Gilead Agrees To Pay $97 Million To Resolve Alleged False Claims Act Liability For Paying Kickbacks

Pharmaceutical company Gilead Sciences, Inc. (Gilead), based in Foster City, California, has agreed to pay $97 million to resolve claims that it violated the False Claims Act by illegally using a foundation as a conduit to pay the copays of thousands of Medicare patients taking Gilead’s pulmonary arterial hypertension drug, Letairis, the Justice Department announced today. 

“This settlement demonstrates the government’s commitment to hold accountable companies that pay illegal kickbacks, whether directly or through a third party,” said Acting Assistant Attorney General Jeffrey Bossert Clark of the Department of Justice’s Civil Division.  “We will not allow permit pharmaceutical manufacturers to set unaffordable drug prices while circumventing important cost-control mechanisms within the Medicare program.”

“Like its competitors, Actelion and United Therapeutics, Gilead used data from CVC that it knew it should not have, and effectively set up a proprietary fund within CVC to cover the co-pays of just its own drug,” said U.S. Attorney Andrew E. Lelling for the District of Massachusetts.  “Such conduct not only violates the anti-kickback statute, it also undermines the Medicare program’s co-pay structure, which Congress created as a safeguard against inflated drug prices. During the period covered by today’s settlement, Gilead raised the price of Letairis by over seven times the rate of overall inflation in the United States.”

“When pharmaceutical companies deceitfully employ the charitable donation process as an instrument to subsidize copays for their own drugs, it subverts a critical safeguard against the excessive inflation of drug costs,” said Phillip M. Coyne, Special Agent in Charge, Office of the Inspector General of the Department of Health and Human Service’s Boston Regional Office.  “Manipulation of this process threatens the integrity of our federal healthcare system, disregarding the American taxpayer who ultimately bears the cost.  As such, we remain vigilantly focused on confronting this type of conduct and will continue our aggressive enforcement in this area.”

“Health care fraud costs our country tens of billions of dollars each year because of unscrupulous schemes like the one Gilead orchestrated that dangled kickbacks disguised as copay assistance in front of Medicare patients,”  said Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigations, Boston Division.  “Today’s $97 million settlement ensures Gilead pays for defrauding a government insurance program and reaffirms the FBI’s resolve to pursue investigations and exhaust all efforts to uncover these schemes.”

When a Medicare beneficiary obtains a prescription drug covered by Medicare, the beneficiary may be required to make a partial payment, which may take the form of a copayment, coinsurance, or a deductible (collectively “copays”).  Congress included copay requirements in the Medicare program, in part, to serve as a check on health care costs, including the prices that pharmaceutical manufacturers can demand for their drugs. 

Under the Anti-Kickback Statute, a pharmaceutical company is prohibited from offering or paying, directly or indirectly, any remuneration — which includes money or any other thing of value — to induce Medicare patients to purchase the company’s drugs.  This prohibition extends to the payment of patients’ copay obligations. 

Gilead sells Letairis, which is approved for treatment of pulmonary arterial hypertension.  The government alleged that Gilead used a foundation, which claims 501(c)(3) status for tax purposes, as a conduit to pay the copay obligations of thousands of Medicare patients taking Letairis and to induce those patients to purchase Letairis, because it knew that the prices Gilead set for Letairis could otherwise pose a barrier to those purchases.  From 2007 through 2010, Gilead made payments to the foundation, which, in turn, used those funds to pay copays of patients prescribed Letairis.  The government alleged that Gilead routinely obtained data from the foundation detailing how much the foundation had spent for patients on Letairis; it then used this information to decide how much to pay to the foundation and to confirm that its payments were sufficient to cover the copays of only patients taking Letairis.  The government also alleged that, to generate revenue from Medicare and induce purchases of Letairis, Gilead referred Medicare patients to the foundation, which resulted in claims to Medicare to cover the cost of Letairis.   

The government’s resolution of this matter illustrates the government’s emphasis on combating healthcare fraud.  One of the most powerful tools in this effort is the False Claims Act.  Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).

The investigation was conducted by the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the District of Massachusetts, in conjunction with the Department of Health and Human Services, Office of Inspector General and the Federal Bureau of Investigation. 

The claims resolved by the settlement are allegations only; there has been no determination of liability. 

