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Sponsored Genetic Testing Programs: Compliance Considerations Following DOJ False Claims Act Settlement
Friday, January 19, 2024

Manufacturer-sponsored genetic testing programs provide several benefits to patients, including expanding access to genetic testing, providing opportunities for patients to participate in research, empowering patients to make more informed decisions about their health, and providing physicians with clinically actionable information about their patients.

However, manufacturers and laboratories that offer manufacturer-sponsored genetic testing programs should take care to ensure that they do not run afoul of the federal Anti-Kickback Statute (AKS).

In December 2023, Ultragenyx Pharmaceutical Inc. (“Ultragenyx”) agreed to pay $6 million to resolve allegations it violated the False Claims Act by paying kickbacks through its sponsored genetic testing program.[1] This marks the first major settlement involving a sponsored genetic testing program after the U.S. Department of Health and Human Services, Office of Inspector General (OIG), issued Advisory Opinion 22-06 (the “opinion”) in April 2022, which addressed a separate sponsored genetic testing program.[2] The juxtaposition of the Ultragenyx settlement with the favorable opinion that preceded it offers several compliance considerations for companies that wish to offer a sponsored genetic testing program.

Advisory Opinion 22-06

In April 2022, OIG issued a favorable opinion wherein a biopharmaceutical company (the “company”) offered a free genetic testing program to screen for specific genetic mutations associated with an unnamed disorder (the “disorder”) that can present in different forms. The company also offered free genetic counseling services. One form of the disorder is an unnamed disease (the “disease”), for which the company has medications approved by the Food and Drug Administration (FDA).

Under the arrangement, the company entered into a contract with a third-party laboratory company (the “testing vendor”) to offer a free genetic test to screen for specific gene mutations associated with the disorder. In order to be eligible for a free genetic test, an individual must be at least 18 years old, reside in the United States, and meet one of the following criteria: (1) the patient was diagnosed with the disease; (2) the patient’s physician suspects that the patient has the disease based on clinical evidence but has not yet made a diagnosis; or (3) the patient has not been diagnosed with the disease, but a family member has a confirmed diagnosis of the hereditary form of the disease. The company also offers free counseling services to eligible patients through a separate third-party vendor (the “counseling vendor”), conducted by licensed genetic counselors. Neither the testing vendor nor the counseling vendor can bill any third party, other than the company, for the testing and counseling services furnished under the arrangement.

In issuing its favorable opinion, OIG noted that the company’s sponsored genetic testing program implicated both the AKS and the Beneficiary Inducements CMP, the civil monetary penalty for beneficiary inducements. Nonetheless, OIG concluded that the arrangement posed a sufficiently low risk of fraud and abuse under both statutes for the following reasons:

