New Favorable OIG Advisory Opinion Allows Patient Assistant Programs Funded by Drug Manufacturers

The Office of Inspector General (OIG) recently issued a new favorable advisory opinion regarding patient assistance programs (PAP) for 12 specific disease funds. PAPs help patients pay high cost-sharing obligations for medications. The OIG has previously recognized the importance of PAPs to mitigate the increasing cost of prescription drugs as long as these PAPs do not implicate the federal anti-kickback statute, the civil monetary penalties law, or other laws. Previously, the OIG has stated that PAPs must be independent of pharmaceutical manufacturer influence and must not act as merely cover for a pharmaceutical manufacturer to make payments to patients for choosing their products.

Factual Background of this PAP

A non-profit (Non-Profit) organization operates each of the 12 disease funds, but each fund is financed by a single pharmaceutical manufacturer (Donor). Donors that fund the 12 PAPs also manufacture or market drugs that treat the same disease as those PAPs. The Non-Profit publicizes these PAPs throughout the community and a patient may apply to the PAPs for financial assistance. Additionally, a patient’s eligibility for the PAP is not contingent on the selection of a particular treating physician or pharmacy and the Non-Profit does not solicit information regarding the type of drug or treatment the patient may need besides the general out of pocket cost to the patient. Finally, the PAPs are open to all patients including those that may be enrolled in federal health care programs.

Key Laws

The anti-kickback statute prohibits anyone from knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for, the referral of an individual for any item or service. Additionally, the OIG may impose Civil Monetary Penalties (CMPs) against any person who offers or transfers remuneration to a Medicare or state health care program beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier.

Key Takeaway of this Opinion

The OIG notes that the arrangement implicates the federal anti-kickback statute but not CMPs. The arrangement implicates the anti-kickback statute because Donors, through the Non-Profit, provides remuneration to patients who may be federal health care program beneficiaries who have been diagnosed with diseases that can be treated by a drug that the Donor manufacturers. Conversely, the arrangement does not implicate the CMP because a patient’s eligibility for a PAP does not impact the patient’s selection of a physician or pharmacy. As a result, the remuneration from the PAP does not sway a beneficiary’s choice of drug or provider.

Despite the implication of the anti-kickback statute, the OIG announced it would exercise its enforcement discretion and not impose administrative sanctions for this arrangement. First, although the disease funds vary substantially and a Donor may support a fund that provides assistance for a large proportion of its own drug, the arrangement included many features the OIG has previously highlighted as reducing the risk of fraud and abuse. These include:

• Defining Disease Funds based on established disease states;
• Awarding assistance without regard to the treatment regimen prescribed for a particular patient;
• Limitations on the sharing of information with donors; and
• Application of a financial eligibility process.

Second, the funds only provide financial assistance with rare diseases. In these cases, PAPs can provide life-changing assistance for these patients. Additionally, a portion of the fund’s assistance is spent on non-drug cost sharing items and services.

Importantly, the OIG notes that this advisory opinion is only effective through December 31, 2026, and starting January 1, 2027, this opinion will no longer effective. It is highly unusual for the OIG to limit the effective period of an advisory opinion. In this case, OIG did this because Congress recently enacted legislation restructuring the cost sharing obligations of Medicare Part D enrollees and caping the enrollees’ out of pocket costs at US$2,000. The OIG noted that the reduction in Part D enrollee’s cost sharing obligations could change its assessment of the fraud and abuse risks in this arrangement. Because of the changing landscape, this opinion will no longer be effective two years after the legislation is enacted. This two-year grace period is to ensure that the Non-Profit has sufficient time to collect data supporting the need for these PAPs even after the legislation changes have been enacted.

Non-profit organizations, drug manufacturers, and other actors that may offer PAPs should take note of this opinions and the factors that the OIG emphasized in reducing risk of fraud and abuse. Although the effectiveness of this opinion is limited, it provides important insight in how the OIG evaluates and analyzes fraud and abuse risks in PAPs.

Foley is here to help you address the short- and long-term impacts in the wake of regulatory changes. We have the resources to help you navigate these and other important legal considerations related to business operations and industry-specific issues. Please reach out to the authors, your Foley relationship partner, our Health Care & Life Science Sector, or to our Health Care Practice Group with any questions.