A Big Pharma-funded charity that helps patients pay for drugs just sued the government

A charity that helps patients pay for expensive prescription drugs is suing the federal government over what it alleges are unlawful federal restrictions that put a "stranglehold" on its ability to communicate with donors - which happen to be pharmaceutical companies that sell expensive drugs.

Patient-assistance charities have become a mainstay of drug companies' efforts to ensure patients can afford their products. It's a circular kind of philanthropy: Drug companies give hundreds of millions of dollars a year to independent nonprofits, which in turn provide financial assistance for patients' drug co-pays or other medical expenses.

Due to the potentially fraught nature of the relationship, the charities are regulated by the government to ensure that they operate independently and don't fall afoul of a federal anti-kickback law.

In its lawsuit Monday, Patient Services Inc. (PSI) alleges that federal oversight of its charity has grown, violating its free speech rights and posing a threat to its existence. The charity argues the government is limiting its ability to have basic conversations or communications with donors.

"These restrictions violate our First Amendment right; they prohibit us from communicating truthful and nonmisleading information," said Neil Millhiser, general counsel of PSI, which offers support to patients with a wide array of illnesses, including rare diseases and cancers. "That impedes our ability to help these patients out."

Millhiser said a half dozen newly established funds for publicly insured patients have failed to gain any donors over the past year, including funds to support people with sickle cell disease, Parkinson's and diabetes.

Don White, a spokesman for the Office of Inspector General at the department of Health and Human Services declined to comment.

These charities help patients out, but they also provide a lucrative philanthropic option for donors. Drug companies get reimbursed by government health programs or private insurers, and defuse potential criticism from sick people who can't afford their drugs. A Citi Research report from 2017 found that every $1 million the drug industry spends on charitable donations to support access to high-priced drugs has the potential to generate up to $21 million for the sponsor company.

"The companies get a huge recycling of money through this process," said Christopher Robertson, associate dean for research and innovation at the University of Arizona. "If you start adding in the tax deductibility [of donations], it's obviously a good business strategy."

The lawsuit comes as this niche of the charitable sector faces intense government scrutiny, including from the U.S. Attorney's office in Massachusetts, the Internal Revenue Service and the Office of the Inspector General for the Department of Health and Human Services.

Last week a different patient-assistance charity, Caring Voice Coalition, announced that it would not offer financial assistance to patients this year, after the federal government found the charity providedspecific patient information to at least one donor that would allow the drug company to understand how its contributions were contributing to its sales. The federal government wrote last week to PhRMA, the drug lobby, to say that companies could give free drugs to patients who had been supported by the charity this year.

There have been a number of recent First Amendment challenges to federal regulatory authority in health care, largely focused on whether drug companies are allowed to promote their drugs for uses not included on the label approved by the Food and Drug Administration.

But Robertson said he did not think free speech was being restricted in the way the charity argues it is in the lawsuit. The federal government says in its advisory opinion that the charity will not "solicit suggestions from donors regarding the identification or delineation of disease funds" and cannot allow the donor to "directly or indirectly influence" the funds.

He said a drug company might put out a fact sheet about an upcoming drug launch, the number of patients affected and the kind of financial help they might need to a number of charities without triggering concern. What would likely tread the line, he said, would be a $10 million check with a memo titled: New Cancer Drug to Be Launched Soon.

Robertson sees the PSI lawsuit as a gambit to receive some explicit, written certainty for the charity - and its donors - about what sort of information is specifically allowed to be exchanged. Having an explicit list of allowed items could provide reassurance to pharmaceutical companies that have pulled back on their donations to PSI, as its operating budget has dropped 17 percent for this year, to $83 million.

"They don't have much to lose," Robertson said. "Bringing in the Constitution is sort of like a Hail Mary pass. It's bringing a big gun into the conversation."

The lawsuit asks the court to declare that truthful and nonmisleading communication in 12 categories are not restricted, including discussion of the cost of a drug and insurance coverage.