Pfizer lawsuit could legalize Medicare co-payments and spark a sales gold rush


Three years ago, pharmaceutical giant Pfizer paid $ 24 million to settle federal accusations that it paid kickbacks and hyped sales by reimbursing Medicare patients for out-of-pocket drug costs.

By making prohibitively expensive drugs virtually free to patients, the company encouraged them to use Pfizer’s drugs, even though the price of one of those drugs covered by Medicare and Medicaid soared 44% to $ 225,000 a year, the Justice Department said.

Pfizer is now suing Uncle Sam to legalize essentially the same practice it was accused of three years ago – a militant response to federal crackdowns that have accused a dozen pharmaceutical companies of similar actions.

Pfizer’s victory could cost taxpayers billions of dollars and erase important controls over pharmaceutical marketing after decades of regulatory erosion and soaring drug prices, health policy analysts said. A federal judge’s decision is expected any day.

“If it is legal for Pfizer, Pfizer will not be the only pharmaceutical company to use it, and in fact there will be a gold rush,” government lawyer Jacob Lilliwhite said last month.

Pfizer’s legal argument is “aggressive,” said Chris Robertson, professor of health law at Boston University. “But I think there’s such a political tailwind behind them” because of the pain in the wallet over prescription drugs – even though it’s caused by the pharmaceutical manufacturers. Pfizer’s message, “We’re just trying to help people afford to buy drugs,” is pretty compelling, he said.

That’s not all that works in Pfizer’s favor. Courts and regulations have promoted pharmaceutical activity ever since the FDA authorized limited television advertisements for drugs in the 1980s. Other companies of all kinds have also gained freedom of speech, allowing aggressive marketing and political influence that was unthinkable decades ago, according to legal scholars.

Among other legal arguments, Pfizer initially argued that the current regulation violates its First Amendment speech protection, essentially saying that it should be allowed to communicate freely with third-party charities to provide direct patient care.

“It’s nice to know that, as outlandish as they seem, there is widespread support for such claims in many courts,” said Michelle Mello, professor of law and medicine at Stanford University. “Pharmaceutical companies are likely to recognize that there is a trend towards greater recognition of commercial expression rights in the courts.”

Pfizer’s lawsuit in the Southern District of New York seeks a judge’s permission to directly reimburse patients for two of its heart failure drugs, each costing $ 225,000 a year. An outside administrator could use Pfizer’s premiums to cover Medicare co-payments, deductibles, and co-insurance for these drugs, which would otherwise cost patients about $ 13,000 a year.

Allowing pharmaceutical companies to put money directly into patients’ pockets to pay for their own expensive drugs “really encourages people to buy a particular product” rather than buying a cheaper or more effective alternative, said Stacey Dusetsina, assistant professor of health policy at Vanderbilt. University. “It’s kind of defining a rollback.”

Government officials warned against such payments since the launch of Medicare Part D drug benefits in 2006. Pharmaceutical companies usually help privately insured patients with cost-sharing through coupons and other means, but private carriers can negotiate a total price.

Since Congress did not give Medicare any control over the price of prescription drugs, the fact that patients bear even a fraction of the cost is the only economic force that protects against unrestricted price increases and industry profits at the expense of taxpayers.

At the same time, however, regulators have allowed the industry to help co-pay patients by channeling money through external charities – but only as long as charities “conscientious, independent “organizations that do not match drug manufacturers’ money and specific drugs.

The Justice Department said several charities have flagrantly violated this rule in recent years by colluding with pharmaceutical companies to subsidize certain drugs. A dozen companies have paid more than $ 1 billion to settle charges of violating kickbacks.

Pfizer set up an in-house fund in one of its charities, the Patient Access Network Foundation, to cover patients’ costs for a heart arrhythmia drug at the exact same time as it was increasing its wholesale cost from $ 220 to $ 317 for a 40-capsule pack. Ministry of Justice said… The government said Pfizer referred Medicare patients who needed the drug to the PAN Foundation.

Under such agreements, every $ 1 million donated through charity “can bring up to $ 21 million.[illion] for a sponsoring company funded by the US government, wrote Citi pharmaceutical stock analyst Andrew Baum in 2017.

