United Therapeutics in Settlement Talks With Justice Department -- Update

Drugmaker United Therapeutics said Thursday it has set aside $210 million for a possible settlement of a U.S. Justice Department investigation of whether the company's contributions to patient-assistance charity groups violate federal laws against kickbacks and false claims.

United Therapeutics, a Silver Spring, Md., maker of drugs to treat pulmonary arterial hypertension, is in settlement talks with the Justice Department to resolve the investigation, the company said in a filing with the Securities and Exchange Commission. The company said it believes it could successfully defend itself against any action the Justice Department might bring.

United Therapeutics is one of at least nine drug companies being investigated by the Justice Department over their contributions to nonprofit groups that help patients pay their out-of-pocket costs for drugs, including patients in the federal Medicare program for the elderly, according to companies' regulatory filings. Others receiving subpoenas in the probe since 2015 include Johnson & Johnson, Pfizer Inc. and Biogen Inc. The companies have said they are cooperating with the investigations.

United Therapeutics, which had revenue of $1.6 billion last year, is the first of the companies to disclose a potential settlement. The company's SEC filing said any settlement may include a corporate-integrity agreement with the federal government, a pact that typically requires companies to adhere to certain business practices for several years.

The company said it received a subpoena from the Justice Department in May 2016 seeking documents about its support of nonprofit organizations that provide financial assistance to patients taking its medicines. The company hasn't identified the organizations.

A United Therapeutics spokesman declined to comment beyond what the company disclosed in its SEC filing and its second-quarter earnings press release.

A Justice Department spokeswoman declined to comment.

Nonprofit organizations, sometimes centered around a specific disease, provide financial assistance to reduce patients' out-of-pocket costs, and drug companies have donated to the charities.

This has triggered scrutiny by the federal government because patients covered by federal health-insurance programs such as Medicare have received the assistance. The federal anti-kickback law prohibits companies from making payments intended to induce the use of a drug or medical product that is reimbursed by federal health programs.

The Office of Inspector General of the U.S. Department of Health and Human Services in 2014 issued a bulletin saying that if a company's donation to a patient-assistance charity is intended specifically to induce the charity to pay for patients' use of the company's drugs, it could be a violation of the anti-kickback law.

The OIG said drug companies' donations to charities can be appropriate if the charity is sufficiently independent in deciding which patients receive the financial help, or how much.

But the OIG said it had concerns that companies were supporting charities for patients with narrowly defined diseases, so that the charities were primarily supporting payments for the donor companies' products.

The heightened scrutiny of patient-assistance charities has hit some drugmakers' sales, as manufacturers have reduced donations to the charities and instead given away certain medicines free.

United Therapeutics said Thursday it reduced its grants to nonprofit patient-assistance programs by $32 million during the first six months of 2017. The company didn't say why it decreased the grants.

United Therapeutics markets four drugs that treat pulmonary arterial hypertension, which is high blood pressure in arteries feeding the lungs. Sales of its biggest drug, Remodulin, dropped 1% to $157.7 million for the second quarter.

Write to Peter Loftus at peter.loftus@wsj.com

(END) Dow Jones Newswires

July 27, 2017 14:12 ET (18:12 GMT)