Health Law Daily Drug maker had fair notice that its donations to copay foundation likely violated AKS
Tuesday, December 8, 2020

Drug maker had fair notice that its donations to copay foundation likely violated AKS

By Jeffrey H. Brochin, J.D.

Communications between manufacturer’s reimbursement manager and charitable copay foundation raised plausible evidence of AKS violation claims alleged by federal government.

A federal district court in Massachusetts has denied the motion to dismiss filed by Regeneron Pharmaceuticals, Inc. (Regeneron) manufacturer of Eylea®, America’s best-selling drug for the treatment of age-related macular degeneration (AMD) in an anti-kickback (AKS) and False Claims Act (FCA) action brought by the federal government. HHS’s OIG had previously set out guidelines as to the acceptable practices for a drug company to make charitable donations to a co-pay foundation, however, Regeneron’s conduct went beyond those guidelines into the sphere of prohibited conduct that was not protected by either the First Amendment nor the Fifth Amendment (U.S. v. Regeneron Pharmaceuticals, Inc., December 4, 2020, Saylor, F.).

Good Day foundation operations. The Chronic Disease Fund (CDF), now operating as Good Days, is a non-profit foundation that solicits donations from pharmaceutical companies and uses that money to cover Medicare copays for prescription drugs. Since 2010, CDF has operated an "AMD fund" that covers Medicare copays for patients prescribed AMD drugs. Following FDA approval for Eylea in 2011, Regeneron began to finance the AMD fund, which covered copays for Eylea and a competitor Lucentis--but not the much cheaper Avastin. If a physician administered Eylea to a Medicare patient who indicated that they would have trouble affording the copay, the physician might submit a claim to CDF for the applicable Medicare co-pay, and CDF would pay that amount directly to the physician.

Cost-benefit of CDF "donations." Prior to the commercial launch of Eylea in 2011, Regeneron commissioned a report from Xcenda, an outside consultant, to analyze the proposed pricing and reimbursement structures for the drug. Xcenda concluded that Regeneron should donate approximately $3 million to co-pay assistance foundations in 2012 to offset the cost of Eylea copays. At that time, Regeneron was considering a price of $1,500 per injection, however, Xcenda’s report found that increasing the price to $1,950 would benefit Regeneron financially, because the 43 percent increase in donations to co-pay assistance foundations that Regeneron would need to make would be offset by revenue increases from Medicare reimbursements. Ultimately, Regeneron set the price of Eylea at $1,850.

HHS-OIG guidelines. The court noted that in cases such as the instant AKS-FCA claim, a jury must make the difficult factual determination of a payor-company’s intent in paying or offering remuneration to a healthcare provider: i.e., is the prospect of inducing Medicare-funded patient referrals the motivating factor for the remunerative relationship, or is it simply a collateral hope or expectation? The former subjects the payor-company to liability under the AKS, while the latter does not. Under this legal framework, companies’ practices of waiving copays or making donations to offset the cost of copays may violate the AKS, as case law and guidance from the HHS-OIG have established. In 2005, HHS-OIG issued a bulletin as to how improperly structured donations to copay-assistance charities may violate the AKS—if they are made with the intent to induce Medicare-funded referrals or drug purchases—and steps that can be taken to avoid AKS liability.

Communications with CDF. The record was replete with both internal communications and those between Regeneron and CDF’s executive director indicating that the amount of donations to the foundation were clearly related to patient assistance by the foundation to patient copay for Eylea: the executive director provided Regeneron with a spreadsheet entitled "Regeneron Projections 2013," which projected the number of Eylea patients assisted by the AMD fund and the amount of copay assistance they would need over 2013, concluding that CDF needed $40 million in contributions from Regeneron to cover the cost of Eylea copays. Ultimately, Regeneron’s donations were less than that figure, however, throughout the email and verbal exchanges regarding Regeneron’s donations, the impact on copays for Eylea were clearly the focus.

A plausible claim of AKS violation. The court reiterated that the intent of the entity providing remuneration is critical to proving an AKS violation, and found that the facts alleged in the complaint—and the reasonable inferences from those facts—were sufficient to state a plausible claim of an AKS violation. Regeneron indirectly provided remuneration to patients prescribed Eylea by making donations to CDF that offset patients’ copays, and, arguably, the promise of copay waivers through CDF also provided remuneration to the physicians prescribing Eylea.

Furthermore, the complaint plausibly alleged that Regeneron intended for its CDF donations to induce Medicare claims for Eylea, and the testimony of its former senior director for reimbursement, established that Regeneron’s senior management did not wish for its CDF donations to go toward copays for Lucentis, its competitor. In sum, Regeneron had fair notice of the prohibited conduct, and their conduct was not to be dismissed on the ground that the enforcement of the statute violated its due-process rights under the Fifth Amendment.

For the foregoing reasons, the court denied Regeneron’s motion to dismiss.

The case is No. 1:20-cv-11217-FDS.

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