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Drug Charity May Shutter After U.S. Faults Pharma Influence

Updated on
  • Office of Inspector General cites charity, drugmaker ties
  • Caring Voice funded almost entirely by pharmaceutical industry

A medical charity that received hundreds of millions of dollars from pharmaceutical companies lost a crucial stamp of approval from the U.S. government, after allowing its donors improper influence over how the nonprofit was run.

For the last decade, Caring Voice Coalition has been one of the biggest patient assistance charities in the U.S. The Mechanicsville, Virginia-based foundation helps patients afford expensive drugs by funding health insurance co-payments that can otherwise total more than $10,000 a year. Without the charity, which is funded almost entirely by drugmakers, many patients might not be able to afford life-saving medicine.

It had another effect, according to a redacted letter from the Department of Health and Human Services’ Office of Inspector General. It provided drugmakers with data that could help them see if their contributions were helping their own customers, potentially giving the companies “greater ability to raise the prices of their drugs while insulating patients from the immediate out-of-pocket effects,” and letting Medicare pay for the cost increases, according to the OIG’s letter, which was posted on the HHS website.

Caring Voice confirmed it was the recipient of the letter, in which the OIG said the charity “may cease operations.”

“Our board of directors is evaluating this very serious matter and will determine the most appropriate path forward,” Gregory Smiley, chief executive officer of Caring Voice, said in an email. “We are very disappointed to receive this news, particularly given the work we have undertaken over the past six months, including dramatic leadership and comprehensive policy overhauls.”

Charity May Close

Pharmaceutical companies increased their donations to copay charities in recent years, often in tandem with large increases of the price of drugs. Under federal law, drug companies can’t give direct co-pay help to patients covered by Medicare -- which would be considered an illegal kickback because it could steer patients to one drug or another. Instead, they’re permitted to donate to independent charities that help Medicare patients, provided the companies don’t exert sway over how the nonprofits operate. 

The OIG’s advisory opinions essentially give a stamp of approval to the charities. While such approvals aren’t required, drugmakers are unlikely to continue donating to a charity that doesn’t have one.

The OIG findings are similar to reporting by Bloomberg Businessweek from May 2016 that Caring Voice gave preferential treatment to patients of some company donors.

Read more: How pharma works with drug charities to cover price hikes

Five former employees of the charity said at the time that Caring Voice sometimes favored drug companies that were donors over those that weren’t. In one case, patients who needed donor Jazz Pharmaceuticals Plc’s expensive narcolepsy drug Xyrem got help quickly, the former staff members said, while patients who used narcolepsy drugs from a non-affiliated company were sometimes steered away or wait-listed.

Jazz said in a statement that earlier this year it decided not to fund Caring Voice’s narcolepsy fund. Instead, it gave a grant to start a fund at another charity. The company said it has a program to comply with all legal and regulatory requirements related to patient assistance programs.

Jazz shares closed down 1.2 percent to $137.87 on Wednesday.

Close Ties

The OIG said it’s rescinding its previous favorable advisory opinions of the charity “effective immediately,” due to its failure to disclose how it was actually operating.

It’s the first time the OIG has rescinded a favorable advisory opinion for a patient assistance charity, said Tesia Williams, an OIG spokeswoman.

“We determined that the public interest required us to rescind requestor’s opinion,” Williams said in an email

According to the OIG letter, Caring Voice “allowed donors to directly or indirectly influence the identification or delineation” of its disease categories, contradicting assurances that it wouldn’t, said the letter, which is signed by OIG Chief Counsel Gregory E. Demske.

Drugmakers say the charities benefit society by helping patients pay for medicine that they couldn’t otherwise afford. At the same time, their contributions can potentially stop hundreds of patients from abandoning a costly drug, enabling the donor company to continue getting paid through Medicare as patients stay on the treatments.

Congress has also questioned the role of the charities.

In a letter to the OIG Tuesday, Senator Ron Wyden called information sharing between charities and drug firms “of great concern” and asked for more details on the nature of the interactions and which drug companies got the information.

The charities “have been controversial in part due to the very question of their independence from manufacturers,” the Oregon Democrat said in the letter.

Drug Funds

Caring Voice says on its website that it provides copay support for patients with narcolepsy, pulmonary hypertension, chronic pain, and other diseases. The charity received nearly $153.2 million in corporate contributions in the fiscal year ended June 30th, 2016, up from $131.1 million the previous year, according to its financial statements.

The OIG’s move to rescind the advisory opinion comes amid a wide-ranging investigation by the Justice Department into the charities.

Jazz Pharmaceuticals has recently received three subpoenas from the Justice Department related to its relationship with copay charities, according to securities filings this year. Celgene Corp., United Therapeutics Corp., Pfizer Inc., and Gilead Sciences Inc., have also received similar subpoenas.

In July, United Therapeutics Corp., which makes drugs for pulmonary hypertension, said it had set aside $210 million for a potential settlement with the Justice Department over its charity contributions. Jazz has also said it could be subject to penalties.

In its Caring Voice decision, the OIG said it was revoking the charity’s favorable advisory opinion retroactively back to 2006, when it was first issued.

A determination of whether any laws had been broken was beyond the scope of the advisory opinion process, OIG said, though it added that “nothing in this letter limits the investigational or prosecutorial authority of OIG, the Department of Justice, or any other agency.”

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