Co-Pay Charity Faces Scrutiny for Drug Company Donations

A charity that helps patients pay the out-of-pocket costs of prescription drugs is facing scrutiny for its ties with a pharmaceutical company that itself is under investigation for its marketing practices, the New York Times reports.

The Chronic Disease Fund in Plano, Texas, has been in turmoil after articles in Barron's and on the investor Web site Seeking Alpha suggested the charity may have improperly favored Questcor Pharmaceuticals, whose only marketed product is an expensive drug for immune diseases. One of the largest charities in the United States in terms of both total revenue and private and individual giving, CDF reportedly pulled in donations totaling more than $900 million between 2007 and 2012 — 81 percent from two unnamed drug manufacturers — to help patients purchase prescription drugs. The articles also noted that the charity was purchasing millions of dollars a year in services from for-profit companies owned by CDF founder and president Michael Banigan.

Contributions from pharmaceutical companies to such patient-assistance charities qualify for a tax deduction and are legal as long as the company does not require that its donations be used exclusively to pay for its own drugs. Fearing defections from donors as a result of the controversy, CDF has replaced its entire board, and Banigan is leaving the organization. With the help of a Washington law firm, the fund also is revising its practices to ensure compliance with legal requirements, the Times reports, including no longer providing co-pay assistance for diseases only treatable by a single drug and severing all ties with companies owned by Banigan.

Critics told the Times that co-pay assistance helps keep drug prices high and circumvents efforts by insurers to control drug spending by making consumers bear part of the cost. "These subsidies are unfortunately used to promote the overutilization of expensive brand-name drugs," said Wells Wilkinson, a lawyer at Community Catalyst, a consumer advocacy organization.

Meanwhile, some executives of patient-assistance charities are worried about increased scrutiny. "We could all get painted with the same brush," said Patrick McKercher, president of the Patient Access Network Foundation, whose contributions more than doubled in 2012, to $179 million.

"Look at the alternative," said Dana Kuhn, founder and president of Virginia-based co-pay charity Patient Services. "If they didn't donate their dollars, people would die."