UnitedHealthcare Insurance Co. has accused Regeneron Pharmaceuticals Inc. of engaging in a kickback scheme that inflated the cost of Eylea, its most profitable drug, and bilked Medicare out of millions of dollars.
UnitedHealthcare Insurance accused the Tarrytown company of fraud and racketeering, in a lawsuit filed Dec. 17 in U.S. District Court, White Plains.
“Regeneron set Eylea”™s price well beyond what the market would otherwise bear,” the lawsuit states, and left Medicare plan sponsors such as United “to foot the large majority of the inflated bill.”
“We are reviewing the details in the complaint,” Regeneron spokesperson Joe Ricculli said in an email, “and will vigorously defend ourselves against this lawsuit.”
Eylea is priced at $1,850 per dose and is administered every four to eight weeks for an annual cost of about $10,000.
Medicare has spent $11.5 billion on the drug since 2013, according to the complaint, and UnitedHealthcare Insurance has paid $917 million on behalf of Medicare patients.
The Food and Drug Administration approved the drug in 2011 for treatment of wet, age-related macular degeneration, where abnormal blood vessel growth in the back of the eye causes blind spots, blurry vision and eventually blindness.
Genentech Inc. makes a comparable drug, Lucentis, priced at $2,000 a dose. It also makes Avastin, a similar drug approved for certain forms of cancer that also has been found about as effective as Eylea and Lucentis for treating macular degeneration. Doctors may prescribe Avastin off-label for that purpose. It cost $55 per dose.
Yet despite the price differential, Eylea is the top-selling drug of its kind, the lawsuit states, and UnitedHealthcare Insurance said Regeneron has achieved that unlikely result by breaking federal and state anti-kickback laws.
The health care insurer accuses Regeneron of scheming with the Chronic Disease Foundation, of Frisco, Texas.
The Chronic Disease Foundation covers cost-sharing charges that patients are unable to pay.
The purpose of cost-sharing fees, such as co-pays and deductibles, is to motivate doctors to prescribe and patients to use cheaper drugs, and by doing so, to spur competition by drugmakers.
Drug companies may not pay cost-sharing fees, according to the complaint, but sometimes they waive the charge. To the patient, the drug is free, but the health care insurer still has to pay the balance of the price.
Thus, Avastin at $55 is more expensive than Eylea at $1,850, to the patient. But drug companies can then charge more to health care insurers.
Drugmakers may also make donations to patient assistance programs, such as Chronic Disease Foundation, to cover cost-shares.
The program must be a bona fide, independent charity. Drugmakers may not form, fund or control the organization. And the charity is expected to cover costs of all comparable drugs for a particular therapy.
The reason for the rules, according to the lawsuit, is that cost-sharing programs can lead to kickbacks, where the subsidy is steered only to a particular drug. Then the manufacturer can increase the overall price and offset the cost of the donation.
That”™s what UnitedHealthcare Insurance claims happened here.
“Regeneron covertly funneled illegal kickbacks to patients through a purportedly independent charity, the CDF, to ensure that ”¦ contractual obligations would not restrain Eylea”™s price,” the complaint states. “Regeneron was thus able to charge significantly higher prices for Eylea and bilk United out of tens, if not hundreds, of millions of dollars.”
In 2012, Regeneron donated $600,000 to CDF, according to the complaint, and balked at donating more because it did not want to help subsidize Genentech”™s drugs.
CDF asked for more, and a Regeneron official allegedly calculated that a $32.6 million donation could generate $198.5 million in sales, for a return on investment of 465%.
Regeneron donated $35 million in 2013, and company executives understood, according to the complaint, that the donations would cover cost-sharing obligations only for Eylea patients.
United also claims that Regeneron concealed its relationship with CDF from its auditors.
“Regeneron”™s scheme worked precisely as planned,” the lawsuit states. “Regeneron maintained an artificially high price and reaped windfall profits for years.”
Sales of Eylea have generated $22.4 billion in revenue since 2011, according to the complaint, and represent about 60% of Regeneron”™s annual revenue.
United said it does not yet know the full scope of damages caused by the alleged illegal conduct.
The United lawsuit was filed a week after Regeneron sued the U.S. Department of Health and Human Services, as well as the Centers for Medicare and Medicaid Services, claiming that a new federal drug pricing rule for Medicare will devastate U.S. pharma.
In that lawsuit, Regeneron said the government has singled out Eylea as costing twice as much as in comparison countries.
United is represented by Robins Kaplan LLP attorneys in Manhattan and Minneapolis.
