Sanofi Demonstrates How Brand Name Drug Companies Use Nonprofits to Keep Prices High & Pad Their Bottom Line
Providing the latest example of the extremes Big Pharma will pursue in order boost their bottom-line, brand name drug giant Sanofi was recently caught exploiting charities at the expense of taxpayers. In a settlement announced last week, Sanofi must pay the U.S. government nearly $12 million after the company “used a charity that helps cover Medicare patients’ out-of-pocket drug costs as a means to pay them kickbacks to use a high-priced multiple sclerosis drug,” Reuters reports. “Sanofi used a supposed charity as a conduit to funnel money to patients taking Sanofi’s very expensive drug, all at the expense of the Medicare program,” said U.S. Attorney Andrew Lelling.
Sanofi is not the only brand name drug company to use non-profits as a scheme to keep prices high and pad their bottom line. Bloomberg Government reports that six of the industry’s top brand name drug manufacturers “funneled more than $680 million into hundreds of nonprofits last year, including many now campaigning against federal legislation to tackle the rising cost of medicine.”
In August, The Economist dug into the inner workings of Big Pharma-backed charities, revealing that drug companies make billions off of this scheme:
“The impact of these charities is large and growing. Most of them are less than 15 years old. In 2001 just five drugmakers operated charities, spending a total of $370m. That had risen 20-fold, to $7.4bn, by 2016. According to Ronny Gal, an analyst at Berstein, a research firm, the co-payment on the price of a drug is usually just 10% of the cost the pharmaceutical company ultimately charges to the insurance provider. This would mean that $7.4bn, if it were all spent on co-payments, could earn drugmakers $74bn in revenues – which would account for nearly a quarter of total drug spending in America.”
And there’s another way these charities help boost profits – through tax deductions.
“Using co-pay charities to support high prices is good for business, but charitable contributions foster healthy profits in another way, too: they are tax-deductible. The corporate tax codes of most countries allow companies to deduct the cost of any charitable giving from pre-tax profits. But in America the system is more generous, says Jason Factor, a tax lawyer at Cleary Gottlieb Steen and Hamilton. Companies that give products for the benefit of the ‘needy or ill’ can deduct up to twice the cost of donated goods. How convenient!”
These shady tactics raise prices for everyone, while boosting profits for Big Pharma, as outlined by GE Bai, PHD, CPA, Associate Professor of Accounting at Johns Hopkins Carey Business School at a recent hearing on Capitol Hill:
“These actions lead to market distortions, price increases and the inefficient drug spending, but benefit the bottom lines of the drug manufacturers … These programs are called in appearance ‘assistance programs’ but if we think about the kickback concern, it’s really a mechanism designed to bring money to drug companies.”
And the returns for Big Pharma can be enormous, as Juliana Keeping, a patient advocate and mother of a child with cystic fibrosis detailed at the recent congressional hearing:
“It’s a great investment if you are a drug manufacturer. Research shows that for every $1 million drug manufacturers donate to assistance charities, they make up to $21 million in sales. These programs actually reward companies for increasing drug prices … As a result of the rigged system, drug prices keep rising and the costs are being passed along to all of us.”
Exploiting charities to increase profits and oppose bipartisan drug pricing solutions are just one example of how Big Pharma employs shady tactics and anti-competitive practices to keep drug prices high and boost their bottom line.
Read more about what expert witnesses had to say about Big Pharma’s exploitation of charities to undermine competition and boost their profits at the recent U.S. House of Representatives Committee on Ways & Means Subcommittee on Health hearing HERE.
See CSRxP’s infographic detailing solutions to hold Big Pharma accountable with significant bipartisan momentum in Congress HERE.