Boosting a Drug’s Market Share Can Cross a Dangerous Line

Hub programs are growing in popularity as a way for pharmaceutical companies to combat the clout of employers, health plans, and PBMs. But they spell trouble if they spark collusion, threaten patients, or waste federal dollars.


Thomas Reinke

Selling branded drugs, never smooth sailing, is an especially tough business these days. Well-established generics and brand names often have a lock on whatever drug class they fall into. Employers, health plans, and PBMs frequently put hurdles in the way of newcomers, using higher copays, prior authorization requirements, and step therapy policies that put less-established products at a distinct disadvantage. Drug manufacturers grouse about a lack of “market access” and a playing field that is far from level—especially with new drug launches, where long-term success depends on how much of a market share a drug can grab after it goes on sale.

One remedy, pharmaceutical companies believe, is hub programs. They’re gaining traction as a way to push into markets and counter the clout of the payers and PBMs. Hub programs group packages of services (thus the term hub) designed to drive the marketing, sales, and utilization of a drug. Hub programs as a business have grown in tandem with the limited distribution agreements some manufacturers have with a select group of specialty pharmacies. Services include benefits investigations, prior authorization negotiations, delivery services, care management, and managing copayments and coinsurance issues for patients. Some simple hub programs zero in on just one aspect of a drug, while more comprehensive programs exert tight control over every aspect of a drug’s revenue cycle. Some drug manufacturers create and manage their own hub programs. The more common approach is for a drug manufacturer to partner with a consulting firm to perform administrative tasks while a pharmacy, specialty pharmacy, or pharmacy network fills prescriptions and works with patients to keep them adherent.

Leading specialty hub services providers, 2015
Company Ownership Affiliated specialty pharmacy
Access and Adherence Solutions Cardinal Health Cardinal Health Specialty Pharmacy
AccessMED McKesson OncologyRx Care Advantage
Centric Health Resources Dohmen Life Science Services Centric
Envoy Health Diplomat Pharmacy Diplomat Pharmacy
inVentiv Patient Access Solutions (iPAS) TMS Health, a Xerox Company n/a
Lash Group AmerisourceBergen U.S. Bioservices
RxCrossRoads Omnicare Advanced Care Scripts
Triplefin H.D. Smith CompleteCare Pharmacy
UBC Express Scripts Accredo Specialty Pharmacy
Pembroke Consulting/Drug Channels Institute, The 2016 Economic Report on Retail, Mail, and Specialty Pharmacies

Hub programs have emerged as a profitable new line of business in the sales and distribution side of the pharmaceutical industry that has got more than its fair share of wheeling and dealing. For the consulting companies, the programs mean multi-year contracts and for specialized pharmacies they can be more profitable than the contracts they have with PBMs. And a lot of drug manufacturers believe that an in-house hub program has the potential to generate more business than the old-school way of getting market share for a product—the hard slog of negotiating prices, rebates, and formulary placement with payers.

Two faces of hubs

The hub business is one with two very different personas. Health plans and drug manufacturers have used them to good effect to inject some reality into the much-talked about “patient-centered” approach. Health plans have used them to optimize therapy management for specialty medicines or rare diseases. They are also useful for accomplishing some important steps in drug development and post-market safety and outcomes studies.

But there’s also a darker side. Manufacturers have used hub programs to muscle the sales of their products through alternative channels that are really all about sales and not what’s best for the patient. These programs start with marketing the drug to patients and physicians. They often add on a coupon program to reduce out-of-pocket costs and get patients locked into a drug. Once the patient is enrolled, the hub program does the billing, monitors refill rates, collects detailed patient data, and follows up with an adherence program designed to build “loyalty,” a favorite term of the hub industry.

The industry’s reputation has been tainted by some deceitful if not illicit hub programs that captured national attention. The dealings between Valeant Pharmaceuticals and Philidor RX Services LLC, which ran a number of hub programs for Valeant, have come under Congressional scrutiny. News reports have described byzantine money flows and shady business relationships. According to Bloomberg and other news outlets, documents released by the Senate Special Committee on Aging in May showed that Valeant and Philidor had an undisclosed contract that dangled millions of dollars of bonus money in front of Philidor if it hit certain sales targets. Bloomberg reported last year that Philidor employees were instructed to change codes on prescriptions so it would look like the prescriber had asked for Valeant brand-name drug. Valeant, CVS, and Express Scripts cut all their ties with Philidor, and the company went out of business late last year.

Still, the hub industry is still growing. New companies are entering the business, and some of the existing ones are consolidating. The big three pharmaceutical distribution companies—AmerisourceBergen, Cardinal Health, and McKesson—and the largest PBMs—Express Scripts and CVS Health—are major players. Each of these companies has a subsidiary that provides the infrastructure for hub programs as well as a specialty pharmacy for distribution and patient services.

