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Pharmaceutical Manufacturer Incyte Becomes Latest To Settle Co-Pay Foundation Kickback Allegations

On May 4, 2021, the Department of Justice announced that Incyte Corporation, a Delaware-based pharmaceutical company, agreed to pay $12.6 million to resolve allegations that it used a foundation, Chronic Disease Fund dba Good Days (“CDF”), to funnel kickbacks to Medicare patients taking its own drug. Incyte sells Jakafi, a drug that, through 2014, was approved only to treat myelofibrosis. Incyte charges over $180,000 per year for Jakafi. Because of Incyte’s pricing practices for Jakafi, the co-pays for the drug are not affordable for many Medicare patients.

According to the government’s allegations, Incyte coordinated with CDF to set up a fund that, as a practical matter, would cover co-pays almost exclusively for Jakafi during the period from 2011 through 2014. Incyte was the only donor to the fund. Nominally, the fund covered co-pays for patients with myelofibrosis, but the government alleged that Incyte pressured CDF to provide economic assistance to Medicare patients who were taking Jakafi for other conditions. In other words, contrary to the HHS-OIG guidance on co-pay foundations, CDF’s “myelofibrosis” fund was not a disease fund at all; rather, it was a drug-specific fund that functioned as a conduit for money from Incyte to Medicare patients taking Jakafi. As a result, those patients had no concern about Jakafi’s ever-increasing cost, and the burden of that cost fell only on the taxpayers who fund Medicare. At least indirectly, the taxpayers also fund Incyte’s coffers and enable Incyte to sustain Jakafi’s enormous price.

The government further alleged that Incyte used a third-party contractor, known in industry parlance as a “hub,” to help patients using Jakafi for conditions other than myelofibrosis to complete their applications to the CDF myelofibrosis fund. The hub thus played an integral role in Incyte’s illegal kickback scheme.

Incyte is not the first company to settle allegations involving the use of CDF funds as kickback vehicles. Astellas, Novartis, and Onyx (now Amgen), among others, allegedly conspired with CDF to set up funds that enabled the manufacturers to pay kickbacks to patients taking their own expensive drugs. In 2019, CDF itself reached a settlement with the Department of Justice to resolve allegations that it violated the False Claims Act by enabling pharmaceutical manufacturers to pay kickback to their own patients.