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Gilead accused of funneling kickbacks to providers to boost sales


The drugmaker Gilead Sciences has been hit with a whistle-blower suit accusing it of paying healthcare providers, government agencies and others organizations to boost sales of its hepatitis and HIV drugs.

In an unsealed False Claims Act case in California federal court, a whistle-blower claimed Gilead’s Frontlines of Communities in the United States program, which partners with other institutions to facilitate hepatitis and HIV screenings, resulted in billions of dollars in excess government spending.

U.S. sales of Gilead’s Sovaldi and Harvoni through both public and private payers totaled $20.6 billion after rebates from December 2013 to August 2015, according to the company’s financial reports. The drugs can cost between $80,000 and $100,000 for a full treatment cycle and Medicare spent nearly $8.2 billion before rebates for the 18-month period after Sovaldi was introduced in December 2013, the Senate found in an investigation.

According to the whistle-blower lawsuit, the publicly traded drugmaker allegedly funneled kickbacks through the program by paying doctors’ salaries through FOCUS grants, funding patient travel to screenings, paying for upgrades to providers’ medical software, paying for or providing personnel to facilitate writing prescriptions, funding upgrades to laboratory equipment and providing resources to disseminate the efficacy of its products.

That led to unnecessary tests and prescriptions, increased demand for Gilead’s drugs, raised their prices and ultimately boosted profits, according to whistle-blower Allen Kuo, who filed the complaint in 2017. His lawsuit alleges $3.4 billion in damages.

The federal government, 20 states and Washington, D.C., have all declined to intervene in the suit. The U.S. Department of Justice, which asked for three different extensions to determine whether to intervene, declined to comment.

“I would expect the government to intervene if they were confident that there was actionable evidence that Gilead engaged in multi-billion dollars worth of fraud against the government,” said Mark Silberman, a partner at the law firm Benesch. The government would still have to approve a potential settlement, he added.

Medicare’s monthly spending on hepatitis C treatment increased more than six-fold from $116.4 million in January 2014 to $793.2 million in June 2015, the Senate investigation revealed.

While the cost of the hepatitis C drugs doesn’t factor in rebates, one state official said that even with the rebates the drugs “jeopardize the solvency of (Texas’) Medicaid and public health programs,” former Deputy Medicaid/CHIP Director of the Texas Health and Human Services Commission Andy Vasquez wrote in a 2015 letter to Congress.

FOCUS funds were allegedly awarded to “partners” based on the total numbers of patients who are screened and linked to care. By the end of the third quarter of 2015, providers in FOCUS conducted approximately 2 million HIV tests and 200,000 hepatitis C tests, according to the lawsuit.

The FOCUS program allegedly identified and paid part of the salaries of certain “champion” doctors who are charged with advocating change across the entire institution in support of Gilead products. It would also fund patient travel to FOCUS screening clinics, the lawsuit claims.

HHS requested documents on FOCUS in 2017, and Gilead said it takes compliance “very seriously and is pleased with the outcome” of HHS’ probe.

Gilead in 2017 also received a subpoena from the U.S. Attorney’s Office for the Eastern District of Pennsylvania for information relation to its “reimbursement support offerings, clinical education programs and interaction with specialty pharmacies,” according to Gilead’s securities filings. Other states’ requests followed including for information related to Gilead’s speaker programs, advisory boards and other marketing materials.

Although some drug marketing payments have safe harbors from anti-kickback statutes, the lawsuit claims FOCUS isn’t protected.

Gilead noted that a similar FCA suit was dismissed in July 2018.

As drug marketing comes under increased scrutiny and opioid litigation against drugmakers continues, companies may become more cautious about their advertising practices.

“These can serve as warnings and a reason for pharmaceutical companies to take greater care in how the drugs are presented,” said Scarlett Nokes, counsel with Bradley Arant Boult Cummings. However, previous settlements seemingly haven’t done enough to change drugmakers’ behavior, Nokes added.

More than half of the $59 billion in fraud settlements recovered by the DOJ since 1986 has come from False Claims Act lawsuits brought by whistle-blowers, the primary target being the healthcare industry, according to DOJ data. Whistle-blowers have been paid upwards of $7 billion in rewards for filing False Claims Act cases on behalf of the federal government, noted Joy Stephenson-Laws, founding and managing partner of Stephenson, Acquisto & Colman.

These companies could face civil and criminal litigation for the type of marketing activities revealed in recent lawsuits, even if a settlement is reached, she said.

“As long as there are such worthwhile incentives for private citizens to report these fraudulent acts, drug manufacturers should be concerned,” Stephenson-Laws wrote in an email to Modern Healthcare.

Consumers and physicians are inundated with drug commercials and sales representatives’ requests to prescribe their drug. Scrutiny is mounting on both ends. The current administration proposed that drugmakers include the list price of their drugs in their television ads.

Academic medical centers, for instance, enacted policies restricting meetings between sales reps and physicians. The market share of drugs that sales reps pushed was cut by more than half from 2006 to 2012 when those policies went into place, according to a 2017 study published in JAMA.

“I have heard anecdotally that companies are relying on primetime commercials in hopes of reaching physicians in addition to potential patients because they don’t have the access to physicians they once had,” Nokes said.