Bloomberg News Launches Fictional Series: Drug Companies Using Charities to Launder Money

  • by: Robert Goldberg |
  • 08/04/2016
Bloomberg fiction writers Robert Langreth and Ben Elgin are pushing the idea that contributions from a pharmaceutical company to a patient assistance programs (PAPs) run by non profits operate on the edges of anti-kickback law or outright illegal.  Or put another way:  they craft a compelling story that drug companies are using poor patients to launder money and reap profits. 

Relying mostly on unsealed documents from a private case brought by an ex-Celgene employee, the duo cite an expert witness that the donations “were actually illegal kickbacks designed to hide the fact that Celgene was contributing these payments to the foundations to get Medicare patients to use more” of Celgene’s cancer drugs, Thalomid and Revlimid.’

Their reporting is, as the movie disclaimer goes: “Inspired by a true story” which begins here:

First, PAP’s  have been around for decades to help patients with limited financial ability to pay for out of pocket health care costs, including medicines. 

In 2006, the Medicare Part D benefit kicked in.  Beneficiaries no longer qualified for assistance under traditional PAP eligibility criteria whereby companies provided support directly to patients because they could run afoul of federal anti-kickback statutes and other law.  But many patients who did not qualify for low income subsidies still needed financial help.  Hence, the Department of Health and Human Services Office of Inspector General drew up regulations to allow cost-sharing subsidies provided by bona fide, independent charities unaffiliated with pharmaceutical manufacturers… even if the charities receive manufacturer contributions.”  These regulations have been continually updated and PAPs are strictly regulated by HHS.   

Elgin opines that such arrangements are a ‘grey area.’   He might tell that to HHS and the Department of Justice since they are not a party to this private lawsuit.  (More on the intricacies of the suit later. )

Second, drugs not covered on the Medicare Part D plan formulary or drug list are not counted towards the out of pocket costs. The PAP's assistance on behalf of the PAP enrollee does not count towards a Part D beneficiary's true-out-of-pocket cost (TrOOP).  In other words,  PAP assistance would not fill the donut hole and push patients into the catastrophic part of Part D where the program pays 95 percent of all drug costs.  

Third, there are many other patient assistance programs that have also been around for decades to help people with HIV,  Hepatitis C and many rare diseases.  Apparently the dynamic duo also believe these are “schemes” to gain billions. 

Fourth, in addition to ignoring that PAP assistance does NOT boost catastrophic drug spending, Langreth and Elgin rely heavily on the expert testimony provided on behalf of the plaintiff who makes these sweeping claims.   (More on the inventive path the expert took to estimate Celgene raked in $19 billion in excess sales over the last decade in another post.)  

Fifth, they also ignore the vast body of evidence that co-pay assistance often helps patients whose drugs are not covered and who’s copay or cost sharing have increased much faster than drug prices net of rebates.  And often these rebates are generated agreements that specify a “competitor’s drug must have a higher copayment than that of the rebated drug. Other agreements require the sponsor to exclude a competitor’s drugs from its formulary altogether. Rebates were often larger when fewer competitors’ drugs were given preference on the formulary. For example, one sponsor received a 35-percent rebate when the drug was one of two preferred drugs in its class, but a 40-percent rebate when the drug was the only preferred drug in its class on the formulary. “

But I guess helping patients who are powerless to fight such decisions should suffer and die.   Perhaps Langreth and Elgin feel that's a small price to pay to strike a blow for tort lawyer settlements.  

Here’s what Mick Kolassa, one the world’s experts on drug pricing and reimbursement (and a great blues artist) concludes: “Insurers can argue that these offset programs drive patients to use costlier branded drugs (in lieu of cheaper branded options or generics), but studies have shown that more than 40% of the time, in the absence of a copay-offset program, if the patient cannot pay the OOP expenses, they won’t switch to a cheaper drug—they will simply forgo the medication.  The insurance industry will end up losing considerably more money over the long run, in terms of covering related medical expenses that arise when the patients don’t control their conditions through the use of medication.”

To sum up, Langreth and Elgin allege that drug companies and PAPs are colluding to evade anti-kickback laws and overbill Medicare.   So they are alleging that the relationship is nothing less than money laundering and racketeering. 

I am sure that the article has gotten a lot of clicks.   Call me old-fashioned, but I’d trade clicks and self-serving media exposure for being fair and truthful.  

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

Blog Roll

Alliance for Patient Access Alternative Health Practice
Better Health
Biotech Blog
CA Medicine man
Cafe Pharma
Campaign for Modern Medicines
Carlat Psychiatry Blog
Clinical Psychology and Psychiatry: A Closer Look
Conservative's Forum
Club For Growth
Diabetes Mine
Disruptive Women
Doctors For Patient Care
Dr. Gov
Drug Channels
DTC Perspectives
Envisioning 2.0
FDA Law Blog
Fierce Pharma
Fresh Air Fund
Furious Seasons
Gel Health News
Hands Off My Health
Health Business Blog
Health Care BS
Health Care for All
Healthy Skepticism
Hooked: Ethics, Medicine, and Pharma
Hugh Hewitt
In the Pipeline
In Vivo
Internet Drug News
Jaz'd Healthcare
Jaz'd Pharmaceutical Industry
Jim Edwards' NRx
Kaus Files
Laffer Health Care Report
Little Green Footballs
Med Buzz
Media Research Center
More than Medicine
National Review
Neuroethics & Law
Nurses For Reform
Nurses For Reform Blog
Opinion Journal
Orange Book
Peter Rost
Pharm Aid
Pharma Blog Review
Pharma Blogsphere
Pharma Marketing Blog
Pharmacology Corner
Pharmaceutical Business Review
Piper Report
Prescription for a Cure
Public Plan Facts
Real Clear Politics
Shark Report
Shearlings Got Plowed
Taking Back America
Terra Sigillata
The Cycle
The Catalyst
The Lonely Conservative
Town Hall
Washington Monthly
World of DTC Marketing
WSJ Health Blog