[Federal Register Volume 70, Number 224 (Tuesday, November 22, 2005)]
[Notices]
[Pages 70623-70628]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-23038]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of Inspector General
Publication of OIG Special Advisory Bulletin on Patient
Assistance Programs for Medicare Part D Enrollees
AGENCY: Office of Inspector General (OIG), HHS.
ACTION: Notice.
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SUMMARY: OIG periodically develops and issues guidance, including
Special Advisory Bulletins, to alert and inform the health care
industry about potential problems or areas of special interest. This
Federal Register notice sets forth the recently issued OIG Special
Advisory Bulletin addressing patient assistance programs for Medicare
Part D enrollees.
FOR FURTHER INFORMATION CONTACT: Darlene M. Hampton, Office of Counsel
to the Inspector General, (202) 619-0335.
SUPPLEMENTARY INFORMATION:
Special Advisory Bulletin: Patient Assistance Programs for Medicare
Part D Enrollees (November 2005)
I. Introduction
Patient assistance programs (PAPs) have long provided important
safety net assistance to patients of limited means
[[Page 70624]]
who do not have insurance coverage for drugs, typically serving
patients with chronic illnesses and high drug costs. PAPs are
structured and operated in many different ways. PAPs may offer cash
subsidies, free or reduced price drugs, or both. Some PAPs offer
assistance directly to patients, while others replenish drugs furnished
by pharmacies, clinics, hospitals, and other entities to eligible
patients whose drugs are not covered by an insurance program. Some PAPs
are affiliated with particular pharmaceutical manufacturers; others are
operated by independent charitable organizations (such as, for example,
patient advocacy and support organizations) without regard to any
specific donor or industry interests.
Many pharmaceutical manufacturers have historically sponsored PAPs
that assist patients whose outpatient prescription drugs are not
covered by an insurance program (including some Medicare
beneficiaries), in obtaining the manufacturer's products for free or at
greatly reduced cost. Beginning on January 1, 2006, Medicare Part D
will offer Medicare beneficiaries who elect to enroll broad coverage
for outpatient prescription drugs. Accordingly, Medicare beneficiaries
who enroll in Part D will no longer qualify under traditional PAP
eligibility criteria. Part D enrollees will incur cost-sharing
obligations (including deductibles and copayments), although many low-
income beneficiaries will qualify for subsidies that will reduce or
eliminate their financial obligations.\1\ Pharmaceutical manufacturers
have expressed interest in continuing to assist Medicare Part D
enrollees of limited means who do not qualify for the low-income
subsidy.
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\1\ See 42 CFR 423.782.
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OIG is mindful of the importance of ensuring that financially needy
beneficiaries who enroll in Part D receive medically necessary drugs,
and OIG supports efforts of charitable organizations and others to
assist financially needy beneficiaries, as long as the assistance is
provided in a manner that does not run afoul of the Federal anti-
kickback statute or other laws.\2\ We have been asked whether the anti-
kickback statute will be implicated if pharmaceutical manufacturer PAPs
\3\ continue to offer assistance to financially needy Medicare
beneficiaries who enroll in Part D by subsidizing their cost-sharing
obligations for covered Part D drugs. For the reasons set forth below
and consistent with extant OIG guidance, we conclude that
pharmaceutical manufacturer PAPs that subsidize Part D cost-sharing
amounts present heightened risks under the anti-kickback statute.
However, in the circumstances described in this Bulletin, cost-sharing
subsidies provided by bona fide, independent charities unaffiliated
with pharmaceutical manufacturers should not raise anti-kickback
concerns, even if the charities receive manufacturer contributions. In
addition, we believe other arrangements described in this Bulletin, if
properly structured, may pose reduced risk. Thus, we believe lawful
avenues exist for pharmaceutical manufacturers and others to help
ensure that all Part D beneficiaries can afford medically necessary
drugs.
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\2\ This Bulletin focuses on the application of the Federal
anti-kickback statute. Other potential risk areas, including, for
example, potential liability under the False Claims Act, 31 U.S.C.
3729-33, or other Federal or State laws, are not addressed here.
Moreover, this Bulletin focuses on arrangements that involve
pharmaceutical manufacturers directly or indirectly subsidizing Part
D cost-sharing amounts. Programs that subsidize Part D premium
amounts pose risks under the anti-kickback statute that are not
addressed here. Similarly, PAPs established by health plans that
subsidize cost sharing or premium amounts under Part D raise
different issues and may require a different analysis. While this
Bulletin may provide some useful guidance for other kinds of PAP
arrangements, such PAPs are not specifically considered here.
