Foundations Resolve Allegations of Enabling Pharmaceutical Companies to Pay Kickbacks to Medicare Patients

BOSTON – The U.S. Attorney’s Office announced today that two foundations, Chronic Disease Fund, Inc. d/b/a Good Days from CDF (“CDF”), and Patient Access Network Foundation (“PANF”), have agreed to pay $2 million and $4 million, respectively, to resolve allegations that they violated the False Claims Act by enabling pharmaceutical companies to pay kickbacks to Medicare patients taking the companies’ drugs.

The government alleged that CDF and PANF worked with various pharmaceutical companies to design and operate certain funds that funneled money from the companies to patients taking the specific drugs the companies sold. These schemes enabled the pharmaceutical companies to ensure that Medicare patients did not consider the high costs that the companies charged for their drugs. The schemes also minimized the possibility that the companies’ money would go to patients taking competing drugs made by other companies. 

When a Medicare beneficiary obtains a prescription drug covered by Medicare Part B or Part D, the beneficiary may be required to make a partial payment, which may take the form of a co-payment, co-insurance, or deductible (collectively, “co-pays”). Congress included co-pay requirements in these programs, in part, to encourage market forces to serve as a check on health care costs, including the prices that pharmaceutical manufacturers can demand for their drugs. 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 law further prohibits third parties, such as co-pay foundations, from conspiring with pharmaceutical companies to violate the Anti-Kickback Statute. 

“According to the allegations in today’s settlements, CDF and PANF functioned not as independent charities, but as pass-throughs for specific pharmaceutical companies to pay kickbacks to Medicare patients taking their drugs,” said United States Attorney Andrew E. Lelling. “As a result, CDF and PANF enabled their ‘donors’ (the pharmaceutical companies) to undermine the Medicare program at the expense of American taxpayers.”

“OIG continues to be concerned by evidence indicating that foundations are not operating independently from their donors,” said Gregory E. Demske, Chief Counsel to the Inspector General. “Our Integrity Agreements promote such independence and require legal determinations about whether the foundations’ future operations of their assistance programs are compliant with the Anti-Kickback Statute.” 

“Today’s settlements are a warning to all pharmaceutical companies, foundations, and others who try to subvert the charitable donation process for their own financial gain at the expense of American taxpayers. Both the Chronic Disease Fund and the Patient Access Network used their status as charities to shield the illegal activities of pharmaceutical companies seeking to maximize profits,” said Joseph R. Bonavolonta, Special Agent in Charge of the FBI Boston Division. “The FBI and our partners will continue to hold organizations accountable, and to protect and preserve the Medicare system, and the taxpayers who fund it, from kickback schemes like these.”

The United States alleged that, from 2010 through 2014, CDF conspired with five pharmaceutical companies – Novartis, Dendreon, Astellas, Onyx, and Questcor – to enable them to pay kickbacks to Medicare patients taking their drugs.  It is further alleged that, from 2011 through 2014, PANF permitted four pharmaceutical companies – Bayer, Astellas, Dendreon, and Amgen – to use PANF as a conduit to pay kickbacks to Medicare patients taking their drugs.  Details of the conduct can be found in attached addendum.

The amounts of the settlements announced today were determined based on analysis of each foundation’s ability to pay after review of its financial condition.

CDF and PANF each entered a three-year Integrity Agreement (IA) with OIG as part of their respective settlements.  The IAs require, among other things, that the foundations implement measures designed to ensure that they operate independently and that their arrangements and interactions with pharmaceutical manufacturer donors are compliant with the law.  In addition, the IAs require compliance-related certifications from the Boards of Directors and detailed reviews by independent review organizations.  

U.S. Attorney Lelling, HHS-OIG Chief Counsel Demske and FBI SAC Bonavolonta made the announcement today. The U.S. Postal Inspection Service also assisted with the investigation. The matter was handled by Assistant U.S. Attorneys Gregg Shapiro and Abraham George, of Lelling’s Affirmative Civil Enforcement Unit.

ADDENDUM

CDF’s PNET Co-pay Fund for Novartis. In May 2011, Afinitor, a Novartis product, was approved to treat progressive neuroendocrine tumors of pancreatic origin (“PNET”). In 2012, Novartis asked CDF to open a co-pay fund to cover Afinitor co-pays for PNET patients. At that time, CDF knew that Sutent, a Pfizer drug, also was approved to treat PNET. In August 2012, at Novartis’ request, CDF opened a supposed “PNET” fund. The fund, which Novartis financed alone, covered co-pays only for Afinitor; it did not cover co-pays for Sutent, the other approved PNET drug.

CDF’s Provision of Data to Dendreon for the mCRPC Fund. Provenge, a Dendreon product, is an immunotherapy that the FDA approved in April 2010 for treatment of metastatic castration resistant prostate cancer (“mCRPC”). In or about January 2010, Dendreon contacted CDF to request that CDF create a mCRPC fund. At that time, Provenge’s principal competitor therapy was Taxotere, a less costly injectable therapy indicated for treatment of various types of cancer. CDF opened its mCRPC fund in June 2010, and, from that time until August 2011, Dendreon alone financed CDF’s mCRPC fund. From June 2010 through 2011, at Dendreon’s request and on multiple occasions, CDF provided Dendreon with data concerning the number of Provenge patients receiving money from CDF’s mCRPC fund, the number of Taxotere patients receiving money from the fund, and the average amounts of money the fund was providing to Provenge and Taxotere patients, respectively. In May 2011, following the FDA approval of Zytiga, an oral therapy indicated for treatment of mCRPC, CDF also provided Dendreon with information concerning the number of Zytiga patients receiving money from CDF’s mCRPC fund. CDF’s provision of this information made it possible for Dendreon to confirm that CDF was using Dendreon’s money primarily to cover co-pays for Provenge, even though other mCRPC drugs were on the market.