  1. Low risk of overutilization or inappropriate utilization. OIG found that the arrangement was unlikely to lead to overutilization or inappropriate utilization because the genetic test only indicates the presence of the disorder-related genetic mutations and is insufficient to diagnose the disease or prescribe one of the company’s products to a patient. Furthermore, OIG found that the nexus between the remuneration offered through the sponsored genetic testing program and a prescriber’s order of the company’s products to be sufficiently “attenuated” because the company’s products are not medically appropriate for those who have not been diagnosed with the disease, nor does the company offer any other items or services used to treat or diagnose the disorder or the disease. Moreover, in instances where a patient has a diagnosis of the disease, the genetic test result would have no bearing on whether a physician would prescribe one of the company’s medications or which of the company’s medications would be prescribed to treat the disease because all of the company’s disease-related products are indicated for both the hereditary and non-hereditary forms of the disease.
  2. Unlikely to skew clinical decision-making or create quality-of-care issues. OIG also found that the arrangement was unlikely to skew clinical decision-making or raise patient safety concerns since providers are neither required nor incentivized to order the company’s products as a result of utilizing the sponsored genetic testing program. Indeed, OIG noted that the genetic test might improve patient safety and quality of care by shortening the time to diagnosis of the disease.
  3. Safeguard against use as a sales or marketing toolFinally, OIG noted the various safeguards in place to prevent the use of the sponsored genetic testing program as a marketing or sales tool to induce physicians to order items and services from the company. OIG specifically pointed out that although its sales representatives distribute materials or collection kits to physicians, they do not do so in a manner that takes into account a physician’s usage of the sponsored genetic testing program or the physician’s history of prescribing the company’s products or other products. Sales representatives are limited in the number of collection kits they may provide to any individual physician. Importantly, OIG also acknowledged the various limitations on the exchange of data related to the sponsored genetic testing program to prevent targeting specific providers or patients for further testing or to encourage the purchase of the company’s products. Although the testing vendor provides monthly reports to the company to track participation, the data received by the company is de-identified such that the company cannot identify patients who receive genetic tests or the providers who order the genetic tests through the arrangement. The company’s policies also prohibit company personnel, including its sales representatives, from soliciting information from providers or their staff regarding whether they have utilized the sponsored genetic testing program. Furthermore, the company does not allow its sales force to access any data it receives from the testing vendor or the counseling vendor, and such data is not used for sales and marketing activities, including sales targeting or incentives. Per the terms of the contracts between the company and the testing and counseling vendors, the testing vendor is prohibited from promoting the arrangement to providers and patients, and the counseling vendor is prohibited from promoting the company’s products to patients, their family members, providers, or payors. Also, the company does not proactively provide information about the sponsored genetic testing program to patients.

Accordingly, in issuing this favorable opinion, OIG outlined the parameters within which it would find sponsored genetic testing programs to be of low risk of fraud and abuse.

Ultragenyx Settlement

The Ultragenyx settlement marks the first major enforcement action taken since the opinion was issued in April 2022. While the opinion provides the broad outlines for a compliant sponsored genetic testing program, the Ultragenyx settlement demonstrates the characteristics of what the government would consider to be a non-compliant sponsored genetic testing program.

Ultragenyx is a pharmaceutical manufacturer that manufactures Crysvita, an FDA-approved drug to treat X-linked hypophosphatemia (XLH) in adult and pediatric patients that are six months of age and older. XLH is a rare inherited disorder characterized by low levels of phosphate in the blood, which can lead to weak bones and, in many instances, may require a genetic test to definitively diagnose XLH.

As part of the settlement, Ultragenyx admitted the following:[1] Ultragenyx understood that, in some cases, a positive genetic test for a genetic mutation consistent with XLH would be required for a payor (including Medicare or Medicaid) to reimburse Crysvita prescribed to a patient or for a physician to diagnose XLH and prescribe Crysvita. Accordingly, Ultragenyx entered into an arrangement with a genetic testing laboratory (the “lab”) wherein Ultragenyx paid the lab to conduct these genetic tests—at no cost to physicians or patients—and provide the results to the physician. Ultragenyx sales personnel discussed the XLH testing program with physicians and delivered order forms for the tests to the physician offices. Ultragenyx paid the lab separately to provide the test results to Ultragenyx. While the test results did not contain patient names, they did contain the name of the ordering physician, a de-identified patient ID number, the date the test was ordered, and the test result itself (the “results reports”). Additionally, Ultragenyx’s commercial team used the results, in part, to target physicians for Crysvita marketing efforts. Specifically, Ultragenyx disseminated the results reports to its sales force with instructions to make follow-up sales calls for Crysvita to physicians who ordered a test or had a patient with a positive test result.