\3\ For purposes of this Special Advisory Bulletin, a
pharmaceutical manufacturer PAP includes any PAP that is directly or
indirectly operated or controlled in any manner by a pharmaceutical
manufacturer or its affiliates (including, without limitation, any
employee, agent, officer shareholder, or contractor (including,
without limitation, any wholesaler, distributor, or pharmacy
benefits manager)). Moreover, for purposes of an anti-kickback
analysis, we would not consider a charitable foundation (or similar
entity) formed, funded or controlled by a manufacturer or any of its
affiliates (including, without limitation, any employee, agent,
officer, shareholder, or contractor (including, without limitation,
any wholesaler, distributor, or pharmacy benefits manager)) to be a
bona fide, independent charity, because interposition of the entity
would not sever the nexus between the patient subsidies and the
manufacturer. Indeed, in most cases, the foundation would receive
all of its funding from the pharmaceutical manufacturer (or its
affiliates) and would provide subsidies only for the manufacturer's
products.
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Given the importance of ensuring continued access to drugs for
beneficiaries of limited means and the expedited time frame for
implementation of the Part D benefit, we are issuing this Special
Advisory Bulletin to identify potentially abusive PAP structures, as
well as methods of providing assistance that mitigate or vitiate the
potential for fraud and abuse. This Special Advisory Bulletin draws on
the government's prior fraud and abuse guidance and enforcement
experience. However, because the Part D benefit has not yet begun, and
any assessment of fraud and abuse is necessarily speculative, this
Bulletin cannot, and is not intended to, be an exhaustive discussion of
relevant risks or beneficial practices.
At the outset, it is important to note the following:
PAPs need not disenroll all Medicare beneficiaries from
their existing PAPs to be compliant with the fraud and abuse laws.
Enrollment in Part D is voluntary; therefore, existing PAPs may
continue to provide free or reduced price outpatient prescription drugs
to Medicare beneficiaries who have not yet enrolled in Part D. The
Centers for Medicare & Medicaid Services (CMS) anticipates instituting
procedures that will help PAPs determine if PAP clients have enrolled
in Part D.
Occasional, inadvertent cost-sharing subsidies provided by
a pharmaceutical manufacturer PAP to a Part D enrollee should not be
problematic under the anti-kickback statute (e.g., where, despite due
diligence, a pharmaceutical manufacturer PAP does not know and should
not have known that a beneficiary has enrolled in Medicare Part D).
Nothing in the Part D program or in any OIG laws or
regulations prevents pharmaceutical manufacturers or others from
providing assistance (e.g., through cash subsidies or free drugs) to
uninsured patients. Nothing in this Bulletin impacts programs that
assist uninsured patients.
Nothing in this guidance should be construed as preventing
pharmacies from waiving cost-sharing amounts owed by a Medicare
beneficiary on the basis of a good faith, individualized assessment of
the patient's financial need (or failure of reasonable collection
efforts), so long as the waiver is neither routine, nor advertised.
Financial need-based waivers that meet these criteria have long been
permitted.\4\ However, a pharmacy has not waived a cost-sharing amount
if the amount has been paid to the pharmacy, in cash or in kind, by a
[[Page 70625]]
third party (including, without limitation, a PAP).
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\4\ See, e.g., section 1128A(i)(6)(A) of the Act; OIG Special
Advisory Bulletin on Offering Gifts and Other Inducements to
Beneficiaries, August 2002, http:oig.hhs.gov/fraud/docs/alertsandbulletins/SABGiftsandInducements.pdf. The Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)
included a safe harbor specifically incorporating these criteria for
waivers of cost-sharing amounts for Part D drugs. Additionally, the
safe harbor protects cost-sharing waivers offered to individuals who
qualify for the low income subsidy, even if the waivers are routine
and do not follow an individualized determination of financial need,
provided they are not advertised. See Section 1860D-42 of MMA,
codified at 42 U.S.C. 1320a-7b(b)(3)(G).
