Biogen used ‘charity giving’ to illegally boost drug sales, Humana alleged in lawsuit

A federal judge in Massachusetts recently dismissed a case brought by Humana insurance accusing a drug manufacturer Biogen of making unlawful donations to different charities to help fund patient copays of its multiple sclerosis drugs to increase its number of prescriptions and sales.

In September 2021, Humana filed a complaint that claimed Biogen developed a scheme to lure Medicare and its insurers to overpay for Tysabri, Avonex, and Tecfidera, which cost about $50,000 to $80,000 per year. Biogen allegedly “seeded” the market by giving away free medication to patents who lacked insurance coverage and then began “sweeping” patients from its free-drug program into Medicare or other government-funded health care programs and then funneling illegal copayment assistance to those same patients under the guise of unrestricted charitable giving, according to the complaint.

Some pharmaceutical companies attempt to circumvent federal anti-kickback statutes by donating large sums to patient assistance organizations, according to a 2022 Health Affairs report.

Related: Health insurers balk at Biogen’s $56,000-a-year Alzheimer’s treatment

In the Humana lawsuit, Biogen then allegedly coordinated with another specialty pharmacy, Advanced Care Scripts, which steered patients and acted as an information intermediary, as well as two nominally charitable foundations, Chronic Disease Fund Inc. and The Assistance Fund Inc., the complaint said.

While Humana was the ultimate payor of the prescription drugs, it did not directly purchase the drugs from Biogen—making it an “indirect purchaser.” From 2011 through 2019, Humana spent over $2.3 billion on Biogen’s MS medications, the complaint said.

The defendants filed a motion to dismiss, arguing that Humana was not a direct purchaser of the MS drugs.

However, Chief U.S. District Judge F. Dennis Saylor IV agreed with the defendants, holding that Humana’s claims under civil Racketeer Influenced and Corrupt Organizations (RICO) statute or a claim for RICO conspiracy, were barred by the “indirect purchaser” rule.

“Under the ‘indirect purchaser rule,’ first developed by the Supreme Court in the antitrust context, only a direct purchaser of goods has standing to assert a claim for violation of the antitrust laws,” Saylor wrote in his opinion filed in the District of Massachusetts March 31.

However, Saylor noted that the First Circuit’s decision in In re Neurontin Marketing & Sales Practices Litigation made matters more complicated.

In that case, Pfizer engaged in unlawful marketing practices to boost off-label sales of Neurontin. Kaiser, a health insurer, brought a suit under the civil RICO statute, alleging that it had incurred higher costs as a result of inflated sales. A jury ruled in favor of Kaiser and Pfizer appealed.

Here, Humana’s harm is even more direct than that of the insurer in Neurontin. Defendants’ scheme targeted insurers like Humana directly by subsidizing only the copayment for the MS drugs with the knowledge that the remainder of the cost would be picked up by insurers like Humana,” the plaintiffs had argued in opposition to the defendants’ motion to dismiss.

“To state the obvious, a copayment exists only because a patient has health insurance. This means that insurers like Humana were not just targets of the conduct but the only targets. Unlike Neurontin, where the patient and the doctor were arguably duped into taking or prescribing a less effective or ineffective drug, there is no harm either to the patient (who is getting an expensive drug ‘for free’) or the doctor (‘physicians would not be the ones paying for the drugs they prescribed’). Thus no one is better situated to pursue claims against the conspirators under RICO than Humana (‘Kaiser is also in the best position to enforce the law because Kaiser is the party that directly suffered economic injury from Pfizer’s scheme.’).”

“In any event, while there may be reasons to carve out an exception to the indirect purchaser rule, or to conclude that it should not apply, such a decision is fraught with policy judgments that are more properly committed to the Court of Appeals rather than a single District Judge,” Saylor wrote. “Under the circumstances, this Court will follow the lead of every circuit to have considered the issue, and apply the indirect purchaser rule. Accordingly, because Humana is an indirect purchaser of the pharmaceutical products at issue in this case, it does not have standing to assert a civil RICO claim.”