Case 7:21-cv-06245 Document 1 Filed 07/22/21 Page 1 of 67
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`HUMANA INC.,
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`vs.
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`REGENERON PHARMACEUTICALS, INC.,
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`Plaintiff,
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`Defendant.
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` Case No. 21-cv-6245
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`COMPLAINT
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`DEMAND FOR JURY TRIAL
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`Humana Inc. (“Humana”) brings this Complaint against Regeneron Pharmaceuticals, Inc.
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`(“Regeneron”) and alleges as follows.
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`NATURE OF THE ACTION
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`1. This case arises out of a scheme between a drug manufacturer and a sham charity to
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`defraud Medicare and its contracted payors out of hundreds of millions of dollars. For years,
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`Defendant Regeneron has inflated the price of its age-related macular degeneration drug, Eylea,
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`and then provided illegal kickbacks disguised as donations to the Chronic Disease Foundation
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`(“CDF”), a purported “charity”, to cover the cost-sharing obligations for patients who might
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`have otherwise chosen cheaper alternatives to Eylea.
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`2. This scheme has contributed to Eylea’s massive success; it generates billions of dollars
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`in revenue annually for Regeneron and is the top-selling drug of its kind in the United States. But
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`for this scheme, Eylea’s inflated price—approximately $10,000 for just one year of treatment—
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`would be cost-prohibitive for many patients, especially as compared to one of its competitors,
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`Avastin, which is equally as effective but costs only 3% of the price of Eylea.
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`3. Regeneron operated its kickback scheme as follows: to prevent patients from seeking a
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`more cost-effective drug alternative to Eylea, Regeneron began secretly and unlawfully
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`funneling money disguised as donations to CDF, which CDF then used to pay for the cost
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`sharing obligations (e.g., deductibles, co-payments, and co-insurance) of patients who were
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`enrolled in Medicare plans (including Medicare Advantage and Medicare Part D plans) and who
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`were in need of a drug like Eylea. While Regeneron’s “donations” were ostensibly to assist with
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`the cost-sharing obligations for any patient in need of a macular degeneration drug, Regeneron
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`engineered the scheme so that its payments to CDF would only benefit patients receiving Eylea.
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`Thus, patients could obtain Eylea at no cost to them instead of choosing drugs offered by
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`Regeneron’s competitors which were otherwise significantly cheaper. This operation eliminated
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`any sensitivity by patients or their physicians to the true price of Eylea and at the same time,
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`allowed Regeneron to price Eylea well-above what the market would otherwise support. In doing
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`so, Regeneron relied on Medicare and other payors to pay for the remaining portion, i.e., the vast
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`majority, of the drug’s inflated price.
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`4. Regeneron’s scheme was carefully and intentionally engineered to maximize its
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`profits. In 2012, Regeneron determined that it could increase its prices dramatically if it paid
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`patients’ cost-sharing obligations by funneling the money through a third-party charity.
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`Regeneron subsequently began coordinating with CDF to do just that. Regeneron sought, and
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`CDF provided, information that allowed Regeneron to determine how much it needed to
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`“donate” to CDF to cover and eliminate the cost-sharing obligations owed by Eylea patients who
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`were insured by Medicare. Regeneron and CDF understood that there would be a corresponding
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`one-to-one relationship between the amounts Regeneron paid in and the amounts that CDF paid
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`out to fund Eylea patients’ cost-sharing obligations. Pursuant to this understanding, and after
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`determining that such payments would generate a substantial return on investment, Regeneron
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`funneled the carefully calculated payments through CDF.
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`5. For many years, Regeneron’s scheme worked, and it generated massive profits from
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`Eylea sales. Since 2013, Medicare programs have paid out approximately $11.5 billion to cover
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`the cost of Eylea, and in 2019, Eylea sales generated $4.6 billion for Regeneron. Regeneron’s
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`profits have come at the expense of both the government and payors, including Humana, who
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`bear the cost of spending for patients enrolled in Medicare plans. Humana, alone, has paid out
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`more than $900 million to cover the cost of Eylea for patients enrolled in its Medicare Advantage
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`and Medicare Prescription Drug plans.
