The pharmaceutical industry is very profitable and highly competitive. Like any industry, its players are always looking for ways to increase those profits. But sometimes they go too far. The Department of Justice says pharmaceutical company Pfizer has done just that by working a scheme to offer Medicare patients kickbacks for using their medicines. Now, the drug giant has agreed to pay nearly $24 million to settle the case.

False Claims Act

One of the reasons Congress included copays in the Medicare program was so that the market could serve as a check on healthcare costs, including the prices drug companies would charge for their drugs. Additionally, the False Claims Act prohibits pharmaceutical companies from offering anything of value to convince Medicare patients to buy their drugs. However, according to Reuters, while drugmakers may not directly subsidize co-payments for Medicare patients, they are allowed to donate to independent non-profits who do.

Funneled Through Non-Profit

A probe led by the office of U.S. Attorney Andrew Lelling accused Pfizer of using a supposedly independent charity, the Patient Access Network Foundation, as a conduit to cover the co-payments of patients taking Pfizer drugs. The DOJ says Pfizer made donations to the foundation, and then worked with a specialty pharmacy to move patients taking two of its kidney cancer drugs to the foundation. “Pfizer knew that the third-party foundation was using Pfizer’s money to cover the copays of patients taking Pfizer drugs,” Lelling said.

They also accuse the company of working with the foundation to start a fund for patients taking its heart drug, and of coordinating the opening of the fund with a hike in the drug’s price. “Pfizer used a third party to saddle Medicare with extra costs,” Lelling explained.

Undermines Physician-Patient Relationship

While many individual Medicare patients are probably grateful for subsidized copayment programs, kickbacks can muddy the waters and have larger overall effects. When patients are offered kickbacks for taking certain drugs, it can steer the focus away from what is most medically beneficial for the patient. As Chad Readler, the acting assistant attorney general of the civil division put it, “Kickbacks undermine the independence of physician and patient decision-making, and raise healthcare costs.”

While Pfizer has agreed to pay the fine, they are not admitting any wrongdoing or liability, but instead cited their “desire to put this legal matter behind [them].”

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