Pfizer’s Bid to Help Pay Deductibles and Copays for a New Drug Denied Because the Bid Violates the AKS

Pfizer, the drug manufacturer whose vaccines have helped people with COVID-19 and many other diseases, recently requested that the Supreme Court reviews a federal district court and a Second Circuit decision involving the interpretation of the Anti-Kickback Statute. Pfizer claims that the review examines how businesses can help patients pay for expensive medications.

The federal court, based in New York, ruled in Pfizer Inc. V. United States on September 30, 2021, that Pfizer’s request for a declaratory judgment in support of its proposed copay support programs should be denied. The court noted on the first page of the decision that “the consequences of a violation could be dire for Pfizer, potentially including civil or criminal monetary penalties and exclusion of all Pfizer products from eligibility for coverage under Medicare and Medicaid.” The Second Circuit Court affirmed the federal court’s ruling.

Pfizer’s proposed programs

The court summarized the Pfizer programs as follows:

Pfizer produces and markets a drug called tafamidis to treat Transthyretin Amyloid Cardiomyopathy (“ATTR-CM”).  This health disorder is a progressive, rare disorder that “causes deposits of amyloid protein to be deposited in the heart muscle.” Someone with the disorder may experience progressive heart failure to the point of being unable to perform basic life tasks. The life expectancy of a person who is diagnosed with ATTR-CM is two to five years. It’s estimated that 100,000-150,000 people in the U.S. are afflicted with ATTR-CM. The elderly and African American males are most at risk.

As of the date of the federal court’s decision, Pfizer’s drug is the only FDA-approved drug for ATTR-CM. Pfizer needed approximately 20 years to develop the drug. Many of the people who could benefit from tafamidis receive Medicare. Medicare Part D has oversight over drugs used by Medicare patients. Medicare Part D requires that patients pay certain deductibles and co-pays based on the cost of the drugs the patients’ doctors prescribe.

For example, the decision notes, Medicare Part D in 2020 patients paid $435 towards certain deductibles and then paid 25% of the drug costs until the patient’s bills reached the “catastrophic coverage” threshold of $9,303. This meant that a Medicare Part D enrollee who used brand-name drugs had to pay $2,652 before his/her catastrophic threshold covered 95% of the remaining prescription costs.

Nearly 29% of Medicare Part D enrollees can take advantage of copay support if their income is less than 150% of the federal poverty level. Pfizer “offers survey evidence that at least 25% of new Part D enrollees will forgo prescriptions or care if they are asked to pay more than $50 and that almost 50% of cancer patients asked to pay more than $2,000 out of pocket did not fill prescriptions.”  Tafamidis costs $225,000 per year. This means that most patients, according to Pfizer, would have to pay $13,000 yearly for the ATTR-CM drug.

Pfizer proposed two payment support options – to limit a patient’s monthly pay to $35 monthly.

1. A “Direct Copay Assistance Program” (the “Direct Program”) under which Pfizer would provide funds directly to patients who are U.S. residents, meet specific financial need criteria, and are prescribed tafamidis for an on-label (approved) indication. Pfizer states that the company would not advertise the program or use the program to solicit patients before the drug is prescribed.
2. Second, Pfizer proposes a “Charity Program,” in which an independent charity would develop its own criteria to help with tafamidis payments. “While Pfizer would communicate with the charity about funding needs, the charity would otherwise operate independently and develop its own guidelines for aid programs.”

“Pfizer is currently subject to a “Corporate Integrity Agreement” signed as a part of a $23.9 million settlement of earlier AKS claims related to a purportedly independent charity Pfizer attempted to use as a part of a different co-pay assistance program.”

The declaratory judgment request

To protect companies like Pfizer from violations of the AKS and a similar bill (the Beneficiary Inducement Statute aka BIS), Congress authorized drug manufacturers to seek advisory opinions for the US HHS OIG (US Department of Health and Human Services, Office of Inspector General).  In 2005 and 2014, the HHS OIG “published guidance documents about what kinds of assistance programs violate the AKS or BIS and how companies can ensure compliance with the law.”

