Actelion Is Third Company To Settle Charity Co-Pay Kickback Claims With DOJ

Company agrees to pay $360m to resolve allegations it used a charity as a conduit to pay Medicare patient copays for its drugs; several other companies are under investigation.

The US Department of Justice's investigation of pharma ties to charitable groups is reaping results. Actelion Pharmaceuticals Ltd. reached an agreement with the DOJ to pay $360m to resolve allegations it used a charity as a conduit to pay the copays of Medicare patients to induce them to purchase its drugs. It is the third DOJ settlement involving such kickback claims.

The settlement agreement, announced by the US Attorney's Office for the District of Massachusetts on Dec. 6, alleges that Actelion made donations to Caring Voice Coalition, which operated a fund to pay copays of certain patients with pulmonary arterial hypertension (PAH). The government claims the company used the foundation to pay the co-pay obligations of thousands of Medicare patients taking its PAH drugs "because it knew the prices Actelion set" could otherwise pose a barrier to their purchase. The products included Tracleer (bosentan), Ventavis (iloprost), Veletri (epoprostenol), and Opsumit (macitentan).

DOJ said Actelion's conduct violated the False Claims Act (FCA) and Anti-Kickback Statute. The government pursued the investigation on its own; there was no complaint filed by a whistleblower under the False Claims Act as typically occurs in FCA cases.

Actelion was acquired by Johnson & Johnson in June 2017, after the conduct alleged in the agreement took place. DOJ noted that J&J was not involved, directly or indirectly, and the allegations do not relate to it in any way.

"We are committed to full compliance with all laws and regulations in our work to help patients get the medicines they need," Actelion spokesperson Caroline Pavis said in a statement. "Today's agreement resolves the government's investigation into Actelion's donations to a patient assistance foundation in 2014 and 2015, before the company was acquired in 2017."

J&J is one of several companies whose payments to charitable organizations is being investigated by DOJ. J&J, GlaxoSmithKline PLC, Novartis AG, Sanofi, Takeda Pharmaceutical Co. Ltd., and Teva Pharmaceutical Industries Ltd. have reported that they received subpoenas from the US Attorney's Office for the District of Massachusetts in 2016 and 2017. (Also see "Government Pharma Investigations Target Pricing, Opioids, Trade Practices" - Pink Sheet, 4 Sep, 2018.)

Purvis said J&J's Janssen Pharmaceuticals Inc. unit has cooperated with the government's review and is "confident our donations to co-pay assistance foundations are consistent with the law and OIG [Office of Inspector General] guidance."

Patients Were Excluded From Free Drug Program, DOJ Alleges

The settlement agreement says that from Jan. 1, 2014 through August 2015, Actelion routinely obtained data from Caring Voice Coalition (CVC) detailing how many patients on its drugs CVC had assisted, how much CVC had spent on those patients, and how much CVC expected to spend on those patients in the future. The government notes that Actelion received this information through funding requests, telephone calls, and written reports.

"Actelion used this information to budget future payments to CVC on a drug-specific basis and to confirm that its contribution amounts to CVC were sufficient to cover the copays of patients taking [its drugs], but not of patients taking other manufacturers' PAH drugs," the settlement states. "Actelion engaged in this practice even though CVC warned the company against receiving data concerning CVC's expenditures on copays of the Subject Drugs."

The settlement also says that Actelion had a policy of not permitting Medicare patients to participate in its free drug program, which was open to other financially needy patients, even if those Medicare patients could not afford their copays for Actelion drugs. Instead, the settlement says, in order to generate revenue from Medicare and to induce purchase of its drugs, the company referred Medicare patents prescribed its PAH drugs to CVC, thereby causing false claims to be submitted to Medicare.

Last year, United Therapeutics Corp. reached a similar $210m settlement with the DOJ to resolve claims it used Caring Voice Coalition to pay the copays of Medicare patients taking its pulmonary arterial hypertension drugs. (Also see "Copay Kickback Enforcement Gains Momentum: United Therapeutics Settles Charges" - Pink Sheet, 27 Dec, 2017.)

And in May, Pfizer Inc. agreed to pay $23.85m to resolve claims it made donations to the Patient Access Network Foundation to pay the copay obligations for three of its drugs. (Also see "Pfizer Agrees To Oversight Of Charitable Assistance Programs In DOJ Settlement" - Pink Sheet, 24 May, 2018.) 

United Therapeutics and Pfizer both entered into a corporate integrity agreement with HHS' Office of Inspector General as part of their settlements. The Actelion settlement did not include a corporate integrity agreement.

DOJ Loosens Requirements for Cooperation Credit

Anne Walsh, a director at Hyman, Phelps & McNamara, said that when companies began co-pay programs they were intended to help patients get the drugs they needed, not to increase sales. The DOJ settlements "show all activity by companies is under scrutiny and fair game," she said.

As for the size of the settlements, Walsh said that under the FCA, damages are calculated based on the amount that is paid by the federal government, in which the cost of the drugs and the period at issue are factors.

The Actelion settlement agreement states that the government is not releasing the company from any criminal liability or releasing individuals from any liability. Walsh said this is routinely included in settlements and it is possible that individuals could face prosecution. But she said there is a lower likelihood that individuals will be prosecuted or face civil suits given the DOJ's new policy on individual accountability.

Walsh, former associate chief counsel in FDA's Office of Chief Counsel, said the new policy, which Deputy Attorney General Rod Rosenstein announced in a Nov. 29 speech at an American Conference Institute meeting, will give companies a greater chance to earn credit for cooperating with an investigation.

Under the previous policy, to be eligible for any credit for cooperating with the DOJ, corporations had to provide all relevant facts about the individuals substantially involved in the misconduct. The policy was announced in 2015 by then Deputy Attorney General Sally Yates in a memo to assistant attorneys general and all US attorneys. (Also see "Acquittal Of Former Warner Chilcott Exec May Make Future Prosecutions More Difficult" - Pink Sheet, 17 Jun, 2016.)

Under the new policy, DOJ attorneys can award gradations of cooperation credit and consider what an individual can pay.

"This is a significant and positive development for defendants generally and a better use of government resources," Walsh said.