Inventory System Supplier Settles Anti-Kickback Claim

The supplier of an inventory management system used in physicians’ offices has agreed to pay a $1.67 million to settle claims it violated federal anti-kickback laws by providing systems at no costs to retina practices as an incentive to purchase drugs from the supplier.

ASD Specialty Healthcare, doing business as Besse Medical, agreed to the settlement, the Department of Justice (DOJ) stated in a press release. ASD and Besse are subsidiaries of Cencora, formerly known as Amerisource Bergen.

ASD distributes specialty drugs nationwide, including biologic injections for treating neovascular, or wet, age-related macular degeneration (AMD). According to the settlement agreement, ASD acquired the PODIS inventory management system in 2017 and through November 2023 gave the system at no cost to physicians if they signed “prime vendor agreements” that obligated them to purchase a set percentage of their specialty drugs from ASD, including branded medications for wet AMD, and for switching to ASD from another inventory management system. The DOJ claimed those activities violated federal laws barring “ any person, including specialty medical and pharmaceutical suppliers, from offering or paying, directly or indirectly, any remuneration — which includes money or anything of value, such as free inventory management systems — to induce the purchase of a drug that Medicare pays for. ”

Customers who did not sign the agreements paid a monthly fee for the PODIS system, but once ASD acquired PODIS, the company cut off retina practices that used PODIS but were not ASD customers, even if they offered to pay a monthly fee, according to the DOJ.

Medicare spent almost $386 million on branded AMD drugs in 2022, the last year for which data is available. This includes the $334.4 million spent on aflibercept.

Whistleblower Claims

The case arose from whistleblower claims brought by two former employees of Regeneron Pharmaceuticals, which manufactures and distributes Eylea (aflibercept 2 mg), one of the top-selling treatments for wet AMD, and since FDA approval in 2023, Eylea HD (aflibercept 8 mg). The whistleblowers, Julianne Nunnelly and Matthew Shanks, will receive $250,705 from the proceeds of the settlement, the DOJ stated.

The DOJ alleged that the kickbacks induced physicians to submit false claims to Medicare, TRICARE, and the Department of Veterans Affairs.

“According to the allegations in today’s settlement, ASD purchased a commercially available product and leveraged it to gain business in violation” of the anti-kickback statutes, said principal deputy assistant attorney general Brian M. Boynton, head of the Justice Department’s Civil Division.

In response to an inquiry from Medscape Medical News, Cencora issued a statement that read, “While Besse Medical is confident that we have always acted in accordance with the law, we believe this settlement is the right approach to resolving the matter with the US government and allows us to focus on best meeting the needs of customers and patients. We strongly dispute the idea that there was any wrongful conduct.” 

After discussions with the government, the company has made improvements to its inventory management contracting processes, the statement read, “and we will continue to regularly monitor and evolve these processes as necessary moving forward.” 

The DOJ last March filed a separate False Claims Act complaint against Regeneron, alleging the company fraudulently inflated Medicare reimbursement rates for Eylea by submitting false average sales price reports to the Centers for Medicare and Medicaid Services that excluded certain price concessions. That claim remains pending, the DOJ said.

Regeneron has not replied to a request for comment.

Richard Mark Kirkner is a medical journalist based in the Philadelphia area.