On February 23, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services issued Advisory Opinion 23-02, approving a pharmaceutical company’s program to provide a free 14-day supply of an enzyme replacement therapy drug to patients with a rare genetic condition who experience insurance coverage delays for the drug (the Program). While limited in scope, this favorable opinion is noteworthy because it involves a free drug product primarily taken by federal program beneficiaries.
The requestor’s drug (the Drug) is the only enzyme replacement therapy approved in the United States to treat patients with an inherited genetic disorder that is fatal if left untreated. The Drug treats, but does not cure, the condition and is administered via injection. The only therapeutic alternative to the Drug is a bone marrow transplant.
The Program is available to insured patients, including federal healthcare program beneficiaries, who have been diagnosed with the condition and (1) have received a prescription for, but have not yet been treated with, the Drug; and (2) have experienced a minimum 48-hour coverage delay for insurance approval. This 48-hour period is required based on underlying legitimate factors such as payor polices and statutory guidance requiring coverage determinations within 48 hours. One additional 14-day supply would be provided if a coverage denial is being appealed or a coverage determination was not received during the initial 14-day period. As of July 2021, 49 patients in the United States were receiving the Drug, 38 of whom are federal healthcare program beneficiaries.
The requestor works exclusively with one specialty pharmacy to dispense prescriptions for the Drug. The specialty pharmacy may not bill any third-party payor for Drugs dispensed under the Program. If an insurer makes a favorable coverage determination within 48 hours, the patient would not be eligible to participate in the Program, and the Drug would be billed according to applicable payor policies. Participation in the Program is not tied to any purchasing obligations, including future purchases of the Drug. Additionally, the Program will involve less than one-hundredth of one percent of prescribed vials of the Drug. Although the requestor may distribute educational materials about the Program to healthcare providers or patients about the disease state, the requestor will not advertise the Program.
OIG concluded that the Program implicates the Anti-Kickback Statute (AKS) because patients receive remuneration in the form of a free 14-day supply of the Drug that could induce future purchases of the Drug, some of which may be federally reimbursable. OIG nevertheless concluded that the Program is sufficiently low risk under the AKS for the following reasons:
- It is unlikely the Program will lead to Drug overutilization. The Drug’s sole FDA-approved indication is for the treatment of a rare genetic condition, and the Program is limited to individuals diagnosed with the condition who have experienced a delay in insurance coverage. Patients who receive a favorable insurance coverage determination within 48 hours are not eligible for the Program. Further, patients must pay all cost-sharing amounts for all prescriptions of the Drug that are not dispensed as part of the Program.
- The Program is distinguishable from “seeding” programs. In problematic seeding programs, a pharmaceutical manufacturer may offer a drug for free or at a greatly reduced cost to induce a patient to begin the drug and obtain subsequent supplies. Here, the Program is offered only in the event of insurance coverage delay. The OIG reasoned that patients and prescribers likely assume at the time the Drug is prescribed that it will be covered by insurance; therefore, it is unlikely that the Program would influence patients or prescribers to choose the Drug over alternative therapies, particularly when the only alternative treatment is a bone marrow transplant.
- Prescribers receive no financial benefits under the Program. Under the Program, the prescriber receives no financial benefits, as the specialty pharmacy ships the self-administered Drug directly to patients, and prescribers do not bill for the Drug.
- The Program does not involve costs to Federal Health Care Programs (FCHPs). The specialty pharmacy may not bill any third-party payor for Drugs dispensed under the Program, and patients are advised that they may not submit claims to their insurance for coverage for the free Drug.
- The Program does not inappropriately induce the use of the specialty pharmacy. The Program does not obligate the patient to continue to purchase the Drug or any other item or service from the specialty pharmacy.
- The Program is not used as a marketing tool. Although the requestor may distribute educational materials to healthcare providers about the Program or patients about the specific disease state, the requestor will not advertise the Program, and prescribers are prohibited from marketing their participation in the Program. OIG noted its favorable conclusion might be different if the Program involved alternative facts, such as if the Program were used as a marketing tool.
Beneficiary Inducements CMPL
OIG noted that the requesting manufacturer is not a “provider, practitioner or supplier” for purposes of the Beneficiary Inducements Civil Monetary Penalty Law (CMPL) but that any remuneration the requestor offers could implicate the Beneficiary Inducements CMPL if the requestor knows or should know that the remuneration is likely to influence a beneficiary to select a particular provider, practitioner or supplier. However, in this case, because the specialty pharmacy is the only pharmacy that dispenses the Drug and all patients who require the Drug must obtain it from the specialty pharmacy, the Program is unlikely to influence a beneficiary to purchase the Drug from the specialty pharmacy. In addition, OIG noted that the initial free supply (and possible refill) after an insurance coverage delay would be unlikely to influence a patient to purchase other products from the specialty pharmacy.
While the facts involved in the Advisory Opinion are narrowly tailored to the Program, pharmaceutical manufacturers offering “quick start” free drug programs and the specialty pharmacies implementing those programs should consider the OIG’s reasoning when structuring their arrangements.
For example, the Program is limited to a 14-day free drug supply after a minimum 48-hour delay in insurance coverage, with one potential refill. While a 48-hour delay normally might be viewed as too short a period of time before providing the free drug, requestor based the 48-hour period on legitimate factors such as payor policies and statutory guidance requiring coverage determinations within 48 hours, and patients who receive insurance denials in that time frame would be ineligible for the free Drug. OIG reasoned that patients and prescribers reasonably would expect the Drug to be covered by insurance, which mitigated seeding concerns. Notably, the free drug program addressed in Advisory Opinion 15-11 required a five-day delay in insurance coverage before a free drug would be offered to beneficiaries. Manufacturers and pharmacies should carefully consider the time period associated with any insurance coverage delays and document the factors that support that time period to ensure that any free drug is provided only after most insurance denials are likely to occur. Manufacturers and pharmacies also should consider the severity of the disease and the health consequences of delayed treatment.
Manufacturers and pharmacies additionally should examine whether free drug programs result in any financial remuneration to prescribers and whether patients are required to use the specialty pharmacy for any other items or services. Finally, patient notifications and education should be reviewed to avoid the appearance of publicly marketing free drug programs.
If you have any questions about how this new Advisory Opinion may impact your business, please contact the authors.