Federal Court Rejects Bid to Declare Co-Pay Assistance Program Lawful

The United States District Court for the Southern District of New York recently rejected Pfizer’s request for a declaration that its co-pay program would not violate the Anti-Kickback Statute (“AKS”). The case is Pfizer Inc. v. United States Department of Health and Human Services, Case No. 1:20-cv-04920-MKV (S.D.N.Y. Sept. 30, 2021).


The case involved two separate co-pay assistance programs for tafamidis, a drug that treats Transthyretin Amyloid Cardiomyopathy (“ATTR-CM”), a rare, progressive condition that causes deposits of amyloid protein to be deposited in the heart muscle. Tafamidis is currently the only FDA-approved drug to treat ATTR-CM. It costs $225,000 per year, and the cost-sharing obligations for Medicare Part D participants are approximately $13,000 per year. Concerned that these cost-sharing obligations would reduce access to tafamidis for many “middle-income” patients, Pfizer proposed “two programs in which it would provide additional assistance to patients in order to limit their costs to a maximum of $35 a month.”

Under the first proposed program (“Direct Program”), Pfizer would provide funds directly to the patient. The proposed conditions for eligibility for the Direct Program were that the patients must: “(1) be prescribed tafamidis for an on-label (approved) indication, that is, ATTR-CM; (2) be United States residents; and (3) meet program criteria for financial need tailored to address the burden otherwise faced by middle-income patients who are unable to access other available resources.” The Direct Program would be open to patients with Medicare Part D benefits.

Under the second program (“Charity Program”), “Pfizer would fund an existing independent charity to develop its own guidelines and programs to assist Part D participants with payments for tafamidis…. While Pfizer would communicate with the charity about funding needs, the charity would otherwise operate independently and develop its own guidelines for aid programs.”

In June 2019, Pfizer sought an advisory opinion from the United States Department of Health and Human Services Office of Inspector General (“OIG”) about these proposed co-pay assistance programs. OIG determined that it could not issue an advisory opinion about the Charity Program “because ‘the same or substantially the same course of action is under investigation, or has been the subject of a[n] [enforcement] proceeding involving [HHS] or another governmental agency.’” As to the Direct Program, OIG ultimately concluded that it “would not violate the Beneficiary Inducement Statute (“BIS”), but that it could violate the AKS ‘if the requisite intent to induce or reward referrals for, or purchases of, items and services reimbursable by a Federal health care program were present.’”

The opinion largely focused on the intent of the program as the hallmark for an AKS violation, noting that the Direct Program might “operate as a quid pro quo—[Pfizer] would offer remuneration . . . to the beneficiary in return for the beneficiary purchasing” tafamidis…. Significantly, the OIG observed that the program appeared designed to induce “a Medicare beneficiary [who] otherwise may be unwilling or unable to purchase [tafamidis] due to his or her cost-sharing obligations, which are driven by the list price, . . . to purchase” the drug…. The HHS OIG further noted that the Direct Program presented “more than a minimal risk of fraud and abuse,” as a result of Pfizer’s elimination of patient cost-sharing, “one of the key pricing controls” inherent in Medicare Part D.

Pfizer filed a lawsuit seeking declarations that: (1) the Direct Program and Charity Program do not violate the AKS or the BIS; (2) OIG’s guidance regarding the Charity Program violated its First Amendment rights; (3) OIG’s guidance regarding the Charity Program would violate the Fifth Amendment Due Process Clause; and (4) the advisory opinion was contrary to law under the Administrative Procedure Act and should be vacated.

The Decision

The court held that there were no cognizable claims related to the Charity Program because OIG declined Pfizer’s request for an opinion on that program and, therefore, “never decided that the Charity Program violated the AKS and the BIS.” Though the court concluded that it would have jurisdiction to consider the Charity Program, it determined that “the claim is far too remote and the facts of the underlying program are far too undeveloped to” justify court intervention. Instead, the court determined that “the prudent approach is the one envisioned by the law, permitting Pfizer and the HHS OIG first to review the program and reach definitive conclusions.” Thus, the court did not decide whether the Charity Program would violate the AKS or BIS.

For the Direct Program, the court considered the merits of OIG’s advisory opinion. It summarized Pfizer’s argument as follows:

Pfizer does not contend that the Direct Program would not “induce” purchases of tafamidis that otherwise might not occur. Instead, its primary argument is that, even if Pfizer’s intent were to induce purchases, that intent would be insufficient to constitute a violation of the AKS. Rather, Pfizer suggests that AKS liability requires that the Direct Program be administered with a “corrupt” intent or that the payments made through the Direct Program otherwise must constitute an improper quid pro quo where Pfizer directly influences a doctor’s or patient’s decision to prescribe or purchase tafamidis…. Pfizer then argues that because it lacks such an intent and because there is no such monetary benefit, the argument goes, the Direct Program cannot violate the AKS.

The court rejected this argument, holding “that text makes clear, the mental state elements of the AKS do not include a ‘corrupt’ intent. Instead, the statute is implicated where a defendant 1) knowingly and willfully provides remuneration 2) to induce (inter alia) a purchase.” The court rejected Pfizer’s argument that “remuneration” only includes payments made with a corrupt intent because the “word is not amenable to a reading that there be corruption involved.” The court also rejected Pfizer’s argument “that the ‘to induce’ element in the AKS, itself implies that a corrupt intent is required or that a quid pro quo transaction exists.”

The court held that “the HHS OIG determination that the Direct Program could violate the AKS ‘if the requisite intent to induce or reward referrals for, or purchases of, items and services reimbursable by a Federal healthcare program were present’ … is not contrary to law.” The court noted that the Direct Program “is aimed to allow individuals who otherwise may not purchase tafamidis (through economic hardship, personal choice, or both) to purchase it.” Thus, “[b]ecause the stated intent of the payments Pfizer proposes here are to increase the number of Medicare beneficiaries who purchase the drug, the Court is unable to issue the declaratory judgment Pfizer seeks or to issue judgment in its favor on the APA claim, since the AKS prohibits all remuneration that induces purchases of drugs like tafamidis (unless the payments fall into one of the safe harbors).”

The court acknowledged that its decision might reduce the accessibility of tafamidis. However, it concluded that it “must apply the law as it currently is written and is bound by precedent and legal authority that interprets the AKS broadly and as potentially encompassing the kinds of payments Pfizer would make as part of the Direct Program.” Thus, it concluded that any remedy would have to come from administrative or legislative channels and not from the courts.