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Non-profit Foundation Pays $3 Million Settlement for Alleged Kickbacks to Medicare Patients

Patient Services, Inc. (“PSI”), a non-profit foundation based in Midlothian, Virginia, allegedly helped three pharmaceutical companies pay kickbacks to Medicare patients taking the companies’ medications. PSI paid $3 million to settle the allegations that it violated the False Claims Act.

The Anti-Kickback Statute of the False Claims Act prohibits pharmaceutical companies from directly or indirectly paying or offering anything of value to persuade Medicare patients to purchase their drugs. The statute also prohibits third parties, including co-pay foundations like PSI, from conspiring with companies providing products or services to Medicare patients.

The government alleged that PSI worked with pharmaceutical companies – Insys, Aegerion, and Alexion – to design and operate three distinct funds that diverted money from the drug manufacturers to Medicare patients only taking drugs they sold. Additionally, the kickbacks acted as a patient incentive to withstand the exorbitant costs charged for the drugs, rather than searching for a cheaper alternative.

In addition to the $3 million payment, the settlement agreement mandates that PSI enter into a three-year Integrity Agreement (“IA”) with the U.S. Department of Health and Human Services, Office of Inspector General. The IA requires compliance-related certifications from the Board of Directors, detailed reviews by an independent review organization, autonomous operations, and compliance with the law regarding arrangement and interactions with pharmaceutical manufacturer donors.

PSI is the fourth foundation to resolve kickback allegations and have paid a combined $13 million in settlements. Furthermore, the U.S. Attorney’s Office has collected more than $840 million from eight pharmaceutical companies to settle allegations of using third-party foundations to facilitate kickbacks. Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division says that these settlements are only the beginning as the Department of Justice “will continue to combat unlawful kickback arrangements and their pernicious influence on our health care system.”

United States Attorney Andrew E. Lelling summarized the settlement saying, “Pharmaceutical companies cannot use foundations to funnel drug co-payments disguised as routine charitable donations, all to prop up excessive drug prices. PSI allegedly operated as a vehicle for specific pharmaceutical companies essentially to pay kickbacks at the ultimate expense of the American taxpayers who support the Medicare program.” He added that “[w]e will continue to pursue this kind of enforcement until the practice disappears.

© 2020 by Tycko & Zavareei LLP

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About this Author

Kristen Sagafi, Tycko Zavareei Law Firm, Fraud Attorney
Partner

Ms. Sagafi focuses her practice on consumer fraud cases, including matters involving false advertising and unfair competition. In 2014, Ms. Sagafi drafted and advanced a bill to strengthen the protections afforded to consumers under California’s Consumers Legal Remedies Act, an effort that included presenting testimony to the California State Senate Judiciary Committee.

Beyond her consumer protection practice, Ms. Sagafi brings her legal expertise to a number of volunteer activities. She has received more than 40 hours of accredited mediation...

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