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Regeneron faces DOJ complaint in alleged Medicare overcharge of Eylea

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7 min read

The U.S. Department of Justice (DOJ) has filed a lawsuit against Regeneron Pharmaceuticals, Inc. alleging the company has been intentionally overcharging Medicare for its Eylea (aflibercept) injection 2 mg.

Lots to unpack here… let’s start with Eylea.

Developed by Regeneron and Bayer AG, Eylea is a vascular endothelial growth factor (VEGF) inhibitor administered as an intravitreal injection.

Eylea was most recently approved by the FDA in February 2023 for retinopathy of prematurity (ROP) treatment in preterm infants; prior to that, it was approved for the following retinal diseases:

  • Wet age-related macular degeneration (AMD)
  • Macular edema following retinal vein occlusion (RVO)
  • Diabetic macular edema (DME)
  • Diabetic retinopathy (DR)

Go on…

Eylea is what’s known as a “buy-and-bill” drug, as the DOJ noted, in which clinicians and their practices (Regeneron’s customers) typically “incur an upfront expense to purchase Eylea that payors later reimburse.” 

In most cases, these customers (retinal and other ophthalmic practices) purchase the drug from third-party distributors.

And who are Eylea’s distributors?

Regeneron is reported to have established distribution contracts with the following:

  • Besse Medical
  • McKesson Corporation
  • CuraScript SD Specialty Distribution
  • Metro Medical (division of Cardinal Health)

Now explain the Medicare process for Eylea.

As the lawsuit outlines, once a clinician administers the drug to a patient, that practice submits a claim for reimbursement to Medicare or other payors.

With Medicare Part B, Eylea (and other similarity-administered drugs) is intended to be reimbursed based on what’s known as an average sales price (ASP) of the drug.

Explain ASP.

ASPs are calculated by dividing a manufacturer’s total revenue from drugs sold to U.S. purchasers by the total number of units sold in a given calendar year.

A drug’s ASP is based on the average prices for sales of that drug within the U.S. (minus price concessions, ie: a price that is lower than the originally-agreed-upon price).

With Medicare, providers are reimbursed at a rate of the ASP plus an additional 6% fee. These ASPs are then used to establish reimbursement rates for such drugs as Eylea.

What’s a company’s legal obligation with ASPs?

As mandated by the Centers for Medicare & Medicaid Services (CMS), drug manufacturers—such as Regeneron—are required to report the ASP of each of their Medicare Part B drugs on a quarterly basis.

Alrighty, now let’s dive into these new allegations.

Filed in the U.S. District Court in Massachusetts under the False Claims Act (FCA), the lawsuit alleges that the company “fraudulently manipulated Medicare reimbursement” for Eylea by “knowingly submitting false (ASP) reports to Medicare.”

Note: The FCA is a federal law that imposes liability on any person(s) or companies who defraud governmental programs.

Gotcha. What else is the company accused of?

Per the complaint, Regeneron reportedly inflated the ASP for Eylea by “paying credit card processing fees for the benefit of physician-customers purchasing Eylea.”

The mistake: The company failed to report those payments as price concessions to Eylea’s ASP.

The (alleged) consequence of this: Due to this, false claims for Eylea were submitted, along with “hundreds of millions of dollars” in inflated reimbursements by Medicare.

  • See page 45 of the lawsuit for examples of these claims, made from March 2013 to March 2023.

Was Regeneron aware of its wrongdoing?

Apparently so.

That includes knowing it was required to report all price concessions for Eylea—yet still choosing not to include those concessions (in the form of credit card processing fees).

Per the DOJ, these concessions were meant to be paid to specialty drug distributors for the benefit of its customers.

Who ended up paying those fees?

Regeneron, the lawsuit alleges.

The company reportedly paid the fees for Eylea purchases so that “distributors would accept credit cards for physicians’ Eylea purchases while still charging those customers the lower cash price.”

And what benefit did this give to the company’s customers?

Thanks to those payments, Regeneron’s customers were allegedly able to use credit cards to purchase Eylea without an additional fee.

In addition, these distributions received benefits such as “cash back” and other credit card benefits, the lawsuit alleges.

In fact, the DOJ further alleged that the company “internally attempted to disguise the payments as ‘bona fide service fees’ (BFSFs), which are not considered price concessions, when it knew the payments were not BFSFs.”

Yikes. What exactly prompted this investigation?

A whistleblower. Plus, two former Regeneron employees are named in the lawsuit as “realtors” (private parties) who filed the FCA allegations.

Quick refresh: Under the FCA, a private party can file a lawsuit on behalf of the government (under “qui tam” suits) against those who have allegedly defrauded the government.

  • In this case, the FCA enabled the U.S. government (the DOJ) to take action against Regeneron.

So...  what happens if Regeneron is found liable?

If the company is found in violation of the FCA, the government is permitted to “recover three times the amount of its losses plus applicable penalties,” the DOJ stated.

Lastly, has the company commented on these allegations yet?

In a statement to Glance, Regeneron said that the complaint relates to its "lawful reimbursement of costs incurred by our specialty distributors" and that the allegations are “without merit."

The company further claims it “has fully cooperated with the government’s investigation and will vigorously defend itself in court.”

Editor's note: This story was updated on April 13, 2024, to include Regeneron's response to our request for comment.

*Disclaimer: The information provided in this article does not and is not intended to constitute legal advice; instead, all information, content, materials available herein are for general information purposes only.

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