How pa­tient-as­sis­tance funds give drug com­pa­nies cover to raise prices

Bloomberg Businessweek (North America) - - Focus On/The Cloud - By Ben El­gin and Robert Lan­greth

In Au­gust 2015, Tur­ing Phar­ma­ceu­ti­cals and its then-chief ex­ec­u­tive, Martin Shkreli, pur­chased a drug called Dara­prim and im­me­di­ately raised its price more than 5,000 per­cent. Within days, Tur­ing con­tacted Pa­tient Ser­vices Inc., or PSI, a char­ity that helps peo­ple meet the in­surance co­pay­ments on costly drugs. Tur­ing wanted PSI to cre­ate a fund for pa­tients with tox­o­plas­mo­sis, a par­a­sitic in­fec­tion that is most of­ten treated with Dara­prim.

Hav­ing just made Dara­prim much more costly, Tur­ing was now of­fer­ing to make it more af­ford­able. But this is not a feel­good story. It’s a story about why ex­pen­sive drugs keep get­ting more ex­pen­sive, and how U.S. tax­pay­ers sup­port a bil­lion­dol­lar sys­tem in which char­i­ta­ble giv­ing is, in ef­fect, a very prof­itable form of in­vest­ing for drug com­pa­nies—one that may also be tax-de­ductible.

PSI, which runs sim­i­lar pro­grams for more than 20 dis­eases, jumped at Tur­ing’s of­fer and sug­gested the com­pany kick things off with a do­na­tion of $22 mil­lion, in­clud­ing $1.6 mil­lion for the char­ity’s costs. That got Tur­ing’s at­ten­tion. “Did you see the amounts??? $22MM!!!” wrote Tina Ghor­ban, Tur­ing’s se­nior di­rec­tor of busi­ness an­a­lyt­ics, in an e-mail to a col­league. (The doc­u­ment was ob­tained by con­gres­sional in­ves­ti­ga­tors look­ing into the com­pany’s pric­ing.) Tur­ing ul­ti­mately agreed to con­trib­ute $1 mil­lion for the pa­tient fund, plus $80,000 for PSI’S costs.

PSI is a pa­tient-as­sis­tance char­i­ta­ble or­ga­ni­za­tion, com­monly known as a co­pay char­ity. It’s one of seven large char­i­ties (among many smaller ones) of­fer­ing as­sis­tance to some of the 40 mil­lion Amer­i­cans cov­ered through the gov­ern­ment-funded Medi­care drug pro­gram. Those who meet in­come guide­lines can get much or all of their out-of-pocket drug costs cov­ered by a char­ity: a large ini­tial co­pay for a pre­scrip­tion, an­other sum known as the cov­er­age gap or the donut hole, and more-mod­est on­go­ing costs. It adds up fast. Af­ter Tur­ing raised Dara­prim’s price, some tox­o­plas­mo­sis pa­tients on Medi­care had ini­tial out-of-pocket costs of as much as $3,000.

That’s just a frac­tion of the to­tal cost. Tur­ing’s new price for an ini­tial six-week course of Dara­prim is $60,000 to $90,000. Who pays the dif­fer­ence? For Medi­care pa­tients, U.S. tax­pay­ers shoul­der the bur­den. Medi­care doesn’t re­lease com­plete data on what it pays phar­ma­ceu­ti­cal com­pa­nies each year, but this much is clear: A mil­lion-dol­lar con­tri­bu­tion from a phar­ma­ceu­ti­cal com­pany to a co­pay char­ity can keep hun­dreds of pa­tients from aban­don­ing a newly pricey drug, en­abling the donor to col­lect many mil­lions from Medi­care.

The con­tri­bu­tions also pro­vide public-relations cover for drug com­pa­nies when they face crit­i­cism for price hikes. An in­ter­nal Tur­ing case study about how to talk about price in­creases, writ­ten last Oc­to­ber and re­leased by Congress ear­lier this year, con­tained the sug­ges­tion that pa­tient as­sis­tance pro­grams be “re­peat­edly ref­er­enced.”