The most clearly documented case of a hub program gone awry involves Novartis and Exjade (deferasirox), a drug approved by the FDA for treatment of elevated iron levels caused by blood transfusions. In November 2015, Novartis agreed to pay $392 million to settle a Department of Justice lawsuit alleging that the drug manufacturer’s hub program paid illegal kickbacks to the pharmacies. Separately Accredo and Bioscrip agreed to pay $60 million and $15 million, respectively, to settle allegations of their illegal activities in the scheme. The Lash Group in Charlotte, N.C., which is part of AmerisourceBergen, administered the program but was not named in the lawsuit or part of the settlement. The settlement also included Myfortic (mycophenolic acid), an immunosuppressant drug marketed by Novartis, but the settlement focuses mainly on the hub services for Exjade.

Program designed to boost sales

Novartis’s admissions demonstrate how hub programs can be primarily focused on the drug, not the patient (see sidebar). According to the settlement, Novartis used pay-for-performance incentives and scorecards of refill and patient adherence rates to steer patients to the pharmacies with the highest rates. There is nothing wrong with scorecarding and programs to promote adherence, but the settlement paints a less flattering picture of a program focused on boosting sales.

The $465 million settlement in the Novartis case is the largest civil settlement based solely on kickback theory, says attorney Shelley Slade.

“The underlying problem in this case was greed,” says Scott Lampert, a federal investigator with the HHS Office of Inspector General. “In the end all of the activities were based on greed, both on the part of Novartis and on the part of the three specialty pharmacies.” HHS was involved in the case because the lawsuit was brought under the federal Anti-Kickback Statute, which is written explicitly to protect federal health care programs from bribery.

“The aggregate settlement in the Novartis case of $465 million is the largest settlement in a False Claims Act case based solely on a kickback theory” notes Shelley Slade, the attorney who represented the whistleblower who initially brought the lawsuit. Slade’s dollar figure reflects settlements reached by the federal government and 26 states with Novartis and several pharmacies also named as defendants in the case.

A Novartis spokesperson defended the company’s hub program for Exjade. In an email, she said the company believed that patients would benefit from the expertise of a limited group of pharmacies and that compliance is a major issue with iron chelators with possibly dire consequences. She also said that Novartis provided complete prescribing information to the pharmacies about the side effects of Exjade.

Warning shots

“The underlying problem in this case was greed,” says Scott Lampert, a federal investigator with the HHS Office of Inspector General, about the Novartis case.

Lampert says that the pharma sector and hub programs are now on the federal government’s radar screen. The red flags the government looks for include “anything that indicates interference with the traditional doctor-patient relationship or increases health care costs.”

“Federal scrutiny of expensive hub perks is mounting and costly prosecutions and civil actions are warning shots of heightened scrutiny of pharma hub perks,” agrees James Quiggle with the Coalition Against Insurance Fraud, an alliance of insurers, consumer groups, and government agencies. Court actions have alerted the hub industry to the legal difference between honest, profit-making arrangements and illegal backroom deal-making, he adds.

A month before it settled with Novartis, the Department of Justice reached a $9.25 million settlement with PharMerica, a nursing home pharmacy headquartered in Louisville, Ky. The department accused the company of soliciting bribes from Abbott for recommending that physicians prescribe Depakote (valproic acid), its antiseizure medication. Abbott settled with the federal government and individual states four years ago.

PBMs and health plans are also responding to hub programs that depend on “captive pharmacies” that make drugs available only through certain handpicked pharmacies. Express Scripts, CVS, and Optum all excluded Philidor from their networks within days after its hub program with Valeant was revealed.

Meanwhile, some drug manufacturers and hub vendors have taken steps to avoid the kind of legal hot water that Novartis got into. Many hub programs now exclude patients who have coverage through Medicare, Medicaid, and the federal employee benefit plans, so the Anti-Kickback Statute and the Federal False Claims Act, that were the basis of the Novartis lawsuit, don’t apply. Lawsuits would have to be brought under different laws but the burden of proof is higher. Kickback cases take years to resolve and the government has limited resources to pursue them so it chooses its battles carefully.

Legal settlement sheds light on hub program

The lawsuit against Novartis and three specialty pharmacies—Accredo, BioScrip, and US Bioservices—alleged that the hub program violated two closely related federal laws, the False Claims Act and the Anti-Kickback Statute. These laws are intended to protect federal programs from business arrangements that would inappropriately increase costs to the federal government. The kickback law prohibits anyone from offering, paying, soliciting, or receiving compensation or financial incentives to induce or reward referrals to any federal program.

The Department of Justice asserted that Novartis pressured the specialty pharmacies to start and keep Medicare and Medicaid patients on Exjade which increased costs to government. The kickback that Novartis provided, the lawsuit claimed, was a larger number of Exjade prescriptions to fill. Under the law the three pharmacies were prevented from receiving these incentives, and the arrangement between the parties was banned even though Medicare patients may have needed the drug.

