Government sues Regeneron for pharmaceutical copay kickbacks

by Ben Vernia | June 25th, 2020

On June 24, the U.S. Attorney for the District of Massachusetts announced that the government had filed a False Claims Act civil suit against Regeneron Pharmaeuticals, Inc., alleging that the company’s waiver of copayments violated the Antikickback Statute and caused the submission of false claims to federal healthcare programs. According to the U.S. Attorney’s press release:

The U.S. Attorney’s Office announced today that the government has filed a civil False Claims Act complaint against drug manufacturer Regeneron Pharmaceuticals, Inc. (Regeneron), of Tarrytown, N.Y. The complaint alleges that Regeneron paid tens of millions of dollars in kickbacks for its macular degeneration drug Eylea, using a foundation as a conduit to cover co-pays for Eylea.

When a Medicare beneficiary obtains a prescription drug covered by Medicare Part B, the beneficiary may be required to make a partial payment, which can take the form of a deductible or co-insurance amount (collectively, co-pays). Congress included co-pay 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. The Anti-Kickback Statute prohibits pharmaceutical companies from offering or paying, directly or indirectly, any remuneration – which includes money or any other thing of value, including coverage of co-pays – to induce Medicare patients to purchase the companies’ drugs.

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The complaint alleges that, in 2012, soon after the launch of Eylea, Regeneron considered how much to pay a foundation that covered Medicare co-pays for patients taking macular degeneration drugs. At the time, Regeneron and Genentech, which sold Lucentis, were the leading manufacturers of macular degeneration drugs. Regeneron’s senior management was willing to pay the foundation only enough to cover Medicare co-pays for Eylea patients. As Regeneron’s former Chief Financial Officer put it, Lucentis patients were “Genentech’s problem.” Moreover, Regeneron senior management wanted assurances that the company’s payments to the foundation would generate a handsome ROI.

To satisfy senior management, the complaint alleges, Regeneron employees repeatedly contacted the foundation to learn the amount of money the foundation would need to cover the co-pays of Eylea patients only. They then determined the Medicare revenue that Regeneron would derive from those patients and calculated that the company would earn a return of over 400% on its payments to the foundation. Over the course of 2013 and through the beginning of 2014, Regeneron paid the foundation exactly what it said it needed to cover Medicare expenses for Eylea patients only.

The government alleges that Regeneron’s conduct violated the anti-kickback statute which prohibits such “indirect” kickbacks to subsidize the price of a Medicare drug. The government further alleges that Regeneron’s senior management knew the conduct was illegal. In 2013, company auditors twice inquired about the information Regeneron was getting from the foundation about Eylea. Both times, Regeneron management, including the company’s commercial chief, lied and asserted that the company was not getting Eylea-specific data from the foundation. In fact, as the executives knew, the company was getting frequent Eylea-specific reports from the foundation and then using that data to correlate the company’s payments to the foundation with the foundation’s spending on co-pays for Eylea. As a result, the government alleges, the physicians who prescribed and purchased Eylea rarely, if ever, had to consider the drug’s substantial cost, because they knew that the foundation would cover their patients’ Medicare co-pays.

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

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