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`6. While Regeneron managed to conceal its scheme for years, an investigation by the
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`United States Department of Justice (“DOJ”) recently unearthed the operation. On June 24, 2020,
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`the DOJ filed a complaint against Regeneron, laying out Regeneron’s violations of federal law,
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`putting evidence of Regeneron’s unlawful scheme into the public record, and explaining how
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`Regeneron reaped billions of dollars at the expense of the federal government and payors like
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`Humana.
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`7. As evidenced by the DOJ’s complaint, Regeneron’s scheme violated the False Claims
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`Act, the Federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b), and various state laws that
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`prohibit deceptive and unlawful conduct, including pharmaceutical companies paying their
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`customers’ cost-sharing obligations.
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`8. Regeneron’s scheme has also harmed Humana in multiple ways. First, because the
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`claims for Eylea submitted to Humana’s Medicare plans were products of Regeneron’s unlawful
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`kickback scheme, they were not payable. Regeneron knew this, and therefore misrepresented and
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`concealed the nature of its financial relationship with and use of CDF, to ensure that claims
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`continued to be paid. Specifically, Regeneron publicly stated that it did not play a role in funding
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`CDF, and internal Regeneron emails uncovered by the DOJ show that Regeneron executives lied
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`to company auditors who might have uncovered or outed Regeneron’s unlawful conduct.
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`9. Second, Regeneron’s conduct also interfered with, undermined, and defeated key
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`provisions of Humana’s Medicare plans with the individuals (called “members”) enrolled in
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`those plans. Under those plans, members are required to share in the cost of prescription drugs by
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`paying copayments or coinsurance amounts related to those drugs. By paying kickbacks and
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`funneling sums through CDF to eliminate Eylea patients’ cost-sharing obligations, Regeneron
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`tortiously interfered with Humana’s plans with its members, and caused Humana to pay for
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`Eylea when members had not met their required cost-sharing obligations.
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`10. In addition to harming insurers who offer and administer Medicare plans,
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`Regeneron’s conduct harmed the American public, by subjecting taxpayers and the programs
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`that pay for taxpayers’ healthcare costs to the inflated and excessive drug pricing of Eylea.
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`Indeed, if patients used other drugs that were as effective as, but substantially cheaper than,
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`Eylea, the federal government’s Medicare program and taxpayers could save billions of dollars.
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`11. Accordingly, Humana brings this suit to recover damages and stop Regeneron’s
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`unlawful conduct.
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`PARTIES
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`12. Plaintiff Humana Inc. is a Delaware corporation with its principal place of business at
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`500 West Main Street, Louisville, Kentucky. Humana and its subsidiaries are providers of
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`healthcare related services, including insuring risk for prescription drug costs for more than eight
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`million members in all 50 states, the District of Columbia, and Puerto Rico. Among other things,
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`Humana offers and administers Medicare Advantage health benefit plans and Medicare
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`Prescription Drug Plans. Humana is the second largest sponsor of these Medicare plans in the
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`United States.
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`13. Defendant Regeneron Pharmaceuticals, Inc. is a New York corporation with its
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`principal place of business in Terrytown, New York. Regeneron discovers, develops, and
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`commercializes drugs, including the drug Eylea.
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`JURISDICTION AND VENUE
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`14. This Court has subject matter jurisdiction over this action under 28 U.S.C. § 1331
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`because it arises under the Constitution, laws, or treaties of the United States. Specifically,
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`Humana asserts claims arising under the Racketeer Influenced and Corrupt Organizations Act
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`(“RICO”), 18 U.S.C. § 1962, et seq.
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`15. This Court also has subject matter jurisdiction over this action under 28 U.S.C.
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`§ 1332 because the matter is between citizens of different states and the amount in controversy
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`exceeds the sum or value of $75,000, exclusive of interest and costs.
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`16. This Court also has supplemental jurisdiction over Humana’s state law claims,
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`including state common-law claims, under 28 U.S.C. § 1367 because those claims are so related
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`to the federal claims that they form part of the same case or controversy.
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`17. This Court has personal jurisdiction over Regeneron because Regeneron is
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`incorporated and headquartered in the State of New York.
