By Nate Raymond and Dan Whitcomb
BOSTON (Reuters) -The U.S. Justice Department on Wednesday accused Regeneron (NASDAQ:REGN) Pharmaceuticals of manipulating Medicare's drug-pricing process by inflating the average sales price for its expensive macular degeneration drug Eylea.
The department, in a complaint filed in federal court in Boston, alleged the drugmaker failed for years to report how it paid hundreds of millions of dollars to subsidize Eylea purchases by reimbursing drug distributors for credit-card processing fees.
Those payments were made to ensure that specialty drug distributors would accept credit cards from doctors and retina practices purchasing Eylea while continuing to charge physicians a lower price, according to the lawsuit.
The drug, which the Tarrytown, New York-based company began marketing in 2011, is approved by the U.S. Food and Drug Administration for treating conditions including wet age-related macular degeneration, which impairs vision.
The medication has a wholesale acquisition cost of $1,850 per vial, and the department said it was a leading expense for Medicare, the government healthcare program for people 65 and older, with more than $25 billion paid out from 2012 to 2023.
The lawsuit said that by not reporting to Medicare all price concessions for Eylea, the drugmaker violated the False Claims Act, which prohibits submitting a false claim to the government for payment.
"By doing so, Regeneron greatly inflated the costs of its drug to Medicare over many years and enhanced its revenues," acting U.S. Attorney Joshua Levy of Massachusetts said in a statement.
Regeneron in a statement called the allegations without merit and said its reimbursement of costs incurred by specialty distributors were lawful. It said it would "vigorously defend itself in court."
The case is the latest by the U.S. Attorney's Office in Massachusetts against Regeneron concerning Eylea.
An ongoing lawsuit filed in 2020 accused the drugmaker of using a charity that helps cover Medicare patients' drug costs as a means to pay kickbacks for using Eylea. The company denies wrongdoing.
Wednesday's case began as a whistleblower lawsuit filed in 2020 by three people who worked for Regeneron. It was filed under the False Claims Act, which allows whistleblowers to sue companies to recover taxpayer funds paid out based on false claims.
The cases are filed initially under seal to allow the Justice Department a chance to investigate and decide whether to intervene. Whistleblowers are entitled to a share of any financial recovery.