[Federal Register Volume 79, Number 104 (Friday, May 30, 2014)]
[Notices]
[Pages 31120-31123]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-11769]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General


Supplemental Special Advisory Bulletin: Independent Charity 
Patient Assistance Programs

AGENCY: Office of Inspector General (OIG), HHS.

ACTION: Notice.

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SUMMARY: This Supplemental Bulletin updates the OIG Special Advisory 
Bulletin on Patient Assistance Programs for Medicare Part D Enrollees 
that published in the Federal Register on November 22, 2005 (70 FR 
70623).

SUPPLEMENTARY INFORMATION:

I. Introduction

    Patients who cannot afford their cost-sharing obligations for 
prescription drugs may be able to obtain financial assistance through a 
patient assistance program (PAP). PAPs have long provided important 
safety net assistance to such patients, many of whom have chronic 
illnesses and high drug costs. Many PAPs also present a risk of fraud, 
waste, and abuse with respect to Medicare and other Federal health care 
programs. We issued a Special Advisory Bulletin regarding PAPs in 2005 
\1\ (the 2005 SAB) in anticipation of questions likely to arise in 
connection with the Medicare Part D benefit. In the 2005 SAB, we 
addressed different types of PAPs and stated that we believed lawful 
avenues exist for pharmaceutical manufacturers and others to help 
ensure that all Part D beneficiaries can afford medically necessary 
drugs.\2\ We also noted in the 2005 SAB that we could only speculate on 
fraud and abuse risk areas, because the Part D benefit had not yet 
begun. This Supplemental Special Advisory Bulletin (Supplemental 
Bulletin) is based on experience we have gained in the intervening 
years; it is not intended to replace the 2005 SAB, nor does it replace 
other relevant guidance, such as the 2002 OIG Special Advisory Bulletin 
on Offering Gifts and Other Inducements to Beneficiaries.\3\
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    \1\ OIG Special Advisory Bulletin on Patient Assistance Programs 
for Medicare Part D Enrollees, 70 FR 70623 (Nov. 22, 2005), 
available at: http://oig.hhs.gov/fraud/docs/alertsandbulletins/2005/2005PAPSpecialAdvisoryBulletin.pdf.
    \2\ The 2005 SAB focused on PAPs under the then-upcoming Part D 
program, but the guidance also referenced co-payment assistance 
programs for drugs covered under Medicare Part B. Although these 
Medicare programs differ, and the types of PAPs may differ, the 
principles set forth in the 2005 SAB and herein apply regardless of 
which Federal health care program (as defined in section 1128B(f) of 
the Social Security Act (the Act)) covers the drugs.
    \3\ The 2002 OIG Special Advisory Bulletin on Offering Gifts and 
Other Inducements to Beneficiaries is available at: http://oig.hhs.gov/fraud/docs/alertsandbulletins/SABGiftsandInducements.pdf.
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    We continue to believe that properly structured PAPs can help 
Federal health care program beneficiaries. This Supplemental Bulletin 
provides additional guidance regarding PAPs operated by independent 
charities (Independent Charity PAPs) that provide cost-sharing 
assistance for

[[Page 31121]]

prescription drugs. To address some of the specific risks that have 
come to our attention in recent years, this guidance discusses 
problematic features of PAPs with respect to the anti-kickback statute, 
section 1128B(b) of the Act,\4\ and the provision of the Civil Monetary 
Penalties Law prohibiting inducements to Medicare and Medicaid 
beneficiaries (Beneficiary Inducements CMP), section 1128A(a)(5) of the 
Act.\5\ 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.
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    \4\ 42 U.S.C. 1320a-7b(b).
    \5\ 42 U.S.C. 1320a-7a(a)(5).
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II. The Anti-Kickback Statute and the Beneficiary Inducements CMP

