Massachusetts federal prosecutors today claimed that Teva Pharmaceuticals funneled $300 million from a pair of charitable foundations to subsidize Medicare copayments for a multiple sclerosis drug.
Teva Pharmaceuticals and Teva Neuroscience, the maker of Copaxone, simultaneously raised the drug’s price by 329%, allegedly violating the Anti-Kickback Statute and False Claims Act, according to the complaint filed by the U.S. Attorney’s Office in Boston.
The government alleges that Teva conspired with a specialty pharmacy, Advanced Care Scripts, Inc. (ACS), and two purportedly independent foundations, Chronic Disease Fund (CDF) and The Assistance Fund (TAF).
When a Medicare beneficiary obtains a prescription drug covered by Medicare Part B or Part D, the beneficiary may be required to make a co-payment, which can be substantial for expensive medications. The Anti-Kickback Statute prohibits pharmaceutical companies from offering or paying, directly or indirectly, any remuneration — which includes money or any other thing of value — to induce Medicare patients to purchase the companies’ drugs.
The government alleges that, from 2006 through at least 2015, Teva paid the two foundations well over $300 million, not as charity for MS patients generally, but with the intent and understanding that the foundations would use Teva’s money to cover the Medicare co-pays of patients taking Copaxone. During the same period, Teva raised the price of Copaxone from approximately $17,000 per year to over $73,000 per year. Meanwhile, because of Teva’s alleged kickbacks, many Medicare patients (and their doctors) had no reason to consider the drug’s ever-increasing cost, federal prosecutors said.
Here’s how it worked, according to the complaint:
- Teva effectuated its scheme through ACS, to which Teva referred virtually all Copaxone patients who faced Medicare co-pays for the drug.
- ACS, in turn, arranged for the patients to obtain Medicare co-pay coverage from the foundations and then reported back to Teva how many Copaxone patients were receiving co-pay coverage from each foundation.
- At the end of each year, Teva used information from ACS and the foundations to determine how much money each foundation would need to cover the Medicare co-pays of existing Copaxone patients for the following year, and Teva paid each foundation accordingly.
The government further alleges that, after the beginning of a year, when the foundations’ MS funds were often closed to new patients because the foundations had allocated all of their funding to existing patients, ACS would provide periodic reports to Teva on the number of new Copaxone patients awaiting Medicare co-pay assistance. When an ACS report showed a substantial number of Copaxone patients waiting, Teva would allegedly multiply the number of waiting patients by the foundation’s average grant amount for Copaxone patients, add the foundation’s administrative fee, and then send a corresponding payment to the foundation.
Just before sending the payment, Teva would notify ACS, which then would send a “batch file” of applications for all the waiting Copaxone patients to the foundation so that the foundation would act on those applications as soon as the fund re-opened, according to prosecutors. In this way, Teva and ACS allegedly ensured that Copaxone patients received the vast majority of the co-pay grants the foundations made whenever they re-opened their MS funds with money from Teva.
The government said it previously entered into settlement agreements with ACS, TAF and CDF.
“The government’s complaint today alleges that Teva used ostensibly independent charitable foundations as vehicles to pay hundreds of millions of dollars in kickbacks, all while raising the price of its drug, Copaxone, at a rate over 19 times the rate of inflation,” said Andrew E. Lelling, U.S. attorney for the District of Massachusetts, in a statement. “Teva’s alleged kickbacks undermined the Medicare program’s co-pay structure, which Congress created as a safeguard against inflated drug prices.”
Teva defended its efforts to ensure patient access to MS drugs and vowed to vigorously defend itself against the allegations.
“The company’s legacy multiple sclerosis patient assistance charity program was designed to support patients who needed important treatment options by appropriately providing charitable contributions to independent charitable foundations that helped patients obtain access to medicines, as prescribed by their physician,” Teva spokesperson Kelley Dougherty said in an email statement to Drug Discovery & Development. “This case brought by the Department of Justice regarding these charitable contributions only seeks to further restrict patients’ access to important medicines and healthcare.”