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    In U.S GAO News
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    In U.S GAO News
    What GAO Found The Department of Defense (DOD) is making changes to its space-related processes and organization that will present both opportunities and challenges to the way it acquires its space systems. GAO has reported over the past decades on challenges DOD faces in its space acquisitions—including schedule delays, multibillion-dollar cost increases, significant reductions in capabilities, and in some cases cancelation—and made recommendations that have improved program outcomes. For example, DOD took actions to implement a GAO recommendation to use an incremental approach to acquiring space launch services. DOD's modified approach reduced risk by allowing it to incorporate knowledge gained from early launch competitions to inform subsequent competitions. Many of the most troubled programs are nearing completion, and DOD is starting new programs to develop the next generation of capabilities, some of which are being acquired under a streamlined acquisition process known as the middle-tier of acquisition pathway (see table below). Starting new programs is an opportunity to learn from past mistakes and take measures to put programs on successful paths. GAO's work has shown that in many cases, DOD is attempting to do so. Selected New DOD Space Programs and Near-Term Estimated Costs Dollars in billions New program Current estimated costs for 5-year middle-tier effort Evolved Strategic SATCOM (ESS) Protected satellite communications $1.4 Future Operationally Resilient Ground Evolution (FORGE) Ground control for Next Generation Overhead Persistent Infrared satellites $3.0 Next Generation Overhead Persistent Infrared (OPIR) Block 0 Missile warning, infrared intelligence, surveillance, and reconnaissance $8.4 Protected Tactical SATCOM (PTS) Protected satellite communications $1.0 Source: Department of Defense (DOD) data. | GAO-21-520T However, DOD faces challenges because it will be starting these new programs amid significant changes to the acquisition environment. Some of these changes are external to DOD, such as increased threats to on-orbit space systems. But over the past several years, DOD also initiated substantial organizational and acquisition process changes. While the Space Force offers an important opportunity to streamline lines of authority, accountability, and decision-making and avoid duplication of effort, many details will require careful consideration. In addition, adopting leading practices for acquisition, as previously recommended, could help DOD achieve faster delivery of new capabilities, especially if DOD balances new, streamlined acquisition processes with sufficient oversight to help ensure program success. Why GAO Did This Study DOD space systems provide critical capabilities that support military and other government operations. Space systems can be expensive to acquire and field, costing billions of dollars each year. The U.S. Space Force was recently established as the sixth branch of the U.S. military. As planned, the Space Force will consolidate leadership, planning, and management for some DOD space programs, as appropriate and authorized. This statement discusses the challenges and opportunities DOD faces as it acquires space systems amid changes to the acquisition environment. This statement is based on GAO reports issued over the past 10 years on DOD space programs. It also draws on recent work supporting GAO's 2021 annual report on the progress of major defense acquisition programs.
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    In U.S GAO News
    What GAO Found Like most medical institutions nationwide, the Department of Veterans Affairs (VA) faced difficulties obtaining medical supplies, including personal protective equipment for its medical workforce, particularly in the early stages of the COVID-19 pandemic. Long-standing problems with its antiquated inventory management system exacerbated VA's challenges. GAO found VA obligated over $4 billion for COVID-19-related products, such as ventilators, and services, such as information technology to support VA's telework environment, as of May 2021. GAO also found that some vendors were unable to deliver personal protective equipment, which resulted in VA terminating some contracts, particularly early in the pandemic. VA also took additional steps to screen vendors. VA has several initiatives underway to modernize its supply chain and prepare for future public health emergencies, but each faces delays and is in early stages (see figure). For example: Inventory management. VA intended to replace its system with the Defense Medical Logistics Standard Support (DMLSS), with initial implementation in October 2019, and enterprise-wide implementation by 2027. Prior to the pandemic, however, this schedule was at significant risk. VA hopes to accelerate full implementation to 2025, and has received COVID-19 supplemental funds to help, but it is too soon to tell if this will occur. Regional Readiness Centers. VA planned to establish four centers—as central sources of critical medical supplies—by December 2020. As of March 2021, VA has not completed a concept of operations or implementation plan for the project. VA faces an additional year delay in achieving full operational capability, which is now expected in 2023. According to VA officials, the pandemic, among other things, contributed to delays. Warstopper program. VA seeks participation in this Defense Logistics Agency program, which would allow VA emergency access to critical supplies. Legislation recently was introduced to require VA participation. However, as GAO reported in March 2021, several questions remain, such as the range of products the program will cover, the amount of funding needed, and the way the program links to Regional Readiness Centers. Department of Veterans Affairs' Selected Ongoing and New Supply Chain Initiatives, Fiscal Years 2021 through 2028 Why GAO Did This Study In March 2020 and March 2021, Congress appropriated $19.6 billion and $17 billion in supplemental funds, respectively, for VA's COVID-19 response effort. VA also authorized use of emergency flexibilities and automated aspects of its inventory system. In accordance with Congress's direction in the CARES Act to monitor the exercise of authorities and use of funds provided to prepare for, respond to, and recover from the pandemic, relevant committees requested our sustained focus on VA. GAO was asked to assess VA's acquisition management during its COVID-19 pandemic response. This report examines VA's efforts to obtain and track COVID-19-related products and services amid its ongoing struggle to improve its inventory and supply chain management. GAO reviewed federal procurement data, analyzed selected VA contract documents, reviewed selected interagency agreements, assessed VA documents on modernization and other initiatives, and interviewed VA officials and staff.
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