DOJ Casting Wider Net In Pharma Kickback Probes
Executive Summary
Government is pursuing behavior it once would have taken a pass on, former DOJ attorney notes; pharma companies have inked 16 settlements in past year.
The US government's investigation of pharma companies for health care fraud violations has evolved in recent years, shifting from off-label promotion to anti-kickback allegations. And that has led the Department of Justice to pursue new areas of enforcement action.
"As companies become more compliant and the rules become stricter within industry, that doesn't mean the government has gone away," John Bentivoglio, a partner at Skadden, Arps, Slate, Meagher & Flom, said during a recent Food and Drug Law Institute webinar on anti-kickback risks. "I think they have decided to pursue what in the past they have passed on."
Bentivoglio noted that the seriousness of the financial relationships, or the amount of dollars at stake in the enforcement actions the government has taken, have declined. For example, 10 years ago, enforcement efforts focused on speaker payments or consulting fees often totaling tens of thousands or hundreds of thousands of dollars. As industry has put controls in place that reduced this risk, he said the government has turned to looking at the value of what event attendees receive – for example, repeat dinners – as the inducement in exchange for writing prescriptions.
This behavior was at the center of DOJ's $3.1m settlement with medical device manufacturer Abiomed Inc. in March 2018. The government alleged Abiomed sought to induce physicians to use its heart pumps by buying them meals at expensive restaurants.
In other cases, the DOJ has targeted training events and free or discounted practice and market development support to physician practices.
Bentivoglio, former associate deputy attorney general and special counsel for health care fraud at DOJ, noted that the department is also looking at financial relationships that it believes contribute to the high cost of specialty drugs. He said these include co-pay assistance through independent charitable foundations, reimbursement support beyond traditional product-specific support activities, and improper payments to specialty pharmacies and distributors.
The focus on drug pricing "may strike folks as odd given DOJ doesn’t seem to have a statutory mandate to regulate drug prices. But the government has been very explicit, particularly in press releases around [settlements involving charity] copays, that it's troubled by high prices of certain drugs and troubled by activities" companies undertake to prop up high drug prices.
The department has entered into settlements with 16 pharma companies since January 2018. (See chart at end of story.)
The largest settlement by far is the $1.4bn settlement with Reckitt Benckiser Group PLC to resolve a criminal investigation of its marketing, sale and distribution of the opioid addiction treatment Suboxone (buprenorphine/naloxone) (Also see "DOJ's Investigation Of Reckitt's Suboxone Promotions Marks The Return Of The Big Settlement" - Pink Sheet, 18 Jul, 2019.) The sum is in line with settlements of nearly a decade ago that involved allegations of off-label promotion. (Also see "The Era Of Billion Dollar Pharma Settlements" - Pink Sheet, 11 Jun, 2012.)
Indictments In Avanir Settlement
The most recent settlement, announced last month, was with Avanir Pharmaceuticals Inc.. In a striking development, four individuals, including former Avanir employees and a top prescriber of Nuedexta (dextromethorphan HBr/quinidine sulfate) were indicted for violation of the Anti-Kickback Statute.
Avanir agreed to pay $95.9m to resolve False Claims Act allegations that it provided remuneration in the form of money, honoraria, travel and food to certain physicians and other healthcare providers to induce them to write Nuedexta prescriptions. It also paid a $7.8m penalty and a $5m forfeiture and entered into a deferred prosecution agreement under which it admitted it paid a doctor to induce him to increase his prescription volume.
The government also alleged that Avanir marketed the drug to long-term care facilities for unapproved antipsychotic use. Nuedexta is approved for treatment of pseudobulbar affect, which is characterized by involuntary, sudden and frequent episodes of laughing or crying that may occur in patients with neurological disease or injury.
'Priming The Pump' For Price Hikes
One of the primary targets of the DOJ in the last two years has been pharma company arrangements with third-party charitable organizations. The department has reached a total of nine settlements, the first two of which were inked in 2017 with Aegerion Pharmaceuticals Inc. and United Therapeutics Corp. Aegerion's settlement also involved allegations it failed to comply with a Risk Evaluation and Mitigation Strategy (REMS). Numerous other companies are under investigation for their charity relationships. (Also see "Government Pharma Investigations Target Pricing, Opioids, Trade Practices" - Pink Sheet, 4 Sep, 2018.)
Lisa Rachlin, associate director and corporate counsel at Vertex Pharmaceuticals Inc., said there are now four themes in these cases: (1) the manufacturer is too involved in setting up the charity fund or the criteria for the fund; (2) the manufacturer is seeking or receiving data from the charity to do analyses on their donations to determine appropriate amounts or return on investment; (3) the manufacturer is directing needy patients to charities instead of covering them in their free drug programs; or (4) the manufacturer is providing a significant donation or setting up a fund right before a large price increase.
Rachlin noted that the latter was first alleged in DOJ's May 2018 settlement with Pfizer Inc. "The government seemed to be suggesting that Pfizer was sort of priming the pump" with the charity fund before there was a significant increase in the wholesale acquisition cost of Pfizer's arrhythmia drug Tikosyn (dofetilide), she said.
In a release announcing the settlement, DOJ said Pfizer raised the wholesale acquisition cost by 44% and alleged it coordinated the timing of the price increase with the charity's opening of a fund for Medicare patients.
There are several ongoing investigations and more settlements are expected. But Rachlin noted that some companies may not want to settle because the corporate integrity agreements accompanying these resolutions "can be a sticking point."
Pfizer, United Therapeutics, Jazz Pharmaceuticals PLC, Lundbeck Inc., Astellas Pharma US Inc. and Amgen Inc. are among companies that have entered into CIAs with HHS' Office of Inspector General. (Also see "Amgen, Astellas Bring Tally Of US Charity Co-Pay Kickback Settlements To Eight" - Pink Sheet, 25 Apr, 2019.)
The CIAs require manufacturers to establish an independent charity group, which is solely responsible for budgeting and other activities relating to independent charities. They specify that the group must be separate and independent from the commercial organization and must not share information related to donations with commercial personnel.
The CIAs also require manufacturers to establish a review program to conduct annual audits of independent charity donations. Among other things, they must review documents relating to decisions to fund a particular charity and written agreements between the company and the independent charities.
One sign that DOJ might be facing pushback from companies is Mallinckrodt PLC's settlement with the DOJ last month. While it resolved kickback claims that it provided lavish dinners and entertainment to encourage doctors to prescribe H.P. Acthar Gel (repository coritoctropin gel), it did not settle DOJ's investigation of its arrangement with a charitable foundation. (Also see "Mallinckrodt Settles Portion Of DOJ's Acthar Gel Kickback Claims; Charity Copay Probe Continues " - Pink Sheet, 5 Sep, 2019.)