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`18. Venue is proper in this district under 28 U.S.C. § 1391 and 18 U.S.C. § 1965 because
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`Regeneron resides in this district and because a substantial part of the events giving rise to the
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`claims in this action have occurred in this district. Specifically, Regeneron devised, directed, and
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`carried out the unlawful scheme described in this Complaint in and from this district.
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`BACKGROUND ALLEGATIONS
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`Eylea and Other Drugs for Treating Macular Degeneration
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`19. Eylea, a drug manufactured and sold by Regeneron, is used to treat a type of eye
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`disease called neovascular or “wet” age-related macular degeneration (“AMD”).
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`20. There are two types of AMD: nonexudative or “dry” AMD and neovascular or “wet”
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`AMD. Dry AMD accounts for 90 percent of cases in the United States and progresses slowly,
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`with minimal early-stage symptoms. Wet AMD, though less common, is associated with more
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`severe symptoms, where blood vessels in the back of the eye can grow in abnormal ways, bleed,
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`and leak, which can cause blind spots and other vision problems. Wet AMD can also follow dry
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`AMD. People who suffer from wet AMD can become legally blind.
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`21. Sometimes, wet AMD is treated with photodynamic therapy, in which lasers and
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`light-sensitive medicine are used in combination to break down blood vessels that have
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`experienced abnormal growth. But more commonly, wet AMD is treated with “anti-VEGF”
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`drugs administered via injection, which reduce swelling and impede the growth of blood vessels
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`that cause wet AMD. Anti-VEGF injections slow, but do not prevent, vision loss, and therefore
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`need to be administered to patients who suffer from wet AMD regularly and indefinitely.
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`22. Regeneron obtained FDA approval for Eylea in 2011, and has subsequently turned
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`Eylea into its most profitable drug, generating billions of dollars in sales every year.
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`23. Although Eylea is extremely lucrative for Regeneron, it is neither the most effective
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`nor the least expensive anti-VEGF drug at $1,850 per dose. It is recommended that patients on
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`Eylea receive an injection once every four weeks for the first five doses, then once every eight
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`weeks after that, bringing the cost of Eylea injections to over $10,000 per year.
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`24. A different company, Genentech, Inc., manufactures and sells two drugs that compete
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`with Eylea. One of those drugs, Lucentis, is an anti-VEGF drug approved by the FDA to treat
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`wet AMD and priced at $2,000 per dose. The other drug, Avastin, is chemically similar to
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`Lucentis but is approved by the FDA only to treat certain forms of cancer. However, clinical
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`studies have shown that Avastin is comparably effective to Eylea and Lucentis in treating wet
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`AMD if used off-label to do so.1 Avastin provides the same benefits as both Eylea and Lucentis,
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`but costs far less; indeed, compounding pharmacies sell Avastin for just $55 per dose
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`(approximately 3% of the cost of Eylea) to treat wet AMD via off label use.
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`25. Doctors generally prescribe Avastin instead of Eylea (or Lucentis) when financial
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`considerations come into play. Tellingly, Richard O’Neal—Vice President of Market Access at
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`Regeneron—recently testified that federal regulations lowering the Medicare reimbursement rate
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`for Eylea created a “looming need [for doctors] to switch patients from EYLEA to off-label
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`Avastin,” and “at least some patients who were switched from EYLEA to off-label Avastin (or
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`other drugs) would be unlikely to return to EYLEA.” 2
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`26. Despite Avastin being cheaper than Eylea and equally as effective, Eylea remains the
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`top-selling drug for treating wet AMD in the United States.
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`27. In 2019, Medicare Part B (explained below) spent more on Eylea than any other drug.
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`The Centers for Medicare and Medicaid Services (“CMS”) recently cited Eylea as an example of
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`1 National Eye Institute, Avastin as Effective as Eylea for Treating Central Retinal Vein
`Occlusion (May 9, 2017), https://www.nei.nih.gov/about/news-and-events/news/avastin-
`effective-eylea-treating-central-retinal-vein-occlusion.
`2 See Declaration of Richard O’Neal in Support of Plaintiff’s Order to Show Cause for
`Preliminary Injunction, Temporary Restraining Order, and Expedited Briefing Schedule (Dkt.
