Pfizer pays nearly $24 million to settle kickback case

by Ben Vernia | June 5th, 2018

On May 24, the Department of Justice announced that the pharmaceutical company Pfizer, Inc., had agreed to pay $23.85 million, and enter into a five-year corporate integrity agreement, to settle allegations that the company paid kickbacks to patients in the form of copayment waivers paid for by the company’s foundation. According to DOJ’s press release:

Pharmaceutical company Pfizer, Inc. (Pfizer), based in New York, NY, has agreed to pay $23.85 million to resolve claims that it used a foundation as a conduit to pay the copays of Medicare patients taking three Pfizer drugs, in violation of the False Claims Act, the Justice Department announced today.

When a Medicare beneficiary obtains a prescription drug covered by Medicare Part B or Part D, the beneficiary may be required to make a partial payment, which may take the form of a copayment, coinsurance, or deductible (collectively copays).  Congress included copay requirements in the Medicare program, in part, to encourage market forces to serve as a check on health care costs, including the prices that pharmaceutical manufacturers can demand for their drugs.  Under the Anti-Kickback Statute, a pharmaceutical company is prohibited from offering, directly or indirectly, any remuneration—which includes paying patients’ copay obligations—to induce Medicare patients to purchase the company’s drugs.

As part of today’s settlement, the government alleged that Pfizer used a foundation as a conduit to pay the copay obligations of Medicare patients taking three Pfizer drugs:  Sutent and Inlyta, which both treat renal cell carcinoma, and Tikosyn, which treats arrhythmia in patients with atrial fibrillation or atrial flutter.  The government alleged that, in order to generate revenue, and instead of giving Sutent and Inlyta to Medicare patients who met the financial qualifications of Pfizer’s existing free drug program, Pfizer used a third-party specialty pharmacy to transition certain patients to the foundation, which covered the patients’ Medicare copays.  Pfizer allegedly made donations to the foundation to enable it to cover the copays of these patients and received confirmation from the foundation, via the specialty pharmacy, that the foundation funded the copays.

With respect to Tikosyn, Pfizer raised the wholesale acquisition cost of a package of forty .125 mg capsules of the drug by over 40 percent in the last three months of 2015.  Pfizer allegedly knew that the price increase would also increase Medicare beneficiaries’ copay obligations for Tikosyn, and potentially prevent some patients from being able to afford the drug.  Pfizer allegedly worked with the foundation to create and finance a fund for Medicare patients suffering from the condition treated by Tikosyn, coordinated the opening of the fund with the implementation of its price increase for the drug, and referred patients to the fund.  For the next nine months, Tikosyn patients accounted for virtually all of the beneficiaries whose copayments were paid by the fund.

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The case apparently stems from a government investigation, and not a qui tam whistleblower’s suit.

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