    The anti-kickback statute makes it a criminal offense to knowingly 
and willfully 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 give or 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 5 
years, or both. OIG may also initiate administrative proceedings to 
exclude a person from Federal health care programs or to impose civil 
monetary penalties for kickback violations under sections 1128(b)(7) 
and 1128A(a)(7) of the Act.\6\
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    \6\ 42 U.S.C. 1320a-7(b)(7) and 42 U.S.C. 1320a-7a(a)(7).
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    Two remunerative aspects of PAP arrangements require scrutiny under 
the anti-kickback statute: donor contributions to PAPs (which can also 
be analyzed as indirect remuneration to patients) and PAPs' grants to 
patients. If a donation is made to a PAP to induce the PAP to recommend 
or arrange for the purchase of the donor's federally reimbursable 
items, the statute could be violated. Similarly, if a PAP's grant of 
financial assistance to a patient is made to influence the patient to 
purchase (or to induce the patient's physician to prescribe) certain 
items, the statute also could be violated. A determination regarding 
whether a particular arrangement violates the anti-kickback statute 
requires an individualized evaluation of all of the relevant facts and 
circumstances, including the parties' intent. For PAPs, the nature, 
structure, sponsorship, and funding of the particular PAP are factors 
relevant to the analysis.
    The Beneficiary Inducements CMP provides for the imposition of 
civil monetary penalties against any person that offers or transfers 
remuneration to a Medicare or State health care program (as defined 
under section 1128(h) of the Act) beneficiary that the benefactor knows 
or should know is likely to influence the beneficiary to order or 
receive from a particular provider, practitioner, or supplier any item 
or service for which payment may be made, in whole or in part, by 
Medicare or a State health care program. OIG may initiate 
administrative proceedings to seek such CMPs and exclude such person 
from the Federal health care programs. A subsidy for cost-sharing 
obligations provided by a pharmaceutical manufacturer through a PAP may 
implicate the Beneficiary Inducements CMP, if the subsidy is likely to 
influence a Medicare or State health care program beneficiary's 
selection of a particular provider, practitioner, or supplier, such as 
by making eligibility dependent on the patient's use of certain 
prescribing physicians or certain pharmacies to dispense the drugs.

III. Independent Charity PAPs

    Longstanding OIG guidance, including the 2005 SAB, makes clear that 
pharmaceutical manufacturers can effectively contribute to the safety 
net by making cash donations to independent, bona fide charitable 
assistance programs. The 2005 SAB sets forth a number of factors that 
we continue to believe are fundamental to a properly structured 
Independent Charity PAP. See 70 FR 70626. Many of these factors relate 
to the independence of the charity, as discussed further below. In this 
Supplemental Bulletin, we expand on our previous guidance in that 
regard, focusing on three areas: Disease funds, eligible recipients, 
and the conduct of donors.

A. Disease Funds

    As we explained in the 2005 SAB, we recognize that bona fide 
independent charities may reasonably focus their efforts on patients 
with particular diseases (such as cancer or diabetes) and that, in 
general, the fact that a pharmaceutical manufacturer's donations to an 
independent charity are earmarked for one or more broad disease funds 
should not significantly raise the risk of abuse. At the time, however, 
we also expressed our concern that, in some cases, charities might 
define their disease funds so narrowly that the earmarking effectively 
results in a donor's subsidization of its own products. Over the past 
several years, we have become aware that some Independent Charity PAPs 
are, in fact, establishing narrowly defined disease funds and covering 
a limited number of drugs within those funds. To address this 
development, we discuss and expand on some of the safeguards that we 
originally set forth in the 2005 SAB to reduce the risk of abuse. We 
reiterate here that an Independent Charity PAP must not function as a 
conduit for payments or other benefits from the pharmaceutical 
manufacturer to patients and must not impermissibly influence 
beneficiaries' drug choices.
    One of the points we made in the Independent Charity PAPs section 
of the 2005 SAB was that pharmaceutical manufacturers and their 
affiliates should not exert any direct or indirect influence or control 
over the charity or its assistance program. We also stated that donors 
should not influence the identification of disease funds \7\ and that 
we would be concerned if disease funds were defined by reference to 
specific symptoms, severity of symptoms, or the method of 
administration of drugs. These were merely examples--not an exclusive 
list--of improperly narrow approaches to defining disease funds. For 
example, we also are concerned about disease funds defined by reference 
to the stages of a particular disease, the type of drug treatment, and 
any other ways of narrowing the definition of widely recognized disease 
states. A charity with narrowly defined disease funds may be subject to 
scrutiny if the disease funds result in funding exclusively or 
primarily the products of donors or if other facts and circumstances 
suggest that the disease fund is operated to induce the purchase of 
donors' products.\8\
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    \7\ The 2005 SAB used the term ``disease categories.'' Our 
experience since 2005 suggests that the term ``disease fund'' is 
more accurate in this context.
    \8\ This is true even if the charity has obtained a favorable 
advisory opinion, because favorable opinions related to PAPs 
typically are based upon the charity's certifications that: (1) No 
donor or affiliate of any donor has exerted or will exert any direct 
or indirect influence or control over the charity or any of the 
charity's programs; (2) the charity will define its disease funds in 
accordance with widely recognized clinical standards and in a manner 
that covers a broad spectrum of available products; and (3) the 
charity's disease funds will not be defined by reference to specific 
symptoms, severity of symptoms, or the method of administration of 
drugs. If the arrangement does not in practice comport with the 
facts presented in the advisory opinion, then the arrangement is not 
protected by the opinion. All of our advisory opinions are available 
on the OIG Web site at: http://oig.hhs.gov/compliance/advisory-opinions/index.asp.

