The Department of Justice on Wednesday accused drug maker Regeneron Pharmaceuticals Inc. of fraudulent practices related the pricing of its blockbuster vision-impairment drug Eylea, boosting its sales in the process.
The agency alleged that Regeneron REGN, -0.81% inflated Medicare reimbursement rates on Eylea for years by “knowingly submitting” false sales price reports to the Centers for Medicare and Medicaid Services that excluded certain price concessions intended to limit what doctors pay for the drug.
In doing so, the company “greatly inflated the costs of its drug to Medicare over many years and enhanced its revenues,” Joshua S. Levy, acting U.S. attorney for the District of Massachusetts, said in a statement.
The accusations, which Regeneron said were meritless, were made as the Biden administration tries to crack down on drug pricing and other forms of what it says amount to health care-related fraud, as well as broader corporate concentration that it says has led to higher consumer prices overall.
Shares of Regeneron fell 1.2% after hours.
The Justice Department’s allegations stem from the way Regeneron subsidizes purchases of Eylea.
In its complaint against the company, the Justice Department said that since Eylea came to market in 2011, Regeneron has paid millions to fund purchases of the drug by reimbursing drug distributors for credit-card processing fees, so long as the distributors used those reimbursements to lower the amount they charged to doctors for the drug.
Regeneron paid those fees so doctors and other medical facilities that bought Eyelea could use credit cards at no extra cost and get millions in cash-back rewards and other benefits on their purchases of the drug, the complaint said.
“Regeneron’s subsidy payments were price concessions that Regeneron should have included in its price reporting to CMS for Eylea,” the complaint alleged. “Regeneron knowingly excluded the credit-card processing fee payments in its price reports, however, thereby falsely inflating Medicare reimbursements for Eylea and giving Regeneron an unfair competitive advantage.”
“Regeneron’s conduct, and the resulting harm to Medicare, is ongoing,” the complaint continued.
The Justice Department and the U.S. attorney’s office for Massachusetts are overseeing the case, with help from the Department of Health and Human Services and the FBI. The government is seeking damages, disgorgement of profits and any other relief deemed necessary.
Eylea, which is used to treat age-related macular degeneration, brought in roughly $ 9.4 billion in sales last year, down a bit from the prior year. Regeneron, in a statement, said it would defend itself in court.
“Regeneron believes that the allegations against us are without merit,” the company said.
“The complaint, which follows a Civil Investigative Demand from the U.S. Department of Justice in June 2021, and which the company previously disclosed, relates to the company’s lawful reimbursement of costs incurred by our specialty distributors,” that statement added. “Regeneron has fully cooperated with the government’s investigation and will vigorously defend itself in court.”