U.S. Sues Pharmaceutical Company For Alleged Multiple Sclerosis Drug Kickbacks

Interviewer: We’re talking with Ben Barry from Martin, Harding & Mazzotti. And Ben, I read a story which pharmaceuticals sometimes get a bad rep, that may be a snarky comment on my part. Pharmaceuticals get a bad rep all the time on a number of things but I don’t typically hear stories like this where it looks like it actually involves some kickbacks. Can you tell us a little bit more about this case?

Ben: Yeah, well there was recently a case filed the United States of America v. Teva Pharmaceuticals and Teva Neuroscience. It was filed in the district court of Massachusetts. And that claim alleges that the pharmaceutical companies that are named defendants were providing illegal kickbacks to patients who were receiving their very expensive medication that helped with some of the symptoms associated with multiple sclerosis. The drug at issue here is Copaxone and essentially what the United States is alleging is that the Teva Corporation, the defendants had engaged in a scheme that circumnavigated the congressional intent that is built into the Medicare programs. What I mean by that is if you are a Medicare recipient, particularly Part D, I won’t get into the specifics, but if you’re a Part D recipient, you would have to pay co-payments for pharmaceuticals that you were receiving and that co-payment was intended to create efficiencies in the pharmaceutical industry whereas if I’m a Medicare Part D recipient, I’m not gonna go and pay $2,000 on a copay. I don’t have the money, I’m probably not gonna choose that pharmaceutical, I’m gonna go with a more affordable option that does the same thing and my doctor’s probably gonna prescribe me with the more affordable option and so it would limit the runaway cost of some of these pharmaceutical drugs. With the defendants, what happened was initially their drug was very affordable and over the last, you know, six or seven years, the drug has increased its cost by 19 times what it initially costs. So right now to get this treatment it’s about $73,000, it used to be $6,000.

Interviewer: I’m sorry. So why are they going after the transaction between the pharmaceutical company and the patient? Because I’ve seen all kinds of pharmaceuticals do this. My daughter happens to be type 1 diabetic, and I remember specifically the pharmaceutical company at the time would give out a cash rebate in order to help pay back, you know, your purchase of the Lancet injections, things like that. So how is this different? Why is this not a price-gouging charge?

Ben: Well, it may be that as well. This particular complaint alleges that what the company was engaging in is in violation of the anti-kickback statute because one, Teva is not permitted, I don’t believe under the Medicare plan, I don’t believe that Teva is allowed to provide a direct rebate to the consumer. For whatever reason Congress decided that they can’t do that directly. And ultimately this complaint alleges that Teva did that anyways by using a charitable organization and they made a donation to the charitable organization and that organization then earmarked that money specifically for users of that drug. And so they basically used a third party to do what they were prohibited from doing directly as a first-party transaction. Now with respect to your daughter, I don’t know the particulars of her insurance plan or your insurance plan that she was covered on or the approval process but in some circumstances, I believe that for qualifying individuals, there are provisions that allow those types of funds to flow from the manufacturer or for example, the company that makes the device that would administer the drug, it’s a different set of rules and regulations and calculations and really those are determined by the government but also the individual plans. In this case, the complaint is really dealing with Medicare Part D and how Teva went about getting money to the consumer in violation of the anti-kickback statute.

Interviewer: Now, Ben, the government’s seeking triple damages for violations of the federal False Claims Act, and of course, Teva is saying it will vigorously defend itself and they say that the lawsuit will only seek to further restrict patient’s access to important medicines and healthcare. I know you can’t predict an outcome of any court case obviously but does it look like the government has a strong case in court here?

Ben: Yes they do. They do. I think that what Teva is going to ultimately rely on is the emotional appeal of our drug is so good, you know, how can the government prevent their own people from receiving this drug if we’re willing to subsidize part or all of the cost? But the government is saying yes that may be true, our policies are going to prevent some people from receiving your drug but there is another alternative that is tethered to a price that Medicare is willing to pay. The government will pay for your drug but you have to make it cheaper and the co-pays have to be affordable for the people under this plan. So I think ultimately what the government says is, yeah, you’re right, your argument that people should be receiving your drug and have access to it is a salient argument, but that’s on you. It’s not our job to pay $73,000 for your drug, it’s up to you to figure out a way to produce it and manufacture it that’s more affordable for the people that you care so much about and you want to have your drug. And I think that what the government will do is they will point to the price point index that the drug initially came on the market at and say what has changed? Why has this drug increased by 19 times over a very short period of time when, if anything, you’re manufacturing, distribution and your entire network should becoming more efficient? And the cost of delivering the drug and making the drug is less now 10 years later but you seem to be charging so much more and you’re not charging your patients because if you were charging people $73,000 to take the drug, they can’t afford it, they won’t take it, they find something new and they would figure it out. But you’ve kind of tricked the system and ultimately you’ve tricked the United States into paying these extremely high amounts for this drug without really having to feel the effects of the market regulator that was intended by Congress, which is the co-payment.

Interviewer: Ben, I have no idea what typically happens in a case like this, a court case like this, do they…both sides see it all the way through to the end or is there any potential that there’s some kind of a settlement?

Ben: There’s likely in most circumstances there is a settlement. In this particular complaint, there are other parties that were involved, the two charitable foundations and another pharmaceutical…like a pharmacy and they have all settled for, you know, hundreds of millions of dollars, I think hundreds of millions of dollars, it may have been in the tens of millions of dollars, but they’ve all settled for very significant amounts of money because they recognize, look, we’re on the hook here, we’re gonna take a pretty cold bath if we don’t get out of this thing. I think that Teva right now has a lot to lose, you know, they’ve got this big drug, they’ve got a lot of people taking it, they’re making a lot of money on it. So they may say, look, if we can’t preserve our market base with this drug by virtue of this court case and the outcome thereon then we’re going to go for broke and we’re gonna see this thing through. And we either set precedent, we are able to, you know, tinker with what Congress has set out to be as part and parcel of the Medicare Part D program or alternatively they get somewhere along in the litigation and then they make a cost-benefit analysis and they say, look, we just need to cut bait on this case, we’re gonna pay the government something, we’re not gonna pay them all that they want but we’re gonna pay them something and we’re gonna settle this case and learn our lesson and move on.

Interviewer: Like what we used to say playing Texas hold’em, risk versus reward.

Ben: Or you gotta know when to hold them and when to fold them.

Interviewer: Yeah, exactly, I like Kenny Rogers better. Ben, thank you so much for the insight, this is an interesting case we’ll have to continue to watch it and see what happens and how this unfolds but we appreciate the insight. And we encourage anybody if you have legal questions and you need legal advice ask the experts at Martin, Harding & Mazzotti, you can give them a call at 1800law1010.com. Thanks, Ben.

Man: Thank you, Ben.

Ben: Thank you, gentlemen. Have a good day.

Interviewer: You too. Take it easy. Bye.

Ben: All right. Bye-bye.