Our firm deals with pharmaceutical companies on a regular basis in litigation. We have learned lots about “Big Pharma” operations. Unfortunately, in the world of big pharma, drug companies rarely provide benefits that have no self-serving return. Thus, drug companies have now turned “charitable” giving into a profitable investment. By funding charities that assist with copays of drugs that are subject to a price increase, drug companies can ensure consumers will not switch to an alternative drug and use taxpayers to fund the remaining cost. A million-dollar contribution from a pharmaceutical company to a copay charity can keep hundreds of patients from abandoning a newly pricey drug, enabling the donor to collect many millions from Medicare. Moreover, these contributions may be tax deductible.
Pharmaceutical companies are not allowed to give direct help to Medicare patients, as it can be considered an illegal kickback to influence patients to use their particular drug. Independent charities, however, are allowed to provide assistance to Medicare patients with their drug costs. Moreover, these drug companies are able to fund charities that mostly support their own drugs. Drug companies, thus, fund these charities to ensure their high-priced drugs continue to generate revenue as the expense of the government-funded Medicare program. Drug companies make a donation to the charity, the charity covers the copay for the drug, and the drug company receives the full Medicare payment for its drug and enjoys a tax write-off from its self-serving “donation.”
Although the charities claim they make decisions independent from their donors, their presentations and marketing materials have focused on explaining to drug companies how their contributions can help their bottom line. For example, a brochure published by Chronic Disease Fund stated that contributions to these charities can be more profitable than many of the for-profit initiatives. In light of this potentially illegal scheme, the federal government has served subpoenas on multiple drug companies and charities to determine whether these companies are violating the law.
Gilead Sciences Inc., Biogen Inc. and Jazz Pharmaceuticals Plc recently received subpoenas following a subpoena to Valeant Pharmaceuticals International, Inc. several months ago. If a charity supported a donor company’s drug over another company’s drug when they both treat the same disease, that support might violate Medicare’s anti-kickback rules.
Source: Bloomberg News
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