Posted on April 04 2019
As you might recall earlier this week, I decided to jump into the deep end of the Big Pharma pool of corruption, enterprise and other unsavory behavior. In doing so I opted to focus on Norvartis AG, given there was a recent Court ruling, see entry here.
Mini Glossary & hyperlinks
Corporate Integrity Agreement (CIA)
Department of Justice (DOJ)
Office Of Inspector General (OIG)
Health and Human Services (HHS)
Securities and Exchange Commission (SEC)
Jazz Pharmaceuticals plc (JAZZ)
Jazz Merger and Acquisitions Of (JAZZ M&A)
Lundbeck LLC (LLLC)
Alexion Pharmaceuticals Inc. (Alexion)
Civilian Health and Medical Program (ChampVA)
Oh Shittlestix - Spicy snark for Oh Dear
What you may not know is earlier today the DOJ announced:
Three Pharmaceutical Companies Agree to Paya Total of Over $122 Million to Resolve Allegations. That They Paid Kickbacks Through Co-Pay Assistance Foundations
The DOJ OPA release reads in part:
...have agreed to pay a total of $122.6 million million to resolve allegations that they each violated the False Claims Act by illegally paying the Medicare or Civilian Health and Medical Program (ChampVA) copays for their own products, through purportedly independent foundations that the companies used as mere conduits.
When a Medicare beneficiary obtains a prescription drug covered by Medicare, the beneficiary may be required to make a partial payment, which may take the form of a copayment, coinsurance, or a deductible (collectively “copays”). Similarly, under ChampVA, patients may be required to pay a copay for medications.
Congress included copay requirements in the Medicare program, in part, 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 a pharmaceutical company from offering or paying, directly or indirectly, any remuneration — which includes money or any other thing of value — to induce Medicare or ChampVA patients to purchase the company’s drugs. This prohibition extends to the payment of patients’ copay obligations.
ChampVA is a program for Veteran’s Dependents and it is administered by the Veterans Affairs. I am actually old enough to remember ChampusCare aka ChampUS. Which was a legacy Department Of Defense (DOD) healthcare program for DOD Dependents. It is now known as TriCare. As in I remember my parents taking us to Ft Myer and occasionally Walter Reed for specialized care, when needed. Needless to say seeing the DOJ disclose that these three Pharma companies agreed to pay millions in dollars to settle the “ongoing investigation into Kick-back violations” is rather disappointing.
As many of you know. I’ve long held that SEC filings contain a lot of weighty and factually based disclosures. Therefore it should not come as any suprise that one of the first steps I take when researching is: review any and all SEC filings. For example JAZZ SEC Form 10Q, which was filed in March 2016, I now refer you to pages 21, 66, 72, found here (it’s a link to JAZZ’s Corporate Investors Page), which reads in part:
In May 2016, we received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts requesting documents related to our support of 501 (c)(3) organizations that provide financial assistance to Medicare patients, and, for Xyrem, documents concerning our provision of financial assistance toMedicare patients. Other companies have disclosed similar inquiries. We intend to cooperate with this subpoena. We are unable to predict how long thisinvestigation will continue or its outcome, but it is possible that we will incur significant costs in connection with the investigation, regardless of theoutcome.
JAZZ HHS-OIG CIA 2007 to Present:
What you may be unaware of is, JAZZ formed in 2003, four years later the HHS-OIG entered into a CIA with JAZZ, (found here) the 2007-CIA has a term of five years. See page 2 for term, which reads in part:
Jazz under this CIA shall be five years from the effective date of this CIA, unless otherwise specified. Theeffective date shall be the date on which the final signatory of this CIA executes this CIA (Effective Date). Each one-year period, beginning with the one-year period following..,July 1,2007 shall be referred to as a "Reporting Period."
The terms and conditions of the 2007 JAZZ HHS-OIG CIA are pretty straightforward. With respect to compliance officer(s) and reporting requirements. Based on a plain reading of the 2007 CIA, this expired on or about July 2, 2013.
JAZZ & HHS-OIG 2019 CIA, found here. In large part this CIA is nearly identical to the 2007 CIA (which expired in 2013).
The only distinguishably I can determine starts on page 17 thru 20. Whereas the HHS-OIG now mandates that JAZZ establishes Independent Charity Patient Assistance Program Activities, with a copious amount of restrictions, controls and mandatory reporting:
As further detailed on pages 18 thru 20:
Jazz shall continue the Independent Charity PAP policies, procedures, and practices described below ( or equivalent processes) throughout the term of the CIA, and shall notify 010 in writing at least 60 days prior to the implementation of any modifications to such policies, procedures, and practices.
