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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.

© 2022 by Tycko & Zavareei LLPNational Law Review, Volume X, Number 45
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About this Author

Jonathan K. Tycko leads the Whistleblower Practice Group of Tycko & Zavareei LLP

In recent years, the laws of the United States have undergone a whistleblower revolution. Federal and state governments now offer substantial monetary awards to individuals who come forward with information about fraud on government programs, tax fraud, securities fraud, and fraud involving the banking industry. Whistleblowers also now have important legal protections, designed to prevent retaliation and blacklisting.

The law firm of Tycko & Zavareei LLP works on the cutting edge of this whistleblower revolution, taking on even the most complex and confidential whistleblower...

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