Why do copay charity arrangements matter?
When a manufacturer funds a charity that in practice only covers copays for its own drug, Medicare still pays the full list price while the patient feels no cost — an arrangement prosecutors call an illegal kickback that has generated more than $1 billion in DOJ collections since 2017.
Medicare Part D requires patients to pay part of the cost of their drugs, which is intended to make them and their doctors sensitive to price. When a manufacturer funds a charity that in practice covers copays only for its own drug, the patient no longer feels the price, while Medicare still pays the manufacturer's rising list price. The Justice Department argues this is an illegal kickback because it induces purchases paid for by a federal programme.
Since 2017, the government has collected over $1 billion from drugmakers that allegedly used third-party foundations this way, not counting Teva's settlement. Other drugmakers, including Biogen, Novartis and Mallinckrodt, have faced similar allegations. Drugmakers counter that these charities help patients who could not otherwise afford essential drugs.