Pharmaceutical Corporation Accused of Using Charities in 'Scheme to Gain Billions'

Since October 2015, at least four major pharmaceutical corporations have received subpoenas from the U.S. Justice Department investigating their relationships with patient-assistance charities.

Add one more to the list.

A whistleblower lawsuit last week accused Celgene, a biotechnology giant best known for producing the $644-per-pill cancer drug Revlimid, of donating hundreds of millions of dollars to patient-assistance charities as part of a "scheme to gain billions," according to Bloomberg. The suit alleged that the corporation violated federal laws by working to ensure the charities covered Celgene's drugs, then collecting billions in Medicare and other public health plan reimbursements.

Celgene denied the allegations, calling them "baseless." But it's more than a little unsettling that accusations like these are becoming increasingly common. Via Bloomberg:

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 nonprofits 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 Inc., Biogen Inc. and Jazz Pharmaceuticals PLC all disclosed receiving subpoenas from the U.S. Justice Department regarding their relationships with patient-assistance charities.

According to Bloomberg, another drugmaker, Valeant Pharmaceuticals International, revealed in October that it received a subpoena regarding its dealings with patient-assistance charities. Celgene revealed last week that, in December, it too received a subpoena.

Federal law prohibits drug companies from providing direct financial assistance to Medicare patients. Another law prevents drug companies from gathering data from charities that would show exactly for what drugs donations were used. Theoretically, it should be difficult for drug companies to pull off what the lawsuit alleges.

But Bloomberg reported that Joel Hay, professor of pharmaceutical economics and policy at University of Southern California, wrote in a witness report that contracts between Celgene and at least two large patient-assistance charities show the company requested significant information:

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 Chronic Disease Fund and Patient Access Network 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.

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.

Lawyers for whistleblower Beverly Brown said they obtained documents further supporting those claims, but those documents remain sealed, Bloomberg reported.

No charities were named as defendants in the lawsuit, but both Chronic Disease Fund and Patient Access Network Foundation told Bloomberg they were in compliance with federal regulations.