`13), Regeneron Pharmaceuticals, Inc. v. U.S. Department of Health and Humans Services, Case
`No. 7:20-cv-10488 (S.D.N.Y. Dec. 11, 2020).
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`the need for drug-pricing reform in the United States, noting that Eylea is “approximately two
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`times as expensive in Medicare Part B as in comparison countries.”3
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`Design of Health Benefit Plans and the Impact of Eliminating Cost-Sharing Obligations
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`28. When a person purchases or signs up for a type of insurance, they enroll in a health
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`benefit plan. The plan sets forth terms and conditions identifying whether things like drugs,
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`healthcare services, and other items will or will not be paid for by the administrator, and in what
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`amount.
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`29. In the United States, benefit plans are designed and structured to play an essential role
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`in managing healthcare costs. This is particularly true with respect to spending on drugs, because
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`there are no limits or caps on drug prices.
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`30. Specifically, benefit plans are designed and structured to sensitize plan beneficiaries
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`to the cost of the drugs or care they receive. The plans do this by requiring beneficiaries to
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`“share” in the cost by paying for a portion of the drugs or services they receive. The amounts
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`beneficiaries are required to pay are called “cost-sharing obligations,” and can take the form of
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`deductibles (amounts the beneficiary must pay before the health plan pays), coinsurance amounts
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`(amounts that constitute a percentage of the cost of the item or service received), and copays
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`(fixed amounts). By requiring beneficiaries to pay cost-sharing obligations, benefit plans
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`sensitize them to the cost of their care, incentivize them to consume less expensive drugs and
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`services, and can shift their behavior toward using lower cost alternatives when they are
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`available. When lower cost alternatives are not available, cost-sharing obligations still sensitize
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`3 Centers for Medicare & Medicaid Services, FACT SHEET: Most Favored Nation Model for
`Medicare Part B Drugs and Biologicals Interim Final Rule with Comment Period (Nov. 20,
`2020), available at https://tinyurl.com/lj8hbs85.
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`beneficiaries to the cost of drugs and services, which puts downward pressure on how high those
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`drugs and services can be priced, especially the most expensive drugs and services.
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`31. Because cost-sharing obligations require patients to pay for a portion of their care,
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`they also sensitize the patients’ physicians to the cost of that care. Simply put, physicians know
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`that the price of the services they order and the drugs the prescribe can have significant financial
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`impacts on their patients because of cost-sharing obligations built into benefit plan design, and
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`therefore are incentivized to order and prescribe lower cost items when possible.
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`32. Many for-profit healthcare providers and drug companies, like Regeneron, strongly
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`dislike cost-sharing obligations, because they function as a barrier to charging, and getting paid,
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`maximum amounts on drugs—like Eylea—without losing customers. In other words, by
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`sensitizing patients and their physicians to the cost of Regeneron’s drugs, cost-sharing
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`obligations limit Regeneron’s ability to charge inflated prices without suffering adverse
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`consequences in terms of patient usage and profit.
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`33. Motivated by greed, and unwilling to lower the prices they charge for their drugs,
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`many drug manufacturers have attempted to find ways to eliminate the cost-sharing obligations
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`that benefit plans impose on beneficiaries. One way they do this is by paying the obligations
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`themselves, having calculated that, by paying the cost-sharing obligations, they can keep patients
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`on their drugs and recoup massive returns on their investment in the form of payments from
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`insurers for the remaining portion of the astronomical price of the drugs. The result of the drug
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`manufacturers’ payments, which are effectively routine cost-sharing waivers, is that neither
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`patients nor their physicians are sensitized to the cost of the drugs, allowing the drug
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`manufacturers to attract customers, keep their customers, and maintain or inflate the prices they
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`charge, without worrying about any adverse impact of those actions on their profits.
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`34. The effect of cost-sharing waivers on drug prices is well studied. For example, a large
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`study conducted in Germany in 1989 showed that when drug companies were prevented from
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`waiving cost-sharing obligations, drug prices dropped between 10 and 26 percent on average. In
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`other words, the companies were able to substantially inflate their prices simply by waiving
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`patients’ responsibility to share in the cost of the drugs.
