In 2012, the U.S. Attorney’s Office convicted four people in a multi-million dollar hemophilia medication kickback scheme for participating in a scheme to defraud Alabama Medicaid through illegal kickbacks. In 2018, a man sued his former employer, Accredo Health Group, Inc. (a specialty pharmacy for anti-hemophilic medications), as well as Medco Health Solutions, Inc., and Hemophilia Health Services, Inc., for violating anti-kickback statues for their own gain. In September, 2020, the National Cornerstone Health Services (NCHS), a specialty pharmacy, was ordered to pay $4.2 million in restitution to Medicare and Medicaid for illegal kickbacks they had provided to parents of children with hemophilia who purchased their anti-hemophilic therapies.
And these are just a few of the on-going behind-the-scenes fraud and illegal activities in treatment of hemophilia for over a decade. For many years, pharmaceutical companies, specialty pharmacies, and other related entities have been offering kickbacks to hemophilia patients, their caregivers, and physicians to influence them into using their products over a competitor’s regardless of whether it was the best option for the patient or not. This not only violates several government laws and acts, it also affects the quality of care of the patient.
Treatment of hemophilia, a genetic blood clotting disorder and bleeding disorder that affects about 20,000 people in the US and approximately 400,000 worldwide, can be very expensive. According to HemoAware, the main medication for treating hemophilia is clotting factor or simple factor and this can be rather pricy. The U.S. hemophilia drug market alone is worth about $4.6 billion a year, and the cost to treat a patient per year is about $300,000-$500,000 and up to $1 million per year for complicated cases. Medicare and Medicaid often foot the bills for most patients due to the cost of the treatment, and, incidentally, medications for hemophilia, including blood factors, are some of most expensive drugs on the Medicaid program.
Due to the profitability of these hemophilia therapies, especially the clotting factors, competition amongst pharmaceutical companies and specialty pharmacies is fierce, with each company increasing their prices steeply and steadily over the years. In 2018 alone, the cost of providing anti-hemophilic factor increased by 62% over the course of the year. This increase is partly due to better and more efficient treatment options but also largely due to competition as companies try to keep up with competitor pricing and kickbacks.
With a great deal of money on the table, pharmaceutical companies, specialty pharmacies, and related entities recognized the need for creative marketing strategies years ago. They had to become innovative in order to retain a good share of the market, and one popular strategy became hiring or recruiting parents or guardians of hemophilia patients and incentivizing them to use their products, sell to their family members, or sell to the hemophilia community. Essentially, people were being offering kickbacks or bribes for using a company’s brand of medication.
Kickbacks as incentives for patients or caregivers to purchase a certain pharmaceutical product is a tactic that pharmaceutical industries have employed over the years to influence the purchase of their products with the goal of profiting through sales and insurance reimbursements. Kickbacks can be paid as bribes, free meals, free vacations, invitations to all-expenses paid conferences, consulting fees, free tickets to events, and so many other creative avenues. On the surface, kickbacks might seem harmless as the patient is seemingly not hurt; however, kickback arrangements can result in medically-unnecessary treatments for patients, use of inappropriate medications, questionable motivation, and use of more expensive products when cheaper and comparable products are available. Kickbacks also drive up costs, lead to waste in resources, and cause unfair competition.
In order to safeguard patients and prevent fraud and abuse of Federal healthcare programs, The False Claim Act (FCA), Anti-kickback Statute (AKS), and the Stark Law were enacted and enforced by the Department of Justice, the Department of Health and Human Services Office of the Inspector General (OIG) and the Centers of Medicare and Medicaid Services (CMS) as a foundation for the federal Fraud and Abuse laws.
