Regeneron Funneled Kickbacks Through a Patient Charity, Federal Lawsuit Claims

The drugmaker Regeneron funneled tens of millions of dollars to a charity that paid the out-of-pocket costs for patients who took the company’s expensive eye drug, then lied to internal auditors about it, according to a lawsuit filed Wednesday by federal prosecutors in Massachusetts.

The suit, filed in the U.S. District Court of Massachusetts in Boston, claims that Regeneron violated federal anti-kickback laws by using the patient-assistance fund to encourage doctors to prescribe their drug, Eylea, over a less-expensive competitor.

“Kickback schemes can undermine our health care system, compromise medical decisions, and waste taxpayer dollars,” said Phillip Coyne, the special agent in charge at the inspector general’s office in Boston for the Department of Health and Human Services.

In a statement, Regeneron dismissed the lawsuit’s claims and sought to draw attention to its efforts to develop a treatment for Covid-19.

“It is unfortunate that the government chose to bring these baseless allegations related to our 2013 and early 2014 patient assistance donations at a time when Regeneron employees have been coming to work in the epicenter of the Covid-19 pandemic with the goal of providing an effective treatment,” said Joseph LaRosa, the executive vice president, general counsel and secretary of Regeneron. “We look forward to having our case heard and will file a motion to dismiss.”

Regeneron is the latest company to come under federal scrutiny for its use of charities to cover patients’ drug costs. In 2018, Johnson & Johnson agreed to pay $360 million to settle allegations that a company it had acquired, Actelion Pharmaceuticals, funneled illegal kickbacks through a charity. In 2017, United Therapeutics paid $210 million to settle similar allegations, and several other drugmakers have disclosed that they are also under investigation for their use of patient-assistance charities.

In 2019, the charity that Regeneron used to operate its patient assistance program, the Chronic Disease Fund, paid $2 million to resolve allegations that it had served as a conduit to companies paying kickbacks to Medicare patients taking their drugs. That settlement involved its work with five other companies: Novartis, Dendreon, Astellas, Onyx, and Questcor. The charity, which has been renamed Good Days, did not respond to a request for comment.

Drug companies have long used financial assistance — such as coupons to cover drug co-payments — to ease the burden on individual patients and blunt the outrage over rising drug costs. Insurers then cover most of the cost.

But federal anti-kickback laws prohibit companies from giving such assistance to Medicare and Medicaid beneficiaries because the practice is considered an inducement, or kickback, to buy their drugs. For years, drugmakers have gotten around those laws by donating to nonprofit charities, which then give the money to Medicare patients. The arrangements are legal as long as there is no direct coordination between the pharmaceutical company and the nonprofit organization.

But according to the lawsuit, executives at Regeneron kept close track of how much of the money that they donated to the charity would go toward payments for their drug, and said they wanted the money to go only toward Eylea, and not toward a competing product, Lucentis, which is sold by Genentech.

According to internal documents included in the suit, the Chronic Disease Fund sent the company detailed projections for how many patients would need help paying for Eylea, and provided specific financial requests to cover that amount.

In 2013, according to the lawsuit, Regeneron paid the fund $35 million, which closely matched what the fund told the company would be needed to cover co-payments for Eylea patients.

Prosecutors said that the company’s executives later lied to Regeneron’s own internal auditors who were investigating the company’s use of charitable assistance programs and denied directly discussing with the fund how much money would cover the cost of assistance for Eylea.

Eylea is Regeneron’s top-selling drug, bringing in more than $4.6 billion in 2019, and treats a common eye disease in older people known as wet macular degeneration. It competes with Lucentis, as well as Avastin, a similar drug also sold by Genentech. Although the three drugs have been found to have comparable efficacy, Avastin is much cheaper at $55 a dose, compared with $2,000 a dose for Lucentis and $1,850 for Eylea, according to the federal lawsuit.

But Avastin actually became more expensive to patients, because the charitable fund provided help only to those who were prescribed Lucentis or Eylea. Doctors, knowing this, commonly prescribed Eylea or Lucentis, “so as not to impose large Medicare co-pays on their patients or risk being unable to collect those co-pays,” the lawsuit said.

As a result, the patient assistance program was integral to driving sales of Eylea, the prosecutors said, because it made Eylea more affordable than Avastin. In 2014, for example, when a large retina clinic heard that the Chronic Disease Fund may have run out of funds, it started “putting patients only on Avastin,” according to an email from a Regeneron sales representative that was included in the lawsuit.

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