Pharmaceutical Company Agrees To Pay $97 Million To Resolve Alleged False Claims Act Liability For Paying Kickbacks

The US DOJ announced on September 23, 2020 that the pharmaceutical company Gilead Sciences, Inc. (Gilead), located in Foster City, California agreed to pay $97 million to settle claims made pursuant to the federal False Act. The claims alleged that the company illegally used a foundation to funnel copays of “thousands of Medicare patients taking Gilead’s pulmonary arterial hypertension drug, Letairis.”

The Acting Assistant Attorney General stated that the settlement shows that the US government is committed to holding companies liable – when they pay illegal kickbacks in order to obtain direct or indirect referrals to do business. The AG said, “We will not allow permit pharmaceutical manufacturers to set unaffordable drug prices while circumventing important cost-control mechanisms within the Medicare program.”

The False Claims Act whistleblower program

The False Claims Act is a federal law that dates back to the administration of President Abraham Lincoln. The aim of the law is to enlist the aid of the public in disclosing fraudulent claims requesting that that federal agencies make payment for those claims. The original agency covered under the False Claims Act was the US Department of Defense. The False Claims Act and similar federal lawyers now help to protect Medicare and other federal agencies from these illegal claims. False claims cost the American taxpayers billions of dollars.

The False Claims Act encourages former employees and other individuals to file disclosures of illegal activity with the US Department of Justice. If the claims result in a recovery, the person making the disclosure may be entitled to a percentage of any recovery. This percentage payment can be worth hundreds of thousands of dollars, or even millions. The percentage is based on the amount of the illegal payment plus the amount of statutory fines. The fines can be quite high.

The US Attorney for the District of Massachusetts said that, “Like its competitors, Actelion and United Therapeutics, Gilead used data from CVC that it knew it should not have, and effectively set up a proprietary fund within CVC to cover the co-pays of its own drug.” This type of conduit, he charged, violates the federal Anti-Kickback Statute (AKS). It also impacts the ability of Medicare to pay its bills by undermining the program’s co-pay structure. Congress enacted a co-pay structure to provide protection against inflated drug prices. The allegations which led to the settlement cover a period during which Gilead “raised the price of Letairis by over seven times the rate of overall inflation in the United States.”

Another government official stated that the use of charitable donations by pharmaceutical companies to deceitfully subsidize copays for the company’s drugs – “subverts a critical safeguard against the excessive inflation of drug costs.” It’s not just Medicare’s integrity which is affected by the fraudulent scheme. The American taxpayer is the one who ultimately pays for the costs

An FBI agent said that health care fraud annually costs the American taxpayer tens of billions of dollars – by disguising kickbacks in the form of copay aid for Medicare patients. The $97 million settlement shows how dedicated the FBI, in conjunction with other federal agencies, is to pursing investigations of fraud to ferret out illegal schemes.

In more detail, a beneficiary of Medicare is often required to make a partial payment (a copay, co-insurance, or a deductible) for prescription drugs. This copayment serves as a check on pharmaceutical prices by having the beneficiary decide whether to buy medications when part of the payment comes from the beneficiary’s own pocket.

What is the AKS?

The AKS is a federal lawyer that forbids drug companies and other healthcare businesses and healthcare providers from making payments (or providing other incentives) to doctors in order to pressure the doctor to make a referrals. Recommendations of a drug by a doctor should be based on what is in the best health interest of the patient – not what’s good financially for the physician.

The AKS also forbids healthcare businesses, such as Gilead from “offering or paying, directly or indirectly, any remuneration — which includes money or any other thing of value — to induce Medicare patients to purchase the company’s drugs. This prohibition extends to the payment of patients’ copay obligations.”

The False Claims Act covers violations of the AKS. In this case, Gilead manufactures the medication – Letairis. This drug is approved for treatment of pulmonary arterial hypertension. The US government claimed that Gilead use a nonprofit foundation to pay the copays for the Medicare patients who needed the drug Letaris. The payment of the copay enables Gilead to take advantage of the Medicare beneficiaries who might, but for the copayment, choose a drug from another pharmacy company or might choose not to use any drug.

The scheme ran from 2007 through 2010. The “government alleged that Gilead routinely obtained data from the foundation detailing how much the foundation had spent for patients on Letairis; it then used this information to decide how much to pay to the foundation and to confirm that its payments were sufficient to cover the copays of only patients taking Letairis. The government also alleged that, to generate revenue from Medicare and induce purchases of Letairis, Gilead referred Medicare patients to the foundation, which resulted in claims to Medicare to cover the cost of Letairis. “

There were several agencies involved in the investigation including:

  • The US Attorney’s Office for the District of Massachusetts
  • The US Department of Health and Human Services
  • The DOJ
  • The Office of Inspector General
  • The FBI

The settlement is not an admission of liability.

At the California Law Offices of Stephen A. Danz and Associates, we’ve helped whistleblowers file False Claims Act disclosures and obtain their rightful share of the recovery. We’ve been helping honest employees and others who file disclosures of fraud – for 40 years. To discuss a whistleblower claim involving healthcare fraud or any other type of fraud, call us at 877-789-9707 or use our online contact form to make an appointment. Se habla espanol.