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Pfizer Lawsuit Tests Crackdown on Drugmakers Picking Up Copays

Feb. 24, 2021, 10:46 AM

A Pfizer Inc. challenge to an enforcement push against drug company and charity collaborations is testing the bounds of the government’s crackdown against illegal kickbacks and showcases the complexity of helping patients pay for high-cost medications.

Justice Department allegations that such arrangements are unlawful have netted the government more than $1 billion in settlements since 2017. Federal enforcers see them as attempts to defeat the cost-control function of Medicare’s copay mechanisms under the guise of charitable giving, and to gain an advantage over competitors’ drugs.

But a key issue in most enforcement actions is whether a charity providing copay assistance to patients is independent of the control of the drug companies, DOJ officials told Bloomberg Law on background.

Pfizer is asking a federal court in New York to approve its proposals to provide charitable assistance—around $13,000 per year—for some Medicare beneficiaries with a rare heart condition who could benefit from tafamidis, a Pfizer drug with a list price of $225,000 per year. Pfizer markets the drug under the names Vyndaqel and Vyndamax.

Red flags for HHS and DOJ enforcers include attempts by drug companies to ensure that funds donated to a foundation are used for the donating company’s drugs only, the officials said. Such an arrangement is at the heart of Pfizer’s proposals.

The Department of Health and Human Services Office of Inspector General said Pfizer’s proposals would likely violate the federal anti-kickback statute and could cost Medicare as much as $32 billion per year if all eligible patients were treated, almost 10% of Medicare’s annual spending on prescription drugs. The plan also would improperly insulate Pfizer from market pressure to reduce the cost of the drug, the HHS said in court filings.

“The key thing here is intent,” said Mary Inman, a partner with Constantine Cannon LLC in London, who represents whistleblowers in False Claims Act cases.

“If you have a charitable foundation, then you’ve got to give copay waivers to everybody for all drugs, not just for your drugs,” Inman said. “And it isn’t charity when it’s a form of selective charity that lines your pockets. And that’s the pushback that the government can and should give here.”

Enforcement

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, too, 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 current proposals would allow more people to get treatment for transthyretin amyloid cardiomyopathy (ATTR-CM), which leads to a progressive loss of heart function and death.

The drugmaker took the matter to court after the HHS OIG rejected two versions of its proposal to provide charitable assistance to patients who didn’t qualify for Medicare’s low-income subsidies but didn’t have the resources to cover the coinsurance requirements under Medicare Part D, which pays for prescription drugs in retail pharmacies.

Pfizer’s Proposals

Under one of the proposals it submitted to the HHS for review, Pfizer would directly pay the copays and coinsurance costs for tafamidis of Medicare beneficiaries earning between 500 and 800% of the federal poverty level. In the other, it would cover the same costs through an independent charity.

Pfizer provides the drug free to patients earning less than 500% of the poverty level, it said in court filings.

Pfizer said there’s an important difference between its proposals and charitable-giving arrangements that have previously drawn enforcement scrutiny: Tafimidis is the only FDA-approved drug for ATTR-CM. As a result, there is no question of patients being steered to tafamidis rather than a competitor’s drug.

The plans also wouldn’t provide any financial incentive to physicians to prescribe or favor tafamidis, the drugmaker said.

But the HHS rejected Pfizer’s proposals, saying the plans would still have the effect of inducing patients to buy tafamidis who wouldn’t otherwise do so, and would defeat Medicare’s mechanisms aimed at forcing drug companies to price their drugs reasonably.

Pfizer’s proposals also would lock patients into its drugs for ATTR-CM, and would make it more difficult for a competitor drug to emerge, the HHS said.

First Amendment

Pfizer claims in its lawsuit that the HHS-OIG’s enforcement approach violates its First Amendment right to communicate with charities about its preferred charitable goals.

That claim, if accepted by the court, would upend the HHS’s entire enforcement initiative, said Max Voldman, an associate with Constantine Cannon.

“Their argument appears to be you as a drug company can give to a charity how you want, when you want, to whom you want, as a First Amendment right, and that would make all of these cases fall apart,” he said.

But Inman said Pfizer is unlikely to get much of a hearing from a court on a First Amendment claim.

“Certainly everyone has a right to give to a charity of their choice, or set up a charity of their choice,” she said. “But when you are in the business of supplying pharmaceuticals, and you’ve set up a charity that directs patients to your drugs only, that’s not a free speech issue anymore. I just don’t think that argument flies anymore in these cases.”

To contact the reporter on this story: Christopher Brown in St. Louis at ChrisBrown@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Karl Hardy at khardy@bloomberglaw.com

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