variety of proposals aimed at taming drug prices, including a provision in a budget reconciliation bill (H.R. 5376) that would allow Medicare to negotiate drug prices and cap seniors’ out-of-pocket costs at $2,000 a year.
The DOJ’s enforcement drive against copay assistance programs and collaborations with putatively independent charities has netted more than $1 billion in settlements since 2017.
A key issue in the cases is whether a charity providing copay assistance to patients is independent of the control of the drug companies, DOJ officials have said. The government argues that the programs insulate drugmakers from pressure to lower prices, and give them a competitive advantage over competitors that don’t cover patients’ copay costs.
Recent settlements with drug companies in copay fraud cases include a $360 million settlement with Actelion Pharmaceuticals US Inc. in 2018, a $100 million settlement in 2019 with Astellas Pharma US Inc., and a $97 million settlement with Gilead Sciences Inc. in 2020.
Pfizer has been caught in the enforcement sweep. The company agreed in 2018 to pay $23.85 million to resolve allegations it used a foundation to pay the copays of patients using its drugs.
Pfizer said its proposal to the HHS would allow more people to get treatment for transthyretin amyloid cardiomyopathy (ATTR-CM), which leads to a progressive loss of heart function and death. But the Second Circuit held this week that the proposal qualified as a prohibited inducement under the Anti-Kickback Statute, which bars efforts to reward business referrals in federal health programs.
The annual cost of Pfizer’s treatment for the disease, tafamidis, is $225,000. Annual copays for Medicare beneficiaries total $13,000.
The ruling doesn’t affect similar programs for patients covered by private insurance, Newsome said. The decision also doesn’t restrict the ability of drugmakers to make donations to charity programs that operate independently of the company.
But that option is unlikely to be attractive to drugmakers, said Mary Inman, a partner with Constantine Cannon in San Francisco, who represents whistleblowers in False Claims Act cases.
“The reason the pharma companies have been interested in these programs is that they give them a market advantage,” Inman said. “Take that away—take away their ability to make sure their donations help the uptake of their products—and they lose the incentive.”
The case is Pfizer Inc. v. Dept. of Health & Human Servs., 2d Cir., No. 21-2764, Opinion 7/25/22.