Fourth Foundation Resolves Allegations that it Conspired with Pharmaceutical Companies to Pay Kickbacks to Medicare Patients

BOSTON – The U.S. Attorney’s Office announced today that Patient Services, Inc. (“PSI”), a foundation based in Midlothian, Va., has agreed to pay $3 million to resolve allegations that it violated the False Claims Act by enabling certain pharmaceutical companies to pay kickbacks to Medicare patients taking the companies’ drugs.

The government alleged that PSI 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 who were not taking the companies’ drugs. 

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.

“Pharmaceutical companies cannot use foundations to funnel drug co-payments disguised as routine charitable donations, all to prop up excessive drug prices. PSI allegedly operated as a vehicle for specific pharmaceutical companies essentially to pay kickbacks at the ultimate expense of the American taxpayers who support the Medicare program,” said United States Attorney Andrew E. Lelling. “We will continue to pursue this kind of enforcement until the practice disappears.”

“The Department is committed to ensuring that foundations are not used as mere conduits to funnel kickbacks from pharmaceutical companies to Medicare patients and to increase company profits while avoiding an important cost-control aspect of the Medicare program,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division.  “We will continue to combat unlawful kickback arrangements and their pernicious influence on our health care system.” 

“Few things undermine public confidence quite like finding out the pharmaceutical companies and non-profits they entrust with their health and financial peace of mind have been playing fast and loose with the law. Schemes like these, and the individuals and organizations who perpetrate them, are an affliction on our health care systems,” said Joseph R. Bonavolonta, Special Agent in Charge of the FBI Boston Division. “This settlement demonstrates the FBI’s resolve to ensure that patients receive care that is based solely on sound medical judgment, and not compromised by kickbacks.”

“Foundations operating patient assistance programs should operate with integrity and act independently from their donors,” said Gregory E. Demske, Chief Counsel to the Inspector General. “Our Integrity Agreement is designed to promote such independence and monitor the foundation to reduce the risk of future kickbacks.”

The United States alleged that PSI conspired with three pharmaceutical manufacturers – Insys, Aegerion, and Alexion – to enable them to pay kickbacks to Medicare patients taking their drugs. Details of the alleged conduct can be found in attached addendum.

The amount of the settlement announced today was determined based on analysis of PSI’s ability to pay after review of its financial condition.

PSI entered a three-year Integrity Agreement (IA) with HHS-OIG as part of the settlement. The IA requires, among other things, that PSI implement measures designed to ensure that it operates independently and that its arrangements and interactions with pharmaceutical manufacturer donors are compliant with the law. In addition, the IA requires compliance-related certifications from PSI's Board of Directors and detailed reviews by an independent review organization.

PSI is the fourth foundation to settle allegations of kickbacks. In total, the four foundations (PSI, The Assistance Fund, Chronic Disease Fund, and Patient Access Network Foundation) have paid $13 million. In addition, the U.S. Attorney’s Office has collected more than $840 million in total from eight pharmaceutical companies (United Therapeutics, Pfizer, Actelion, Jazz, Lundbeck, Alexion, Astellas and Amgen) to resolve allegations that they used third-party foundations as instruments for kickbacks.

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. Attorney Gregg Shapiro, of Lelling’s Affirmative Civil Enforcement Unit, and Trial Attorneys Sarah Arni and Augustine Ripa, of the Department of Justice’s Civil Division.

ADDENDUM

PSI’s Breakthrough Cancer Pain Fund.  In late 2013, PSI and Insys began discussing a potential copayment assistance fund for Subsys, a sublingual form of fentanyl, a powerful opioid painkiller. Subsys was approved for the treatment of breakthrough cancer pain in opioid-tolerant patients. PSI worked with Insys to create a budget for the “Breakthrough Cancer Pain” fund.  Insys was the only donor to the fund. PSI provided Insys, through the Insys Reimbursement Center, with access to a “referral portal,” where Insys could see the status of each patient that it referred to PSI, including whether that patient had received copay assistance from PSI and the amount of the assistance. PSI did not provide access to the referral portal to other manufacturers of fentanyl products that did not donate to the fund. PSI knew that Insys was referring patients to the Breakthrough Cancer Pain fund who did not have cancer, but PSI stated that it would only prevent “off-label use…if the Donor wants us to.” PSI provided Insys with monthly “invoices” to cover the patients who had received assistance from PSI. PSI worked to avoid covering patients taking fentanyl products other than Subsys, noting that PSI “cannot allow them to deplete funds from INSYS.”

PSI’s HoFH Fund.  Aegerion sold Juxtapid, which is approved to treat patients with homozygous familial hypercholesterolemia (“HoFH”). In 2013, at Aegerion’s request, PSI created a fund, supported only by Aegerion donations, for HoFH. PSI represented to Aegerion that “it makes more sense to have industry provide a very small amount of funding [in the form of donations for copayment coverage] to gain a reimbursement vehicle rather than give compassionate product.” PSI’s HoFH fund allowed Aegerion to pay for Medicare patients’ copayments to eliminate any price sensitivity to physicians prescribing and patients taking Juxtapid. Aegerion participated in establishing the patient eligibility criteria that PSI used to cover the copayment obligations of patients taking Juxtapid.

PSI’s CMD Fund.  Alexion sells Soliris, an intravenously administered complement inhibitor. From Jan. 1, 2010, through June 30, 2016, Soliris was indicated for the treatment of patients with paroxysmal nocturnal hemoglobinuria (“PNH”) to reduce hemolysis and for the treatment of patients with atypical hemolytic uremic syndrome (“aHUS”) to inhibit complement-mediated thrombotic microangiopathy. Alexion approached PSI in January 2010 to request that PSI create a fund to provide Soliris patients with financial assistance, such as coverage for Medicare copays for Soliris, health insurance premiums, infusion and nursing services, and travel expenses. Over the next several months, Alexion and PSI discussed the coverage parameters that Alexion desired for the fund, including Alexion’s desire that PSI “not support a patient with any of these diagnoses for other reasons tha[n] Soliris therapy.” PSI opened an orphan disease fund entitled Complement Mediated Diseases (“CMD”) to provide assistance to patients taking Soliris. Except in rare instances, PSI provided financial assistance from the CMD fund only if a patient was taking Soliris. PSI provided Alexion with access to PSI’s referral portal software, through which PSI reported information back to Alexion confirming the specific Soliris patients who were approved for copay or other financial assistance from PSI and through which PSI detailed payments to those patients.