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II. The Federal Anti-Kickback Statute
The Federal anti-kickback statute, section 1128B(b) of the Social
Security Act (the Act),\5\ makes it a criminal offense knowingly and
willfully to offer, pay, solicit, or receive any remuneration to induce
or reward the referral or generation of business reimbursable by any
Federal health care program, including Medicare and Medicaid. Where
remuneration is paid purposefully to induce or reward referrals of
items or services payable by a Federal health care program, the anti-
kickback statute is violated. By its terms, the statute ascribes
criminal liability to parties on both sides of an impermissible
``kickback'' transaction. For purposes of the anti-kickback statute,
``remuneration'' includes the transfer of anything of value, directly
or indirectly, overtly or covertly, in cash or in kind. The statute has
been interpreted to cover any arrangement where one purpose of the
remuneration was to obtain money for the referral of services or to
induce further referrals. Violation of the statute constitutes a felony
punishable by a maximum fine of $25,000, imprisonment up to five years,
or both. OIG may also initiate administrative proceedings to exclude a
person from Federal health care programs or to impose civil money
penalties for kickback violations under sections 1128(b)(7) and
1128A(a)(7) of the Act.\6\
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\5\ 42 U.S.C. 1320a-7b(b).
\6\ 42 U.S.C. 1320a-7(b)(7); 42 U.S.C. 1320a-7a(a)(7).
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A determination regarding whether a particular arrangement violates
the anti-kickback statute requires a case-by-case evaluation of all of
the relevant facts and circumstances, including the intent of the
parties. For PAPs, the nature, structure, sponsorship, and funding of
the particular PAP are necessarily relevant to the analysis.
III. Patient Assistance Programs
As described more fully below, cost-sharing subsidies provided by
pharmaceutical manufacturer PAPs pose a heightened risk of fraud and
abuse under the Federal anti-kickback statute. However, there are non-
abusive alternatives available. In particular, as discussed below,
pharmaceutical manufacturers can donate to bona fide independent
charity PAPs, provided appropriate safeguards exist. Moreover, this
Bulletin discusses several other alternatives that may pose a reduced
risk of fraud and abuse.
This section addresses in turn: pharmaceutical manufacturer PAPs,
independent charity PAPs, manufacturer PAPs that operate ``outside of
Part D''; ``coalition model'' PAPs, and bulk replacement programs.
A. Pharmaceutical Manufacturer PAPs
Analytically, pharmaceutical manufacturer PAPs raise two main
issues in connection with the Part D program: (i) Whether subsidies
they provide can count toward a Part D enrollee's true out-of-pocket
costs (known as the TrOOP); and (ii) whether the subsidies implicate
the Federal anti-kickback statute.\7\
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\7\ In some cases, a subsidy for Part D cost-sharing obligations
provided by a pharmaceutical manufacturer may also implicate the
prohibition on offering inducements to beneficiaries, as set forth
in section 1128A(a)(5) of the Act, if the subsidy is likely to
influence the beneficiary's selection of a particular provider,
practitioner, or supplier, such as a physician or pharmacy. We have
interpreted ``provider, practitioner, or supplier'' to exclude
pharmaceutical manufacturers unless they also own or operate
pharmacies, pharmaceutical benefits management companies, or other
entities that file claims for payment under the Medicare or Medicaid
programs. See Special Advisory Bulletin on Offering Gifts and Other
Inducements to Beneficiaries, supra note 4.
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As to the first issue, the Part D regulations make clear that
beneficiaries may count toward their TrOOP assistance received from any
source other than group health plans, other insurers and government
funded health programs, and similar third party payment
arrangements.\8\ The preamble to the Part D regulations explains that
cost-sharing assistance furnished by a PAP, including a manufacturer
PAP, will count toward a beneficiary's TrOOP expenditures, even if the
PAP does not comply with the fraud and abuse laws.\9\ This approach
relieves beneficiaries of the financial risk of accepting assistance
from an entity that may be improperly structured or operated.
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\8\ See 42 CFR 423.100; 42 CFR 423.464; 70 FR 4194, 4239
(January 28, 2005). We note that CMS is the proper agency to address
questions about the mechanics of calculating TrOOP. In certain
circumstances, knowing improper TrOOP calculations may give rise to
liability under the False Claims Act, 31 U.S.C. 3729-33.
\9\ See 70 FR 4194 at 4239.
