U.S. v. Teva Pharmaceuticals USA Inc et al

Lawsuit alleges the company illegally paid two purportedly independent charitable foundations $328 million from 2006 to 2015 to cover co-payments of Copaxone patients, while Copaxone’s price quadrupled to $73,326 a year.

By Brendan Pierson

(Reuters) – Israeli drugmaker Teva Pharmaceutical Industries Ltd must face a lawsuit by the U.S. government accusing it of using kickbacks paid through charitable foundations to boost sales of its multiple sclerosis drug Copaxone, resulting in false claims being submitted to Medicare.

U.S. District Judge Nathaniel Gorton on Thursday denied Teva’s motion to dismiss the case, rejecting its argument that its donations to the foundations could not violate the law because the company did not control how they were ultimately used.

Eric Sitarchuk of Morgan, Lewis & Bockius, a lawyer for Teva, declined to comment, as did Liz McCarthy, a spokesperson for the office of the U.S. Attorney in Boston, which is handling the case.

The U.S. Justice Department sued Teva in August 2020. It alleged that the company illegally paid two purportedly independent charitable foundations $328 million from 2006 to 2015 to cover co-payments of Copaxone patients, while Copaxone’s price quadrupled to $73,326 a year.

That led to hundreds of millions of dollars in kickback-tainted claims being submitted to Medicare, violating the False Claims Act, and circumvented Congress’ intent that co-payments help keep drug prices down, the government said.

Copaxone has been one of Teva’s largest drugs, generating $1.3 billion in revenue last year, though sales have fallen and are expected to decline further amid growing generic competition.

According to the complaint, Teva referred Copaxone patients to the Florida-based specialty pharmacy Advanced Care Scripts Inc, which then arranged co-payment coverage from the foundations, the Chronic Disease Fund and The Assistance Fund.

While federal law allows drugmakers to donate to independent nonprofits that offer co-payment assistance, they are forbidden from directly subsidizing Medicare patients’ co-payments.

The government said Teva coordinated with the pharmacy to make sure that its donations matched the amount needed to cover Copaxone patients’ co-payments, ensuring that all the money would be used to subsidize sales of the drug.

Teva moved to dismiss the case in October, arguing that it did not control what the foundations did with the money and that it merely hoped and expected it would be used to pay for Copaxone.

Gorton said the scheme described by the government went beyond that.

“The complaint plausibly alleges, however, that Teva did far more than ‘hope and expect,'” he wrote. “The government has alleged, in sufficient detail, a scheme by which Teva practically guaranteed that its own donations would result in the submission of Medicare claims for Copaxone.”

Gorton also dismissed Teva’s argument that the lawsuit attempted to restrict speech between it and the foundations, violating its First Amendment rights. The judge said the case was about conduct, not speech.

Advanced Care Scripts and the foundations previously agreed to pay a combined $9.5 million to resolve related charges.

The case is the latest in a federal probe of drugmakers’ financial support to patient assistance charities, which has resulted in more than $1 billion in settlements.

The case is U.S. v. Teva Pharmaceuticals USA Inc et al, U.S. District Court, District of Massachusetts, No. 20-11548.

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