Drugmakers settle with DOJ over claims they manipulated Medicare program

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Three drugmakers settled with the Department of Justice for a total of $122.6 million over allegations they violated a federal law that prevents pharmaceutical firms from paying copays for Medicare patients prescribed their treatments, the agency said on Thursday.

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When purchasing drugs, enrollees in the Medicare program are sometimes required to pay out-of-pocket costs, including copays. Congress enacted the False Claims Act to try to prevent pharmaceutical companies from dramatically increasing the price of treatments or gaming Medicare to bolster sales by blocking those firms from paying those costs.

Still, the practice continues. The Justice Department alleged that Jazz Pharmaceuticals, Lundbeck LLC and Alexion Pharmaceuticals violated the statute by using independent, patient assistance foundations as conduits to pay Medicare for those out-of-pocket costs.

"This misconduct is widespread, and enforcement will continue until pharmaceutical companies stop circumventing the anti-kickback laws to artificially bolster high drug prices, all at the expense of American taxpayers,” U.S. Attorney Andrew Lelling said in a statement.

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As part of the settlement, Jazz and Lundbeck each agreed to five-year agreements that require the companies to ensure the patient assistance programs that may receive money from the drugmakers are operated independently.

The Justice Department said Alexion has already made “sweeping and fundamental organizational changes,” according to Gregory Demske, chief counsel to the agency’s inspector general.

“The changes included hiring a new eight-member executive leadership team and changing half of the members of its Board of Directors. In addition, 40 percent of Alexion's employees are new and the company relocated its corporate headquarters,” he said in a statement.

TickerSecurityLastChange%Chg
JAZZJAZZ PHARMACEUTICALS PLC134.83+3.44+2.62%
ALXNALEXION PHARMACEUTICALS INC.110.85+1.81+1.66%
LUNn.a.n.a.n.a.n.a.

In 2011, Jazz allegedly requested that an outside foundation launch a special fund that would pay the copays for Medicare patients prescribed narcolepsy treatment Xyrem. The company then prohibited some patients from enrolling in their free drug program, instead referring them to the payment assistance group – ultimately increasing sales for the Ireland-based firm.

“Meanwhile, Jazz raised the price of Xyrem by over 150 percent from 2011 through the end of the relevant time period,” the DOJ said.

At Lundbeck – which manufactures Xenazine, the only approved drug to treat ailments associated with Huntington’s disease – the agency claimed the Denmark-based company funneled millions of dollars to a patient-support foundation that ultimately was used to pay for copayments for the treatment.

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Alexion faced similar allegations related to Soliris, a drug to treat a rare blood disorder that costs roughly $500,000 per year. The New Haven, Connecticut-based company allegedly asked a foundation it funded to cover out-of-pocket expenses for patients that take Soliris.

“Alexion allegedly knew that the price it set for Soliris could pose a barrier to patients' purchases of it,” the DOJ said.