A Wolf in Sheep’s Clothing: The Government’s Latest Stand Against Patient Kickbacks Disguised as Charity

The U.S. Department of Justice (DOJ) is deeply committed to combating drug companies’ pervasive practice of disguising patient kickbacks as charity. Most recently, Boston-based prosecutors reached a $51 million settlement with Swiss pharmaceutical giant Novartis, resolving allegations that Novartis coordinated with charitable foundations to steer Medicare patients to its drugs and away from competitors’ cheaper alternatives. The “charitable” foundations doled money out to patients to cover their Medicare copays for Novartis drugs, but not for those of competing companies. 

The government treats these kinds of “charitable” contributions as patient kickbacks, and thus a violation of the Anti-kickback Statute, which prohibits payments to patients that might alter their choices, because they eliminate regular market forces that drive patients to use cheaper drugs, drive their doctors to prescribe them, and drive pharmaceutical companies to develop them. If, through these “charitable” contributions, expensive drugs wind up costing them nothing (or very little), patients will continue to use the expensive drugs, causing Medicare to be improperly billed thousands.

Last month, the DOJ filed another False Claims Act case, this time against the pharmaceutical company Regeneron, alleging similar conduct: paying kickbacks in the form of charitable co-pay waivers to steer patients to the company’s macular degeneration drug, Eylea. The Boston U.S. Attorney’s Office has collected nearly a billion dollars pursuing these cases against many giants in the pharmaceutical industry, including Pfizer, United Therapeutics, Amgen, Astellas, Alexion, Actelion, Jazz, and Sanofi-Aventis.

Big pharma is, of course, free to make legitimate donations to charity. However, the potential illegality arises when those donations are meant to boost sales of the donor’s products at the expense of competitors and the Medicare Trust Fund, which is exactly what was alleged in the Novartis case. Novartis allegedly timed its donations to be available exactly, and only, when it told patients to contact these foundations. Regeneron executives allegedly ordered substantial analyses evaluating the return on investment of their “charitable,” donations and did what they could to boost that number.

Like the panel of drugs Novartis was promoting, Regeneron’s Eylea is an expensive drug. It generally costs about $10,000 a year, per patient, and since 2013, Medicare has spent $11 billion on it. Regeneron set Eylea’s dose price at $1,850, while alternatives like Avastin run as low as $55 per dose.

While the Novartis and Regeneron cases were brought directly by the government, several of the other cases were initiated by whistleblowers. Because relationships between drug companies and charities are often confusing and opaque, whistleblowers are essential to bringing frauds like these to light, saving the Medicare program, and American taxpayers, astounding sums of money.