Based on the conduct to which Ultragenyx admitted, the government alleged that from February 1, 2019, through May 30, 2022, Ultragenyx caused the submission of false claims to federal health care programs “by paying remuneration: (1) to the Laboratory to induce the Laboratory to provide the Results Reports which referred Ultragenyx employees to HCPs [health care providers] for the furnishing or arranging for the furnishing of Crysvita through a targeted effort that resulted in Crysvita prescriptions reimbursed by Medicare and Medicaid; and (2) to beneficiaries in the form of covering the cost of the genetic tests, to induce their purchase of Medicare or Medicaid-reimbursed Crysvita.”[2] The settlement also notes that in April 2022, after becoming aware of the opinion, Ultragenyx stopped providing results reports to its sales force and stopped using results reports for marketing purposes.

As a result, Ultragenyx agreed to pay $6 million to resolve the allegations. Commenting on the settlement, Acting U.S. Attorney for the District of Massachusetts Joshua S. Levy stated that “[a]s medical practices evolve, our office is committed to ferreting out improper financial kickbacks of any permutation.”[3]

Key Takeaways

The Ultragenyx settlement presents several takeaways for manufacturers who wish to compliantly operate sponsored genetic testing programs:

  • Consider whether the services offered at no cost to physicians and patients are appropriate. In the opinion, one of the factors that led OIG to consider the arrangement to be a low risk for overutilization or inappropriate utilization is that the genetic test itself was not determinative of whether the disease could be diagnosed or the company’s disease-related drug could be prescribed. In the Ultragenyx matter, however, at least in some cases, a positive genetic test for a genetic mutation consistent with XLH would be required for a physician to diagnose XLH and prescribe Crysvita or for a payor (including Medicare or Medicaid) to reimburse Crysvita prescribed to a patient. When evaluating the appropriateness of the services offered at no cost to physicians and patients, a manufacturer should consider whether the services offered at no charge are sufficiently attenuated from the items or services that the manufacturer offers at a cost.
  • Consider whether the data received from the sponsored genetic testing program and the use of such data are appropriate. In the opinion, the data received by the company is fully de-identified such that the company cannot identify patients who receive genetic tests nor the providers who order the genetic tests through the arrangement. The company’s policies also prohibit its sales force from accessing any data it receives from the testing or counseling vendors. They also prohibit such data from being used for sales and marketing activities, including sales targeting or incentives. Ultragenyx, on the contrary, received results reports that contained the name of the ordering physician, a de-identified patient ID number, the date the test was ordered, and the test result itself. Additionally, Ultragenyx disseminated the results reports to its sales force with instructions to make follow-up sales calls for Crysvita to physicians who ordered a test or had a patient with a positive test result. A manufacturer who receives data from its sponsored genetic testing program should consider whether such data is necessary and why it is necessary and ensure that such data is neither accessible by its commercial team nor used for any sales targeting or product marketing purposes.
  • Consider whether a self-disclosure is necessary. Notably, almost immediately after OIG issued the opinion in April 2022, Ultragenyx ceased sharing results reports with its sales force and using its results reports for marketing purposes. Nonetheless, a qui tam had already been filed in July 2021, and Ultragenyx’s conduct up to May 30, 2022 was alleged to have violated the AKS. Accordingly, even if a manufacturer had already taken remedial action with regard to its sponsored genetic testing program in light of the April 2022 opinion, it should still consider its liability for conduct prior to such remedial action and weigh whether a self-disclosure to the government is appropriate to mitigate potential liability.

* * *

ENDNOTES

[1] Press Release, “Pharmaceutical Company Ultragenyx Agrees to Pay $6 Million for Allegedly Paying Kickbacks to Induce Claims for its Drug Crysvita” (Dec. 21, 2023).

[2] OIG Advisory Opinion No. 22-06 (April 11, 2022), https://oig.hhs.gov/documents/advisory-opinions/1028/AO-22-06.pdf.

[3] USA v. Ultragenyx – Settlement Agreement (Dec. 19, 2023), https://www.justice.gov/media/1329981/dl.

[4] Id.

[5] Press Release, “Pharmaceutical Company Ultragenyx Agrees to Pay $6 Million for Allegedly Paying Kickbacks to Induce Claims for its Drug Crysvita” (Dec. 21, 2023).

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