“It looks great for phar­ma­ceu­ti­cal com­pa­nies to say they are help­ing pa­tients get the drugs,” says Adri­ane Fugh-ber­man, a doc­tor who’s stud­ied pharma mar­ket­ing prac­tices for three decades and is an as­so­ciate pro­fes­sor of phar­ma­col­ogy and phys­i­ol­ogy at Ge­orge­town Univer­sity. The in­tent of these do­na­tions, she says, is to “de­flect crit­i­cism of high drug prices. Mean­while, they’re bankrupt­ing the health-care sys­tem.”

It’s not just Dara­prim. In 2014, the drug com­pany Retrophin—run at the time by Shkreli—ac­quired Thi­ola, a 26-year-old drug that treats a rare con­di­tion in which pa­tients con­stantly pro­duce kid­ney stones. As Retrophin raised the drug’s price 1,900 per­cent, it also gave money to PSI for co­pay aid for kid­ney-stone pa­tients. In 2010, Valeant Phar­ma­ceu­ti­cals In­ter­na­tional bought a pair of old drugs that treat Wil­son Dis­ease, an ob­scure dis­or­der in which cop­per ac­cu­mu­lates in the body. Three years later, amid a se­ries of price in­creases that ul­ti­mately ex­ceeded 2,600 per­cent, Valeant gave money to the Pa­tient Ac­cess Net­work (PAN) Foun­da­tion for co­pay aid to Wil­son Dis­ease pa­tients.

Fueled al­most en­tirely by drug­mak­ers’ con­tri­bu­tions, the seven big­gest co­pay char­i­ties, which cover scores of dis­eases, had com­bined con­tri­bu­tions of $1.1 bil­lion in 2014. That’s more than twice the fig­ure in 2010, mir­ror­ing the surge in drug prices. For that $1 bil­lion in aid, drug com­pa­nies “get many bil­lions back” from in­sur­ers, says Fugh-ber­man.

“Drug com­pa­nies aren’t con­tribut­ing hun­dreds of mil­lions of dol­lars for al­tru­is­tic rea­sons,” says Joel Hay, a pro­fes­sor and found­ing chair in the department of phar­ma­ceu­ti­cal eco­nom­ics and pol­icy at the Univer­sity of South­ern Cal­i­for­nia. The char­i­ties “don’t ever have to scrounge for money. It falls right to them.” Both Hay and Fugh-ber­man have served as paid expert wit­nesses in law­suits against drug com­pa­nies.

When Tur­ing bought Dara­prim and sought to boost its an­nual rev­enue from $5 mil­lion to more than $200 mil­lion, the use of pa­tient-aid funds was con­sid­ered es­sen­tial, in­ter­nal com­pany doc­u­ments show. Last May, as the com­pany did its due dili­gence be­fore the pur­chase, one ex­ec­u­tive warned in an e-mail that new, high co­pays would force tox­o­plas­mo­sis pa­tients to seek al­ter­na­tive drugs.

“We want to avoid that sit­u­a­tion,” wrote Nancy Ret­zlaff, Tur­ing’s chief com­mer­cial of­fi­cer. “The need to ad­dress co­pay as­sis­tance is a key suc­cess fac­tor.” Tur­ing of­fi­cials de­clined an in­ter­view re­quest but said in an e-mail that by “suc­cess,” Ret­zlaff meant that “no pa­tient is de­nied ac­cess to our medicines by in­abil­ity to pay.” Tur­ing added that it gives hos­pi­tals dis­counts of up to 50 per­cent on Dara­prim and that most pa­tients re­ceive the drug through pro­grams such as Med­i­caid that pay just 1¢ per pill.

Nonethe­less, a doc­u­ment in which PSI laid out its plans for the new fund con­tained a clue about whose in­ter­est was be­ing served. It says: “Client | Tur­ing Phar­ma­ceu­ti­cals.”

In 1983, Dana Kuhn was a young man work­ing in a Pres­by­te­rian church in Jack­son, Tenn., when his life took a tragic turn. Dur­ing a fundrais­ing bas­ket­ball game, he went up for a re­bound, came down awk­wardly, and broke his foot. A mild he­mo­phil­iac, Kuhn re­ceived a blood in­fu­sion. It con­tained the HIV virus. Not re­al­iz­ing he was in­fected, Kuhn trans­mit­ted the virus to his wife, who died in 1987, leav­ing him the sole par­ent of their two young chil­dren.

