Pharmaceutical company Gilead Sciences, based in Foster City, California, has agreed to pay $97 million to resolve claims that it violated the False Claims Act by illegally using a foundation, Caring Voice Coalition, as a conduit to pay the Medicare co-pays for its own drug, Letairis.

When a Medicare beneficiary obtains a prescription drug covered by Medicare Part D, the beneficiary may be required to make a partial payment, which may take the form of a co-payment, co-insurance, or deductible. Congress included co-pay requirements in these programs, in part, to encourage market forces to serve as a check on health care costs, including the prices that pharmaceutical manufacturers can demand for their drugs. The Anti-Kickback Statute prohibits pharmaceutical companies from offering or paying, directly or indirectly, any remuneration – which includes money or any other thing of value – to induce Medicare patients to purchase the companies’ drugs.

The government alleged that Gilead used Caring Voice Coalition, which claimed 501(c)(3) status for tax purposes, as a conduit to pay the co-pay obligations of thousands of Medicare patients taking Letairis, which is approved to treat pulmonary arterial hypertension. According to the government’s allegations, Gilead used CVC to cover the patients’ co-pays in order to induce those patients’ purchases of Letairis. Gilead knew that the prices it set for Letairis otherwise could have posed a barrier to those purchases.

Gilead routinely obtained data from CVC detailing how many Letairis patients CVC had assisted, how much CVC had spent on those patients, and how much CVC expected to spend on those patients in the future. Gilead allegedly received this information through funding requests, telephone calls, and written reports.

Gilead then used this information to budget for future payments to CVC to cover the co-pays of patients taking Letairis, but not of patients taking other manufacturers’ similar drugs. The government alleged that Gilead engaged in this practice even though it knew it should not receive or use data concerning CVC’s expenditures on co-pays for Letairis. The government also alleged that, to generate revenue from Medicare, Gilead referred Medicare patients to CVC, which resulted in claims to Medicare to cover the cost of Letairis.

“Like its competitors, Actelion and United Therapeutics, Gilead used data from CVC that it knew it should not have, and effectively set up a proprietary fund within CVC to cover the co-pays of just its own drug,” said United States Attorney Andrew E. Lelling. “Such conduct not only violates the anti-kickback statute, it also undermines the Medicare program’s co-pay structure, which Congress created as a safeguard against inflated drug prices. During the period covered by today’s settlement, Gilead raised the price of Letairis by over seven times the rate of overall inflation in the United States.”

To date, the Department of Justice has collected over $1 billion from eleven pharmaceutical companies (United Therapeutics, Pfizer, Actelion, Jazz, Lundbeck, Alexion, Astellas, Amgen, Sanofi, Novartis, and Gilead) that allegedly used third-party foundations as kickback vehicles. The Department also has reached settlements with four foundations (Patient Access Network Foundation, Chronic Disease Fund, The Assistance Fund, and Patient Services, Inc.) and a pharmacy (Advanced Care Scripts, Inc.) that allegedly conspired or coordinated with pharmaceutical companies on these kickback schemes.