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[[Page 31122]]

    We also are increasingly concerned about Independent Charity PAPs 
that choose to establish or operate disease funds that limit assistance 
to a subset of available products. Through our advisory opinion 
process, we have seen Independent Charity PAPs seeking to cover few 
drugs, such as by covering copayments only for expensive or specialty 
drugs. We are concerned that funds limited in this manner may not be 
beneficial to patients or Federal health care programs. Beneficiaries 
should not be tied to a particular product, or to a subset of available 
products, to receive or continue their assistance. Although we 
recognize that a patient prescribed an expensive drug may have a 
greater need for financial assistance than a patient prescribed a less 
expensive alternative, we are concerned that limiting PAP cost-sharing 
support to expensive products may steer patients in a manner that is 
costly to Federal health care programs and may even facilitate 
increases in drug prices. Moreover, whether a drug is ``expensive'' is 
a relative question that depends, in part, on the financial resources 
of the consumer; even a generic drug can be expensive for some 
patients. Finally, limiting assistance to certain drugs may steer 
patients away from potentially more beneficial products because 
assistance is available for one treatment and not another. 
Consequently, a fund will be subject to more scrutiny if it is limited 
to a subset of available products, rather than all products approved by 
the Food and Drug Administration (FDA) for treatment of the disease 
state(s) covered by the fund or all products covered by the relevant 
Federal health care program when prescribed for the treatment of the 
disease states (including generic or bioequivalent drugs).\9\
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    \9\ An Independent Charity PAP is not required to provide 
assistance for drugs prescribed off-label. However, we would expect 
a truly independent charity to treat all its funds equally. Thus, if 
the Independent Charity PAP offered assistance for all drugs covered 
by Medicare in Fund A, but limited assistance offered for Fund B to 
FDA-approved uses, the funds could be subject to scrutiny to 
determine whether either coverage determination was made to benefit 
a donor.
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    The 2005 SAB acknowledged that, in rare circumstances, there may be 
only one drug covered by Part D for the disease(s) in a particular 
disease fund or only one pharmaceutical manufacturer (including its 
affiliates) that makes all of the Part D covered drugs for the 
disease(s) in a particular disease fund. The 2005 SAB noted that, in 
these unusual circumstances, the fact that a disease fund includes only 
one drug or drugs made by one manufacturer would not, standing alone, 
be determinative of an anti-kickback statute violation. A determination 
of an anti-kickback statute violation can be made only on a case-by-
case basis after examining the applicable facts and circumstances, 
including the intent of the parties. Notwithstanding the need for an 
individualized analysis, a disease fund that covers only a single 
product, or the products made or marketed by only a single manufacturer 
that is a major donor to the fund, will be subject to scrutiny. When 
determining whether an anti-kickback violation occurred, we would 
consider, among other factors, whether the disease fund in question 
appears to be narrowly defined in a manner that favors any of the 
fund's donors.
    While we understand that many charities have limited resources and 
seek to use them to assist patients with the greatest financial need, 
assessing a patient's financial need is a separate concern from 
determining which drugs to include in a disease fund. Narrowly defining 
disease funds or limiting disease funds to provide assistance only for 
expensive drugs can result in steering patients to the drugs for which 
assistance is available. This type of steering increases the likelihood 
that the donors could use the PAPs as improper conduits to provide a 
subsidy to patients who use the donors' own products. This potentially 
increases costs to the Federal health care programs in cases where a 
lower cost, equally effective drug is available. Moreover, the ability 
to subsidize copayments for their own products may encourage 
manufacturers to increase prices, potentially at additional cost to 
Federal health care programs and beneficiaries who are unable to obtain 
copayment support.
    In short, disease funds should be defined in accordance with widely 
recognized clinical standards and in a manner that covers a broad 
spectrum of products; disease funds should not be defined for the 
purpose of limiting the drugs for which the Independent Charity PAP 
provides assistance.