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`35. Researchers have also discussed the effect of patient assistance programs sponsored
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`by drug companies on drug spending and cost. For example, in a 2009 article, researchers noted:
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`Drug company–sponsored PAPs [Patient Assistance Programs] may inhibit cost-
`effective medication use, and their widespread use may have important
`implications for public drug spending. This potential impact must be better
`understood. Drug company–sponsored PAPs may steer patients toward and lock
`them into a particular manufacturer’s product, even when other equally effective
`and less costly alternatives are available. If these patients ultimately acquire better
`coverage, then they may request unnecessarily expensive medications. In the case
`of Medicare Part D, patients’ prior use of PAPs that provide subsidies for brand-
`name products may lead to higher overall individual and public drug spending.4
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`36. Similarly, researchers in a 2014 article explained:
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`Assistance programs are a triple boon for manufacturers. They increase demand,
`allow companies to charge higher prices, and provide public-relations benefits.
`Assistance programs are an especially attractive proposition for firms that sell
`particularly costly drugs. Faced with high out-of-pocket costs, some patients may
`decide against taking an expensive medication. Patient-assistance programs can
`convert such patients from nonusers to users. Programs must incur costs for
`patients who would have used the drug even in the absence of a program, but
`manufacturers can afford to pay a lot of $25 or $50 copayments in return for even
`a small increase in the sales of a $50,000 drug.5
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`37. In sum, by paying patient cost-share obligations, drug manufacturers like Regeneron
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`can remove mechanisms that put downward pressure on their prices and act as barriers to
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`4 Choudhry, Niteesh K et al., Drug company-sponsored patient assistance programs: a viable
`safety net?, Health Affairs (Project Hope), Vol. 28, No. 3 (2009), https://tinyurl.com/y33pp57k.
`5 David H. Howard, Drug Companies’ Patient-Assistance Programs—Helping Patients or
`Profits?, New England Journal of Medicine (2014), https://tinyurl.com/y66kwwea.
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`unrestrained, inelastic consumption. Healthcare payors, whether it be the federal government or
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`plan sponsors such as Humana, must then pay for the bulk of the inflated prices charged by the
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`manufacturers, providing the funds that manufacturers pocket as windfall profits.
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`38. In this case, Regeneron designed and carried out its conduct for the specific purpose
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`of undermining, eliminating, and defeating the cost-sharing obligations that Humana and other
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`insurers’ benefit plans required patients to satisfy, which stood as barriers to Regeneron charging
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`and getting paid as much as possible for Eylea.
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`39. Specifically, Regeneron used CDF as a financial conduit through which to funnel
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`funds calculated to specifically pay for the cost-sharing obligations of Eylea patients, thereby
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`eliminating and waiving the obligations, and desensitizing Eylea patients and their prescribing
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`physicians to the inflated cost Regeneron charged for the drug.
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`40. This tortious conduct is responsible for Eylea’s financial success. Indeed, because
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`Regeneron managed to covertly fund and eliminate the portion of the cost of Eylea usually borne
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`by patients, it effectively rendered Eylea “cheaper” or even free to patients, including with
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`respect to a competing drug that is far less expensive. In doing so, Regeneron subverted and
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`interfered with the design of the health benefit plans like those offered by Humana, which are
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`intended to encourage patients and their physicians to select cost-effective care.
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`Humana’s Medicare Advantage Plans
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`41. The national health insurance program in the United States known as Medicare has
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`four parts – A, B, C, and D – through which health benefits are provided to individuals who
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`qualify for them.
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`42. Part A covers inpatient hospital services, skilled nursing facility services, and some
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`forms of home-based care. Part B covers physician services, outpatient hospital services,
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`diagnostic services, and other medical services. Parts A and B also cover drugs delivered during
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`medical procedures, and Part B specifically pays for drugs provided incident to treatment at a
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`physician’s office (called “clinically administered drugs”), so long as the drugs are used
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`consistent with FDA approval or in another medically accepted manner. The federal government
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`directly administers Parts A and B through CMS.
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`43. Individuals who are eligible for Part A and enrolled in Part B have the option of
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`enrolling in Medicare Part C, otherwise known as Medicare Advantage, which is required to
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`offer the same benefits covered by Parts A and B, and also typically covers outpatient
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`prescription drugs. CMS offers Medicare Advantage plans through private payors like Humana.