Novartis’s hub program activities began in 2006 and continued into 2012. At one point the case included allegations of illegal hub activities for six drugs and a much larger group of companies including Aetna, Caremark, Cigna, Curascript, and Walgreens SPP, according to court documents.

The hub program contained all of the elements that demonstrate how hub programs can work against the best interests of patients. The following details are taken from the signed stipulation and order of settlement.

Novartis created an exclusive distribution network with the three pharmacies for Exjade called Exjade Patient Assistance and Support Services, or EPASS. The network was administered by the LASH Group, a hub services vendor owned by AmerisourceBergen that provides an IT platform for hub programs. Doctors who prescribed Exjade submitted a patient registration form and the prescription to LASH for fulfillment. LASH distributed the prescriptions among the three EPASS pharmacies, tracked and reported detailed patient information including data on the reasons for discontinuation, and provided the data to Novartis on a regular rate basis.

In 2007, the discontinuation data the pharmacies submitted to LASH showed that physicians and patients were discontinuing Exjade because of serious side effects. In 2007, Novartis added warnings to the drug’s label for renal failure, thrombocytopenia, and hepatic failures to its drug label.

Novartis kept monthly scorecards on the pharmacies that measured patient adherence scores and in 2007 told Bioscrip that its “refill rates and other adherence metrics” were below those of the other two pharmacies. Novartis told Bioscrip that if it did not improve its performance Novartis would terminate the distribution relationship or reduce the number of prescriptions that LASH assigned to it.

In response Bioscrip initiated a recovery program for patients who had stopped ordering Exjade. Bioscrip told Novartis that it would tell patients that they “should continue taking Exjade” because “undetected or untreated excess iron kills after inflicting injury to a variety of body organs.”

In 2008, Novartis took further steps to incentivize all three pharmacies distributing Exjade to increase prescription refill levels by allocating 60% of unassigned patients to the pharmacy with the highest “adherence” metric (as measured based on the number of refills) and paying additional rebates to the pharmacies for meeting quarterly shipment goals based on Novartis’s sales targets.

“We alleged that the pharmacies would be penalized on the scorecards even for patients who were taken off the drug by their doctor and those who experienced side effects and chose to stop the medication,” says Shelley Slade, the attorney who represented the whistleblower who initially brought the lawsuit against Novartis.

Novartis’s signed admissions state that it pushed US Bioservices and Accredo to implement adherence improvement plans that involved assigning nurses to call patients and encourage them to stay on Exjade prescriptions. Novartis also told US Bioservices and Accredo that, if those pharmacies did not increase their adherence scores, Novartis would reduce the number of undesignated patients allocated to those pharmacies.

The settlement also states that in January 2008, Accredo provided Novartis with the “call template” that nurses at Accredo would follow when they called Exjade patients. The document directed the nurses at Accredo to tell patients that compliance with the Exjade regimen is extremely important and that, if untreated, “iron overload could result in arthritis, liver or heart problems, high blood sugar, persistent abdominal pain, severe fatigue, and skin discoloration.” The settlement says that it directed the nurse to ask about, but did not specifically direct the nurse to discuss, the risks of renal impairment or hepatic impairment.

Two years later, the FDA required Novartis to add a black box warning to Exjade’s label to highlight that it may cause renal failure, liver failure, and gastrointestinal hemorrhage. The warning also stated that these reactions were fatal in some cases. A month later, Accredo updated its adherence call protocols, which continued to direct nurses to advise patients about the common adverse reactions and to tell patients “compliance with Exjade is very important in order to prevent the following complications that result from untreated iron overload: arthritis, high blood sugar, persistent abdominal pain, severe fatigue, skin discoloration, stroke, or death.” However, those protocols did not discuss the black box warnings. The hub program continued to operate into 2012.

The Exjade hub program is not the first time that the Department of Justice has accused Novartis of wrongdoing. In 2010, the company agreed to pay $420 million in criminal fines and a civil settlement to resolve allegations of off-label promotion and violations of the False Claims Act for Trileptal (oxcarbazepine), an anticonvulsant, and five other drugs. As part of the settlement Novartis was required to set up a five-year corporate integrity program designed to prevent future violations of federal health care and kickback regulations. In 2013, the Department of Justice sued Novartis again, this time for violating the Anti-Kickback statute. A press release about the legal action said the company paid doctors to speak about certain drugs (two hypertension drugs, Lotrel [a combination of amolodipine and benazepriat] and Valturna [a combination of aliskiren and valsartan that has been pulled from the market], and a diabetes drug, Starlix [nateglinide], are mentioned) at “events that were often little or nothing more than social occasions for the doctors.”

In an email response to an inquiry about its current hub programs, Novartis said that its patient access and support programs can serve an important function for patients. The company said it is committed to improving and extending patient lives by delivering better outcomes while complying with all applicable laws. Novartis also said that it has expanded its corporate integrity program as a means to prevent future problems.