Prosecutors Sue Teva’s U.S. Business Over Charitable Donations

Teva said it would defend itself against the suit.

Photo: amir cohen/Reuters

Federal prosecutors accused Teva Pharmaceutical Industries Ltd. TEVA -9.58% ’s U.S. business of violating an anti-kickback law by using charitable donations to shield Medicare patients from rising costs of a multiple sclerosis drug while ensuring the drug’s sales.

Between 2006 and at least 2015, Teva’s U.S. unit and one of its subsidiaries paid two foundations more than $300 million for Medicare copays for patients using the company’s Copaxone drug to treat multiple sclerosis, according to a civil suit the Justice Department filed Tuesday in the U.S. District Court for Massachusetts.

The Teva businesses used the foundations as conduits, prosecutors allege, intending for the funds it provided to cover copays as it raised the cost of the drug from about $17,000 a year to more than $73,000 a year from late in 2006 until five years ago, the suit alleges. Using the foundations in such a manner violated a federal anti-kickback statute, according to the complaint.

“Teva intended the payments to ensure that Copaxone patients never faced the steep prices that Teva charged for its drug, thus inducing the patients, including Medicare patients, to purchase the drug,” the lawsuit says.

Teva said it would defend itself against the suit.

“This case brought by the Department of Justice regarding these charitable contributions only seeks to further restrict patients’ access to important medicines and health care,” a spokeswoman for the drugmaker’s U.S. business said in a statement.

American depository receipts for Israel-based Teva Pharmaceutical Industries were down 10% in midday trading in New York.

The new suit against Teva’s U.S. unit is the latest example of federal prosecutors taking aim at the relationship between pharmaceutical companies and charitable foundations that help patients pay for treatments. The Justice Department has investigated more than a dozen drugmakers for their donations to such organizations.

In June, the Justice Department accused Regeneron Pharmaceuticals Inc. of paying kickbacks to a foundation to boost sales of its eye-disease treatment Eylea. A Regeneron spokeswoman said at the time the company didn’t believe the case had merit and would defend itself.

Other drugmakers have settled investigations into whether they violated federal law by using charities to pay for Medicare patients’ out-of-pocket costs for prescriptions. Pfizer Inc. agreed two years ago to pay about $24 million to resolve such allegations, saying at the time the settlement wasn’t an admission of facts or liability.

Prosecutors claim that Teva’s U.S. unit and its subsidiary referred patients using Copaxone who faced Medicare copays to a specialty pharmacy. That company arranged for patients to obtain help with copays through two foundations, Chronic Disease Fund and the Assistance Fund, according to the suit.

The specialty pharmacy told Teva how many Copaxone patients were receiving copay help from each organization, which Teva would use, along with information from the foundations, to determine how much it needed to donate to each foundation, the lawsuit says.

The foundations, as well as the pharmacy, aren’t listed as defendants in the case. Representatives from the Chronic Disease Fund and from the pharmacy, Advanced Care Scripts Inc., didn’t immediately respond to requests for comment.

A spokeswoman for the Assistance Fund said that it is committed to operating in full compliance with federal rules, adding that its alleged conduct, as described in the suit, was attributed to a former employee.

Write to Micah Maidenberg at [email protected]

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