Kuhn be­came an ad­vo­cate for he­mo­philia pa­tients and a plain­tiff in a law­suit against drug com­pa­nies that were slow to ad­dress the risk of HIV in clot­ting treat­ments. He also be­gan work­ing as a coun­selor to hos­pi­tal pa­tients, and in that ca­pac­ity

Drug com­pa­nies aren't con­tribut­ing hun­dreds of mil­lions of dol­lars for al­tru­is­tic rea­son

he saw how med­i­cal costs harmed fam­i­lies, even those with in­surance. Pa­tients blew through their sav­ings; some had to sell their homes, he re­calls.

He founded PSI from his kitchen ta­ble in 1989 and ran it with­out draw­ing a salary for the first seven years. “The right kind of as­sis­tance can keep some­body in their home, help them main­tain a job, and keep them as a pro­duc­tive mem­ber of so­ci­ety,” says Kuhn, now a lanky 63-year- old with close­cropped brown hair and a gray­ing mus­tache.

Kuhn cre­ated the model, and an act of Congress in 2003 al­lowed such char­i­ties to dra­mat­i­cally ex­pand in scale. That year, law­mak­ers ex­panded Medi­care, cre­at­ing Medi­care Part D to cover pre­scrip­tion drugs. This big, tax­payer-funded mar­ket came with a catch for drug­mak­ers: They’re al­lowed to give direct help to pa­tients cov­ered by com­mer­cial in­sur­ers—and dis­count cards cov­er­ing drug co­pays have be­come ubiq­ui­tous— but they can’t do the same for Medi­care pa­tients. Direct gifts to these peo­ple can be con­sid­ered il­le­gal kick­backs, im­prop­erly steer­ing pa­tients to a par­tic­u­lar com­pany’s drug in­stead of cheaper al­ter­na­tives.

How­ever, gov­ern­ment pol­icy does al­low “bona fide, in­de­pen­dent” char­i­ties to help Medi­care pa­tients with drug costs. Pharma com­pa­nies can con­trib­ute to char­i­ties for spe­cific dis­eases, pro­vided they don’t ex­ert any sway over how the non­prof­its op­er­ate or al­lo­cate their funds.

Un­der the new rules, PSI’S rev­enue grew rapidly, from $16 mil­lion in 2003 to $128 mil­lion last year. In 2014 the char­ity said just over half its funds came from a sin­gle drug com­pany, though it didn’t name the donor. For­mer em­ploy­ees say it was No­var­tis; No­var­tis con­firmed it’s given to PSI, but de­clined to say how much.

The largest co­pay char­ity, the PAN Foun­da­tion, grew even faster, soar­ing from about $36 mil­lion in con­tri­bu­tions in 2010 to more than $800 mil­lion last year. About 95 per­cent of PAN’S con­tri­bu­tions come from the pharma in­dus­try, the char­ity says; in 2014, five un­named drug com­pa­nies kicked in more than $70 mil­lion apiece, ac­cord­ing to PAN’S tax fil­ing. With this ea­ger sta­ble of donors, PAN spent just $597,000 on fundrais­ing in 2014. That’s less than 1 per­cent of the fundrais­ing ex­pense for sim­i­lar-sized char­i­ties, like the Amer­i­can Can­cer So­ci­ety and the Amer­i­can Heart As­so­ci­a­tion.

Kuhn’s com­pen­sa­tion has in­creased along with PSI’S scope. In 2014 his salary was $576,000, making him the high­est-paid co­pay char­ity ex­ec­u­tive. Kuhn has also had close busi­ness deal­ings with the char­ity he cre­ated. Be­fore 2004, PSI con­tracted out some of its op­er­a­tions, in­clud­ing fundrais­ing and pro­gram ser­vices, to a for-profit com­pany called Man­aged Care Con­cepts, which Kuhn co-owned. The char­ity also leased of­fice space from Kuhn’s com­pany. In 2005 the char­ity pur­chased of­fice build­ings from Man­aged Care Con­cepts for $1.06 mil­lion, or about $200,000 more than the com­pany had paid for them in 2000 and 2003.

