Understanding Pfizer v. HHS: The Ethics of Pharmaceutical Copays

Authored by Sarah Lim, Psychology ‘23

Art by Frieda Nemon, Biological Sciences '25

The U.S. Supreme Court rejected Pfizer’s co-pay assistance plan to make its blockbuster cardiovascular drug more affordable for patients – and for good reason. Transthyretin amyloid cardiomyopathy (ATTR-CM) is a progressive cardiovascular disease characterized by the accumulation of misfolded transthyretin fibrils in the heart’s muscles [1]. Tafamidis is the first and only FDA-approved drug that treats ATTR-CM, which is currently produced by Pfizer Inc. under the brand names Vyndaqel and Vyndamax [2]. The discovery of tafamidis represents a breakthrough in the treatment of ATTR-CM, especially for patients who have had to rely on off-label drugs that only provide symptomatic relief. However, the astronomical price tag of $225,000 per year poses a significant barrier to patient access to tafamidis therapy [3].

In order to better understand the significance of the court decision, it is necessary to outline the dynamic yet sequential interplay between demographic, pharmaceutical, and political forces. Because ATTR-CM predominantly affects older male adults, most patients with ATTR-CM are enrolled in Medicare, a federal health insurance program for people over the age of 65, and some younger people with certain disabilities [4]. However, even with Medicare coverage, patients are still liable for an annual copay of approximately $13,000. To make tafamidis more affordable for Medicare patients, Pfizer proposed the Direct Copay Assistance Program (the “Direct Program”), which provides various levels of financial assistance to eligible patients to offset their out-of-pocket costs associated with tafamidis treatment. Under this program, Medicare patients would gain access to tafamidis at only $35 per month, with Pfizer covering the remainder of the copay.

Circumstances changed when in December 2019, the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) rejected Pfizer’s proposal on the grounds that the Direct Program is a violation of the Anti-Kickback Statute (AKS), a federal law that prohibits pharmaceutical companies from knowingly offering remunerations to physicians or patients to induce purchases of federally insured medicines [5]. According to the advisory opinion, the program appeared to induce a Medicare beneficiary, who would have been otherwise unable or unwilling to purchase tafamidis due to the expensive out-of-pocket costs to purchase the drug, and therefore runs afoul of the AKS.

Pfizer denied these allegations in a request for review of the advisory opinion to the District Court for the Southern District of New York in 2021 and the Supreme Court in 2022, claiming that the Direct Program neither solicits new patients to use tafamidis nor provides any financial incentives to physicians to prescribe tafamidis over alternative drugs [6]. The Big Pharma company also argued that the OIG’s decision to ban the Direct Program was based on an unlawful interpretation of what constitutes “corrupt intent” under the AKS. Despite continued efforts to revive the Direct Program, the Supreme Court denied Pfizer’s petition in early January, affirming the judgment of the district court [7].

This lawsuit illustrates several complex legal and ethical concerns raised in healthcare fraud and abuse cases that are tied to federal healthcare programs. On the one hand, these programs can be a lifeline for patients living with chronic conditions that require ongoing medical attention, like many heart diseases. On the other hand, critics argue that copay assistance programs contribute to higher healthcare costs by steering patients toward expensive brand-name drugs and removing the incentive for drugmakers to lower their prices at all [8].

One can see the irony of how many copay assistance programs work: by shielding patients from the full cost of their treatment, pharmaceutical companies can continue to charge astronomical prices on drugs. Pfizer’s victory in the tafamidis case would have directly challenged the current structure of patient cost-sharing, which is virtually the only means of control by the government over drug pricing [9]. Additionally, patients without federal health insurance coverage or those who are ineligible for copay assistance programs would likely be faced with even higher barriers to access to medication.

These issues call for significant reform in the current economic structure of the U.S. healthcare system and in the design of relevant laws and regulations. A good starting point for such reform is implementing a value-based approach to drug pricing [8]. In other words, the price of a drug should reflect its true clinical value, measured using known metrics such as quality-adjusted life-years. A study on the cost-effectiveness of tafamidis found that a 92.6% reduction from the current list price of $225,000 per year is necessary to make tafamidis cost-effective, given that tafamidis prolongs quality-adjusted survival by 1.29 years compared to other non-specific cardiovascular therapies [10].

