December 6, 2019

Senators Whitehouse & Warren Call for Reforms to Eliminate Big Pharma Kick-Back Schemes Via Patient Assistance Programs

Big pharmaceutical companies often cheat the system and collect tax write-offs by setting up "charities" that directly funnel donations to their own products

Washington, DC – United States Senators Sheldon Whitehouse (D-R.I.), member of the Senate Finance Committee, and Elizabeth Warren (D-Mass.), member of the Senate Health, Education, Labor, and Pensions Committee, wrote to U.S. Department of Health and Human Services (HHS) Acting Inspector General Joanne Chiedi raising concerns about abuse of charitable Patient Assistance Programs (PAPs) by pharmaceutical companies.

PAPs are largely funded by pharmaceutical companies and set up as independent charitable foundations to help patients afford their prescription drugs; however, many of their programs are structured to steer profits back to their donors. Since December 2017, the Department of Justice (DOJ) has reached settlements with at least eight pharmaceutical manufacturers, totaling more than $800 million, for funneling kickbacks through PAPs. These included a $210 million settlement with United Therapeutics and a $360 million settlement with Actelion Pharmaceuticals, both for receiving kickbacks through a foundation that helped patients purchase the manufacturers’ drugs for pulmonary arterial hypertension.

“Currently, the perverse structure of these programs allows pharmaceutical companies to reap profits from their tax-deductible ‘charitable donations’ while doing nothing to lower the high drug prices that force patients to rely on such programs in the first place,” the senators wrote in their letter. 

Independent PAPs are not required to disclose key information, such as a list of the drugs that they cover – a lack of transparency that corporate donors can exploit. A recent study of the two PAPs that do release public data on the drugs covered by their programs revealed that 59% of Medicare Part D drugs were not covered, that covered drugs were an average of three times as expensive as non-covered drugs, and that expensive brand-name drugs were covered more often than their generic equivalents. These findings appear to indicate that these PAP arrangements violate HHS-Office of the Inspector General guidance that all Food and Drug Administration (FDA)-approved treatments must be covered by PAPs.

“Although patients may need more help affording more expensive drugs, covering only higher-cost treatments can also have the effect of steering patients away from lower-cost options, benefiting drug manufacturers at the expense of taxpayers,” the lawmakers wrote. “With little transparency, it is impossible for patients, the public, and HHS-OIG to know whether drug assistance decisions correlate with donors’ interests and whether PAPs are complying with HHS-OIG guidance.”

The same study also found that 97% of PAP programs required recipients to have health insurance, which excludes patients who may need assistance the most, but ensures that the pharmaceutical companies receive the full rate for their drugs when the PAP helps the patient meet their co-pay.

The senators’ letter calls on HHS-OIG to update guidance issued in 2014 to tighten the rules and oversight of charitable PAPs, including by: (1) prohibiting pharmaceutical company donors from earmarking their donations for disease-specific funds; (2) requiring public disclosure of the treatments the funds cover and justification for any FDA-approved treatments not covered; and (3) requiring PAPs to cover generic alternatives.

“It is past time to end this inside game and ensure that public charities are serving patients and their families, rather than steering kickbacks to deep-pocketed pharmaceutical companies at taxpayer expense,” wrote the senators.

The letter requests that the HHS-OIG update its PAP guidance as rapidly as possible, and provide a staff-level briefing by December 20, 2019.


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