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As to the second issue, the core question is whether the anti-
kickback statute would be implicated if a manufacturer of a drug
covered under Part D were to subsidize cost-sharing amounts (directly
or indirectly through a PAP) incurred by Part D beneficiaries for the
manufacturer's product. Consistent with our prior guidance addressing
manufacturer cost-sharing subsidies in the context of Part B drugs,\10\
we believe such subsidies for Part D drugs would implicate the anti-
kickback statute and pose a substantial risk of program and patient
fraud and abuse.\11\ Simply put, the subsidies would be squarely
prohibited by the statute, because the manufacturer would be giving
something of value (i.e., the subsidy) to beneficiaries to use its
product. Where a manufacturer PAP offers subsidies tied to the use of
the manufacturer's products (often expensive drugs used by patients
with chronic illnesses), the subsidies present all of the usual risks
of fraud and abuse associated with kickbacks, including steering
beneficiaries to particular drugs; increasing costs to Medicare;
providing a financial advantage over competing drugs; and reducing
beneficiaries= incentives to locate and use less expensive, equally
effective drugs.
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\10\ See, e.g., OIG Advisory Opinion Nos. 02-13 and 03-3
(unfavorable opinions involving proposals from pharmaceutical
manufacturer PAPs to subsidize Part B cost-sharing amounts). We note
that the cost and utilization management features of the Part D
program, while important, do not sufficiently mitigate the risks.
\11\ Some in the industry have asserted that cost-sharing
subsidies for Part D drugs differ from cost-sharing subsidies for
Part B drugs so long as the subsidies are given to patients who are
in a Part D ``coverage gap'' (i.e., a benefit period during which
the beneficiary pays 100% of the cost of the drugs). To support
their position, they contend either that beneficiaries in the
coverage gap are functionally ``uninsured'' or that the situation is
comparable to providing free drugs to financially needy
beneficiaries so long as no Federal health care program is billed
for all or part of the drug, a practice we previously permitted in
the context of subsidies for Part B drugs. See OIG Advisory Opinion
Nos. 02-13 and 03-3. Under Part D, a ``coverage gap'' is a period of
insurance coverage. See CMS Frequently Asked Question ID 4855,
http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_adp.php?p_faqid=4855 (regarding prescription drug benefit
coordination of benefits and TrOOP). During the coverage gap,
beneficiaries remain enrolled in their Part D plans and have a
continuing obligation to pay Part D premiums; Part D plans continue
to receive the monthly per-enrollee direct subsidy from the Medicare
program. Moreover, subsidies during the coverage gap are not like
furnishing free drugs where no Federal health care program is
billed. Sufficient spending during the coverage gap qualifies the
beneficiary to reach the catastrophic coverage portion of the Part D
benefit, at which point the Medicare program resumes payment for
most of the costs of the beneficiary's drugs. In this regard, the
different structures of the Part B and Part D benefits are crucial
to the analysis.
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It is impossible to predict with certainty the way in which abuse
may occur in a new benefit program that is not yet operational. The
following are illustrative examples of some types of abuse that may
occur:
Increased costs to the program. We are concerned that a
manufacturer might use beneficiary cost-sharing subsidies, which help
beneficiaries meet their TrOOP requirement, to increase the number of
beneficiaries using the manufacturer's product who reach the
[[Page 70626]]
catastrophic benefit in any given coverage year and to hasten the point
during the coverage year at which beneficiaries reach the catastrophic
benefit. This is of particular import because Medicare will make cost-
based payments during the catastrophic coverage benefit.\12\ We know
from experience that cost-based reimbursement is inherently prone to
abuse, including by vendors that sell products reimbursed on a cost
basis. Similarly, we are concerned about the use of cost-sharing
subsidies to shield beneficiaries from the economic effects of drug
pricing, thus eliminating a market safeguard against inflated prices.
Inflated prices could have a ``spillover'' effect on the size of direct
subsidies, reinsurance payments, and risk corridor payments paid by
Medicare to Part D plans in future years,\13\ potentially resulting in
higher costs to the Medicare program.
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\12\ See 42 CFR 423.329. For purposes of calculating payments
under catastrophic coverage, the cost of a beneficiary's drug is
based in part on the plan's negotiated price (i.e., a price that is
set by the plan based on negotiations with pharmaceutical
manufacturers and pharmacies).
\13\ See 42 CFR 423.329; 42 CFR 423.336.
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Beneficiary steering and anti-competitive effects.
