BOSTON – The U.S. Attorney’s Office announced today that pharmaceutical company Pfizer Inc. has agreed to pay $23.85 million to resolve allegations that it violated the False Claims Act by paying kickbacks to Medicare patients through a purportedly independent charitable foundation.
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 co-payment, co-insurance, or deductible (collectively “co-pays”). These co-pay obligations may be substantial for expensive medications. Congress included co-pay requirements in these programs, 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 – to induce Medicare patients to purchase the companies’ drugs.
As part of today’s settlement, the government alleged that Pfizer used a foundation, which claims 501(c)(3) status for tax purposes, as a conduit to pay the co-pay 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 worked with a third-party specialty pharmacy to transition some portion of those patients to the foundation, which covered the patients’ Medicare copays and caused Medicare claims to result from the filling of the patients’ Sutent and Inlyta prescriptions. In connection with this initiative, according to the government’s allegations, Pfizer made donations to the foundation and thereafter received data from the foundation, via the specialty pharmacy, confirming that the foundation funded the Medicare copays of Sutent and Inlyta patients. With respect to Tikosyn, Pfizer raised the wholesale acquisition cost of a package of forty .125 mg capsules of the drug by 44 percent during the last three months of 2015. Knowing the price increase would increase Medicare beneficiaries’ copay obligations for Tikosyn, which could result in more Medicare patients needing financial assistance to fill their Tikosyn prescriptions, Pfizer allegedly worked with the foundation to create and finance a fund for Medicare patients being treated for arrhythmia with atrial fibrillation or atrial flutter. According to the allegations in the settlement agreement, Pfizer coordinated the timing of the opening of the fund for these patients with the implementation of a Tikosyn price increase, and Pfizer then began referring to the foundation any Medicare patients who needed financial assistance to meet their newly-increased copays for the drug. For the next nine months, Tikosyn patients accounted for virtually all of the beneficiaries of the fund.
“Pfizer used a third party to saddle Medicare with extra costs,” said United States Attorney Andrew E. Lelling. “According to the allegations in today’s settlement agreement, Pfizer knew that the third-party foundation was using Pfizer’s money to cover the co-pays of patients taking Pfizer drugs, thus generating more revenue for Pfizer and masking the effect of Pfizer’s price increases. The Anti-Kickback Statute exists to protect Medicare, and the taxpayers who fund it, from schemes like these. At the same time, we commend Pfizer for stepping forward to resolve these issues in a responsible manner.”
“Kickbacks undermine the independence of physician and patient decision-making, and raise healthcare costs,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “As today’s settlement makes clear, the Department will hold accountable drug companies that pay illegal kickbacks—whether directly or indirectly—to undermine taxpayer funded healthcare programs, including Medicare.”
“Today’s settlement demonstrates the FBI’s commitment to making sure patients receive, and the government pays for, health care that is not compromised by kickbacks,” said Harold H. Shaw, Special Agent in Charge, FBI Boston Division. “What Pfizer is accused of doing in this case—masking charitable contributions to increase company profits-- violates the basic trust patients extend to the healthcare system and threatens the financial integrity of the Medicare program.”
Pfizer also has entered into a corporate integrity agreement (CIA) with the Department of Health and Human Services Office of Inspector General (HHS-OIG). The five-year CIA requires, among other things, that Pfizer implement measures designed to ensure that arrangements and interactions with third-party patient assistance programs are compliant with the law. In addition, the CIA requires reviews by an independent review organization, compliance-related certifications from company executives and Board members, and the implementation of a risk assessment and mitigation process.
“Our corporate integrity agreement promotes independence between Pfizer and any patient assistance programs to which it may donate,” said Gregory E. Demske, Chief Counsel to the Inspector General for the United States Department of Health and human Services. “Without true independence, as we have seen in this case, drug companies may use patient assistance programs as conduits for improper payments that harm Medicare.”
U.S. Attorney Lelling, Acting Assistant Attorney General Readler, HHS-OIG Chief Counsel Demske, and FBI SAC Shaw made the announcement today. This matter was investigated by HHS-OIG, the Federal Bureau of Investigation, the United States Postal Inspection Service, and the United States Department of Veterans Affairs Office of Inspector General. The matter was handled by Assistant U.S. Attorneys Gregg Shapiro, Abraham George, and Deana El-Mallawany of Lelling’s Office, and by Trial Attorneys Augustine Ripa and Sarah Arni of the Justice Department’s Civil Division.