CDF’s ARI Co-pay Fund for Astellas. Xtandi, an Astellas product, is indicated for treatment of mCRPC for patients who have failed chemotherapy. After the launch of Xtandi in September 2012, Astellas provided funding for the mCRPC fund at CDF. Xtandi is an androgen receptor inhibitor (“ARI”); none of the other major mCRPC drugs is an ARI. In May 2013, Astellas contacted CDF to request the opening of an ARI fund, which would cover mCRPC patients’ co-pays for ARIs, but not for other mCRPC drugs. CDF knew this meant that Astellas was seeking to earmark money for Xtandi patients, and not others, because Xtandi was the dominant ARI drug for treatment of mCRPC. On July 1, 2013, at Astellas’ request, CDF opened an ARI fund. Astellas alone financed CDF’s ARI fund. As CDF intended, Xtandi patients received nearly all of the money that the fund disbursed.

CDF’s Multiple Myeloma Travel Fund for Onyx. In July 2012, Onyx (now owned by Amgen) received approval to market Kyprolis as a third-line treatment for multiple myeloma.  Kyprolis must be infused at a health care facility. At around the time of the approval, Onyx asked CDF to create a fund that, ostensibly, would cover health care related travel expenses for patients taking any multiple myeloma drug. At Onyx’s request, CDF created the fund, which Onyx alone financed. Internally, CDF at times referred to the fund as the “Kyprolis Travel” fund, and, in fact, it functioned primarily to cover travel expenses for patients taking Kyprolis.

CDF’s Provision of Data to Onyx for the Multiple Myeloma Co-Pay Fund. CDF operated a fund that covered co-pays for multiple myeloma drugs, including Kyprolis and several other drugs. CDF’s multiple myeloma co-pay fund received financing from several pharmaceutical manufacturers. In 2013, CDF provided Onyx with data detailing the amounts CDF had spent, and anticipated spending, on Kyprolis co-pays. This enabled Onyx to view CDF’s funding requests as seeking amounts necessary to pay Kyrpolis co-pays but not the co-pays of any other multiple myeloma drug. In 2013, after receiving this information, Onyx paid CDF just enough to cover CDF’s anticipated spending on co-pays for Kyprolis patients.

CDF’s MS, Lupus, and RA “Exacerbation” Funds for Questcor. In 2010, 2011, and 2012, respectively, Questcor (now owned by Mallinkcrodt), the maker of Acthar Gel, approached CDF and requested that CDF open separate funds for “exacerbations” (i.e., flare-ups) of multiple sclerosis, lupus, and rheumatoid arthritis, respectively. CDF opened these “exacerbation” funds, and Questcor alone financed them. By design, the multiple sclerosis “exacerbation” fund did not cover drugs (other than Acthar) that treated multiple sclerosis, the lupus “exacerbation” fund did not cover drugs (other than Acthar) that treated lupus, and the rheumatoid arthritis “exacerbation” fund did not cover drugs (other than Acthar) that treated rheumatoid arthritis. After establishing the funds, CDF provided reports to Questcor that enabled Questcor to determine how much money CDF already had spent on Acthar patients and how much more money CDF would need to cover the Acthar co-pays for patients Questcor referred to CDF.   

PANF’s Prostate Cancer Subfunds. In March 2010, PANF opened a fund that covered co-pays for patients taking any drug that treated prostate cancer. In September 2012, PANF opened a fund that covered co-pays for patients taking drugs that treated mCRPC. PANF’s mCRPC fund covered a number of drugs, including Xofigo (a Bayer drug), Xtandi (an Astellas drug), and Provenge (a Dendreon drug), as well as competing drugs made by other companies. After PANF opened its mCRPC fund, Bayer, Astellas, and Provenge worked with PANF to create smaller funds, with each functioning primarily, if not exclusively, to cover the drug of the single company that financed each fund.

• The RIT subfund for Bayer. Xofigo is an alpha particleemitting radioactive therapeutic agent that the FDA approved to treat mCRPC on May 15, 2013. None of the other major drugs to treat mCRPC is radioactive. Prior to the approval of Xofigo, Bayer approached PANF about creating a fund that would cover only radioactive drugs for mCRPC. On May 16, 2013, one day after the FDA approved Xofigo, PANF opened a fund called Radioisotope Treatment of Metastatic Castrate Resistant Prostate Cancer (“RIT”). Bayer alone financed PANF’s RIT fund, and Xofigo patients received nearly all of the money the fund disbursed.
• The ARI subfund for Astellas. After hearing about PANF’s RIT fund, Astellas contacted PANF about creating an ARI fund that would cover only ARI drugs for mCRPC. Astellas alone financed PANF’s ARI fund, and Xtandi patients received the great majority of the money the fund disbursed.
• The GU subfund for Dendreon. Approximately one month after the opening of PANF’s RIT fund, PANF and Dendreon began discussions about PANF creating a fund that would cover copays only for immunotherapy treatments for mCRPC. On August 2, 2013, PANF opened a fund called Immunotherapy for Genitourinary Cancer (“GU”). Dendreon alone financed PANF’s GU fund, and Provenge patients received nearly all of the money the fund disbursed.

PANF’s SHPT Fund for Amgen. Sensipar, an Amgen product, is approved to treat secondary hyperparathyroidism (“SHPT”). The FDA also has approved other drugs to treat SHPT. In September 2011, Amgen approached PANF about creating an SHPT fund. PANF and Amgen then worked together to determine the fund’s coverage parameters so that it would cover only Sensipar. In November 2011, PANF launched a SHPT fund with Amgen alone providing the financing. Until June 2014, Sensipar patients received all of the money PANF’s SHPT fund disbursed.