Dur­ing that time, PSI also paid Kuhn $476,000 for in­tel­lec­tual prop­erty that was “vi­tal to the on­go­ing ac­tiv­i­ties of the or­ga­ni­za­tion,” ac­cord­ing to the char­ity’s tax fil­ings. The IP in ques­tion is an Ex­cel spread­sheet that helps cal­cu­late how much aid pa­tients should get, ac­cord­ing to six for­mer em­ploy­ees and man­agers at PSI. (In a writ­ten state­ment, the char­ity de­fends Kuhn’s com­pen­sa­tion as be­ing com­men­su­rate with his ex­pe­ri­ence. The price in­crease on the build­ings pur­chased from Kuhn’s com­pany was in line with the shift­ing real es­tate mar­ket, it says. And the spread­sheet was val­ued at nearly 10 times the amount Kuhn re­ceived for it by a firm hired by PSI’S board.)

Kuhn talks about PSI only un­til he’s asked about the Tur­ing do­na­tion. Then his tone grows fierce. “I want to make sure you’re not get­ting into a sit­u­a­tion here where a pa­tient dies be­cause of what you write,” he says. “What goes around comes around. Don’t con­tinue to shovel dirt onto pa­tients. The foun­da­tions, we’re just try­ing to throw out life­jack­ets to peo­ple who were on the Ti­tanic. Every­one else is try­ing to throw de­bris on the pa­tients to sink them. It’s just cruel.”

“I’d be dead with­out PSI,” says Steve Ash­brook, a re­tired op­ti­cian in Cincin­nati. He was di­ag­nosed in 2009 with chronic myeloid leukemia, or CML, a slow-mov­ing can­cer that starts in the bone mar­row. His doc­tor pre­scribed Gleevec,

a No­var­tis drug that’s helped dou­ble CML pa­tients’ five-year sur­vival rate, to 63 per­cent, since the 1990s.

When Ash­brook started on Gleevec, he was on a high dose that cost $6,000 per month. Ash­brook, who lives on $1,600 per month from So­cial Se­cu­rity, was fac­ing ini­tial out- of­pocket costs of more than $2,000, and $300 a month af­ter that. At first, No­var­tis gave him free medicine, as drug­mak­ers of­ten do for pa­tients who can’t af­ford it. The in­dus­try has a term for that: “com­pas­sion­ate prod­uct.” Ash­brook’s doc­tor told him about PSI, and a month or two af­ter start­ing on Gleevec, Ash­brook qual­i­fied for help. PSI be­gan cov­er­ing his out- of-pocket costs while his Medi­care plan paid the rest.

Ash­brook says he couldn’t care less where PSI’S money comes from. That’s pre­sum­ably true of most of the hun­dreds of thou­sands of pa­tients sup­ported by co­pay char­i­ties—they’re just grate­ful for the help. But Ash­brook’s story il­lus­trates how the sys­tem en­ables drug pric­ing that squeezes Medi­care.

A year’s sup­ply of Gleevec can be pro­duced for less than $200, ac­cord­ing to An­drew Hill, a re­searcher at the Univer­sity of Liver­pool. When the drug was in­tro­duced, in 2001, its U.S. price was $30,000 a year. At that level, it would have re­couped its devel­op­ment costs in just two years, ac­cord­ing to a let­ter from 100 can­cer spe­cial­ists, pub­lished in the med­i­cal journal Blood in 2013. The price is now up to $120,000 a year in the U.S. (It’s priced at dras­ti­cally dif­fer­ent rates around the world: $25,000 a year in South Africa, for ex­am­ple, and $34,000 a year in the U.K.)

As Gleevec’s price has climbed, so has the bur­den on tax­pay­ers. Medi­care spent $ 996 mil­lion on the drug in 2014, up 158 per­cent from 2010. Most of that in­crease is the re­sult of price hikes; Gleevec’s U. S. list price jumped 83 per­cent from Jan­uary 2010 to Jan­uary 2014, from $ 139 to $ 255 per 400- mil­ligram pill. (A generic is ex­pected to lower costs in the fu­ture.)

