Advertisement
New Zealand markets open in 4 hours 40 minutes
  • NZX 50

    11,699.79
    -28.31 (-0.24%)
     
  • NZD/USD

    0.6135
    +0.0013 (+0.21%)
     
  • ALL ORDS

    8,082.30
    -67.80 (-0.83%)
     
  • OIL

    80.00
    +0.77 (+0.97%)
     
  • GOLD

    2,419.80
    +34.30 (+1.44%)
     

Regeneron (REGN) Accused of Fraudulent Practices Related to Eylea

Shares of Regeneron Pharmaceuticals REGN were down 1.70% on Apr 11, following a complaint filed by the U.S. Department of Justice against the company, alleging fraudulent drug pricing practices related to its lead drug, Eylea.

The Department filed a complaint under the False Claims Act (FCA) against Regeneron, which manufactures and sells the ophthalmology drug, Eylea. The lawsuit was originally filed under the qui tam or whistleblower provisions of the FCA.

Eylea is an anti-vascular endothelial growth factor inhibitor that is approved in the United States for the treatment of neovascular age-related macular degeneration.

The complaint alleges that Regeneron fraudulently raised Medicare reimbursement rates for its leading drug, Eylea, by knowingly submitting false average sales price reports to the Centers for Medicare and Medicaid Services, excluding certain price concessions.

ADVERTISEMENT

Regeneron allegedly manipulated Medicare’s drug pricing process by knowingly failing to report its payment of credit card processing fees as price concessions to its customers. Per the complaint, Regeneron paid these credit card fees so that distributors would accept credit cards for Eylea purchases and simultaneously charged a lower cash price for the drug.  Regeneron’s customers could then receive credit card benefits for their purchases, such as “cash back” and other credit card rewards.

Per the complaint, Regeneron significantly inflated the cost of its drug to Medicare over many years by resorting to these fraudulent practices and, in turn, boosted its revenues. As a result, the higher average sales price cost the Medicare system hundreds of millions of dollars.

These practices likely enabled Eylea to become the market leader in this space and seize market share from its competitors.

Under the FCA, private parties file an action on behalf of the United States and receive a portion of the recovery. The matter is being handled by the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the District of Massachusetts, with assistance from the Department of Health and Human Services Office of Inspector General and the FBI.

The lawsuit definitely puts Regeneron in the back seat. If Regeneron is found guilty, the government is eligible to recover three times the amount of its losses from the company plus fines under the FCA.

The mammoth litigation costs will be a drag on the company’s bottom line.
Regeneron’s shares have risen 8.7% in the past year against the industry’s decline of 15.4%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

We note that Eylea is also approved for diabetic macular edema and diabetic retinopathy, among others. The drug is already facing challenges and its sales were under pressure in 2023 due to competition from Roche’s RHHBY Vabysmo.

The uptake of Vabysmo has been outstanding. RHHBY designed Vabysmo to block pathways involving Ang-2 and VEGF-A. The European Commission also approved Vabysmo for these indications.

Regeneron co-developed Eylea with Bayer AG BAYRY. It records net product sales of Eylea in the United States and Bayer records net product sales of the drug outside the country. Regeneron records its share of profit/loss in connection with the sales of Eylea outside the United States.

Zacks Rank & a Stock to Consider

REGN currently has a Zacks Rank #3 (Hold). A better-ranked stock in the biotech sector is ADMA Biologics, Inc. ADMA, which sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, estimates for ADMA Biologics’ 2024 earnings per share have improved from 22 to 30 cents. In the past year, shares of ADMA have surged 89.4%.

ADMA Biologics’ earnings beat estimates in three of the trailing four quarters and met once, delivering an average surprise of 85.00%.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Regeneron Pharmaceuticals, Inc. (REGN) : Free Stock Analysis Report

Roche Holding AG (RHHBY) : Free Stock Analysis Report

Bayer Aktiengesellschaft (BAYRY) : Free Stock Analysis Report

ADMA Biologics Inc (ADMA) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research