No Good Deed Goes Unpunished: DOJ’s Pursuit of Alleged Drug Co-Pay Kickbacks Extends to the Charities Themselves

Back in May, we wrote about substantial settlements totaling $125 million to resolve Department of Justice (DOJ) allegations that money donated by Astellas Pharma US, Inc. and Amgen Inc. to drug co-pay charities constituted illegal kickbacks under the False Claims Act (FCA).  At the time, we noted that the settlements were the seventh and eighth such resolutions in the District of Massachusetts since December 2017, with a total settlement amount of over $840 million.  As we said at that time, these cases arose out of the reality that, in certain situations, Medicare recipients often have to pay for a portion of their prescription drugs.  The foundations in question provided assistance to Medicare recipients to help pay those costs.  According to the government, the companies made donations to these co-pay foundations, and the co-pay foundations, in turn, provided payment assistance for drugs manufactured by the pharmaceutical companies.

Since we wrote on this topic in May, DOJ’s pursuits have only continued, and now, it is the charities’ turn.  The United States Attorney for the District of Massachusetts recently announced settlements totaling $6 million with two drug co-pay foundations.  According to the DOJ, the two charities – Patient Access Network Foundation and Good Days – “functioned not as independent charities, but as pass-throughs for specific pharmaceutical companies to pay Medicare patients taking their drugs.”   From the government’s perspective, the illegality of this arrangement is simple to explain: drug makers who sell to customers on Medicare cannot line the pockets of those patients with cash bonuses for buying drugs, and they also cannot get a third-party charity to do it for them.  But drug co-pay foundations serve an important purpose in delivering needed medication to people who cannot afford to pay, and drug companies are right to act charitably towards arguably their most critical constituents, the patients they serve.  As one of the pharma companies said in response to DOJ’s announcement regarding the settlements with co-pay foundations, the company “takes compliance very seriously and believes all patients deserve access to life-extending medicines prescribed by their physicians.”

The lessons in these cases continue to be that it is not always easy to spot what the government might later call fraud or illegal kickbacks, and therefore, an ounce of competent advice going into an arrangement is worth well more than the pounds of trouble an organization may face if the government comes calling later on.  Indeed, the charities involved in this latest settlement not only had to pay substantial cash amounts to resolve DOJ’s allegations, they now face three years of mandated “integrity agreements,” under which they have to take specific steps to ensure relationships with drug companies comply with the law.  Better to get a dose of good advice ahead of time than to have several years of government-mandated compliance monitoring down the road.

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