The Government went on to explain JAZZ’s product Xyrem, classified as a narcolepsy medication with Gamma Hydroxybutyrate (GHB):
”a central nervous system depressant and controlled substance—as its main active ingredient. The government alleged that, in 2011, Jazz asked a foundation to create a fund that would pay the copays of Xyrem Medicare patients and that the foundation agreed to establish a “Narcolepsy Fund,” to which Jazz became the sole donor.
The government alleged that Jazz knew that, although Xyrem accounted for a small share of the overall narcolepsy market, the fund almost exclusively used Jazz’s donations to pay copays for Xyrem and required non-Xyrem patients on competing products to obtain a denial letter from another assistance plan before helping them. The government further alleged that, in conjunction with establishing this fund, Jazz made Medicare patients ineligible for Jazz’s free drug program and instead referred Xyrem Medicare patients to the foundation, enabling Jazz to generate revenue from Medicare and induce purchases of the drug, rather than continuing to provide these patients with free drugs. Meanwhile, Jazz raised the price of Xyrem by over 150 percent from 2011 through the end of the relevant time period.
Jazz also sold Prialt, an injectable severe chronic pain medication.
The government alleged that Jazz asked the same foundation to create a fund ostensibly to assist patients with the co-pays of any severe chronic pain drugs, but which, in practice, almost exclusively paid Prialt Medicare copays.The government alleged that Jazz was also aware that the fund did not appear on the foundation’s website, thereby minimizing the number of non-Prialt patients seeking assistance from the fund. Jazz has agreed to pay $57 million to resolve the government’s allegations. JAZZ Cares Foundation found here.
I don’t mean to sound callous JAZZ Pharmaceuticals has been in business since 2003, with nearly sixteens years in “business” this is now the second CIA. Meaning one could argue that JAZZ has repeatedly flouted our laws that regulate Pharmaceuticals and repeatedly violated kick-back laws. With the term of their second CIA and tens of millions paid in fines, that means this company has 10 years operating under strict regulatory controls. I haven’t even touched my FDA, NIH and CDC files because they are radioactive. Apologies I digressed, again.
The DOJ OPA release essentially chapter and versus of why Competition and actual enforcement of regulatory and anti-trust statutes, forthwith. Frankly by the second paragraph I felt disgusted. The DOJ-OPA reads in part:
Lundbeck sells Xenazine, the only drug that was approved to treat chorea associated with Huntington’s disease until a generic version became available until 2015. The government alleged that Lundbeck was the sole donor and made millions in payments to a fund at a foundation that ostensibly provided financial support only for patients with Huntington’s Disease.
However, Lundbeck allegedly referred Xenazine patients with many other conditions to this foundation, which then paid the Xenazine copays for these unapproved uses from its Huntington’s Disease fund. The government further alleged that, in June 2014, after the foundation determined that its Huntington’s Disease fund would no longer pay the copays of patients taking Xenazine for non-Huntington’s disease uses, Lundbeck agreed to repurpose some of its prior donations to the Huntington’s Disease fund to a “general fund” at the foundation for the purpose of paying these patients’ Xenazine copays, and made subsequent “unrestricted” payments to the foundation with the understanding that the foundation would use these payments to pay Xenazine copays for these same patients. Lundbeck allegedly asked the foundation whether there was a “risk” that this practice would be viewed as not compliant with the foundation’s HHS-OIG Advisory Opinion, and the foundation allegedly replied that “[t]hey don’t know what we use the general fund for.”
The government also alleged that, at the time it was engaged in the foregoing conduct, Lundbeck had a policy of not permitting Medicare or ChampVA patients to participate in its free drug program for Xenazine, which was open to other financially needy patients, even if those Medicare or ChampVA patients could not afford their copays for Xenazine. Instead, in order to generate revenue from Medicare and ChampVA and to induce purchases of Xenazine, Lundbeck allegedly referred financially needy non-Huntington’s Disease Xenazine patients to the foundation, which resulted in claims to Medicare and ChampVA to cover the cost of the drug. Lundbeck has agreed to pay $52.6 million to resolve the government’s allegations.
Although none of this should come as a surprise because in June of 2018 the company issued the following press release:
More recently Lundbeck LLC also disclosed (or reiterated) the DOJ Settlement in their February 2019 notice to shareholders, I now refer you to page 11 of their February 2019 report, found here.
Lundbeck & HHS-OIG 2019 CIA is largely similar to JAZZ, both in terms of scope (five years) and substance (reporting and compliance). You can read the 50,page 2019 CIA here:
Lundbeck shall continue the Compliance Program throughout the term of the CIA and shall do so in accordance with the terms set forth below. Lundbeck may modify the Compliance Program as appropriate. However, at a minimum, Lundbeck shall ensure that during the term of this CIA, it shall maintain a compliance program to comply with the obligations set forth in this CIA.
