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Illustration: Annelise Capossela/Axios

A federal judge will soon determine whether Pfizer can pay Medicare patients' out-of-pocket expenses for one of its heart medications that is priced at $225,000 per year.

Why it matters: A ruling in Pfizer's favor would legalize something that is viewed as a kickback under current law, and would jeopardize taxpayer coffers by spurring a "gold rush" of pharmaceutical companies to cover Medicare copays for expensive drugs.

  • That could include Aduhelm, Biogen's pricey Alzheimer's treatment.

Where things stand: Pfizer sued the federal government last year, arguing rules prohibiting pharmaceutical companies from directly or indirectly funding patients' drug copays were unconstitutional.

  • Pfizer sells Vyndaqel and Vyndamax, which treat a potentially fatal type of heart failure. Because those drugs are priced at $225,000, Medicare patients face out-of-pocket costs of around $13,000 annually.
  • Pfizer argued it should be allowed either to cover those patient costs directly through its own copay assistance program or through a copay program run by a charity that Pfizer funds.

The big picture: The Office of Inspector General has long said most copay programs (and Pfizer's specific proposals) run afoul of federal law because they function like bribes.

  • "Because the federal government can't negotiate [drug prices], the only economic check on the list price is a patient's cost-sharing," Jennifer Michael, a former top OIG lawyer who has worked on copay issues, tells Axios.
  • If pharmaceutical companies cover copays, patients will gravitate toward those companies' drugs, and physicians will prescribe drugs they know are free for their patients — but taxpayers would pick up the bulk of the tab.
  • Pfizer is familiar with these rules. It had to pay $24 million in 2018 to settle allegations it funneled money to a charity as a way to cover Medicare copays for its drugs.

Zoom in: Oral arguments took place last month and showcased how contentious this legal battle is (read the transcript).

  • "Pfizer is asking the court to do something that's unprecedented, to upend decades of settled law and agency guidance in this highly regulated space and bless their program to induce ... Medicare beneficiaries to purchase what is the most expensive cardiovascular drug ever launched in the United States," federal attorney Jacob Lillywhite said.
  • "What Pfizer has effectively done, and admits this, is priced itself out of the market," Lillywhite said. "It has priced the drug so high that most people who are eligible for that drug cannot purchase it."
  • "As soon as, for the patient and the physician, it appears that the drug is effectively free ... Pfizer is able to price the drug whatever it wants. It could say $225,000 this year, and next year it is going to increase it to $500,000, the next year to $2 million," Lillywhite said.
  • Pfizer's lawyers argued the copay program should be allowed in part because "there is no other FDA-approved drug for this condition." After the judge asked if the copay program would still be legal if another drug treating the disease were approved tomorrow, Doug Hallward-Driemeier, an attorney representing Pfizer, said it "would not protect Pfizer to the same extent."

The bottom line: "If this is legal for Pfizer, Pfizer will not be the only pharmaceutical company to use this, and there will effectively be a gold rush until Congress amends the statute," Lillywhite said.

  • Another drug that has a high price tag, no competitors and is mostly for Medicare patients? Aduhelm. Biogen said it is "not planning to comment on this decision."

Go deeper

Oct 14, 2021 - Health

FDA panel unanimously endorses Moderna boosters for certain populations

A pharmacist prepares to give a COVID-19 booster vaccination. Photo: Karwai Tang/Getty Images

Members of the Food and Drug Administration's vaccine expert panel on Thursday endorsed boosters for Moderna recipients who are at high risk of severe COVID-19, occupational exposure to COVID-19 or are 65 years and older.

Why it matters: The unanimous decision mirrors the FDA conditions for those who qualify for a Pfizer booster.

Texas abortion law remains in effect after appeals court ruling

Pro- and anti-abortion protesters outside the Supreme Court as arguments begin about the Texas abortion law on Capitol Hill in November. Photo: Jabin Botsford/The Washington Post via Getty Images

A U.S. appeals court transferred a challenge to Texas' law banning most abortions after about six weeks of pregnancy to the state supreme court in a 2-1 vote on Monday evening.

Why it matters: The 5th U.S. Circuit Court of Appeals' decision means the country's most restrictive abortion law can remain in place for the time being.

2 hours ago - World

At least 2 dead after Tonga volcano eruption and tsunami

A satellite image of the explosive eruption of the Hunga Tonga-Hunga Ha'apai volcano on Saturday. Photo: UNICEF/NOAA

At least two people are confirmed to have died in Tonga following the undersea volcanic eruption that sent tsunami waves toward the island nation and across the Pacific over the weekend, officials said Monday.

The big picture: Officials reported major damage along the western coast of the main island of Tongatapu, where the capital, Nuku'alofa, was covered in ash and dust, including on the runway of the airport. A New Zealand Ministry of Foreign Affairs spokesperson told Axios over the phone that two people had been confirmed to have died in the disaster.

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