A federal appeals court has rejected Pfizer’s claims against the government in a case with major ramifications for drug prices, Medicare spending and government anti-fraud enforcement efforts.
Pfizer’s lawsuit against the US Department of Health and Human Services, first filed in 2020, sought a legal go-ahead for a proposed program that would help cover copays for Medicare patients taking tafamidis, a heart drug that the pharmaceutical giant priced at $225,000 a year . The lawsuit challenged the HHS Office of Inspector General’s finding that such a program would violate federal anti-kickback law, but a US district court judge last fall sided with the government–a decision affirmed on Monday by the US Second Circuit Court of Appeals.
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can have major implications for drug pricing because they insulate patients from the actual cost of their prescriptions, removing the price sensitivity that generally helps keep prices in check, researchers say. Such programs are essentially “a marketing tool” that can help drug companies boost revenues from the Medicare program, said Ge Bai, professor of accounting and of health policy at Johns Hopkins University. Patients eligible for Pfizer’s proposed program would pay only $35 per month, while Pfizer would cover the remaining annual copay of about $13,000, the appeals court wrote in its decision, and “the federal government, through Medicare, would pick up the rest of the $225,000 tab,”–or about $212,000.
Pfizer said in a statement that it was disappointed in the Second Circuit’s decision, as the company “continues to believe that providing copay assistance to eligible patients who have been prescribed tafamidis would represent a fair and effective way to lower out-of-pocket costs and help ensure affordable access to this important medicine.”
Tafamidis, sold by Pfizer as Vyndaqel and Vyndamax, is a treatment for a heart condition called transthyretin amyloid cardiomyopathy (ATTR-CM). The condition primarily affects older people, who are often covered by Medicare. Pfizer generated $612 million in worldwide revenues from the drug in the first quarter of this year, up 41% operationally from the same period a year earlier.
The court’s decision comes as Congress is once again focused on drug pricing reform, including a potential cap on patient out-of-pocket spending under Medicare’s Part D prescription-drug benefit. Currently, Medicare enrollees who reach Part D’s “catastrophic” coverage phase are responsible for 5% of a drug’s cost–which can be unaffordable for many patients taking the priciest drugs.
Federal anti-kickback law generally prohibits offering anything of value to induce the purchase of a federally reimbursable healthcare product. Pfizer’s proposed program “is specifically designed to induce Medicare beneficiaries to purchase Pfizer’s tafamidis, a federally reimbursable drug,” the appeals court wrote in its decision, adding that the program “falls squarely” within the anti-kickback statute’s prohibitions.
The decision may discourage any other drug makers from pursuing programs that would directly subsidize copayments of Medicare patients who are prescribed the company’s products, attorneys said. “It would be extremely risky for any manufacturer to move forward with that type of arrangement, given this opinion,” said Jennifer Michael, partner at Bass, Berry & Sims and former chief of the industry-guidance branch in the office of counsel to the inspector general at HHS.
Pfizer had argued that violations of the anti-kickback law must involve an element of “corrupt” intent – an argument the court rejected. The decision may prove helpful to the government in pursuing anti-kickback statute actions “without facing all these arguments about the specific intent,” said Max Voldman, an attorney at Constantine Cannon who specializes in healthcare industry fraud.
AHIP, a trade group for health insurers, applauded the decision, saying in a statement that the anti-kickback law “is an essential protection against the risk of fraud, waste, and abuse” and that by upholding these protections, “the courts have took an important step to protect Americans from what would otherwise be an unchecked multi-billion-dollar price tag that would make coverage and care less affordable for everyone.”