Regeneron hit with DOJ complaint that it hid 'hundreds of millions' in Eylea credit card processing fees from Medicare

The U.S. government is accusing Regeneron of deliberately using an unusual method to overcharge Medicare for the company’s popular eye drug Eylea.

In a lawsuit filed with the U.S. District Court in Massachusetts following a whistleblower tipoff, the Department of Justice alleges Regeneron knowingly submitted false average sales prices (ASP) to Medicare and therefore inflated reimbursement rates for Eylea.

Regeneron did this by withholding details about credit card processing fees that the company allegedly paid to drug distributors so that no additional expenses would incur for the buyers, the government claims.

According to market research commissioned by Regeneron, being able to use credit cards as a payment method was “seen as important” among retinal practices, the DOJ said in its complaint (PDF).

As federal prosecutors see it, such payments should be counted as rebates and contribute to lower ASPs for Eylea. Medicare reimbursement prices are calculated by adding a small percentage on top of the ASP.

Since Eylea gained its first FDA approval in late 2011, Regeneron has paid “hundreds of millions of dollars” in credit card fee repayments for Eylea, the DOJ alleges in its complaint. For just one of the several distributors involved, AmerisourceBergen’s Besse Medical, the reimbursements exceeded $250 million from 2012 to mid-2021, the DOJ said.

In a statement to Fierce Pharma, Regeneron said it believes that the allegations are “without merit.” The lawsuit follows a civil investigation demand from the DOJ in 2021. The company called the fees at the center of the argument “lawful reimbursement of costs incurred by our specialty distributors.”

“Regeneron has fully cooperated with the government’s investigation and will vigorously defend itself in court,” the company said in the statement.

Biopharma companies routinely face allegations that they have overcharged Medicare or Medicaid under the False Claims Act. In most cases, the complaints center on alleged stymying of competition or price fixing. 

There is an anti-competition component in the Eylea case, too. The extra credit card fee reimbursements gave Eylea an “unfair competitive advantage,” the DOJ said in its complaint.

The lack of distinct compensation for distributor credit card bank fees put Eylea’s biggest rival, Roche and Novartis’ Lucentis, at a disadvantage, the government contends. According to the lawsuit, Regeneron took advantage of that and described it in its initial marketing message: “Credit cards are accepted by all 3 distributors and not for Lucentis orders.”

Meanwhile, Regeneron is fighting Novartis in a separate antitrust lawsuit around their Eylea-Lucentis rivalry.

Rather than incorporating the credit fees as part of ASP, Regeneron put them under “bona fide service fees” (BFSF), a category that’s not considered as price concessions in Medicare, according to the government. But the company should have known the payments didn’t qualify as BFSF, prosecutors contend.

In a consulting project provided for Regeneron in 2019, Deloitte labeled credit card fees as not eligible under BFSF, the complaint shows.

Medicare Part B paid more than $25 billion for Eylea between 2012 and 2023, making it a “top Medicare expense,” the DOJ noted.

If Regeneron is found liable for violating the False Claims Act, the U.S. government may recover three times the amount of its losses, plus applicable penalties, the DOJ said.

In 2023, Eylea and a newly FDA-approved high-dose version generated $5.9 billion in sales for Regeneron in the U.S. Lately, the drug has faced fierce competition from Roche’s bispecific antibody Vabysmo.

As a biologic drug, Eylea could have been up for federal price negotiations under the Inflation Reduction Act. But several companies are developing biosimilars to the blockbuster anti-VEGF therapy, which would exempt the originator from the process.