Pfizer settled the case, saying it was not an admission of wrongdoing, but a consequence of its “desire to leave this legal issue behind us.”

PAN Foundation and three Another charity organisations also struck deals to resolve allegations that they act as banned patient care channels for several pharmaceutical companies. One organization, the Virginia-based Caring Voice Coalition, has closed after government scrutiny.

PAN’s calculations did not mention Pfizer’s alleged deals. They were featured in a separate government deal with Pfizer.


The 2019 PAN agreement dealt with “legacy issues” and “did not address any ongoing PAN operations or disease control funds,” said the organization’s CEO Dan Klein through an official. “Nonprofit patient care programs like PAN are needed to help people access the essential medicines they need to stay healthy.”

But legal troubles are unlikely to slow the growth of a pharmaceutical-funded patient care business.

The four fined nonprofits have agreed to stop channeling money to specific drugs, but they continue to accept hundreds of millions of dollars of pharmaceutical donations to indirectly cover co-payments and other drug costs for patients, the organizations’ reports and IRS filings show. HHS regulators permit this practice because pharmaceutical companies are not involved in deciding which patients and which drugs are subsidized.

Donations to six drug-funded patient care charities reached $ 1.8 billion in 2019, just slightly less than a year earlier, KHN’s analysis of their IRS documents shows. This is almost 50% more than five years ago, before the Justice Department began to take drastic measures.

Last year, Pfizer donated $ 39.7 million to PAN and five other charities to help patients pay out of pocket for drugs, the company said.

If Pfizer’s lawsuit for such a donation for tafamidis drugs for heart failure opens the way for similar practices across the industry, it would drive up Medicare costs through higher prices and more prescriptions, said Gerard Anderson, economist and professor of health policy at Johns Hopkins. Bloomberg School of Public Health at the University. The inspector general of the Department of Health and Human Services estimates that such a program for tafamidi alone would increase Medicare spending by $ 30 billion.

Pharmaceutical companies can “find out which patients are taking a drug and they can sell [and offer financial assistance] directly to this patient, Anderson said. “You will make huge profits.”

Pfizer says its proposal, which the HHS inspector general called “highly suspicious” in an advisory opinion before the company filed a lawsuit, is legitimate and reasonable.

“Providing co-payments to middle-income patients who have been prescribed tafamide is an effective and fair way to reduce their personal costs,” said company spokesman Stephen Danehi.

But the real issue with patient accessibility is that tafamidis is too expensive, as federal attorney Lilliwhite said in court disputes last month. (HHS Inspector General’s office declined to comment.)

According to him, Pfizer “left the market.” The company is committed to “doing something unprecedented to change decades of established laws and agency guidelines” to boost sales of “the most expensive cardiovascular drug ever released in the United States.”

After oral arguments, Pfizer dropped claims that HHS rules violate its right to free speech. Judge Mary Kay Viscosil is only considering the company’s claim that a special fund for tafamidi will not violate kickback bans because, among other things, it is the doctor who decides to prescribe the drug and generate income for Pfizer, not the patient receiving financial assistance. …

But legal analysts continue to view the case as part of a wider movement towards deregulation and corporate rights.

The 1970s Supreme Court case, which was seen as paving the way for an explosion of advertisements for drugs, lawyers, and liquor, and corporate campaign donations, concerned the voice of prescription drug dealers in Virginia. In 2011, a court ruled that the First Amendment allows data collectors to buy and sell prescriptions at pharmacies, provided the patients are not identified.

A year later, a federal appeals court cited a defense of the word when it overturned a conviction against a pharmaceutical sales representative who promoted the drug for use not FDA approved.

Legal scholars believe that even if Pfizer loses its case, the climate could create conditions for similar problems from other drug manufacturers, especially after the appointment of more than 200 federal judges by business-friendly President Donald Trump.

The federal kickback law does not mention charities to promote co-payments, “and it was not designed with these programs in mind,” said Stanford’s Mello. Pfizer’s lawsuit “should be a loud, resounding call to Congress” to clearly define drug subsidies as illegal kickbacks, she said.

Kaiser Health News is the national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation, not affiliated with Kaiser Permanente.

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