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`Known as Medicare Advantage Organizations (“MAOs”), these payors provide Medicare
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`Advantage plans to individuals pursuant to contracts with CMS.
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`44. Medicare Advantage plans are underwritten with taxpayer funds. For instance, CMS
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`pays Humana a fixed amount each month for each person enrolled in Humana’s Medicare
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`Advantage plans. Humana manages the funds it receives from CMS to ensure that the benefits
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`offered by Humana’s Medicare Advantage plans are available to the members enrolled in those
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`plans when they need them.
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`45. Humana offers and administers Medicare Advantage plans that provide the types of
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`benefits discussed above, including coverage of Eylea, as it is a clinically-administered drug.
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`46. In offering and administering these plans, Humana bears significant risks related to
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`the cost and utilization of healthcare services and pharmaceuticals. When Humana assumes these
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`risks, it relies in large part on the protections afforded by state and federal law prohibiting
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`unlawful conduct within the healthcare industry, including law prohibiting the submission of
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`false, fraudulent, or otherwise unlawful claims to government and other payors.
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`47. Healthcare claims are not payable under Medicare if they do not comply with all
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`applicable federal laws, including laws like the Anti-Kickback Statute, as discussed below.
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`48. Indeed, as a condition of participating in Medicare, providers must certify that they
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`“understand that payment of a claim by Medicare is conditioned upon the claim and the
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`underlying transaction complying with such laws, regulations, and program instructions
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`(including, but not limited to, the Federal Anti-Kickback Statute, 42 U.S.C. section 1320a-7b(b)
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`(section 1128B(b) of the Social Security Act) and the Physician Self-Referral Law (Stark Law),
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`42 U.S.C. section 1395nn (section 1877 of the Social Security Act)).”6 Providers also submit
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`claims for Medicare beneficiaries to the government and to payors like Humana using a standard
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`claim form, the CMS 1500, which requires the provider to certify that each claim “complies with
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`all Medicare and/or Medicaid laws, regulations, and program instructions for payment including
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`but not limited to the Federal anti-kickback statute.”
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`49. Humana’s Medicare Advantage plans, like most Medicare Advantage plans, also
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`contain requirements that are designed to control the cost of healthcare. Specifically, Humana’s
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`Medicare Advantage plans contain provisions requiring enrolled members to pay their cost-
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`sharing obligations. Cost-sharing obligations can be in the form of required deductibles (amounts
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`members must pay before the plan pays), coinsurance (amounts members must pay as a
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`percentage of the charge for what they receive), or copays (fixed amounts).
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`50. The details of the Medicare Advantage plans Humana offers and administers are set
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`forth in plan policy documents, including in a type of document called an “Evidence of
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`Coverage” (“EOC”). EOCs describe the health care benefits a plan offers, including what a plan
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`covers and how much enrolled members pay for services. CMS requires that payors use certain
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`6 CMS Form 855I
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`approved, publicly available language in their plan policy documents, and Humana uses that
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`language for its own Medicare Advantage EOCs.
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`51. For example, the Humana Gold Plus plan, a Medicare Advantage plan that served
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`select counties in Florida, is an EOC written for the year 2016 and incorporates Medicare’s
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`model language is attached as Exhibit 1.
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`52. Pursuant to the Humana Gold Plus plan, enrolled members paid 20% coinsurance for
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`Medicare Part B Covered Drugs such as Eylea. Id. at 64.
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`53. Members were required to pay coinsurance until they hit their annual out-of-pocket
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`maximum of $6,700. Id. at 51. Once these thresholds were met, members received 100%
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`coverage for the rest of the plan year. Id.
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`54. The Humana Gold Plus plan members are themselves responsible for paying their
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`cost sharing. See e.g., id. at 157. Cost sharing is defined as the “amounts that a member has to
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`pay when services or drugs are received.” Id. at 206 (emphasis added). The Plan defines member
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`as “[a] person with Medicare . . . who has enrolled in [Humana’s] plan and whose enrollment has
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`been confirmed” by CMS. Id. at 211. Put simply, the Plan does not contemplate pharmaceutical
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`manufacturers paying members’ cost-share obligations.
