Feds Accuse Regeneron Of Paying Kickbacks For Co-Pays

TARRYTOWN, NY — The U.S. Attorney's Office for the District of Massachusetts announced Wednesday that the government has filed a False Claims Act complaint against Regeneron Pharmaceuticals, Inc. The complaint said that Regeneron, which is located in Tarrytown, paid tens of millions of dollars in kickbacks for its macular degeneration drug Eylea, using a foundation as a way to cover co-pays for the drug.

When a Medicaire beneficiary gets a prescription drug covered by Medicare Part B, that person may be required to have a co-pay. The co-pay requirements in Medicare were required by Congress to act as a check on health care costs, including the prices that pharmaceutical companies can ask for their drugs, the district attorney said.

The Anti-Kickback Statute prohibits pharmaceutical companies from offering or paying, directly or indirectly, any remuneration, including money or anything of value, which could include coverage of co-pays — to get Medicare patients to buy their drugs.

U.S. Attorney Andrew E. Lelling said Regeneron funneled tens of millions of dollars in kickbacks through a third-party foundation to ensure that few Medicare patients paid a co-pay on Eylea and that physicians who prescribed and bought the drug did not have to collect Medicare co-pays from their patients.

"Regeneron allegedly paid these substantial sums only after confirming that the foundation needed the money to cover co-pays only for Eylea, and not for competing drugs, and that the company's payments would generate a handsome return on investment, or 'ROI,' in the form of Medicae payments for Elea," he said. "Furthermore, senior company executives allegedly took extensive measures to cover up the scheme."

A spokeswoman for Regeneron, when contacted by Patch, said they do not believe there is any merit to the complaint.

"We have fully cooperated with the government's investigation and will vigorously defend our case," she said.

Prosecutors said that, in 2012, soon after the launch of Eylea, Regeneron considered how much to pay a foundation that covered Medicare co-pays for patients taking macular degeneration drugs. At the time, Regeneron and Genentech, which sold Lucentis, were the leading manufacturers of macular degeneration drugs. Regeneron’s senior management was willing to pay the foundation only enough to cover Medicare co-pays for Eylea patients. As Regeneron’s former CFO put it, Lucentis patients were “Genentech’s problem.” Moreover, Regeneron senior management wanted assurances that the company’s payments to the foundation would generate a handsome ROI.

To satisfy senior management, prosecutors said, Regeneron employees repeatedly contacted the foundation to learn the amount of money the foundation would need to cover the co-pays of Eylea patients only. They then determined the Medicare revenue that Regeneron would derive from those patients and calculated that the company would earn a return of more than 400 percent on its payments to the foundation. Over the course of 2013 and through the beginning of 2014, Regeneron paid the foundation exactly what it said it needed to cover Medicare expenses for Eylea patients only.

The government said that Regeneron’s conduct violated the anti-kickback statute which prohibits such “indirect” kickbacks to subsidize the price of a Medicare drug. Prosecutors said that Regeneron’s senior management knew the conduct was illegal.

In 2013, company auditors twice inquired about the information Regeneron was getting from the foundation about Eylea. Both times, Regeneron management, including the company’s commercial chief, lied and asserted that the company was not getting Eylea-specific data from the foundation, according to authorities. In fact, as the executives knew, the company was getting frequent Eylea-specific reports from the foundation and then using that data to correlate the company’s payments to the foundation with the foundation’s spending on co-pays for Eylea, prosecutors said. As a result, the government said, the physicians who prescribed and purchased Eylea rarely, if ever, had to consider the drug’s substantial cost, because they knew that the foundation would cover their patients’ Medicare co-pays.