Another Pharma Company Settles False Claims Act Claims for paying Kickbacks

Incyte Corporation to pay $12.6 million.

Recently,  U.S. Department of Justice (DOJ) announced that the Delaware-based pharmaceutical company Incyte Corporation has agreed to pay $12.6 million to resolve allegations that it violated the False Claims Act by paying kickbacks to Medicare beneficiaries to increase prescriptions for its drug Jakafi, which is used to treat myelofibrosis, a form of leukemia that causes extensive scarring in bone marrow and leads to severe anemia and fatigue.

Reflective  of the drug’s high cost (Jakafi costs roughly $15,000 per patient per month, or $200,000 per year), Incyte is alleged to have been the sole donor of a charitable patient assistance program (PAP) designed to provide economic assistance to help patients afford the costly co-pays they must make to receive Jakafi – thereby improperly steering patients to the drug. 

The Incyte case marks the latest in a long list of False Claims Act settlements the DOJ has reached with pharmaceutical companies, including ActelionAegerionAmgenUnited TherapeuticsJazzAstellasAlexionSanofi-AventisGilead, and Pfizer, all of which were accused of making conditional donations to PAPs, providing co-pay assistance to increase their drug profits. We have previously reported on several of these settlements for RACmonitor in covering this growing enforcement trend. DOJ’s recoveries in these False Claims Act cases, which heretofore had generally been prosecuted by the U.S. Attorney’s Office in Boston, total well over a billion dollars.

The genesis of this seemingly industry-wide fraud stems from Medicare rules, which indicate that beneficiaries often are required to pay a fee, typically in the form of a co-payment or a deductible, when they pick up medications that Medicare covers. Drug makers reimbursing patients for these costs may run afoul of the Anti-Kickback Statute, which prohibits pharmaceutical companies from paying kickbacks, remuneration, or anything of value to induce patients to purchase or use their drugs.

The allegations against all of these pharmaceutical companies involve a similar scheme in which the companies disguised kickbacks to patients as charitable donations from purportedly independent foundations. In fact, these foundations were generally alleged to have been controlled by the drug companies, and were set up with the goal to increase the sale of certain high-cost drugs that the companies manufacture.

Research has shown that pharmaceutical PAPs can lead to higher drug prices by steering patients away from generic drugs and other less-costly alternatives, leading to the imposition of federal regulations limiting such programs. Generally, the co-pay amount is determined as a percentage of the cost of the drug; hence, the more expensive a drug is, the higher the out-of-pocket cost for the patient. The goal of the patient co-pay policy is that market forces will drive patients towards cheaper alternatives and result in lower drug prices overall. Drug makers are not allowed to directly cover prescription co-payments for Medicare or Medicaid beneficiaries, although they are welcome to donate to bona fide independent charities.

After Incyte’s foundation launched, the government alleged that Incyte used the foundation to pay the co-pays of federal healthcare beneficiaries taking Jakafi who were ineligible for assistance from the fund because they did not have myelofibrosis (the condition the Food and Drug Administration, or FDA, approved the drug to treat), instead pressuring extra prescriptions of Jakafi for off-label use. Incyte managers called and emailed the foundation (of which, again, they were the sole donors) to pressure it to provide co-pay assistance to these ineligible Jakafi patients.

The Incyte case has three notable takeaways:

  1. A mix of frauds: These allegations involve a notable combination of two common types of healthcare fraud: co-pay waivers and off-label promotion. Most of the previous settlements were almost exclusively based on steering patients toward more expensive drugs than potential alternatives, but the patients were otherwise qualified for Medicare reimbursement of the relevant drugs. Here, the government accused Incyte of promoting Jakafi off-label through its foundation using co-pay subsidies, an expansion of the types of potential fact patterns that the government is interested in pursuing in this area.

  2. Whistleblower involvement: Most of the 11 previous cases settled in this area did not involve whistleblowers, and instead were directly brought by the government. The predominance of this trend is unusual in the current climate, wherein roughly 70 percent of healthcare fraud settlements are directly attributable to whistleblowers bringing cases.

    This case was initiated in 2018 by whistleblower Justin Dillon, who was then employed as a senior director in Incyte’s compliance department. Dillon had worked for Incyte for approximately three years, and had more than 22 years of experience in the pharmaceutical industry. Incyte terminated Mr. Dillon in October 2018, allegedly as retaliation for raising numerous compliance issues with management.

    Although the United States and several states initially declined to join his whistleblower case in 2019, Dillon continued to litigate the case on his own, as the False Claims Act allows. In 2021, the government intervened for the purpose of settlement and has awarded Dillon a $3.6 million relator’s share, representing 28.5 percent of the government’s recovery.

  3. Dorothy, we’re not in Boston anymore: As noted, the vast majority of these previous cases were pursued by the U.S. Attorney’s Office for the District of Massachusetts, based in Boston. However, the Incyte case was investigated and settled by the U.S. Attorney’s Office for the Eastern District of Pennsylvania, based in Philadelphia, suggesting that these types of cases have a broadening geographic scope.

We expect this DOJ enforcement trend to continue and grow as additional DOJ offices gain expertise and experience in this area.


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