Pfizer to pay $23.85 million to settle U.S. co-payment kickback probe

By Jonathan Stempel

(Reuters) - Pfizer Inc (NYSE: PFE) agreed to pay $23.85 million to resolve U.S. charges that it used a purportedly independent charity to pay illegal kickbacks to Medicare patients, covering their out-of-pocket costs for its prescription drugs.

The U.S. Department of Justice said on Thursday that the civil settlement resolves allegations that Pfizer improperly used the Patient Access Network Foundation as a conduit to cover co-payment obligations of patients taking three Pfizer drugs.

Pfizer's actions enabled the New York-based drugmaker to boost prices and revenue, violating the federal False Claims Act in a scheme that ran from 2012 to 2016, the department said.

The False Claims Act bans drugmakers from offering anything of value to induce Medicare patients to buy their drugs.

The accord resulted from an industrywide probe led by the office of U.S. Attorney Andrew Lelling in Boston of drugmakers' support of patient assistance charities.

"Kickbacks undermine the independence of physician and patient decision-making, and raise healthcare costs," Chad Readler, the acting assistant attorney general of the Justice Department's civil division, said in a statement.

Pfizer said the settlement was not an admission of liability, but reflected its "desire to put this legal matter behind it and focus on the needs of patients. The company believes all individuals deserve access to medicines prescribed by their physicians."

The largest U.S. drugmaker also entered a five-year corporate integrity agreement with the Office of Inspector General of the U.S. Department of Health and Human Services.

Drugmakers are prohibited from subsidizing co-payments for patients enrolled in Medicare, the government health plan for older Americans, but may donate to independent non-profits that provide such assistance.

Pfizer was accused of working with a third party specialty pharmacy, Advanced Care Scripts, to move patients taking its kidney cancer drugs Sutent and Inlyta to the foundation, rather than provide the drugs for free to qualified patients.

The government also said Pfizer worked with the foundation to create a fund for patients taking its heart drug Tikosyn, and coordinated the fund's opening with a price hike.

Advanced Care Scripts became part of CVS Health Corp (NYSE: CVS) in 2015. "We are not aware of any allegation of wrongdoing by ACS," a CVS spokesman said.

The foundation did not immediately respond to a request for comment.

In December, United Therapeutics Corp (NASDAQ: UTHR) reached a $210 million settlement to resolve similar allegations it improperly used a charity to cover co-payments.

On May 8, Jazz Pharmaceuticals Plc (NASDAQ: JAZZ) said it would pay $57 million in another accord.

(Reporting by Jonathan Stempel in Toronto; Additional reporting by Brendan Pierson in New York; Editing by Bernadette Baum, Dan Grebler and Bill Berkrot)

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