Subsidies provided by traditional pharmaceutical manufacturer PAPs have
the practical effect of locking beneficiaries into the manufacturer's
product, even if there are other equally effective, less costly
alternatives (and even if the patient's physician would otherwise
prescribe one of these alternatives). Subsidizing Medicare Part D cost-
sharing amounts will have this same steering effect. Moreover, as we
have previously noted in the Part B context, cost-sharing subsidies can
be very profitable for manufacturers, providing additional incentives
for abuse. So long as the manufacturer's sales price for the product
exceeds its marginal variable costs plus the amount of the cost-sharing
assistance, the manufacturer makes a profit. These profits can be
considerable, especially for expensive drugs for chronic conditions. We
are concerned that pharmaceutical manufacturers may seek improperly to
maximize these profits by creating sham ``independent'' charities to
operate PAPs; by colluding with independent charity programs to ensure
that the manufacturer's contributions only or primarily benefit
patients using its products (discussed in more detail below); or by
manipulating financial need or other eligibility criteria to maximize
the number of beneficiaries qualifying for cost-sharing subsidies.
These risks are necessarily illustrative, not exhaustive, of the
potential risks presented by pharmaceutical manufacturer PAPs that
subsidize Part D cost-sharing amounts.
Cost-sharing subsidies offered by a pharmaceutical manufacturer PAP
to the dispensing supplier differ in two important respects from a
provider's or supplier's unadvertised, non-routine waiver of cost-
sharing amounts based on a patient's financial need, which has long
been permitted. First, the subsidies result in the dispensing supplier
receiving full payment for the product and avoiding the risk of non-
collection, thus providing the supplier with an economic incentive to
favor the subsidized product and a disincentive to recommend a lower-
cost alternative, such as a generic. In addition, the availability of
PAP assistance is typically advertised and may influence a
beneficiary's choice of product (through the prescribing physician
acting on behalf of the beneficiary). Moreover, once a beneficiary is
enrolled in a pharmaceutical manufacturer PAP, the beneficiary is
effectively locked into using the pharmaceutical manufacturer's
product, since the beneficiary risks losing financial assistance if he
or she switches products, even if an equally effective, but less
expensive, product would be in his or her best medical interests.
A definitive conclusion regarding whether a particular manufacturer
PAP violates the anti-kickback statute would require a case-by-case
analysis of all of the relevant facts and circumstances, including the
intent of the parties. However, for the reasons noted above, we believe
that pharmaceutical manufacturer PAPs that subsidize Part D cost-
sharing amounts raise substantial concerns under the anti-kickback
statute.
B. Independent Charity PAPs
Long-standing OIG guidance makes clear that pharmaceutical
manufacturers can effectively contribute to the pharmaceutical safety
net by making cash donations to independent, bona fide charitable
assistance programs.\14\
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\14\ In-kind donations of drugs to independent charity PAPs pose
additional risks not yet directly addressed in prior OIG guidance,
and we have insufficient experience with them to offer detailed
guidance here. While in-kind donations have the potential benefit of
increasing the value of donations (because marginal costs of drugs
are generally low), they also have the effect of creating a direct
correlation between the donation and use of a particular donor's
product, thereby weakening important safeguards of an independent
charity PAP arrangement. Moreover, there would appear to be
difficult accounting and valuation issues raised by the use of in-
kind product to subsidize Part D cost-sharing obligations, both for
purposes of calculating TrOOP and for purposes of determining the
amount of in-kind drug that equals the Part D cost-sharing amount
owed.
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Under a properly structured program, donations from a
pharmaceutical manufacturer to an independent, bona fide charity that
provides cost-sharing subsidies for Part D drugs should raise few, if
any, anti-kickback statute concerns, so long as:
(i) Neither the pharmaceutical manufacturer nor any affiliate of
the manufacturer (including, without limitation, any employee, agent,
officer, shareholder, or contractor (including, without limitation, any
wholesaler, distributor, or pharmacy benefits manager)) exerts any
direct or indirect influence or control over the charity or the subsidy
program;
(ii) The charity awards assistance in a truly independent manner
that severs any link between the pharmaceutical manufacturer's funding
and the beneficiary (i.e., the assistance provided to the beneficiary
cannot be attributed to the donating pharmaceutical manufacturer);
(iii) The charity awards assistance without regard to the
pharmaceutical manufacturer's interests and without regard to the
beneficiary's choice of product, provider, practitioner, supplier, or
Part D drug plan;
(iv) The charity provides assistance based upon a reasonable,
verifiable, and uniform measure of financial need that is applied in a
consistent manner; and \15\
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\15\ We recognize that what constitutes an appropriate
determination of financial need may vary depending on individual
patient circumstances. We believe that independent charity PAPs
should have flexibility to consider relevant variables beyond
income. For example, PAPs may choose to consider the local cost of
living; a patient's assets and expenses; a patient's family size;
and the scope and extent of a patient's medical bills.