The False Claim Act was first enacted in 1863 and amended to the current act that makes it illegal to submit claims for payment to any federal health care program, including Medicare or Medicaid, when it is known that the claims are false of fraudulent. The Anti-kickback statute of 1972 is a criminal and civil law that “prohibits the knowing and willful payment of remuneration to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care program for Medicare or Medicaid patients,” and carries penalties up to $25,000-$50,000, felony conviction with up to a five-year prison term per kickback, and exclusion from participating in federal healthcare programs like Medicare, Medicaid, and TRICARE. Civil penalties can also be assessed for up to three times the amount of damages sustained by the government. The Stark Law, also known as the “Physician Self-Referral Statue”, was enacted in 1989 and generally prevents a physician from referring Medicare and Medicaid patients to an entity for health services if they or their family member stand to benefit financially from the referral. These three – The False Claim Act, The Anti-kickback Statute, and the Stark Law, together constitute part of the federal fraud and abuse law.
Despite these laws intended to detect and punish fraud, pharmaceutical companies, specialty pharmacies, and other related entities continued to provide illegal kickbacks over the years, influencing patients, their families, their communities, and physicians. This fraudulent act of offering kickbacks not only violates patient’s HIPPA privacy (Health Insurance Portability and Accountability Act), but also crosses so many ethical and moral lines. The Patient Protection and Affordable Care Act of 2010 firmly linked False Claim Act (FCA) and the Anti-kickback statue so that when a kickback law was violated, it would most often trigger the False Claims Act (FCA) if the government is paying part of the bill. This was created to protect patients against the implications of kickbacks as well as expand government reach for violators.
These law and acts, though, did not stop the on-going illegal hemophilia kickback schemes. Due to how creative companies can get with masking the fraudulent kickbacks they offer, it is often hard to discover them; however, the government relies heavily on whistleblowers (also known as “relator” when identifying the original source of fraud against the government), typically in the form of ex-employees, to file an FCA case or inform the government about illegal kickbacks to help curb the fraud. A whistleblower can get up to 30% reward of recovery made by the government based on the information the whistleblower has. Whistleblowers typically have inside knowledge of the fraudulent kickbacks paid by pharmacies, pharmaceutical companies, hospitals, nursing homes, medical specialists, and so many other medical entities that get paid by Medicare.
In 2015, a whistleblower filled one of the most high-profile hemophilia kickback cases against Novo Nordisk Inc. for marketing their hemophilia therapy, NovoSeven® as a prophylactic daily therapy rather than “as needed” per the FDA approval. This complaint was followed up with a more recent accusation and law suit in May 2020, alleging that the company paid kickbacks to patients, families, doctors, and pharmacies to influence the use of NovoSeven®.
The whistleblower, a physician with specialized training in excessive bleeding and clotting, and an ex-employee at Novo Nordisk Inc., alleged that the company used highly illegal efforts (kickbacks, fraudulent publications) to induce this preferential use of NovoSeven® with a goal to maintain, consolidate, monopolize, and expand their market share – and this cost the government billions of dollars. They allegedly ran an elaborate kickback scheme where they paid physicians through a post-marketing surveillance registry, sponsored all-expense paid events, camps, and weekend retreats for patients, provided gifts and other benefits to patients, gave kickbacks to adult patients to promote NovoSeven® to other patients, and paid kickbacks directly to patients and caregivers.
According to the whistleblower, this elaborate kickback scheme of engaging one-on-one with patients and caregivers and showering them with gifts and benefits, including college scholarships, grants for computers, software, tutoring, training for career change, and funded credit cards, led to a 140% increase in the sale of the drug from 2000-2008. This kickback scheme continued until 2015 when they began to exclude patients with government insurance from participating in some of the kickback programs. The case is still pending with a request for trial by jury.
Another high-profile case filed in 1995 against Caremark for fraud and kickbacks in several therapies, including hemophilia, resulted in the company paying $161 million of criminal and civil fines to the government – one of the largest settlement for health-care fraud at that time.
Kickbacks are fraudulent and threaten the quality of care of hemophilia patients. Even though the government has enacted laws to deter and stop these illicit bribes, keeping an eye on the internal workings of pharmaceutical companies, specialty pharmacies, and other related entities that stand to benefit from the sale of these high-ticket therapies is challenging. Whistleblowers have come forth to warn the government, but that is not nearly enough as these companies constantly devise innovative ways to get around the system and continue committing fraud and offering kickbacks for their financial gains.