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`55. Humana’s other Medicare Advantage Plans contain materially similar provisions.
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`Humana’s Medicare Part D Prescription Drug Plans
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`56. Humana administers Medicare Part D Prescription Drug Plans for Medicare
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`beneficiaries. Humana also administers Medicare Advantage plans that combine with
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`Prescription Drug Plan Benefits to create a comprehensive benefit. While Eylea is predominantly
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`reimbursed through Medicare Advantage, at times it may be reimbursed through a pharmacy
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`under a Part D plan.
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`Case 7:21-cv-06245 Document 1 Filed 07/22/21 Page 15 of 67
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`57. Medicare Part D is an optional Prescription Drug Benefit plan (“PDP”); i.e., it is
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`health plan that covers part of the costs of prescription drugs purchased by patients from
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`pharmacies. Medicare Part D PDPs are administered only by private payors like Humana—CMS
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`does not directly administer any PDPs. Medicare Part D enrollees must pay the private
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`administrator of their prescription benefit plan a premium for their prescription drug benefit.
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`CMS then pays a subsidy to the private administrator of the PDP plan based on each enrollees’
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`health risk score, as determined by CMS.
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`58. There are several stages of reimbursement under Medicare Part D, but beneficiaries
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`are required to pay some cost-sharing obligations at each of them. See, e.g., Ex. 1 at 112.
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`59. The Humana Gold Choice plan explicitly states that “[i]t matters who pays.” Only
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`when a member pays for their cost sharing themselves do those payments count towards their
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`out-of-pocket costs. Id. at 121.
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`60. Further, the Plan considers patient assistance programs to be outside the plan benefits,
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`thus Humana will not pay “for any share of [those] drug costs.” Id.at 133. In effect, by opting for
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`patient assistance for their drugs, members are utilizing a different insurance than Humana.
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`61. Humana’s other Medicare prescription drug plans contain materially similar
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`provisions.
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`62. In this case, the cost-sharing payments made by CDF would not count toward a
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`beneficiary’s out-of-pocket costs because those payments were actually made by Regeneron and
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`were not truly charitable, consistent with the allegations set forth in this complaint.
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`63. As with commercial insurance, cost-sharing requirements for Federal health care
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`programs serve an important role in protecting both the Federal health care programs and their
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`beneficiaries. Specifically cost-sharing requirements promote: (1) prudent prescribing and
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`Case 7:21-cv-06245 Document 1 Filed 07/22/21 Page 16 of 67
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`purchasing choices by physicians and patients based on the true costs of drugs; and (2) price
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`competition in the pharmaceutical market.
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`Legal Prohibitions on Drug Companies Paying Patient Cost-Sharing Obligations
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`64. Federal laws, including the AKS, prohibit drug companies from paying the cost-
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`sharing obligations of the patients who use and are prescribed their drugs. The AKS makes it a
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`crime to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or
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`reward the referral or generation of business reimbursable by any Federal healthcare program.
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`65. Because Medicare Advantage is a “Federal health care program” as defined by 42
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`U.S.C. § 1320-7b(f), pharmaceutical companies like Regeneron who obtain reimbursement for
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`their drugs through any Medicare Advantage plan must comply with the AKS.
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`66. A drug company’s payment, or waiver, of patients’ cost-sharing obligations,
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`including by using “charities” as conduits through which to do so, violates the AKS when the
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`patient is enrolled in a Medicare Part A, B, C, or D plan.
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`67. The federal government, through the Office of Inspector General (“OIG”), has issued
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`guidance documents called “Bulletins” explaining this further. For example, in 2005 the OIG
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`issued a Bulletin (see 70 Fed. Reg. 70623 (Nov. 22, 2005)) regarding “patient access programs”
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`(“PAPS”). The OIG explained that PAPS that were funded by drug manufacturers and used to
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`subsidize Medicare Part D cost-sharing obligations presented heightened risk under the AKS.
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`The OIG stated that in some circumstances, and only if certain safeguards were met, cost-sharing
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`subsidies that were provided by organizations that were real, independent charities that were not
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`also affiliated with drug manufacturers could be appropriate.
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`68. But