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(v) The pharmaceutical manufacturer does not solicit or receive
data from the charity that would facilitate the manufacturer in
correlating the amount or frequency of its donations with the number of
subsidized prescriptions for its products.\16\
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\16\ We have previously approved a bona fide independent charity
PAP arrangement that included only limited reporting of aggregate
data to donors in the form of monthly or less frequent reports
containing aggregate data about the number of all applicants for
assistance in a disease category and the number of patients
qualifying for assistance in that disease category. See OIG Advisory
Opinion No. 02-1. No individual patient information may be conveyed
to donors. Moreover, neither patients nor donors may be informed of
the donation made to the PAP by others, although, as required by
Internal Revenue Service regulations, the PAP's annual report and a
list of donors may be publicly available. See OIG Advisory Opinion
No. 04-15. Reporting of data that is not in the aggregate or that is
patient specific would be problematic, as would reporting of any
data, whether or not in the aggregate, related to the identity,
amount, or nature of subsidized drugs.
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[[Page 70627]]
Simply put, the independent charity PAP must not function as a
conduit for payments by the pharmaceutical manufacturer to patients and
must not impermissibly influence beneficiaries' drug choices.\17\
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\17\ For further guidance on establishing compliant independent
charity PAPs, see OIG Advisory Opinion Nos. 04-15, 02-1, 98-17, and
97-1 (favorable opinions issued to bona fide, independent charities
that accept industry funding).
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We recognize that some bona fide independent charities reasonably
focus their efforts on patients with particular diseases (such as
cancer or diabetes) and that some of these charities permit donors to
earmark their contributions generally for support of patients with a
specific disease. In general, the fact that a pharmaceutical
manufacturer's donations are earmarked for one or more broad disease
categories should not significantly raise the risk of abuse. However,
we are concerned that, in some cases, charities may artificially define
their disease categories so narrowly that the earmarking effectively
results in the subsidization of one (or a very few) of donor's
particular products. For example, we would be concerned if disease
categories were defined by reference to specific symptoms, severity of
symptoms, or the method of administration of drugs, rather than by
diagnoses or broadly recognized illnesses or diseases. This type of
arrangement would present an elevated risk of fraud and abuse because
of the increased likelihood that the PAP would function as an improper
conduit for manufacturers to provide funds to patients using their
specific drugs. To avoid this risk, pharmaceutical manufacturers should
not influence, directly or indirectly, the identification of disease or
illness categories,\18\ and pharmaceutical manufacturers should limit
their earmarked donations to PAPs that define categories in accordance
with widely recognized clinical standards and in a manner that covers a
broad spectrum of available products.\19\
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\18\ Nothing in this Bulletin should be construed as preventing
a charity from obtaining educational materials from donors that the
donors generally make available to practitioners or the general
public (e.g., clinical information about drug products).
\19\ We recognize that, in rare circumstances, there may only be
one drug covered by Part D for the diseases in a particular category
or only one pharmaceutical manufacturer (including its affiliates)
that makes all of the Part D covered drugs for the diseases in a
particular category. In these unusual circumstances, the fact that a
disease category only includes one drug or manufacturer would not,
standing alone, be determinative of an anti-kickback statute
violation. Such a determination could only be made on a case-by-case
basis after examining all of the applicable facts and circumstances,
including the intent of the parties. We note that it would be
important for the PAP program to cover additional products or
manufacturers as they become available.
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C. PAPs Operating Outside Part D
CMS has issued guidance stating that PAPs may elect to provide free
drugs to financially needy Medicare Part D enrollees outside the Part D
benefit.\20\ In these circumstances, the beneficiary obtains drugs
without using his or her Part D insurance benefit. Beginning when a
beneficiary's assistance under a PAP became effective, no claims for
payment for any covered outpatient prescription drug provided outside
of the Part D benefit may be filed with a Part D plan or the
beneficiary, and the assistance must not count toward the beneficiary's
TrOOP or total Part D spending for any purpose. For the reasons noted
in connection with pharmaceutical manufacturer PAPs discussed above,
PAPs that provide assistance outside the Part D benefit only during the
coverage gap (i.e., ``wrapping around'' the Part D benefit) pose a
heightened risk of abuse. However, while it is difficult to assess the
application of the fraud and abuse laws to PAPs that operate outside
Part D absent a specific set of facts, it would appear that PAPs that
furnish free outpatient prescription drugs entirely outside the Part D
benefit pose a reduced risk under the anti-kickback statute, provided
that:
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\20\ See CMS Frequently Asked Question ID 6153, http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_adp.php?p_faqid=6153 (regarding PAPs providing assistance with Part
D drug costs to Part D enrollees outside of the Part D benefit and
without counting towards TrOOP).