I think what’s most problematic about Lundbeck is they already have the sole market-share with 100% for Huntington’s Disease. But clearly that wasn’t enough for Lundbeck that they purposely precluded Medicare and ChampVA holders from participating in their free RX program. I don’t know about you but the greed is just insidious and arrogant. Particularly when you read Lundbeck’s 2019 financials, they are making billions a year in profit and it is unseemly that they would violate our Anti-Kickback statutes but then decided to target certain Americans who may in fact not have the funds to pay for the copay of their RX. Frankly it’s just evil and gross
and last but certainly not least:
Unlike the other two big Pharma entities Alexion...I had to read the SEC disclosures three times becuase it’s like the trifecta of the DC alphabet soup all up in your books. Oh you think I’m being slightly dramatic? I now refer you to page 33 (numbered 22 in their SEC filing). For the record this is why I always go to the SEC filings:
In May 2015, we received a subpoena in connection with an investigation by the Enforcement Division of the U.S. Securitiesand Exchange Commission (SEC) requesting information related to our grant-making activities and compliance with the ForeignCorrupt Practices Act (FCPA) in various countries.
In addition, in October 2015, Alexion received a request from the U.S.Department of Justice (DOJ) for the voluntary production of documents and other information pertaining to Alexion's compliance with FCPA.
The SEC and DOJ also seek information related to Alexion’s recalls of specific lots of Soliris and related securitiesdisclosures. Alexion is cooperating with these investigations. At this time, Alexion is unable to predict the duration, scope oroutcome of these investigations. While it is possible that a loss related to these matters may be incurred, given the ongoing natureof these investigations, management cannot reasonably estimate the potential magnitude of such loss or range of loss, if any.
The DOJ-OPA - doesn’t explain one distinction with Alexion. They recently (my assumption is it was voluntary in nature) a rather extensive reorganization. My understanding is that was a mitigating factor that provided a reasonable predicate for Alexion and the HHS-OIG to not enter in to a CIA. But the fact Alexion’s SEC filings from December 2016 to present still have the aforementioned disclosures. My understanding is Alexion might (operative word so be skeptical) be on the hook for bribery violations. That’s my way of saying, stay tuned because I do not think this is the last we will hear from the SEC or DOJ regarding Alexion. Although Alexion paid $13million to settle the claims asserted below:
Alexion sells Soliris, which, from Jan. 1, 2010, through June 30, 2016, was indicated for certain uses to treat patients with paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS). The cost of Soliris, based upon its list price and indicated dosing recommendation, can be approximately $500,000 per year.
The government alleged that Alexion made donations to a “Complement-Mediated Disease” (CMD) fund at a foundation to pay the Medicare copay obligations of patients taking Soliris and to induce those patients’ purchases of Soliris. Alexion allegedly knew that the price it set for Soliris could pose a barrier to patients’ purchases of it. In particular, the government alleged that Alexion approached the foundation in January 2010 to request that it create a fund to provide financial assistance to Soliris patients, including by paying patients’ Soliris Medicare copays and other medical expenses for Soliris patients.
Over the next several months, Alexion and the foundation allegedly discussed the coverage parameters for the fund, including Alexion’s desire that the foundation “not support a patient with any of these [CMD] diagnoses for other reasons tha[n] Soliris therapy.” After the fund opened, Alexion—the sole donor to the fund—allegedly understood that the foundation’s provision of financial assistance to a patient was contingent on the patient taking Soliris. Alexion allegedly noted internally that it needed to be diligent in letting the foundation know if a patient had stopped taking Soliris so that Alexion’s donations would not be used on patients who were not starting or maintaining Soliris therapy.
HHS-OIG Advisory Opinions 2015/2016
In 2014 and into late 2015 the HHS-OIG issued an advisory opinion (which was officially rescinded in November 2017, per the watermark of the opinion). This was a modification to a 2006 HHS-OIG 06-04 (original found here). Subsequently thereafter, HHS-OIG released updated recent opinions adding clarification to how the Government views 501(c)(3) use of funds to pay prescription copays where patients may be unable to afford. Essentially it is not permissible. Full Stop.
My point is our Healthcare System specifically Big Pharma needs to be better regulated and settlements like this are great. But the question remains why are our lawmakers so scared of Big Pharma? At any rate I hope this entry is helpful and it starts a difficult conversation about Big Pharma, anti-trust and when do we address the sky rocking prices of drugs along with what appears to be multiple monopolies? I don’t have the answers but there’s a long over due discussion on why can a single Pharmaceutical Company charge $50,000 for potentially a life saving drug.
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