OIG Advisory Opinion Approves Arrangement Involving Prescription Drug Donations to Free Clinics and Federally Qualified Health Centers
On February 1, 2008, the Department of Health and Human Services Office of Inspector General (OIG) issued Advisory Opinion No. 08-01, which approved an arrangement involving the participation of federally qualified health centers (FQHCs) and free clinics in “bulk replacement” patient assistance programs (PAPs). Since April 2006, the OIG has issued a series of Advisory Opinions approving PAPs but this is the first time the OIG has ruled on the application of the anti-kickback statute to bulk replacement PAPs. The request was submitted by a non-profit corporation, which arranged for FQHCs and free clinics to dispense drugs that were donated by PAP programs.
The OIG concluded that the proposed arrangement would not violate the anti-kickback statute or the prohibition on inducements to Medicare beneficiaries contained in the civil monetary penalties statute.
A bulk replacement PAP is an arrangement that allows pharmaceutical companies to donate drugs from the company’s bulk replacement to FQHCs and free clinics. Bulk replacement PAPs provide a bulk volume of free drugs (typically on a monthly or quarterly basis) to hospitals, pharmacies, health centers, clinics, and other institutions to replace drugs dispensed to patients who meet established PAP criteria. Participating FQHCs and free clinics must agree to distribute the free drugs only to patients whose incomes are less than 200 percent of the federal poverty level and who do not have any form of outpatient prescription drug coverage. Accordingly, donated PAP drugs may not be dispensed to Medicare Part D enrollees or Medicaid patients. As the OIG recognized, PAPs provide important safety net assistance to these uninsured patients with limited means.
In rendering its opinion, the OIG raised concerns that the proposed arrangement may be: (i) a possible inducement for the FQHCs or free clinics to purchase other products from the pharmaceutical sponsors; or (ii) create an improper influence on the prescribing patterns of physicians working at the clinics. Although the OIG acknowledged these potential compliance issues, it concluded that there were sufficient safeguards in the arrangement between the nonprofit group and the drug companies to mitigate risks to the federal health programs. In analyzing the compliance risks associated with bulk replacement PAPs, the OIG reconsidered many of the safeguards applied in Advisory Opinion 06-03, which opined on PAPs operated for Part D enrollees.
Of the safeguards discussed in this Advisory Opinion, the following summarizes those cited by the OIG as mitigating potential compliance risks:
- The pharmaceutical bulk replacement system is structured to protect against FQHCs and free clinics receiving any remuneration, including excess inventory that could be diverted to other uses
- The arrangement is appropriately documented, monitored, and audited to ensure transparency
- The arrangement is structured to prevent PAP sponsors from “cherry-picking” certain FQHCs or free clinics as recipients of the donated drugs
- The program ensures the independent judgment of the prescribing physicians because they do not receive compensation that takes into account their prescribing patterns for the provided drugs
- The arrangement protects the FQHCs and free clinics from the inappropriate influence of the PAP sponsors because of their formulary decision-making processes