Eric Althoff, a spokesper­son for No­var­tis, said via e-mail that the com­pany’s pric­ing isn’t, and shouldn’t be, based on the cost of de­vel­op­ing and man­u­fac­tur­ing its drugs. “We in­vest in de­vel­op­ing novel and cur­rent treat­ments to find ways to make more can­cers sur­viv­able,” he said. “This is chal­leng­ing and risky and needs to be taken into con­sid­er­a­tion when dis­cussing pric­ing of treat­ments.” Althoff also said No­var­tis had contributed $389.4 mil­lion to co­pay char­i­ties since 2004.

The char­i­ties are at pains to dis­tance their work from the drug­mak­ers’ pric­ing strate­gies. “Phar­ma­ceu­ti­cal com­pa­nies do want to do­nate to non­prof­its to help peo­ple,” says Kuhn. “For what rea­sons? I can’t an­swer that.”

Daniel Klein, PAN Foun­da­tion’s chief ex­ec­u­tive of­fi­cer, says his or­ga­ni­za­tion has no in­flu­ence over drug prices. “We are un­aware of any data demon­strat­ing that the help pro­vided by char­i­ta­ble pa­tient as­sis­tance or­ga­ni­za­tions such as PAN has any im­pact on drug prices,” he says. In in­ter­views and e-mails, the heads of sev­eral other co­pay char­i­ties also stressed their in­de­pen­dence from donors.

If a char­ity fund pays mostly for one par­tic­u­lar drug, it may be for rea­sons that have noth­ing to do with whether the drug’s maker is a donor—one drug might sim­ply have a big­ger mar­ket share, for ex­am­ple. If, how­ever, a char­ity sup­ports one drug over an­other when both treat the same dis­ease, that could vi­o­late Medi­care’s anti-kick­back rules. The crim­i­nal penal­ties for such vi­o­la­tions can reach $25,000 and five years in prison for each kick­back, and civil fines can be up to $50,000 per vi­o­la­tion.

To en­sure that char­i­ties and drug com­pa­nies op­er­ate in­de­pen­dently, fed­eral reg­u­la­tors pro­hibit the char­i­ties from dis­clos­ing de­tailed in­for­ma­tion about their op­er­a­tions, which drug com­pa­nies could use to cal­cu­late the im­pact of their do­na­tions to their bot­tom lines. How­ever, data ob­tained through the Free­dom of In­for­ma­tion Act shows that pharma com­pa­nies are able to spon­sor funds that mostly sup­port their own drugs. Over a 16-month pe­riod in 2013 and 2014, PAN Foun­da­tion had 51 dis­ease funds, 41 of which got most of their money from sin­gle drug-com­pany donors, ac­cord­ing to data PAN pro­vided to reg­u­la­tors. Of those 41, 24 funds paid most of their co­pay as­sis­tance claims for pa­tients us­ing drugs made and sold by their dom­i­nant donor.

PAN’S Klein says all its funds are man­aged “in strict com­pli­ance with fed­eral reg­u­la­tions and all are man­aged in­de­pen­dently of the donors.” Char­ity di­rec­tors say they try to have their funds cover wide va­ri­eties of medicines, less­en­ing the chance that a drug­maker can sup­port mostly its own cus­tomers. “In our model, the money gets spread out across a lot of dif­fer­ent treat­ments and prod­ucts,” says Alan Balch, CEO of the Pa­tient Ad­vo­cate Foun­da­tion, which coun­sels pa­tients and also has a co­pay pro­gram.

But in pre­sen­ta­tions and mar­ket­ing ma­te­ri­als over the years, some char­i­ties have ex­plic­itly pitched drug com­pa­nies on how do­na­tions can help their bot­tom lines. In a PSI news­let­ter in 2004, Kuhn promised a “win-win” so­lu­tion for pa­tients and drug­mak­ers. “We pro­vide a way for phar­ma­ceu­ti­cal com­pa­nies to turn their ‘free prod­uct’ pro­grams into rev­enue by find­ing long-term re­im­burse­ment so­lu­tions,” he wrote. Even to­day, on the PSI web­site, one ex­ec­u­tive de­scribes how com­pa­nies work­ing with the char­ity “have re­al­ized in­creased prod­uct us­age” while re­duc­ing “use in com­pas­sion­ate prod­uct.”

