Teva Pharmaceuticals Faces FCA Lawsuit Over Illegal Kickbacks, Company Stocks Drop by 10%

The federal government has filed a False Claims Act lawsuit against Teva and one of its subsidiaries. According to the complaint, the company violated the Anti-Kickback Statute in its marketing of its drug Copaxone. Prosecutors claim Teva illegally paid Medicare co-pays through corrupt foundations in order to boost sales of the multiple sclerosis medication.

Teva Pharmaceuticals Faces FCA Lawsuit Over Illegal Kickbacks, Company Stocks Drop by 10%

No sooner had the lawsuit been announced than the value of Teva's shares dropped by about 10 percent, a clear indication that the company may be liable for millions of dollars in damages. This is a big blow for Teva, which has seen Copaxone sales dwindle over the last few years. Once a $4.2 billion-per-year earner, the drug brought in a meager $628 million (combining U.S. and European sales) between January and June of 2020.

Funneling Kickbacks Through Co-Pay Assistance Foundations

The DOJ alleges that between 2007 and 2015, Teva's purported donations to The Assistance Fund and Chronic Disease Fund were, in fact, illegal kickbacks because they were made knowing the foundations would use the money to assist patients with Copaxone co-pays, ultimately benefitting Teva. Meanwhile, the company increased the price of the drug by nearly 330%. By 2015, an annual supply cost a staggering $73,000.

According to the FBI, the defendant masked "kickbacks as charitable contributions.” The government alleges Teva used a specialty pharmacy, Advanced Care Scripts Inc., to obtain information about Medicare beneficiaries who were required to co-pay for Copaxone. "Teva used [this information] to calculate how much money to pay each foundation to maintain coverage of the Medicare co-pays of Copaxone patients enrolled in each foundation," the DOJ said. Payments to the foundations were allegedly coordinated with patient referrals for Copaxone co-pay assistance.

Medicare Part D and The Role of Co-Pays

Drugs covered by Medicare Part D sometimes require co-pays from patients. Under the Anti-Kickback Statute, drug manufacturers are prohibited from making any form of payment or gift that incentivizes the purchase of its drugs. If a drugmaker controls the patients’ ability to cover co-pays, it can artificially inflate the price of drugs, knowing government programs will eventually foot the bill. Co-pay requirements were originally implemented to prevent the artificial inflation of drug prices.

The Acting Assistant Attorney General of the DOJ’s Civil Division said in a press release that the department “is committed to stopping pharmaceutical companies from using foundations as conduits to funnel kickbacks to Medicare patients, and to prop up excessive drug costs at the expense of the American taxpayers.” The AAG also promised that the federal government "will continue to root out these unlawful kickback arrangements that undermine the integrity of federal health care programs.”

According to the U.S. Attorney for the District of Massachusetts, where the lawsuit was filed, Teva used the 'charitable' foundations "to pay hundreds of millions of dollars in kickbacks, all while raising the price of its drug, Copaxone, at a rate over 19 times the rate of inflation.”

Special Agent in Charge Phillip M. Coyne of the U.S. Department of Health and Human Services, OIG, said in a statement that the HHS OIG “will continue to thoroughly investigate such corrosive schemes.”

How to Become a Healthcare/Pharmaceutical Fraud Whistleblower

The False Claims Act enables whistleblowers with information about healthcare fraud to file a lawsuit and obtain awards. If their case succeeds, relators can receive awards ranging between 15 and 30 percent of any resulting recoveries. Pharmaceutical fraud often involves hundreds of millions of dollars in fraudulent billings, and it tends to yield some of the largest whistleblower awards.

Teva is no stranger to healthcare fraud litigation. Earlier this year, it agreed to a $54 million settlement to resolve allegations that it bribed doctors to boost prescriptions of both Copaxone and Azilect.

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