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Pharma donations to patient assistance foundations – latest kickback cases

Kickbacks by the pharmaceutical industry come in many forms, but they all hurt government healthcare programs and US taxpayers. Image by Pictures of Money via Flickr, (CC BY 2.0)

Kickbacks by the pharmaceutical industry come in many forms. One of the latest twists in pharma kickbacks involves patient assistance foundations conspiring with drug manufacturers to increase manufacturers’ drug sales.

Several patient assistance foundations recently have settled a string of False Claims Act cases alleging that they conspired with pharmaceutical manufacturers, from which they receive financial support, to pay kickbacks to fraudulently induce the sales of manufacturers’ drugs. The Department of Justice has also pursued numerous pharmaceutical manufacturers for their roles in these schemes in the past few years.

In this type of scheme, pharmaceutical manufacturers donate to patient assistance foundations. In turn, the foundations use that money to pay copays, deductibles and other expenses for Medicare patients that use those manufacturers’ drugs. The unsuspecting patients receiving these kickbacks in the form of assistance with out-of-pocket expenses for those drugs are unaware that there is anything wrong with this arrangement.

But Medicare and other government healthcare programs suffer financial  harm from this arrangement because the foundations steer patients toward drugs produced by their donors, which can be more expensive than alternatives. When patients’ out-of-pocket drug expenses are paid for by foundations, patients have little incentive to choose a cheaper generic drug over the brand-name drugs at issue in these cases. Manufacturers therefore reap increased profits, and the foundations receive increased donations that support their continued operations.

While individual patients save money, Medicare—and therefore, taxpayers—end up bearing the higher costs of these drugs.

The government said that some foundations have usurped the charitable purpose of patient assistance foundations through the alleged scheme. Patient assistance foundations are supposed to act independently and give aid to patients based on need, regardless of what brand of drug the patients receive.

The Anti-Kickback Statute, the law under which the Department of Justice sued these foundations and pharmaceutical manufacturers, prohibits paying or offering to pay anything of value either directly or indirectly to induce the purchase of services (such as pharmaceutical drugs) paid for by Medicare, Medicaid and other federal healthcare programs.

Violations of the Anti-Kickback Statute result in false claims made to the federal healthcare program that ultimately pays for the kickback-induced service. The Department of Justice uses the False Claims Act, the federal civil statute that prohibits fraud against the federal government, to enforce the Anti-Kickback Statute, which is a criminal statute.

In late October, the Department of Justice announced that two patient assistance foundations, the Chronic Disease Fund Inc. and the Patient Access Network Foundation, agreed to pay $2 million and $4 million, respectively, to settle allegations that the foundations, acting in concert with pharmaceutical company donors, paid kickbacks to unsuspecting Medicare patients taking drugs produced by the pharmaceutical companies.

The government alleged that the Chronic Disease Fund had conspired with pharmaceutical companies Novartis, Dendreon, Astellas, Onyx and Questcor to direct kickbacks towards patients taking those companies’ drugs. The Patient Access Network allegedly had done the same with manufacturers Bayer, Astellas, Dendreon, and Amgen.

Both foundations also agreed to enter three-year Integrity Agreements with the Office of Inspector General for the Department of Health and Human Services, under which the foundations will institute measures to ensure that they do not conspire with manufacturers and operate independently and lawfully.

One month later, another patient assistant foundation, The Assistance Fund, agreed to pay $4 million to settle allegations that it conspired with pharmaceutical manufacturers Teva, Biogen and Novartis by acting as a conduit for those manufacturers to pay kickbacks to patients taking their high-priced multiple sclerosis drugs.

Using money donated by the manufacturers, The Assistance Fund allegedly paid the Medicare copays for patients taking those manufacturers’ drugs and prioritized those patients above patients taking competitors’ drugs.

The Assistance Fund also entered a three-year Integrity Agreement with HHS-OIG, under which it agreed to independent oversight and to changes to its operation to ensure independence and compliance.

The Justice Department also has prosecuted the pharmaceutical manufacturers that have been involved in these types of schemes.

Since 2017, the government has reached settlements with pharmaceutical manufacturers Actelion, Amgen, Alexion, Astellas, Jazz, Lundbeck, Pfizer and United Therapeutics over allegations of coordinating with patient assistance foundations to funnel kickbacks to patients taking their drugs. Collectively, those pharmaceutical manufacturers have paid over $840 million to the United States to resolve the allegations against them.

When pharmaceutical manufacturers and patient assistance foundations conspire together to twist the aim of charitable giving for private profit and continued financial support, patients and taxpayers both lose. Patients are steered towards drugs for the benefit of manufacturers’ profits instead of patient’s health, while the government ends up footing the bill for these expensive drugs induced by kickbacks.

More cases involving kickbacks schemes by pharmaceutical manufacturers and patient assistant foundations are expected. Those who are aware of issues with patient assistant foundations should consult with an experienced whistleblower lawyer who can answer questions based on their particular circumstances and advise them about their options.

About Phillips & Cohen LLP

Phillips & Cohen is the most successful law firm representing whistleblowers, with recoveries from our cases totaling over $12.3 billion. We have been recognized for our work by numerous national awards. Our attorneys and cases have been in The New York Times, The Wall Street Journal, the Financial Times and other news media. Three of our cases were featured in the CBS series, “Whistleblower.” Phillips & Cohen’s roster includes former federal prosecutors, the first head of the SEC Office of the Whistleblower, a former deputy administrator of the Centers for Medicare and Medicaid Services, the author of a leading treatise on the False Claims Act and attorneys with decades of experience representing whistleblowers.


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