An­other char­ity, Chronic Dis­ease Fund, was even more ex­plicit. In a brochure pub­lished in 2006, it said drug­mak­ers’ gifts to co­pay char­i­ties—which, again, may be tax- de­ductible— can be more prof­itable than many of the com­pa­nies’ for-profit ini­tia­tives. “In other words,” the CDF pam­phlet said, “to achieve the same re­turn as your char­i­ta­ble pa­tient fi­nan­cial as­sis­tance pro­gram you would need to run a pre-tax for-profit pro­gram with a re­turn of 81 per­cent.”

CDF now goes by the name Good Days from CDF. It changed its moniker af­ter the co­pay char­i­ties en­dured the clos­est thing they’ve ever seen to a scan­dal. In 2013, Bar­ron’s pub­lished an ar­ti­cle sug­gest­ing CDF was cre­at­ing dis­ease funds to help Quest­cor Phar­ma­ceu­ti­cals, a drug­maker that was do­nat­ing mil­lions of dol­lars to the char­ity. CDF was of­fer­ing as­sis­tance to peo­ple af­flicted with 37 dis­eases, but eight of its funds sup­ported only a sin­gle Quest­cor prod­uct called Ac­thar, ac­cord­ing to Bar­ron’s. Ac­thar treats a range of ail­ments from in­fan­tile spasms to lu­pus, but other treat­ments for those mal­adies are avail­able. Af­ter ad­di­tional pub­lic­ity, in­clud­ing a cou­ple of de­tailed re­ports from short sell­ers, who sug­gested Quest­cor’s sales were propped up by an im­prop­erly

Medi­care spent $996 mil­lion on Gleevec in 2014 af­ter the can­cer drug's price spiked

close re­la­tion­ship with the char­ity, CDF re­placed its top ex­ec­u­tive and board of di­rec­tors.

CDF “com­pletely dis­avows” the 2006 brochure, says Jef­frey Te­nen­baum, an at­tor­ney for the char­ity and a part­ner at law firm Ven­able. He says the brochure hasn’t been used in a decade and “is com­pletely in­con­sis­tent with every pol­icy and po­si­tion that the or­ga­ni­za­tion takes.” He adds that there was noth­ing im­proper with the Quest­cor re­la­tion­ship and that there’s noth­ing wrong, in gen­eral, with drug com­pa­nies ben­e­fit­ing from these char­i­ties, if their con­tri­bu­tions are nec­es­sary to help pa­tients. “Of course there are ben­e­fits to drug com­pa­nies, but the ben­e­fits to the gen­eral public are greater,” says Te­nen­baum.

The Department of Health and Hu­man Ser­vices re­sponded to the CDF flap by telling all non­prof­its in 2014 that it was go­ing to scru­ti­nize dis­ease funds more closely to make sure they weren’t fa­vor­ing drug-com­pany donors. Since then, the Of­fice of the In­spec­tor Gen­eral (OIG) at Health and Hu­man Ser­vices, which over­sees Medi­care spend­ing, has largely signed off on the op­er­a­tions of most of the char­i­ties.

In De­cem­ber the in­spec­tor gen­eral gave a fa­vor­able ad­vi­sory opin­ion to Car­ing Voice Coali­tion, a char­ity that at­tracted $131 mil­lion in con­tri­bu­tions last year. Five for­mer man­agers and em­ploy­ees say Car­ing Voice fa­vored drug com­pa­nies that were donors over those that weren’t. Pa­tients who needed donor com­pa­nies’ drugs got help quickly, the for­mer staff mem­bers say, while pa­tients who had the same dis­ease but used an­other com­pany’s drug were some­times steered away or wait-listed. The for­mer em­ploy­ees asked that their names not be used be­cause they signed nondis­clo­sure agree­ments or they feared back­lash from the char­ity’s ex­ec­u­tives.

