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Court Battle Over Pfizer’s Medicare Copays Could Result In ‘gold Rush’ Sales

The Pfizer company paid $24 million to resolve allegations that it had paid kickbacks and allowed Medicare patients to choose their pharmacy out of pocket. As the Justice Department alleged, the company induced patients to use its drugs even though one of them was covered by Medicare and Medicaid, yet its price rose 44% to $225,000 a year and was essentially free for them.

A dozen companies have been charged with similar malpractice following a federal crackdown that resulted in Pfizer suing Uncle Sam three years ago.

After decades of regulatory erosion and soaring drug prices, analysts say, another Pfizer victory could cost taxpayers billions of dollars, erode control over pharma marketing, and cause taxpayers to foot the bill. It is expected that a federal judge will rule soon.

Court Battle Over Pfizer’s Medicare Copays Could Result In ‘gold Rush’ Sales

According to government lawyer Jacob Lillywhite in oral arguments last month, if Pfizer is permitted to use this, it will not be the only pharmaceutical company to do so.

Court Battle Over Pfizer's Medicare Copays Could Result In 'gold Rush' Sales

Professor Chris Robertson of Boston University said Pfizer’s legal argument is aggressive. Even though pharma manufacturers are responsible for pocketbook pain related to prescription medicines, they’ve got a political tailwind behind them. According to him, Pfizer’s message of ‘helping people afford their medication’ is quite attractive.

But that’s not all Pfizer is doing well. Pharma has benefited from court rulings and regulations since the Food and Drug Administration permitted limited TV drug advertisements in the 1980s. The free speech rights of other companies also allow aggressive marketing and political influence that was previously unimaginable, according to legal scholars.

Pfizer initially argued that current restrictions violate its First Amendment rights, saying it should be able to communicate freely with charity organizations about patient assistance.

Pfizer is suing in New York’s Southern District, asking for permission to reimburse patients directly for two of the company’s heart failure medications that cost $225,000 per year. Patients would have to pay about $13,000 a year in Medicare copays, deductibles, and coinsurance if Pfizer contributions were not used.

It does lead people to buy a more expensive medicine by letting drug companies put this money directly into their pockets, instead of shopping for a cheaper or more effective alternative, explains Vanderbilt professor Stacie Dusetzina. 

Since Medicare’s Part D drug plan launched in 2006, the government has warned against such payments. Typically, drug companies offer coupons and other means for patients to help with their cost-sharing, but private carriers can negotiate overall prices.

In place of Congress’ freedom from regulating drug prices, having patients share at least a portion of the cost is the only way to protect taxpayers from further price increases and industry profits.

Nevertheless, regulators have provided the industry permission to route money through outside charities to assist patients with copays – but only so long as the organizations are “bona fide, independent” and do not associate money from drugmakers with specific drugs.

There have been numerous instances where charities have been caught colluding with pharmaceutical corporations to provide subsidies to particular drugs in recent years, the Justice Department alleges. Twelve companies have settled allegations of kickback violations with over $1 billion.

According to the Justice Department, Pfizer set up an internal fund at one of the charities, the Patient Access Network Foundation, to help cover patients’ costs when it raised the wholesale price for a package of 40 capsules from $220 to $317. Those who needed the drug from Pfizer were referred to the PAN Foundation, the government reported.

The sponsor company can generate up to $21 million from each $1 million channeled through such a charity, according to Andrew Baum, Citi pharma stock analyst in 2017.

The company said it did not admit wrongdoing but instead spent time wishing to put the case behind it.

Additionally, three other charities agreed to resolve allegations that they served as disallowed patient assistance channels for a range of pharmaceutical companies. After being slammed by the federal government, an organization based in Virginia has shut down.

As far as Pfizer transactions are concerned, no mention was made in PAN’s settlement. Pfizer has separately negotiated a deal with the government concerning these. Despite legal difficulties, patient assistance programs funded by pharma have not slowed down.

Organizer reports and IRS filings reveal that four penalized nonprofit entities have instead shifted money to indirect cost-sharing for patients, instead of directly treating those patients. The HHS allows the practice since the drug companies are not involved in the decision-making process.

According to a KHN analysis of their IRS filings, pharma companies donated $1.8 billion to patient assistance charities in 2019, only a little less than the previous year. Before the Justice Department started cracking down, that amount was nearly 50% higher.

Disclosures from the company show the company donated $39.7 million to PAN and five other charities that help patients make ends meet with out-of-pocket drug costs last year.

It would drive up Medicare costs through rising prescriptions prices and benefits if Pfizer’s lawsuit to prioritize donations for its heart failure drugs set a precedent, said Gerard Anderson, Johns Hopkins’ professor of health policy. HHS estimated that such a program would increase the cost of Medicare by $30 billion for tafamidis alone.

Before it filed its lawsuit, Pfizer said it’s legal and sensible to make the change the HHS inspector general described as “highly suspect”.

Tafamidis, however, is too expensive for patients, said federal attorney Lillywhite at last month’s trial. 

Following the oral arguments, Pfizer dropped its lawsuit against HHS. The judge believes that tafamidis is not a kickback because Pfizer’s revenue is created by the doctor prescribing the drug, not the patient receiving financial aid. However, critics see this case as part of a broader push for deregulation and corporate rights.

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A 1970s Supreme Court decision was about speech rights for prescription drug sellers in Virginia, which was seen as setting the stage for an explosion of advertising for drugs, lawyers, and liquor. The state court found that data mining of prescription records from pharmacies is allowed under the First Amendment, provided the patients’ identities are not revealed.

In June 2008, a federal appeals court overturned a conviction in which a pharma rep had been accused of promoting an unapproved drug.

Even if Pfizer loses its case, other drugmakers may challenge their patents similarly, said legal scholars, given that President Donald Trump has appointed over 200 federal judges.

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