On September 9, 2021, a judge in the United States District Court for the District of Massachusetts denied Teva Pharmaceuticals’ motion to dismiss the United States’ complaint alleging that Teva paid hundreds of millions of dollars in kickbacks to Copaxone patients via two foundations, Chronic Disease Fund dba Good Days (CDF) and The Assistance Fund (TAF), that used Teva’s money to cover Copaxone patients’ Medicare co-pays.
In its complaint, the government alleged that Teva raised the price of Copaxone at a rate over 19 times the rate of inflation, but sought to insure that Medicare patients never had to consider the drug’s price and thus never complained about it or had an economic reason to consider an alternative treatment. Teva did this by engaging in an elaborate scheme to cover the patients’ co-pays under Medicare Part D.
According to the government, Teva referred Copaxone patients to a specialty pharmacy, Advanced Care Scripts, Inc. (ACS, now a part of CVS Health), and ACS periodically would report to Teva the number of new Copaxone patients awaiting Medicare co-pay coverage. When an ACS report showed a substantial number of Copaxone patients waiting, Teva would multiply the number of waiting patients by the relevant foundation’s grant amount for Copaxone patients, add the foundation’s nine percent administrative fee, and then send a corresponding payment to the foundation, either CDF or TAF, with the intent that its money would cover the Medicare co-pays of those Copaxone patients. As a result, the government alleged, CDF and TAF functioned not as charities for MS patients, but as pass-through vehicles for money from Teva to Copaxone patients. The government’s complaint cited an internal Teva document which in 2010 calculated that a $28 million “expense” would support over 4,800 Copaxone patients and generate over $114 million in “ROI” for Teva.
The court rejected all of Teva’s arguments challenging the government’s kickback allegations.
First, the court held that the government adequately alleged that Teva paid “remuneration” to Copaxone patients through the two foundations, even though Teva did not pay the patients directly.
Second, the court held that the government adequately alleged that the purpose of the payments was to induce patients to purchase Copaxone. Notably, the court rejected the finding of the court in United States v. Celgene Corp., 226 F. Supp. 3d 1032, 1057 (C.D. Cal. 2016), that a payment to a foundation could violate the anti-kickback statute (AKS) only if the payment was “contingent on the foundation’s agreement to purchase or recommend [the manufacturer’s] drugs.” According to the Teva court, “the AKS reveals no requirement that a manufacturer have control of or an agreement with a third-party foundation for liability to attach.” The court also distinguished United States v. McClatchey, 217 F.3d 823, 834 (10th Cir. 2000), and held that Teva did more than merely “hope and expect” that its money would go to Copaxone patients: “Teva worked closely with ACS to calculate the precise amount necessary to cover the copays of a specific number of Copaxone patients. Then it coordinated the timing of its donations with the submission of batch files of applications by ACS shortly thereafter, maximizing the likelihood that Teva’s donations would be disbursed to Copaxone patients.” Further, Teva recognized that a reduction in its payments to the foundations would cause a decrease in Copaxone sales.
Finally, the court held that the complaint adequately alleged that Teva acted “willfully” because the company flouted HHS-OIG guidance, which warned pharmaceutical companies against using foundations as a “conduit” for payments to patients.
The Teva decision is the latest in a series of decisions refusing to dismiss cases where the government alleged that pharmaceutical companies channeled money through foundations to insulate patients from the high prices that the pharmaceutical companies themselves set for their drugs. Notwithstanding the hollow protestations of the pharmaceutical companies and of the foundations that exist only because of the pharmaceutical companies’ extraordinary payments to them, the conduct is not “charitable.” As Teva’s own ROI calculation showed, the pharmaceutical companies are effectively paying themselves a very handsome rate of return whenever they cover patients’ Medicare co-pays for the companies’ drugs, whether they do so directly or through a foundation. And the American taxpayer then is left holding the bag for the ever-increasing costs of those drugs.
Gregg Shapiro represents whistleblowers in complex kickback cases and other healthcare fraud matters. He may be reached at 617-582-3875 or gshapiro@newmanshapiro.com.