In 2011, Car­ing Voice set up a fund for nar­colepsy, and Jazz Phar­ma­ceu­ti­cals made a do­na­tion. Jazz makes the nar­colepsy drug Xyrem, which has risen in price by more than 1,000 per­cent since 2007 and now costs about $89,000 per year for a typ­i­cal pa­tient, ac­cord­ing to Con­nec­ture, which sells soft­ware that com­pares drug prices. Two other drugs that treat nar­colepsy, Provigil and Nu­vigil, were made at the time by a com­pany called Cephalon, which wasn’t a Car­ing Voice donor. When nar­colepsy pa­tients con­tacted Car­ing Voice, those who used Xyrem could typ­i­cally ex­pect help quickly, the for­mer em­ploy­ees say. Pa­tients who used Provigil or Nu­vigil were re­ferred back to Cephalon. Pa­tients who could prove that Cephalon’s foun­da­tion de­nied them help would be added to a Car­ing Voice wait­ing list. One for­mer man­ager says he doesn’t re­call any­one mov­ing off the wait list and get­ting help.

On May 10, Jazz Phar­ma­ceu­ti­cals an­nounced that the Department of Jus­tice had is­sued a sub­poena for doc­u­ments re­lated to the com­pany’s sup­port of char­i­ties that pro­vide fi­nan­cial as­sis­tance for Medi­care pa­tients. The Jazz dis­clo­sure specif­i­cally men­tioned Xyrem but didn’t pro­vide details about which re­la­tion­ships with spe­cific char­i­ties were un­der scru­tiny. The com­pany de­clined to com­ment about the sub­poena.

It’s un­clear how much money Jazz contributed to Car­ing Voice, but a com­pany spokes­woman con­firmed it has given since 2011 and said the com­pany has no role in de­ter­min­ing which pa­tients the char­ity sup­ports. In an e-mailed state­ment, Car­ing Voice’s pres­i­dent, Pam Har­ris, said the non­profit’s pro­grams cover a broad va­ri­ety of drugs and its staff mem­bers use uni­form cri­te­ria to de­ter­mine pa­tients’ el­i­gi­bil­ity for help, re­gard­less of which drugs they use. “As­sis­tance is awarded with­out re­gard to any donor’s in­ter­est,” Har­ris said. She de­clined to an­swer ad­di­tional ques­tions.

Ear­lier this year, the co­pay char­i­ties gath­ered for a con­fer­ence at Bal­ti­more’s Hy­att Re­gency In­ner Har­bor Ho­tel, where their staff mem­bers min­gled with rep­re­sen­ta­tives from No­var­tis, John­son & John­son, Merck, Ge­nen­tech, and other drug com­pa­nies.

One panel dis­cus­sion fo­cused on “OIG over­sight” and “opin­ions and developments on pa­tient as­sis­tance.” An­other fo­cused on “le­gal and com­pli­ance con­sid­er­a­tions.” A third touched on “man­u­fac­turer/foun­da­tion relations.” Bloomberg Busi­nessweek wasn’t al­lowed to hear what was said; at the checkin desk, a con­fer­ence staffer told a re­porter that jour­nal­ists weren’t wel­come at the two-day event, even if they paid the $2,399 en­trance fee.

In the ho­tel lobby, Kuhn, the fa­ther of this in­dus­try, sat alone, eat­ing a light break­fast. He was wary of an­swer­ing more ques­tions and de­murred on a re­quest to visit PSI’S of­fices. He asked for a guar­an­tee that a story wouldn’t dam­age the sys­tem he built. The char­i­ties, Kuhn said, “are all to­tally le­git­i­mate.” On the phone, weeks ear­lier, he’d ex­pressed a sim­i­lar con­cern. “I don’t want to see peo­ple put un­e­d­u­cated ques­tions into peo­ple’s minds about not-for-profit foun­da­tions,” Kuhn said.

If the gov­ern­ment forced char­i­ties to ex­pand their funds to in­clude mul­ti­ple dis­eases and more drugs, pharma com­pa­nies might pull their sup­port, he said. “Some foun­da­tions might have to close pro­grams be­cause they be­come so broad.”

Is that be­cause drug com­pa­nies won’t sup­port char­i­ties if they can’t be sure they’re also help­ing them­selves?

“Of course,” Kuhn said. “We live in a cap­i­tal­is­tic so­ci­ety. Every­one needs to make a lit­tle bit of money.” <BW>

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