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(i) The PAP includes safeguards that ensure that Part D plans are
notified that the drug is being provided outside the Part D benefit so
that no payment is made for the subsidized drug by any Part D plan and
no part of the costs of the subsidized drug is counted toward any
beneficiary's TrOOP;
(ii) The PAP provides assistance for the whole Part D coverage year
(or the portion of the coverage year remaining after the beneficiary
first begins receiving the PAP assistance);\21\
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\21\ We note that our position that PAPs operating outside the
Part D benefit should provide assistance for the remainder of the
coverage year is consistent with our observation in several advisory
opinions that manufacturers ``may provide free drugs to financially
needy beneficiaries, so long as no Federal health care program is
billed for all or part of the drugs.'' OIG Advisory Opinion Nos. 02-
13 and 03-3.
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(iii) The PAP assistance remains available even if the
beneficiary's use of the subsidized drug is periodic during the
coverage year;
(iv) The PAP maintains accurate and contemporaneous records of the
subsidized drugs to permit the Government to verify the provision of
drugs outside the Part D benefit;
(v) Assistance is awarded based on reasonable, uniform, and
consistent measures of financial need and without regard to the
providers, practitioners, or suppliers used by the patient or the Part
D plan in which the patient is enrolled; and
(vi) The arrangement complies with any then-existing guidance from
CMS.
In addition, to promote quality of care, we believe it would be
important for PAPs that provide free drugs outside the Part D benefit
to coordinate effectively with Part D plans so that the plans can
undertake appropriate drug utilization review and medication therapy
management program activities.
D. ``Coalition Model'' PAPs
We are aware of nascent efforts by some in the industry to develop
arrangements through which multiple pharmaceutical manufacturers would
join together to offer financially needy Part D enrollees a card or
similar vehicle that would entitle the enrollees to subsidies of their
cost-sharing obligations for the manufacturers' products, typically in
the form of discounts off the negotiated price otherwise available to
the enrollee under his or her Part D plan. It is premature to offer
definitive guidance on these evolving programs. Although these programs
would operate so that the manufacturers effectively underwrite only the
discounts on their own products, we observe that the risk of an illegal
inducement potentially may be reduced if: (i) The program contains
features that adequately safeguard against incentives for card holders
to favor one drug product (or any one supplier, provider, practitioner,
or Part D plan) over another; (ii) the program includes a large number
of manufacturers, including competing manufacturers and manufacturers
of both branded and generic products, sufficient to sever any nexus
between the subsidy and a beneficiary's choice of drug; and (iii) each
participating pharmaceutical manufacturer offers subsidies for all of
its products that are covered by any Part D plan formulary. Other
safeguards may also be needed to reduce the risk of an improper
inducement. Moreover, a program under which Part D enrollees pay a
portion of their drug costs out-of-pocket would tend to reduce the risk
of abuse by preserving the beneficiary's incentive to locate and
purchase equally effective, lower cost drugs.
[[Page 70628]]
IV. Bulk Replacement Models
Bulk replacement'' or similar programs, pursuant to which
pharmaceutical manufacturers (or their affiliated PAPs) provide in-kind
donations in the form of free drugs to pharmacies, health centers,
clinics, and other entities that dispense drugs to qualifying uninsured
patients, are different from traditional PAPs that provide assistance
directly to patients. These programs potentially implicate the Federal
anti-kickback statute if the free drugs are given to a recipient that
is in a position to generate Federal health care program business for
the donor manufacturer. Whether a particular bulk replacement program
complies with the fraud and abuse laws would require a case-by-case
analysis. In undertaking any analysis, we would consider, among other
factors, how the program is structured and whether there are safeguards
in place: (i) To protect Federal health care program beneficiaries from
being steered to particular drugs based on the financial interests of
their health care providers or suppliers; (ii) to protect the Federal
health care programs from increased program costs; and (iii) to ensure
that bulk replacement drugs are not improperly charged to Federal
health care programs. Additionally, bulk replacement as a means of
subsidizing only the Medicare Part D cost-sharing amount potentially
raises substantial risks related to accounting for the amount of
replacement drug that would be equivalent to the cost-sharing amount
owed by the beneficiary; properly attributing that amount to specific
beneficiaries; and properly calculating TrOOP.
