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Celgene accused of using charities in ‘scheme to gain billions’

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(Bloomberg) — Celgene Corp. donated hundreds of millions of dollars to charities that help patients afford high-priced drugs for multiple myeloma and other cancers “as part of a core business scheme to gain billions” from U.S. taxpayers, according to allegations in federal court filings.

The biotechnology giant then coordinated with the charities to ensure that Celgene’s medicines were covered, violating federal law in the process, documents filed last week in a whistleblower lawsuit allege. Doing so enabled Celgene to collect billions of dollars in reimbursements from Medicare and other public health plans, according to the filings for the whistleblower, a former Celgene sales representative named Beverly Brown.

“Ms. Brown is wrong and her allegations are baseless,” Celgene spokesman Brian Gill said in an e-mail. Celgene followed federal rules regarding charitable donations, he said.

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In its own legal filings, the Summit, New Jersey, company, which makes the blockbuster cancer pill Revlimid, said that it gives to charities “because one of Celgene’s core values is to ensure that cancer patients have access to medicines they need” and it does not coordinate with the charities on how they spend the money. Criticism aimed at its donations is “a classic example of ‘no good deed shall go unpunished,”’ the company’s lawyers wrote in one filing.

Growing Charities

Celgene, which reported $9.3 billion in revenue last year, is the latest pharmaceutical titan to come under fire in connection with patient-assistance charities, which set up dozens of funds to provide co-pay assistance to people with specific diseases. Fueled chiefly by donations from drugmakers, the top seven such non-profits more than doubled in size from 2010 to 2014, when they reported more than $1.1 billion in contributions.

As drug prices have surged, drugmakers’ contributions to the charities have given them a public-relations foil against critics and helped keep patients from seeking lower-priced medicines, Bloomberg Businessweek reported in May.

Federal investigators have begun examining whether some companies are working too closely with the charities. Earlier this year, Gilead Sciences, Biogen, and Jazz Pharmaceuticals Plc all disclosed receiving subpoenas from the U.S. Justice Department regarding their relationships with patient-assistance charities. Those subpoenas follow an October disclosure from Valeant Pharmaceuticals International Inc. that it received subpoenas seeking materials related to Valeant’s patient-assistance programs. All of the companies have said in public filings that they’re cooperating with the government’s requests.

Medicare rules

Celgene disclosed last week that it also has received a subpoena, which was delivered in December. The U.S. attorney’s office in Massachusetts sought documents regarding the company’s support for non-profits that provide financial assistance to patients, the company said in a filing to the Securities and Exchange Commission. Celgene said it’s cooperating with the request.

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Under a federal law known as the anti-kickback statute, drugmakers are banned from giving direct co-pay help to the country’s about 40 million Medicare patients with prescription drug coverage. But they can make contributions to charities that help patients — provided the charities are independent and there’s no coordination or detailed information shared on how the drugmakers’ donations are spent.

Out-of-pocket expenses

Celgene’s best-selling product, Revlimid, treats multiple myeloma and other blood cancers. It’s one of the world’s most expensive cancer drugs, at an average wholesale price of $644 per pill, according to Connecture, a maker of price-comparison software. For Medicare patients, the out-of-pocket expenses for a year’s supply can approach $10,000.

The company contributed between $50 million and $100 million a year to charities that help people afford out-of-pocket costs for the diseases that Celgene’s drugs treat, according to deposition testimony in the whistleblower lawsuit, which is separate from the Justice Department subpoenas.

Lawyers for Beverly Brown claim that Celgene has coordinated with the charities to ensure that much of its donations flow to patients who use its drugs. Most of the documents obtained through discovery in the case, including many underpinning that allegation, remain under seal.

The Office of Inspector General at the Department of Health and Human Services, which oversees Medicare spending, allows charities to report aggregate information about their operations back to drug-company donors. But no individual patient information can be conveyed back.

Charity contracts

Drug companies also aren’t allowed to gather data that would be enough to determine how their donations are affecting support for their own products. “Such actions may be indicative of a donor’s intent to channel its financial support to co-payments of its own products, which would implicate the anti-kickback statute,” the office said in a 2014 bulletin.

Contracts between Celgene and two large charities — Patient Access Network Foundation, or PAN Foundation, and Chronic Disease Fund, or CDF — required the non-profits to give the company significant information about its operations, according to an expert witness report authored for Brown’s lawyers by Joel Hay, a professor of pharmaceutical economics and policy at the University of Southern California. That information included the number of applicants for co-pay assistance, the average amount of co-pays, the total amounts paid out, and the amount of Celgene’s donation that remained available for use.

The evidence “strongly indicates that CDF and PAN Foundation provided Celgene with the information it needed to be sure it would fully fund all co-pays needed for its products and that it successfully aligned its funding to achieve this goal,” Hay wrote in the report.

Drug prices

Consequently, he wrote, the company’s donations to the charities “were actually illegal kickbacks designed to hide the fact that Celgene was contributing these payments to the foundations to get Medicare patients to use more” of Celgene’s cancer drugs, Thalomid and Revlimid.

The alleged use of charities to leverage billions of dollars from Medicare and other federal programs was key to “Celgene’s scheme to inflate drug prices,” Brown’s lawyers said in filings.

The charities aren’t named as defendants in the lawsuit. An attorney for the Chronic Disease Fund, which goes by the name Good Days from CDF, said it has never provided any data that would allow donors to deduce how its funds are allocated.

No influence

In addition, the charity “does not limit its co-pay assistance to drugs manufactured by donors nor does it allow donors to influence its establishment of disease funds,” said attorney Jeffrey Tenenbaum, a partner with the law group Venable LLP.

PAN Foundation officials declined to comment for this story. In a statement provided to Bloomberg News in May, the charity said its funds are managed in strict compliance with federal regulations, independently of donors.

Brown’s whistleblower lawsuit, which was filed in 2010, centers around various issues, particularly allegations that Celgene engaged in off-label marketing — that is, pitching its drugs to physicians as treatments for certain diseases before regulators had approved those uses. In filings, Celgene has denied those allegations. The judge has not yet ruled on which claims will be allowed to go forward. Under federal law, the Justice Department can decide to join such whistleblower claims; to date, it has declined to intervene in Brown’s case.

E-mail discussion

Some discovery documents in the lawsuit were made public last week as Celgene’s lawyers asked the court to strike portions of Hay’s expert report.

They included a July 2012 e-mail exchange, which showed that Celgene intervened directly with the PAN Foundation to help a patient get more financial assistance for Thalomid.

During a conference with a Celgene staff member and a PAN Foundation representative, a patient’s son was told the charity would issue a grant for $2,300, the e-mail exchange shows. Concerned about the grant’s size, the Celgene employee sent an e-mail to colleagues asking for help. A Celgene official forwarded the message to a top executive at the PAN Foundation, asking him to look into it.

A half-hour later, the PAN Foundation executive e-mailed back to say the charity’s representative made a mistake; the patient was entitled to $10,000 in co-pay assistance. The executive added, regarding the charity’s representative: “She’ll be subject to our disciplinary process to ensure it doesn’t happen again.”


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