Biotech giant Celgene is being accused of (CELG) illegally colluding with medical charities to boost sales of its pricey cancer drugs.
The allegations are made in a whistleblower suit by former Celgene sales rep Beverly Brown and detailed in documents filed in federal court last week, according to Bloomberg. They claim that the company donated hundreds of millions of dollars to charities like the Patient Access Network (PAN) Foundation and the Chronic Disease Fund (CDF) “as part of a core business scheme to gain billions” from government health programs. The charities assist patients with accessing expensive blood cancer medications like Celgene’s Revlimid by helping them afford their drug co-pays. Annual out-of-pocket costs for the drug can exceed $10,000 for patients and had sales of $1.7 billion in the second quarter of 2016, the company announced last week.
Brown and her lawyers say that Celgene ran afoul of anti-kickback statutes by coordinating with the charities. Companies aren’t supposed to know exactly how their donated money is being spent and are barred from giving money directly to patients covered by Medicare prescription drug plans.
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But an expert witness hired by Brown’s legal team says that Celgene’s arrangements with the charities in question include significant requirements for the nonprofits to disclose detailed information like how many patients had applied for co-pay assistance and how much of Celgene’s donations were still remaining. That “strongly indicates that CDF and PAN Foundation provided Celgene with the information it needed to be sure it would fully fund all co-pays needed for its products and that it successfully aligned its funding to achieve this goal,” wrote the expert witness, University of Southern California pharmaceutical economics professor Joel Hay.
“Ms. Brown is wrong and her allegations are baseless,” a Celgene spokesperson told Fortune in an emailed statement. “[The government] has issued guidance related to donations by medical innovators to charitable patient assistance programs. Celgene complies with that guidance with respect to its donations to patient assistance programs.” The two charities mentioned in the case are not named as co-defendants.
Celgene has also received a subpoena from the Department of Justice regarding its patient assistance programs and how closely it works with medical charities. The Justice Department’s investigation is separate from Brown’s whistleblower case, which the DoJ has declined to join so far.
And the biotech isn’t the first to be scrutinized over its practices. Amid a maelstrom of criticism against biopharmaceutical companies for high drug costs and price hikes, major industry players have pointed to patient assistance programs, arguing that people who need the treatments would never have to pay the full list price. Still, that does little to help insurers and public health plans that must still pay exorbitant amounts of money for the medications.
Valeant Pharmaceuticals (VRX) is also being investigated for its drug pricing and patient assistance programs, and biotechs Gilead (GILD) and Biogen (BIIB) have received similar federal subpoenas regarding patient assistance charities.
