Co-Pay Assistance, Price Hikes and Tarceva Misrepresentations in the News

There’ve been a few different big health care stories and investigations in the news over the past few weeks that we haven’t really covered here. All three involve government investigations into areas of interest to potential health care whistleblowers. So we thought we’d briefly describe all three of them before the weekend hits.

Patient Assistance Programs

Four pharmaceutical companies have now received subpoenas concerning their relationships with charities that provide assistance with affording drug co-pays, according to news reports just before Memorial Day. Drug companies have donated large sums of money to patient assistance programs to help patients afford drugs. In order to provide assistance to Medicare patients, the charity must be independent from the drug company or it could be considered an illegal kickback in violation of the law. In other words, the drug company’s donation to the charity cannot result in the support of the donor’s drug over another company’s drug that treats the same disease.

Among the drugs and companies which have received subpoenas is Gilead’s blockbuster drug for hepatitis C Sovaldi. In the 18 months after FDA approval of Sovaldi, Medicare reportedly spent nearly $8.2 billion on Sovaldi and Harvoni, before any rebates. If there is a False Claims Act case over improprieties involving this drug, it could be a blockbuster.

Price Hikes

Vermont signed a bill into law last week that requires pharmaceutical companies to justify price hikes. It is the first drug transparency legislation to pass in the nation. It follows a Congressional hearing in April with the heads of two drug companies concerning their price increases.

Several other states, including Pennsylvania, are considering similar legislation. The proposed PA law, House Bill No. 1042 in the 2015 Session, would amend The Insurance Company Law of 1921 to require drug companies to file information related to their drug’s costs for production, R&D, clinical trials, marketing, and other specified items.

It is not inconceivable based on public ire and the direction of the early proposed legislation that future changes to the law could make lawsuits for improper price changes a viable theory under the False Claims Act. After all, if the drug company hasn’t properly priced its products, the federal government insurance programs will likely be one of the largest victims of the mispricing.

Genentech and OSI Pay $67 Million Over Cancer Drug Claims

Genentech settled a False Claims Act lawsuit concerning its non-small cell lung cancer drug Tarceva for $67 million earlier this week. The case is notable for holding the drug companies responsible for misrepresentations made to doctors.

According to the allegations, Genentech sales representatives made misleading statements to physicians about the effectiveness of the drug for treating patients who had smoked or did not have a particular gene mutation. In those patients, Tarceva was not effective. According to the allegations, Tarceva nevertheless encouraged doctors to use the drug on all patients with non-small cell lung cancer patients rather that just the patients who could be effectively treated by it.

Although the settlement agreement does not discuss the legal theory under the False Claims Act for holding the defendants responsible for this conduct, the whistleblower’s complaint set forth Medicare’s “reasonable and necessary” clause as one potential justification for holding them liable for government spending.

Medicare will not pay for items and services which “are not reasonable and necessary for the diagnosis or treatment of illness or injury …“. 42 U.S.C. § 1395y(a)(1)(A). In this case, the alleged misrepresentations led to Medicare payments for the treatment of patients where the drug was not proven effective.

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