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US sues Regeneron, alleging false price reporting on Eylea

The U.S. Department of Justice on Wednesday accused Regeneron of defrauding Medicare by knowingly inflating the average sales price for its top-selling eye drug Eylea.

In a lawsuit filed in U.S. District Court in Massachusetts, prosecutors alleged Regeneron failed to disclose hundreds of millions of dollars in price concessions given to drug distributors in the form of credit card fee reimbursements. As a result, they said, the average sales price for Eylea, which Medicare uses to set payment to doctors, was higher than it should have been.

Regeneron’s tactics also gave it an unfair competitive advantage over rivals, the Justice Department said. Eye clinics were able to get Regeneron’s drug for the discounted cash price while at the same time reaping the benefits of credit card rewards such as “cash back.” At some practices, doctors took turns using their personal credit cards to buy the drug, the lawsuit said.

Retina practices didn’t always have the ability to use credit cards to pay for other treatments, such as Avastin, prosecutors said. They noted that Avastin, developed by Genentech, was the most commonly used medicine for patients with wet age-related macular degeneration until Eylea became the market leader sometime around 2016.

The inflated average price and dent in competition caused an unfair drain on Medicare’s limited resources, according to Jodi Cohen, special agent in charge of the FBI, Boston division. Regeneron executives acted to “pad their profits on the backs of taxpayers,” Cohen said in a statement.

In a statement to BioPharma Dive, Regeneron said it believes the allegations are “without merit” and show a “fundamental misunderstanding of drug price reporting standards.” The company added that it will defend itself in court. 

Eylea is a so-called “buy-and-bill” drug, meaning that a retina practice purchases the medicine from drug distributors, then seeks reimbursement from insurers after administering it to patients. Regeneron gave the credit card fee payments to distributors who in turn charged lower prices on credit-card purchases by clinics, according to the Justice Department.

The drugmaker “meticulously tracked” how much it paid distributors to cover the fees, prosecutors said. They allege that Regeneron paid more than $250 million in reimbursements just to one distributor, Besse Medical, between 2012 and mid-2021.

There was internal discussion at Regeneron about whether the payments qualified as service fees that didn’t need to be reported as price concessions when calculating the average sales price for Medicare, prosecutors said. But company executives knew that they were in fact price concessions and should have been reported as such, the lawsuit says.

Government investigators began looking into Regeneron’s pricing practices as the result of a whistleblower lawsuit. On Wednesday, the Justice Department named two company employees who helped build the case — a former regional sales director and a former director of analytics.

Wet AMD most often affects older adults, meaning it’s a top expense for Medicare. Between 2012 and 2023, the program spent more than $25 billion to cover patient use of Eylea. The drug has been a blockbuster for Regeneron, bringing in about $6 billion in revenue in each of the last three years. 

If the court finds in favor of the Justice Department, the government is eligible to recover three times the amount of its losses from Regeneron plus fines under the False Claims Act. Previous actions have resulted in large penalties, with GSK, Pfizer and Johnson & Johnson all paying more than $2 billion.

The Regeneron case will likely be settled, Raymond James analyst Sean McCutcheon wrote in a note to investors. Still, he said the litigation presents a headache for the company and “will put a microscope” on any potential incentive practices Regeneron undertakes to move patients to its new Eylea HD, a longer-lasting version of Eylea.