“In the first guidance document, HHS OIG stated that assistance programs like the Direct Program and Charity Program that Pfizer proposes, ‘pose a heightened risk of fraud and abuse’ under the AKS, particularly because they “shield [Medicare Part D] beneficiaries from the economic effects of drug pricing, thus eliminating a market safeguard against inflated prices.”

The HHS OIG did issue an advisory opinion against the proposed “Direct Program” and held off on deciding the merits of the Charity program for other reasons. In 2014, the HHS OIG wrote that pharmaceutical assistance programs like the one Pfizer proposes (programs that subsidize copayments for their own products) “may encourage manufacturers to increase prices, potentially at additional cost to Federal health care programs and beneficiaries who are unable to obtain copayment support.” The 2014 guidance (and guidance from 2005) did indicate that an assistance fund that targets “only one drug or drugs made by one manufacturer would not, standing alone, be determinative of an anti-kickback statute violation.”

The HHS advisory opinion for Pfizer’s current proposal concluded that the Direct Program could violate the AKS “if the requisite intent to induce or reward referrals for, or purchases of, items and services reimbursable by a Federal health care program were present.” The advisory opinion did conclude that the Direct Program would not violate the BIS. The opinion further noted that the Direct Program might constitute a “quid pro quo” in which Pfizer would offer remuneration (the payments) in return for the patient buying the drug – tafamidis. The HHS opinion also raised concerns that the Direct Program created a risk that the Medicare Part D pricing controls could be abused by Pfizer’s elimination of patient cost-sharing.

The federal court’s ruling

The court stated Pfizer’s position as follows:

• Pfizer does agree that the Direct Program would include the purchase of tafamidis that otherwise might not happen.
• Pfizer’s main argument is that even given that intent (to include the purchase of its drug) that intent is not an AKS violation because:

“AKS liability requires that the Direct Program be administered with a “corrupt” intent or that the payments made through the Direct Program otherwise must constitute an improper quid pro quo where Pfizer directly influences a doctor’s or patient’s decision to prescribe or purchase tafamidis.”

The AKS provides in relevant part:

Whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person . . . to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program, shall be guilty of a felony and upon conviction thereof, shall be fined not more than $100,000 or imprisoned for not more than 10 years, or both.

The federal court reasoned that the text cited directly above only mentions “knowingly and willfully” or providing remuneration to induce a purchase. There’s no mention that the intent must be “corrupt.”

The federal court found that the purpose of Pfizer’s “Direct Program” was to increase the number of Medicare beneficiaries that would use the drug – and thus the programs violated the AKS statute. The federal court also reasoned that showing a corrupt intent or a direct quid pro quo is not necessary to show there is an AKS violation.

The federal court did not rule on the “Charity Program” because the third-party charity funded by Pfizer had not yet been reviewed by the government and the specifics about how the charity would work were “ill-defined and vague.” In short, the federal court ruled that the Charity Program was not ripe for a decision. There were other procedural and substantive reasons that the lower court did not consider the Charity Program.

Overall, the federal court interpreted the AKS in a broad instead of a narrow manner. The decision likely means that patient assistance programs will be reviewed with a great amount of skepticism when violations of the Anti-Kickback Statute are being reviewed.

Drug manufacturers and physicians need to understand how the AKS applies to their business or practice. When Pfizer created plans to help subsidize the costs of a new drug, the HHS OIG and the federal courts objected. Any remuneration in the form of subsidies for copays and deductibles will likely result in a violation of the AKS – even if the remuneration is well intended. Unless a safe harbor applies, the consequences for violating the AKS can be quite severe including civil penalties, criminal penalties, and loss of Medicare and Medicaid coverage.

Drug manufacturers and medical practices should contact Cohen Healthcare Law Group, PC to discuss whether any financial relationships may violate the AKS. Our experienced healthcare attorneys advise healthcare companies and physicians about healthcare compliance laws and regulations.