A New York federal court rejected Pfizer’s request for a declaratory judgment that its proposed copay support programs do not violate the federal Anti-Kickback Statute (AKS). In its Sept. 30, 2021, opinion in Pfizer Inc. v. United States HHS, the Southern District of New York weighed in on multiple aspects of Pfizer’s proposed copay assistance programs, holding that:
(1) The AKS prohibits any remuneration intended to induce someone to purchase or receive a drug or medical service, regardless of whether corrupt intent to influence prescribing exists. The court focused on the plain language of the AKS and the goal of the proposed program: to increase the number of Medicare beneficiaries purchasing the drug. Because independent corrupt intent or direct quid pro quo is not necessary for an AKS violation, the court could not rule that Pfizer’s lack of intent would make the program directly covering Medicare patients’ out-of-pocket costs permissible.
(2) The question of whether Pfizer would be permitted to provide copay assistance through a third-party Pfizer-funded charity was not ripe for adjudication in the court, since the charity program had not undergone government review and the details on the charity program presented were “ill-defined and vague.”
The declaratory judgment action concerns two proposed copay assistance programs for Medicare patients taking Pfizer’s tafamidis drug products. Pfizer’s proposal would provide additional assistance to certain Vyndaqel and Vyndamax patients to reduce their costs from $225,000 a year to a maximum of $35 a month. This assistance would be provided through one of two possible programs: (1) “directly providing copay and coinsurance assistance to Medicare patients through a copay card or coupon” (referred to in Pfizer’s complaint as the “Direct Program”) or (2) “funding an existing independent charity that would provide copay assistance to Medicare patients” who require financial support to access tafamidis (the “Charity Program”).
In 2019, Pfizer requested a review of these proposed copay assistance programs by the Office of Inspector General (OIG,) seeking a determination that neither of the proposed programs constitutes “remuneration” or is intended to influence prescriptions “in the kind of corrupt or improper way addressed by” the AKS and the Beneficiary Inducement Statute (BIS). OIG reviewed Pfizer’s request and concluded:
- It was “not able to issue an advisory opinion” as to the Charity Program, “because ‘the same or substantially the same course of action is under investigation, or has been the subject of a[n] [enforcement] proceeding involving [the Department of Health and Human Services] or another governmental agency.’”
- Pfizer’s Direct Program appeared designed to induce “a Medicare beneficiary [who] otherwise may be unwilling or unable to purchase [tafamidis] due to his or her cost-sharing obligations, which are driven by the list price, . . . to purchase” the drug, and would therefore violate the AKS.
Although warned that failure to withdraw its request would result in a binding OIG opinion being issued, Pfizer declined to withdraw its request, and instead filed the declaratory judgment action. OIG subsequently issued a binding OIG advisory opinion with respect to the Direct Program in September 2020.
Pfizer’s complaint challenged OIG’s rejection of its proposed assistance programs, asserting that without the court’s intervention, “Pfizer is unable to provide this financial assistance because of the significant risk of a criminal or other government enforcement action arising from erroneous legal restrictions imposed by OIG.” The claims, in part, seek a declaration that neither proposed program would violate the AKS.
The government responded that the court lacks jurisdiction to hear Charity Program claims (arguing that there is no claim, other than those for a declaratory judgment, related to it) and requesting judgment on all Pfizer’s claims relating to both programs, to the extent they are not dismissed.
Details of Judgment
Key elements of the decision include:
- Pfizer has alleged a sufficient case or controversy with respect to its Charity Program claims. “Between the allegations of coercion and the potential chilling effect on speech incident to charitable giving, Pfizer has alleged an actual case or controversy between the parties sufficient to maintain a standalone declaratory judgment claim.”
- Pfizer’s Charity Program claims do not satisfy the standard for prudential ripeness and must be dismissed. “HHS OIG never actually gave its own views on the Charity Program. It is unclear, for example, that the HHS OIG would find that this specific program would violate the AKS or BIS or whether, after consultation with Pfizer and any resulting revisions, the program could proceed without objection from either party.”
AKS Substantive Conclusions:
- The plain text of the AKS does not require a corrupt intent or a direct quid pro quo. “In other words, the AKS means what it says. It prohibits knowingly and willfully providing remuneration which is intended to induce a purchase of medical treatments or services. While the statute is broad, that alone does not mandate that the Court must endorse a narrower reading.”
- HHS OIG’s Advisory Opinion conclusion 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” is not contrary to law. “Still, this Court must apply the law as it currently is written and is bound by precedent and legal authority that interprets the AKS broadly and as potentially encompassing the kinds of payments Pfizer would make as part of the Direct Program. While there may be an administrative or legislative remedy to the problems Pfizer seeks to correct here, the remedy does not lie with the Court.”
Final Thoughts and Take-Aways
- This decision confirms the government’s long-standing position that the AKS should be applied broadly, rather than only in instances where the intention is to corrupt the decision making of a prescriber. To the extent Pfizer does not pursue an appeal, this decision emboldens Department of Justice (DOJ) and OIG’s policy of viewing patient assistance programs with greater skepticism and a stricter standard for granting favorable advisory opinions or declining prosecutions. Pharmaceutical manufacturers should review the structure and safeguards of their copay assistance programs to ensure they are compliant with the standards articulated by the court in this case.
- Nevertheless, the pharmaceutical industry will be watching closely for the outcome of any appeal by Pfizer to the Second Circuit. If affirmed (and not reviewed or reversed by the U.S. Supreme Court), the ruling that “remuneration” and “to induce” do not require a corrupt intent or quid pro quo transaction will likely foreclose the use of this argument, which has been raised by drug companies in other OIG advisory opinion requests and some similar court cases.
- The DOJ has been focused on limiting the use of manufacturer-funded charities and copay assistance programs to increase sales by removing cost barriers faced by patients. The DOJ has collected over $1 billion in settlements from pharmaceutical companies, including Pfizer, for copay-related AKS allegations in recent years. In a 2018 settlement, Pfizer agreed to pay $23.85 million and enter a corporate integrity agreement to resolve U.S. civil charges that it used a third-party charity to cover copays for three other drugs. The corporate integrity agreement requires that Pfizer implement measures designed to ensure that arrangements with third-party patient assistance programs are compliant with the law. Because the court’s decision in this case does not specifically reach the merits of the charitable foundation issue, it may leave the door open for future challenges or discussion regarding charitable foundations and copays.
- Although not discussed in the opinion, allowing pharmaceutical companies to provide charitable foundation grants to be used for copays may, in the government’s view, negatively impact the cost-control function of Medicare’s copay mechanisms. As Congress considers giving the federal government the authority to negotiate drug prices in Medicare, the government-perceived risks associated with copays from charitable contributions may decrease. If Congress ultimately allows Medicare to begin negotiating drug prices, the patient copay element may become less essential to controlling drug prices moving forward.