V. Transitioning From Existing Pharmaceutical Manufacturer PAPs
OIG is mindful of the importance of a smooth, effective transition
for beneficiaries who are currently participating in pharmaceutical
manufacturer PAPs and elect to enroll in Medicare Part D. While most
such enrollees are likely to qualify for the low-income subsidies
available under Part D, we are concerned that there may not be
sufficient independent charity PAPs available before the January 1,
2006 start date of the Part D program to accommodate beneficiaries of
limited means who may need an alternative PAP arrangement. We recognize
the importance of not unnecessarily burdening or alarming
beneficiaries. We believe that manufacturers will play an important
role in ensuring an effective transition.
With respect to pharmaceutical manufacturer PAPs that are in
existence prior to the date of publication of this Special Advisory
Bulletin, during the initial calendar year of the Part D benefit, OIG
will take into consideration in exercising its enforcement discretion
with respect to administrative sanctions arising under the anti-
kickback statute whether the PAP is taking prompt, reasonable,
verifiable, and meaningful steps to transition patients who enroll in
Part D to alternative assistance models, such as independent charities.
In addition to taking steps to transition beneficiaries to other
programs, pharmaceutical manufacturer PAPs can reduce their fraud and
abuse exposure by taking one or more of the following steps: (i)
Adjusting financial need criteria to reflect the lower drug costs
incurred by Part D enrollees (i.e., liability for premiums and cost-
sharing amounts only, instead of the total cost of the drugs); (ii)
where possible, subsidizing other drugs in the same class as the
manufacturer's products covered by the PAP if a beneficiary's physician
prescribes an alternate product; and (iii) checking CMS eligibility
files, to the extent available, on a reasonably regular basis to
determine whether PAP patients have enrolled in Part D and should be
transitioned to other assistance programs. Occasional, inadvertent
cost-sharing subsidies provided to a Part D enrollee should not be
problematic (e.g., where, despite due diligence, a pharmaceutical
manufacturer PAP does not know and should not have known that a
beneficiary has enrolled in Medicare Part D). Notwithstanding a
pharmaceutical manufacturer's compliance with the foregoing, the
Government will take enforcement action in cases where there is
evidence of unlawful intent.
The potential variability of PAPs, the fact that the Part D program
is not yet operational, and the fact that it is not possible to predict
all future or potential fraud and abuse schemes with certainty, make it
difficult to provide comprehensive general guidance on the application
of the anti-kickback statute to PAPs for Part D enrollees at this time.
We intend to monitor the situation closely and may issue further
guidance, if needed. Nothing in this Bulletin should be construed as
precluding any form of lawful assistance not described in this
Bulletin.
VI. OIG Advisory Opinion Process
OIG has an advisory opinion process that is available to
individuals and entities, including pharmaceutical manufacturers, that
want assurance that they will not run afoul of the fraud and abuse
laws.\22\ OIG advisory opinions are written opinions that are legally
binding on OIG, the Department, and the party that requests the
opinion. To obtain an opinion, the requesting party must submit a
detailed, written description of its existing or proposed business
arrangement. The length of time that it takes for OIG to issue an
opinion varies based upon a number of factors, including the complexity
of the arrangement, the completeness of the submission, and how
promptly the requestor responds to requests for additional information.
Further information about the process, including frequently asked
questions, can be found on the OIG Web page at http://oig.hhs.gov/fraud/advisoryopinions.html.
\22\ Section 1128D(b) of the Act; 42 CFR part 1008.
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The Office of Inspector General (OIG) was established at the
Department of Health and Human Services by Congress in 1976 to
identify and eliminate fraud, abuse, and waste in the Department's
programs and to promote efficiency and economy in departmental
operations. OIG carries out this mission through a nationwide
program of audits, investigations, and inspections. The Health Care
Fraud and Abuse Control Program, established by the Health Insurance
Portability and Accountability Act of 1996 (HIPAA), authorized OIG
to provide guidance to the health care industry to prevent fraud and
abuse and to promote the highest level of ethical and lawful
conduct. To further these goals, OIG issues Special Advisory
Bulletins about industry practices or arrangements that potentially
implicate the fraud and abuse authorities subject to enforcement by
OIG.
Daniel R. Levinson,
Inspector General.
[FR Doc. 05-23038 Filed 11-21-05; 8:45 am]
BILLING CODE 4150-04-P