(Bloomberg) — Three drugmakers have disclosed receiving subpoenas amid a widening federal investigation into pharmaceutical companies’ relationships with charities that help people afford their products.
Gilead Sciences Inc. (Nasdaq:GILD), Biogen Inc. (Nasdaq:BIIB) and Jazz Pharmaceuticals PLC (Nasdaq:JAZZ) said they’ve received subpoenas this year for documents related to such nonprofits, though the companies provided few additional details. Two companies, Gilead and Jazz, said their subpoenas came from the U.S. attorney for the District of Massachusetts. The filings didn’t disclose names of specific charities.
The new subpoenas follow an October disclosure from Valeant Pharmaceuticals International Inc. (Nasdaq:VLNT) that it received subpoenas from U.S. attorney’s offices in Massachusetts and the Southern District of New York, seeking materials related to Valeant’s patient-assistance programs.
As drug prices have surged, drugmakers’ large contributions to charities have given them a public-relations foil against backlash and helped keep patients from seeking lower-priced medicines, Bloomberg Businessweek reported this month. The seven biggest co-pay charities, which cover scores of diseases, reported combined contributions of $1.1 billion in 2014 — more than double their 2010 figures.
Under federal law, drug companies can’t give direct co-pay help to patients covered by Medicare — such aid would be considered an illegal kickback. Instead, drugmakers are permitted to donate to independent charities that help Medicare patients, provided the companies don’t exert sway over how the nonprofits operate.
If a charity supported a donor company’s drug over another company’s when they both treat the same disease, that support might violate Medicare’s anti-kickback rules. The criminal penalties for such violations can reach $25,000 and five years in prison for each kickback; civil fines can be as much as $50,000 per violation.
Bloomberg Businessweek’s report cited health-care experts who say the drug companies’ charitable contributions serve as investments, in effect, allowing them to keep more patients on pricey drugs — and enabling the companies to collect far more revenue from Medicare itself.
The charities say they operate independently and their drugmaker donors exert no influence over decisions about which patients or which drugs get their support. They also say they have no influence on drug prices; they’re just trying to help patients afford needed medicines.
Meanwhile, the corporate disclosures since April describe an expanding investigation by the U.S. attorney’s office in Massachusetts, which operates a health-care fraud unit. Christina Sterling, a spokeswoman for that office, declined to comment.
On April 21, Biogen disclosed that it had received a federal government subpoena on March 4 “for documents relating to our relationship with non-profit organizations that provide assistance to patients taking drugs sold by Biogen.” The filing didn’t specify which agency issued the subpoena, or which drugs or charities were involved.