(Bloomberg) — Celgene Corp. donated hundreds of millions of dollars to charities that help patients afford high-priced drugs for multiple myeloma and other cancers "as part of a core business scheme to gain billions" from U.S. taxpayers, according to allegations in federal court filings.
The biotechnology giant then coordinated with the charities to ensure that Celgene's medicines were covered, violating federal law in the process, documents filed last week in a whistleblower lawsuit allege. Doing so enabled Celgene to collect billions of dollars in reimbursements from Medicare and other public health plans, according to the filings for the whistleblower, a former Celgene sales representative named Beverly Brown.
"Ms. Brown is wrong and her allegations are baseless," Celgene spokesman Brian Gill said in an e-mail. Celgene followed federal rules regarding charitable donations, he said.
In its own legal filings, the Summit, New Jersey, company, which makes the blockbuster cancer pill Revlimid, said that it gives to charities "because one of Celgene's core values is to ensure that cancer patients have access to medicines they need" and it does not coordinate with the charities on how they spend the money. Criticism aimed at its donations is "a classic example of 'no good deed shall go unpunished,"' the company's lawyers wrote in one filing.
Growing Charities
Celgene, which reported $9.3 billion in revenue last year, is the latest pharmaceutical titan to come under fire in connection with patient-assistance charities, which set up dozens of funds to provide co-pay assistance to people with specific diseases. Fueled chiefly by donations from drugmakers, the top seven such non-profits more than doubled in size from 2010 to 2014, when they reported more than $1.1 billion in contributions.
As drug prices have surged, drugmakers' contributions to the charities have given them a public-relations foil against critics and helped keep patients from seeking lower-priced medicines, Bloomberg Businessweek reported in May.
Federal investigators have begun examining whether some companies are working too closely with the charities. Earlier this year, Gilead Sciences, Biogen, and Jazz Pharmaceuticals Plc all disclosed receiving subpoenas from the U.S. Justice Department regarding their relationships with patient-assistance charities. Those subpoenas follow an October disclosure from Valeant Pharmaceuticals International Inc. that it received subpoenas seeking materials related to Valeant's patient-assistance programs. All of the companies have said in public filings that they're cooperating with the government's requests.
Medicare rules
Celgene disclosed last week that it also has received a subpoena, which was delivered in December. The U.S. attorney's office in Massachusetts sought documents regarding the company's support for non-profits that provide financial assistance to patients, the company said in a filing to the Securities and Exchange Commission. Celgene said it's cooperating with the request.
Under a federal law known as the anti-kickback statute, drugmakers are banned from giving direct co-pay help to the country's about 40 million Medicare patients with prescription drug coverage. But they can make contributions to charities that help patients — provided the charities are independent and there's no coordination or detailed information shared on how the drugmakers' donations are spent.
Out-of-pocket expenses
Celgene's best-selling product, Revlimid, treats multiple myeloma and other blood cancers. It's one of the world's most expensive cancer drugs, at an average wholesale price of $644 per pill, according to Connecture, a maker of price-comparison software. For Medicare patients, the out-of-pocket expenses for a year's supply can approach $10,000.
The company contributed between $50 million and $100 million a year to charities that help people afford out-of-pocket costs for the diseases that Celgene's drugs treat, according to deposition testimony in the whistleblower lawsuit, which is separate from the Justice Department subpoenas.
Lawyers for Beverly Brown claim that Celgene has coordinated with the charities to ensure that much of its donations flow to patients who use its drugs. Most of the documents obtained through discovery in the case, including many underpinning that allegation, remain under seal.
The Office of Inspector General at the Department of Health and Human Services, which oversees Medicare spending, allows charities to report aggregate information about their operations back to drug-company donors. But no individual patient information can be conveyed back.
Charity contracts
Drug companies also aren't allowed to gather data that would be enough to determine how their donations are affecting support for their own products. "Such actions may be indicative of a donor's intent to channel its financial support to co-payments of its own products, which would implicate the anti-kickback statute," the office said in a 2014 bulletin.
