Federal investigators in the United States have been looking into financial contributions by drug manufacturers to charities, amid allegations these act as illegal kickbacks to encourage charities to promote their drugs to patients covered by Medicare.
Implications | Companies under the spotlight in a federal US investigation into drug companies' contributions to charities include Gilead Sciences, Biogen, and Jazz Pharmaceuticals, which have all been subpoenaed to provide documents pertaining to their relationships with charities. |
Outlook | The latest subpoenas appear to be part of a wider investigation by federal authorities and come after the seven largest co-pay charities received combined contributions of USD1.1 billion in 2014 – more than double what they received in 2010. |
According to Bloomberg, US manufacturers Gilead Sciences, Biogen, and Jazz Pharmaceuticals have all revealed in recent regulatory filings that they have been subpoenaed to provide documents pertaining to their relationships with charities. In the case of Gilead and Jazz, the subpoenas were issued by the US Attorney for the District of Massachusetts, while Biogen did not disclose who issued its subpoena. None of the companies revealed which charities were under investigation.
The companies provided few additional details, although Gilead said it was also asked to provide information on its own patient assistance programmes for its hepatitis C drugs – which include Harvoni (sofosbuvir + ledipasvir) and Sovaldi (sofosbuvir) – while Jazz noted that the subpoena it received related to its narcolepsy drug Xyrem (sodium oxybate). Harvoni has a list price of USD94,500 and Sovaldi USD84,000, while a year's treatment with Xyrem costs around USD90,000.
Bloomberg noted that federal law forbids drug companies from directly subsidising patients covered by Medicare, as this would be considered an illegal inducement to use their drugs. Although companies are allowed to make donations to charities that provide assistance to Medicare patients, they are not allowed to exert a direct influence over how the charities use their funds. Similarly, charities are not allowed to favour one company's drug over another if it has received a financial incentive to do so.
According to Bloomberg, it is not known whether any charities have also been subpoenaed as part of the investigation, and charities that it contacted have declined to comment on the issue.
Outlook and implications
The latest subpoenas appear to be part of a wider investigation by federal authorities, and come after Valeant Pharmaceuticals (Canada) was subpoenaed in October last year by the US Attorney's Office for the District of Massachusetts and by the US Attorney's Office for the Southern District of New York, seeking the disclosure of documents relating to the company's patient assistance programmes (see United States: 19 October 2015: US prosecutors subpoena Valeant over pricing practices).
The pricing of drugs in the United States remains a highly sensitive issue, although companies have been seeking to defend their pricing practices by insisting that, in practice, drugs are normally sold at prices significantly lower than their list prices (see United States: 20 January 2016: US drug manufacturers defend pricing practices). Drug companies have also sought to invest heavily in patient assistance programmes and in charity contributions, with Bloomberg reporting that the seven largest co-pay charities received combined contributions of USD1.1 billion in 2014 – which is more than double what they received in 2010.