Three more pharmaceutical companies have entered into settlements with the federal government to resolve allegations that they violated the False Claims Act by illegally paying patients’ federal health care program co-pays for their own medications through purportedly independent foundations providing patient assistance programs that the companies in fact used as “mere conduits” for the unlawful payments, the Department of Justice (DOJ) announced April 4.

Jazz Pharmaceuticals P.L.C., Lundbeck L.L.C. and Alexion Pharmaceuticals Inc. agreed to pay a total of $122.6 million as part of the civil settlements.

Under Medicare and the Department of Veterans Affairs’ Civilian Health and Medical Program (ChampVA), patients sometimes must pay co-payments, coinsurance or deductibles for medications covered by the programs. These forms of co-pays are intended in part to serve as a check on health care costs, including the prices that drug companies can demand for their products.

Under the federal Anti-Kickback Statute, drug manufacturers cannot offer or pay any remuneration, directly or indirectly, to induce patients covered by federal health care programs to purchase their products. The government considers payment of a patient’s co-pay obligation to be an illegal remuneration under the statute. Reimbursement claims under the programs that are made pursuant to an illegal kickback are considered to be false under the False Claims Act.

In June 2018, Pfizer Inc. agreed to pay nearly $24 million to resolve similar allegations that it used a foundation as a conduit to pay Medicare patients’ co-pays for three Pfizer drugs.

The Government’s Allegations

The DOJ made the following allegations against the three drug companies:

Jazz Pharmaceuticals. According to the government, in 2011 Jazz asked a foundation to set up a fund that would pay the co-pays of patients taking its narcolepsy medication Xyrem. The company allegedly knew that, although the drug had only a small share of the market for narcolepsy treatments, the fund “almost exclusively” used the company’s donations to pay Xyrem co-pays, and the fund required non-Xyrem patients who were taking competitors’ medications to obtain a denial letter from another patient assistance program before helping them.

Also, when it set up the fund, Jazz allegedly made Medicare patients taking Xyrem ineligible for the company’s free drug program. The company referred those patients to the foundation, thereby “enabling Jazz to generate revenue from Medicare and induce purchases of the drug,” the DOJ said.

During the period covered by the settlement agreement, Jazz hiked the price of Xyrem by more than 150 percent.

In addition, Jazz manufactured Prialt, an injectable medication for treating severe chronic pain. The company allegedly asked the same foundation to create a fund that ostensibly would help patients meet the co-pay obligations for any drug used to treat severe chronic pain. In fact, however, the fund paid Prialt co-pays almost exclusively. Soon after the fund was set up, the foundation allegedly told Jazz that when patients taking drugs other than Prialt contacted it, its practice was to refer those patients elsewhere.

In addition, the government alleged, Jazz also knew that the fund did not appear on the foundation’s website, “thereby minimizing the number of non-Prialt patients seeking assistance from the fund.”

Jazz Pharmaceuticals agreed to pay $57 million to settle the DOJ’s allegations.

Lundbeck. Lundbeck’s alleged False Claims Act violations involved Xenazine, which was the only drug approved for the treatment of chorea associated with Huntington’s disease before a generic version of the medication became available in 2015.

The company allegedly was the sole donor to a foundation ostensibly set up to provide financial support for patients with Huntington’s disease. However, the company also referred patients taking the drug for other, unapproved uses to the foundation for co-pay coverage.

In June 2014, when the foundation determined that its Huntington’s disease fund would no longer pay the co-pays for patients taking Xenazine for unapproved indications, Lundbeck redirected some of its prior donations to a “general fund” at the foundation to pay these patients’ co-pays. Afterwards, the drug maker made additional, “unrestricted” payments to the foundation with the understanding that the extra money would cover the co-pays for off-label uses of the drug.

In addition, Lundbeck allegedly asked the foundation whether there was a risk that the government would consider this unrestricted payment practice noncompliant with a Department of Health and Human Services (HHS) Office of Inspector General (OIG) Advisory Opinion concerning the fund. According to the government, the foundation replied, “They don’t know what we use the general fund for.”

At the same time, Lundbeck would not let Medicare or ChampVA patients participate in the company’s free medication program for Xenazine, even though the program was open to other patients. The company allegedly referred financially needy non-Huntington’s disease patients to the foundation, thereby resulting in reimbursement claims to the federal health care programs for coverage of the drug’s cost for off-label uses.

Lundbeck agreed to pay $52.6 million to settle the government’s allegations.

Alexion. Alexion markets the drug Soliris, which was indicated from January 2010 through June 2016 for the treatment of paroxysmal nocturnal hemoglobinuria and atypical hemolytic uremic syndrome. The company allegedly contributed to a “Complement-Mediated Disease” (CMD) fund at a foundation that paid for Medicare patients’ co-pays in an effort to induce sales of the drug.

Use of the medication could cost approximately $500,000 per year. Alexion allegedly knew that its price for Soliris could pose a barrier to patient use. According to the DOJ, in January 2010 the company asked the foundation to create the fund to provide financial help for Soliris patients, including the payment of Medicare co-pays. Alexion was the fund’s sole donor.

Over several months, the company and the foundation allegedly discussed the fund’s coverage parameters, with Alexion expressing its desire that the foundation “not support a patient with any of these [CMD] diagnoses for other reasons tha[n] Soliris therapy.”

Once the funding was underway, the company allegedly understood that the funding was available only to patients taking Soliris. The company allegedly was diligent in letting the foundation know if a patient stopped taking the drug, the DOJ said, so that the company’s donations would not be used to pay patients who were not starting or maintaining Soliris therapy.

The government alleged that Alexion’s practice was not to allow Medicare patients to participate in a free drug program, even if they could not afford the Soliris co-pays. The company referred those patients to the foundation through the use of “referral portal” software that reported back to the company that a patient was approved for Soliris co-pay coverage or for other payments from the foundation.

Alexion agreed to pay $13 million to resolve the False Claims Act allegations.

The DOJ noted that there had been no determination of liability with respect to the government’s allegations against the three companies.

Corporate Integrity Agreements

In connection with the settlements, Jazz and Lundbeck entered into five-year Corporate Integrity Agreements (CIAs) with the HHS OIG.

The CIAs called for the two companies to implement internal controls and monitoring designed to promote independence from any patient assistance programs to which they donate, to implement compliance risk assessment programs, and to submit periodic certifications of compliance from the companies’ executives and directors.

Company Statements

Jazz Pharmaceuticals did not respond to a request for comment on the settlement.

A spokeswoman for Lundbeck said that the company had agreed in principle to the settlement in June 2018. Finalizing the settlement, she said, “allows us to put this matter behind us and continue our focus on providing innovative medications for people living with brain disorders.” She noted that the agreement did not include any admission that Lundbeck violated the law.

Alexion said that it was pleased to reach “a constructive resolution with the government that recognizes the significant positive changes achieved during the past two years” under new company leadership. The company had disclosed the serving of a December 2016 subpoena in connection with the government’s investigation.

“We are committed to continuing to work toward our mission of transforming the lives of people with rare and devastating diseases,” Alexion said.