Furthermore, the current guidelines governing the provision and reimbursement of healthcare services seem to be broadly defined, making it difficult for healthcare providers and organizations to know what establishes a legal liability [11]. As a result, some healthcare providers may forgo opportunities to make medicine more affordable altogether to avoid potential penalties.

The Supreme Court decision against Pfizer will likely serve as a powerful legal precedent for future lawsuits involving direct copays for federally reimbursable medicines. Ultimately, while fraud and abuse laws play an important role in protecting the integrity of publicly-funded programs and in ensuring that federal resources are used appropriately to promote health and well-being, policymakers should carefully balance the potential benefits and risks when considering the implications of medical assistance programs.

Works Cited

1. Maurer, M. S., Schwartz, J. H., Gundapeneni, B., Elliott, P. M., Merlini, G., Waddington-Cruz, M., Kristen, A. V., Grogan, M., Witteles, R., Damy, T., Drachman, B. M., Shah, S. J., Hanna, M., Judge, D. P., Barsdorf, A. I., Huber, P., Patterson, T. A., Riley, S., Schumacher, J., … Rapezzi, C. (2018). Tafamidis treatment for patients with transthyretin amyloid cardiomyopathy. The New England Journal of Medicine, 379(11). https://doi.org/10.1056/NEJMoa1805689

2. Park, J., Egolum, U., Parker, S., Andrews, E., Ombengi, D., & Ling, H. (2020). Tafamidis: A first-in-class transthyretin stabilizer for transthyretin amyloid cardiomyopathy. The Annals of Pharmacotherapy, 54(5), 470–477. https://doi.org/10.1177/1060028019888489

3. Liu, A. (2022). Pfizer loses court battle to keep its Vyndaqel copay assistance for Medicare patients–again. Fierce Pharma. https://www.fiercepharma.com/pharma/pfizer-loses-appeal-keep-vyndaqels-copay-assistance-program-over-anti-kickback-law

4. Anti-Kickback Statute, 42 U.S.C. § 1320a-7b (1972).

5. Pfizer, Inc. v. United States Department of HHS, 42 F.4th 67 (2d Cir. 2022).

6. Chung, A. (2023). U.S. Supreme Court rebuffs Pfizer plan to help patients pay for heart medication. Reuters. https://www.reuters.com/legal/us-supreme-court-rebuffs-pfizer-plan-help-patients-pay-heart-medication-2023-01-09/

7. Ridley, D. B. & Lee, C. H. (2020). Does Medicare reimbursement drive up drug launch prices?. The Review of Economics and Statistics, 102(5), 980-993. https://doi.org/10.1162/rest_a_00849

8. Hancock, J. (2021). Pfizer court fight could legalize Medicare copays and unleash ‘gold rush’ in sales. KHN. https://khn.org/news/article/pfizer-court-fight-could-legalize-medicare-copays-and-unleash-gold-rush-in-sales/

9. Kazi, D. S., Bellows, B. K., Baron, S. J., Shen, C., Cohen, D. J., Spertus, J. A., Yeh, Ro. W., Arnold, S. V., Sperry, B. W., Maurer, M. S., & Shah, S. J. (2020). Cost-effectiveness of tafamidis therapy for transthyretin amyloid cardiomyopathy. American Heart Association, 141(15), 1214-1224. https://doi.org/10.1161/CIRCULATIONAHA.119.045093

10. Sinha, M. S., Kesselheim, A. S., & Robertson, C. T. (2022). Patient assistance programs and the anti-kickback statute: Charting a pathway forward. American Medical Association, 327(13), 1231-1232. https://doi.org/10.1001/jama.2022.2043

11. Lane, M. C., Pullen, K. L., & Zuccaro, M. A. (2023). Second circuit rules anti-kickback statute means no “corrupt intent” required for liability. WNJ. https://www.wnj.com/updates/second-circuit-rules-anti-kickback-statute-means-no-corrupt-intent-required-for-liability/