- OIG Issues Advisory Opinion Regarding Patient Assistance Programs for Part D Beneficiaries
- May 31, 2006 | Authors: Kimberly J. Kannensohn; Rachel Goldstein Kempler
- Law Firm: McGuireWoods LLP - Chicago Office
On April 18, 2006, the Office of Inspector General of the Department of Health and Human Services (OIG) issued an advisory opinion in which it concluded that a pharmaceutical company’s patient assistance program (PAP) could provide free outpatient prescription drugs to financially needy Medicare Part D beneficiaries without running afoul of the Medicare and Medicaid Anti-Kickback Statute, 42 U.S.C. §1320a-7b (the Anti-Kickback Statute).
Many pharmaceutical companies offer PAPs to assist qualifying individuals in obtaining expensive medications at reduced or no cost. PAPs have long been a vital source of drug coverage for low income individuals. However, a Special Advisory Bulletin published by the OIG in November 2005 called into question the ability of pharmaceutical manufacturers to include Part D beneficiaries in their PAPs. In the bulletin, the OIG cautioned that drug company PAPs that provide subsidies for Part D drugs “would implicate the anti-kickback statute and pose a substantial risk of program and patient fraud and abuse.” 70 Fed. Reg. 70623, 70625 (Nov. 22, 2005). As a result of the bulletin, many drug companies decided not to expand their PAPs to include individuals enrolled in the Medicare Part D program. This posed a dilemma for lower income Medicare recipients who were forced to choose between enrolling in the Medicare Part D program and foregoing their PAP benefit, or not enrolling in a Part D program and paying a penalty should they need to enroll in the Medicare Part D program at a later date, i.e. subsequent to the May 15, 2006, enrollment deadline.
Advisory Opinion No. 06-03 should resolve the uncertainty that existed after the Special Advisory Bulletin was published, and provide a measure of comfort to pharmaceutical manufacturers who desire to include Part D beneficiaries in their PAPs. In the advisory opinion, the OIG concluded that the two PAPs proposed by Schering Plough, a pharmaceutical manufacturer, contained sufficient safeguards to substantially mitigate the risk that the free drugs provided to Part D beneficiaries by the PAPs would be used to tie the beneficiaries to particular outpatient prescription drugs payable by the Medicare Part D program, or that such free drugs would result in overutilization and increased costs to the Part D program. Thus, the OIG determined that the PAPs, as structured, could provide free drugs to beneficiaries of the Medicare Part D program without running afoul of the Anti-Kickback Statute.
According to the OIG, the principal factor minimizing the risk that the PAPs would violate the Anti-Kickback Statute is that the PAPs are operated entirely outside of the Medicare Part D program. This means that beneficiaries obtain the free drugs without using their Part D insurance benefit. No claims for drugs provided by the PAPs are filed with the beneficiary’s Part D plan, and the assistance provided by the PAPs does not count toward the beneficiary’s true out-of-pocket costs (TrOOP) or total Part D spending for any purpose. Schering Plough will ensure that the benefit remains outside of the Part D program by entering into data sharing agreements with the Centers for Medicare and Medicaid Services (CMS) to enable the PAPs to communicate with Part D plans regarding their beneficiaries’ participation in the PAPs. In addition, the PAPs will inform each beneficiary that the free drugs will not be reimbursed by the beneficiary’s Part D plan, and that the drugs do not count toward the beneficiary’s TrOOP.
Other aspects of the PAPs identified by the OIG as mitigating against the risk of an Anti-Kickback Statute violation under the Medicare Part D program include:
Eligibility for PAP assistance for Part D beneficiaries is determined solely on the basis of financial need. An individual qualifies for assistance only if his or her income is below a certain percentage of the federal poverty level (i.e., 325% for one PAP, and 250% for the other PAP), and the individual has already spent 3% of his or her total household income on outpatient prescription drugs for that coverage year. A beneficiary’s choice of Part D plan, the benefit design of the beneficiary’s Part D plan, and where the Part D beneficiary is on his or her Part D plan’s benefit spectrum, are not taken into consideration when determining eligibility for PAP assistance. Finally, the providers, practitioners and suppliers used by the beneficiary or the Part D plan in which such beneficiary is enrolled are not taken into consideration when determining the beneficiary’s eligibility for PAP assistance.
Each PAP provides assistance to each beneficiary for the entire Part D coverage year, and each PAP continues to provide assistance even if the beneficiary’s use of the free drug is periodic during the coverage year.
The PAPs are operated in compliance with all existing guidance from CMS, and the PAPs maintain accurate and contemporaneous records of the free drugs they provide to Part D beneficiaries.
Under certain circumstances, the PAPs distribute free drugs to beneficiaries through the beneficiaries’ physicians, creating a risk of a violation of the Anti-Kickback Statute if the free drugs inure to the economic benefit of the physicians. This risk is reduced by the fact that quantities shipped to a physician are limited to the amount ordered for a designated patient, and in most cases, do not exceed a three-month supply. In addition, the PAP obtains an agreement from the physician to dispense the drugs only to a designated patient and to refrain from billing for the drugs.
The OIG concluded that the above safeguards minimize the risk that the free drugs provided by the PAPs to Part D beneficiaries would be used to steer or tie Medicare beneficiaries to particular outpatient prescription drugs payable by the Medicare Part D program, or that such free drugs would result in overutilization and the attendant increased costs to the Medicare Part D program. Therefore, the OIG concluded that the operation of Schering Plough’s PAPs, as described, would not violate the Anti-Kickback Statute.
Although OIG Advisory Opinions are technically binding only upon the requestor, Advisory Opinion 06-03 and the fraud and abuse safeguards highlighted therein should be considered by any pharmaceutical company seeking to extend its PAPs to financially needy individuals enrolled in the Medicare Part D program.