Pfizer victory in Vyndaqel copay lawsuit could kneecap the government's only control on prices, lawyer warns

After coughing up nearly $24 million in a federal settlement over donations to patient charities, Pfizer went on the offensive last summer and took the U.S.' anti-kickback policies to task. Late last month, the drug giant got its day in court. 

The company, angling to help Medicare patients pay for its costly heart drugs Vyndaqel and Vyndamax, recently challenged (PDF) U.S. copay and kickback policies in New York federal court. While it's unclear when a decision will come down, a Pfizer win in the case could spur drug pricing fallout across the industry, former U.S. Department of Health and Human Services (HHS) staffer Jennifer Michael told Fierce Pharma.

Pfizer last June sued HHS in a bid to assist patients with their Medicare copays for two costly new medicines. U.S. kickback laws currently forbid drugmakers from helping patients with those costs, which Pfizer’s rare disease head Suneet Varma has flagged as a “fundamental inequity” in the American coverage scheme.

Pfizer is battling for the go-ahead on two programs. The first would allow the company to offer copay support directly to Medicare patients on its tafamidis meds Vyndaqel and Vyndamax, which run for $225,000 a year before rebates. The second would allow it to fund an independent charity to help with copays.

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There’s “a lot of guidance” out there already on the independent charity approach, and it’s unclear whether the court will rule definitively on that program, Michael, the former chief of the industry guidance branch in the office of counsel to the inspector general at HHS, said in a recent interview.

The “more compelling” proposal in Pfizer’s suit, however, is its aim for a direct subsidy to Medicare patients. A ruling in the Big Pharma’s favor could have “a huge impact on drug pricing” for both Pfizer and its peers, said Michael, who now works as a member of the healthcare practice at law firm Bass, Berry & Sims.

Free speech or inducement? 

By limiting drugmakers’ communications and donations to charities, but not those of other industries, the HHS’ Office of Inspector General (OIG) is running afoul of free speech guarantees under the First Amendment, Pfizer has argued.

Unable to chip in on Medicare copays directly, drugmakers have instead opted to donate to third-party charities. That approach has come under federal scrutiny and triggered a string of settlements over alleged kickback violations in recent years. Outside of Medicare, companies can legally help patients pay their copays.

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Pfizer itself got tangled up in a Justice Department copay charity probe several years back, ultimately settling in 2018 for $23.85 million over claims it used a patient foundation as a “conduit” to cover Medicare copays for a trio of cancer and arrhythmia drugs.

As part of that settlement, Pfizer entered a corporate integrity agreement with the OIG that requires it to “abide by all HHS OIG guidance” and steer clear of certain “coordination activities” with an indirect subsidy program, Assistant U.S. Attorney Jacob Bergman said at a recent hearing. A ruling that would permit Pfizer to engage in its “ill defined” proposed donation program could “eviscerate” its corporate integrity pact with the OIG, he said, according to a transcript.

Pfizer’s “unprecedented” request challenges the court to “upend decades of settled law” and HHS guidance to “bless their program to induce … Medicare beneficiaries to purchase what is the most expensive cardiovascular drug ever launched in the United States,” fellow defense lawyer Jacob Lillywhite added.

Straight copay, no charity

Speaking with Fierce Pharma, Michael acknowledged Pfizer’s direct copay assistance plan sounds good on paper as it’s designed to help individual patients. Still, a decision backing Pfizer’s proposal could scupper the government’s only real control on drug pricing, she warned, potentially hurting “Medicare sustainability” overall. 

The government itself doesn’t negotiate drug costs, so “cost sharing obligations are really the only check against pricing,” she explained. If drugmakers were allowed to “greatly reduce or even eliminate those cost sharing obligations, there would be essentially no economic cap on pricing.”

“Right now, a drug that’s $225,000 could next year be $500,000 or $1 million,” she warned.

It's a point the government's lawyers have sought to make in court. Pfizer has basically “priced itself out of the market” with tafamidis, defense lawyer Lillywhite argued at the hearing. If that drug were to become “effectively free out of pocket” for the more than 90% of Medicare patients Pfizer’s proposal would cover, the company would “be able to price the drug whatever it wants,” he said.

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Meanwhile, a positive outcome for Pfizer would likely inspire other drugmakers to follow suit and could incite a “gold rush" of drugmakers pricing their meds "however they want and then ... [offsetting] those out-of-pocket expenses with these direct copays," Lillywhite added. 

For their part, Pfizer’s lawyers pointed out that the disease Vyndaqel is used to treat, transthyretin amyloid cardiomyopathy, mainly affects older patients who are already eligible for Medicare. Only a “small sliver” of those patients could be enrolled in the company’s copay assistance program, which covers those between 500% and 800% of the federal poverty level, Pfizer's lawyers said.

“A very large percentage of this population is getting the drug for free by virtue of the government or Pfizer’s own programs,” noted one of the attorneys for Pfizer, Ilana Eisenstein.

Slashing the drug’s cost by 50% or even 75% would reduce copays, but they wouldn’t be eliminated, and there would still be a “significant class of people” unable to afford Vyndaqel or Vyndamax, Eisenstein said.