On October 5, 2022, the Office of Inspector General (OIG) published Advisory Opinion 22-19 (Advisory Opinion), in which it determined that a proposed oncology drug discount arrangement could constitute grounds for the imposition of sanctions under the federal anti-kickback statute (AKS). The OIG concluded that while beneficiary access to potentially life-saving medications is essential, the provisions of the proposed arrangement “would present more than a minimal risk of fraud and abuse” under the AKS.

Proposed Arrangement

The proposed arrangement assessed by the OIG (Proposed Arrangement) involves certain manufacturers of oncology drugs reimbursed by Medicare Part D that proposed to subsidize costs associated with the receipt of those drugs via a separate non-profit entity which would be responsible for administering the subsidies to patients.

Three categories of spending were included in the Proposed Arrangement. First, drug manufacturers, through the non-profit entity established and funded by the manufacturers, would subsidize cost-sharing amounts for their own products for eligible Medicare Part D enrollees. Second, the manufacturers would contribute specified amounts to the non-profit to finance health insurance premiums and select programs identified as promoting oncology screening and health equity. Third, the manufacturers would finance the non-profit’s operating costs of approximately $20 million per year.

OIG Analysis

Federal Anti-Kickback Statute

In reviewing the Proposed Arrangement, the OIG stated that “beneficiary access to potentially life-saving medications, including [the oncology drugs at issue here] is of paramount concern to OIG.” OIG further acknowledged that some patients are unable or unwilling to access medically necessary oncology drugs due to the significant out-of-pocket costs incurred under the current Medicare Part D cost-sharing structure, but stated this “is driven in large part by the list prices pharmaceutical manufacturers set for these drugs.”  The OIG then assessed the three categories of spending referenced above under the Proposed Arrangement and the implications of those forms of remuneration under the AKS.

The AKS makes it a criminal offense to knowingly and willfully offer or pay any remuneration to any person to induce such person to purchase or arrange for the purchase of any item or service reimbursable under a federal health care program. AKS violations can also result in civil penalties and exclusion from federal health care programs.

Here, the OIG determined that the cost-sharing subsidies provided indirectly by the drug manufacturers to eligible Part D enrollees plainly would constitute remuneration that could induce the purchase of an item reimbursable under a federal health care program. Further, the OIG concluded that these cost-sharing subsidies would not meet the requirements of any statutory exception to or regulatory safe harbor under the AKS and that the cost-sharing subsidies “present more than a minimal risk of fraud and abuse.”

The OIG then determined that the contributions toward specified programs, health insurance premiums, and the healthcare nonprofit’s operating costs would be intrinsically tied to the use of funds to subsidize beneficiary cost sharing.  The OIG thus concluded that the Proposed Arrangement, as a whole, could generate prohibited remuneration if the requisite intent were present and thus could be subject to sanctions under the AKS.

Beneficiary Inducements CMP

The OIG also analyzed potential liability under the Beneficiary Inducements Civil Monetary Penalty (CMP), which sets forth civil penalties for the offer or transfer of remuneration to a beneficiary that is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier for an item or service payable under a federal or state health care program. Notably, the OIG explained that for purposes of the Beneficiary Inducements CMP, pharmaceutical manufacturers are not “providers, practitioners, or suppliers” unless they also own or operate, directly or indirectly, pharmacies, pharmacy benefits management companies, or other entities that file claims for payment under the Medicare or Medicaid programs. Therefore, the OIG concluded that the remuneration that would be offered under the Proposed Arrangement would not be likely to influence a beneficiary to select a particular provider, practitioner, or supplier. Accordingly, the OIG concluded that the Proposed Arrangement would not constitute grounds for the imposition of sanctions under the Beneficiary Inducements CMP.

Takeaways

This Advisory Opinion reflects the OIG’s continued regulatory concerns under the AKS arising from co-payment assistance programs and similar financial subsidization of costs associated with pharmaceuticals. The Opinion follows the recent Second Circuit decision that we previously discussed here, which affirmed that a direct cost-sharing assistance arrangement was prohibited by the AKS. Both the Advisory Opinion and the recent case highlight the continued regulatory scrutiny of drug cost-sharing assistance programs at a time of high drug costs for certain patients. We will continue to monitor OIG guidance and further litigation and legislation on this matter.

As the OIG has emphasized, its Advisory Opinions are issued only to the requestors of the opinion, and have no application to, and cannot be relied on by, any individual or entity, nor may they be introduced into evidence by anyone other than the requestors to prove the individual or entity did not violate the anti-kickback statute or any other law.

*This post was co-authored by Erin Howard, law clerk at Robinson+Cole. Erin is not yet admitted to practice law.