B. Eligible Recipients

    It has come to our attention that some Independent Charity PAPs 
have started operating, or seek to operate, funds that provide 
financial assistance only to Federal health care program beneficiaries. 
We do not believe that the mere fact that a fund serves only Federal 
health care program beneficiaries increases risk to the Federal health 
care programs. In fact, we issued a favorable advisory opinion to an 
Independent Charity PAP that intended to develop a fund to serve only 
Medicare beneficiaries.\10\ The safeguards regarding defining disease 
funds and recipient eligibility described in the 2005 SAB and in this 
Supplemental Bulletin, when properly implemented, should sufficiently 
protect Federal health care programs.
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    \10\ See Modification of OIG Advisory Opinion 07-06, available 
at: http://oig.hhs.gov/fraud/docs/advisoryopinions/2011/AdvOpn07-06_mod.pdf.
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    Regardless of whether a fund is available to all patients or is 
limited to Federal health care program beneficiaries, the Independent 
Charity PAP must determine eligibility according to a reasonable, 
verifiable, and uniform measure of financial need that is applied in a 
consistent manner. Some Independent Charity PAPs base their eligibility 
criteria on the poverty guidelines, which take into account family 
size, for determining financial need. As we explained in the 2005 SAB, 
Independent Charity PAPs also have the flexibility to consider relevant 
variables beyond income. Other variables Independent Charity PAPs may 
choose to consider, for example, are the local cost of living and the 
scope and extent of a patient's total medical bills. We are not 
recommending or requiring any particular method for assessing financial 
need. We do, however, want to emphasize that the cost of the particular 
drug for which the patient is applying for assistance is not an 
appropriate stand-alone factor in determining individual financial 
need; it is likely one of many obligations that affects the patient's 
financial circumstances. We also note that generous financial need 
criteria, particularly when a fund is limited to a subset of available 
drugs or the drugs of a major donor, could be evidence of intent to 
fund a substantial part of the copayments for a particular drug (or 
drugs) for the purpose of inducing the use of that drug (or those 
drugs), rather than for the purpose of supporting financially needy 
patients diagnosed with a particular disease.

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C. Conduct of Donors

    Thus far, this Supplemental Bulletin has focused on the conduct of 
Independent Charity PAPs. Similarly, when we have issued favorable 
advisory opinions regarding Independent Charity PAPs, the focus has 
been on the charities that requested the opinions---not the donors.\11\ 
In requesting an opinion, a charity certifies to actions it will take 
to ensure the independence of the PAP from the donors. The charity is 
not in a position to certify as to the actions of the donors with 
parties outside the arrangement. For example, an advisory opinion 
issued to an independent charity regarding the PAP it operates 
typically states that the charity has certified that it will provide 
donors only with reports including data such as the aggregate number of 
applicants for assistance, the aggregate number of patients qualifying 
for assistance, and the aggregate amount disbursed from the fund during 
that reporting period. Thus, the charity would not give a donor any 
information that would enable a donor to correlate the amount or 
frequency of its donations with the number of aid recipients who use 
its products or services or the volume of those products supported by 
the PAP. The procedures described in these certifications are a 
critical safeguard and a material fact upon which we have relied in 
issuing favorable advisory opinions regarding Independent Charity PAPs. 
These opinions do not address actions by donors to correlate their 
funding of PAPs with support for their own products. Such actions may 
be indicative of a donor's intent to channel its financial support to 
copayments of its own products, which would implicate the anti-kickback 
statute.
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    \11\ An advisory opinion has no application to, and cannot be 
relied upon by, any individual or entity other than the requestor of 
the opinion. Thus, a donor is not protected by an advisory opinion 
issued only to the entity to which it donates. See section 
1128D(b)(4)(A) of the Act (42 U.S.C. 1320a-7d(b)(4)(A)); 42 CFR 
1008.53.
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IV. Conclusion

    OIG continues to believe that properly structured, Independent 
Charity PAPs provide a valuable resource to financially needy patients. 
We also believe that Independent Charity PAPs raise serious risks of 
fraud, waste, and abuse if they are not sufficiently independent from 
donors. This Supplemental Bulletin reiterates and amplifies our 
guidance, based on practices and trends we have seen in the industry. 
We recognize that some charitable organizations with PAPs have received 
favorable advisory opinions that may include features that are 
discouraged in this Supplemental Bulletin. We are writing to all 
Independent Charity PAPs that have received favorable opinions to 
explain how we intend to work with them to ensure that approved 
arrangements are consistent with our guidance. We anticipate that some 
opinions will need to be modified. We will post any such modifications 
on our Web site with the original opinions, consistent with our current 
practice. Favorable advisory opinions will continue to protect the 
arrangements described in the opinions until we issue any final notice 
of modification or termination to the requestors of those opinions. It 
is our intent that there be no disruption of patient care during this 
process. Should donors or PAPs continue to have questions about the 
structure of a particular organization or transaction, the OIG Advisory 
Opinion process remains available. Information about the process may be 
found at: http://oig.hhs.gov/faqs/advisory-opinions-faq.asp.

    Dated: May 16, 2014.
Daniel R. Levinson,
Inspector General.
[FR Doc. 2014-11769 Filed 5-29-14; 8:45 am]
BILLING CODE 4152-01-P