November 2, 2022

OIG Advisory Opinion Highlights Further Concerns for Patient Assistance Programs

Holland & Knight Healthcare Blog
Shannon Britton Hartsfield
Healthcare Blog

Patient assistance programs (PAPs) that seek to subsidize patient co-payments for drugs covered by Medicare may involve compliance challenges. A recent U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) Advisory Opinion raised concerns about one potential structure that was designed to help cancer patients covered by Medicare Part D pay for expensive medications.

On Sept. 30, 2022, the OIG issued Advisory Opinion 22-19, which was the OIG's first one evaluating an arrangement involving a coalition of manufacturers subsidizing cost sharing for their own drugs in the context of an implemented Part D program. Advisory opinions are binding only on the requestors, but they provide insight into how the OIG might view similar arrangements. The OIG determined that, depending on the intent of the arrangement, the program could generate prohibited remuneration under the federal anti-kickback statute.

The proposed arrangement would essentially establish a new payment assistance model based in part on OIG's 2005 Special Advisory Bulleting (2005 Bulletin) to facilitate cost-sharing subsidies, whereby multiple pharmaceutical manufacturers would join together to form a "coalition" to subsidize Part D enrollees' cost sharing for those manufacturers' drugs. Specifically, the requestor's arrangement would allow participating pharmaceutical manufacturers to subsidize three categories of costs: 1) cost sharing incurred by eligible Part D enrollees when filling prescriptions for participating pharmaceutical manufacturers' Part D oncology drugs, 2) health insurance premiums for certain Medicare beneficiaries, 3) specified programs designed to promote oncology screening and increase health equity by promoting clinical trial participation and 4) requestor's operating costs.

The program would also involve certain safeguards. For example, an independent third party would administer the logistics of the proposed arrangement under a contract that would comply with the personal services and management contracts and outcomes-based payment arrangements safe harbors to the Medicare/Medicaid Anti-Kickback Statute (AKS).1 This administrator would make sure the individual beneficiaries met the eligibility criteria and would also ensure that a wide range of pharmacies would accept a subsidy card provided to the beneficiaries. The requestor would implement other safeguards, including a compliance program, regular compliance audits and refraining from marketing the program to prescribers, beneficiaries and others as an incentive to prescribe any drug. Particular drugs would not be promoted, and instead, a list of all covered products would be published in a "neutral fashion."

In the 2005 Bulletin, the OIG identified potentially abusive PAP structures under the AKS.2 The OIG's 2005 guidance included a short, cursory discussion of potential PAP structures that could reduce the risk of fraud and abuse, many of which were included in the requestor's operational model. Specifically, the 2005 Bulletin suggested that the risk of an illegal inducement in the "coalition" model "potentially may be reduced if 1) 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, 2) 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 3) each participating pharmaceutical manufacturer offers subsidies for all of its products that are covered by any Part D plan formulary."3 Additionally, a program which Part D enrollees pay a portion of their drug costs out-of-pocket may reduce the risk of abuse by maintaining an incentive for the beneficiary to find equally effective, lower-cost drugs.4 Having been "further informed by almost two decades of enforcement experience, various appraisals of the administration of the Medicare Part D program, and increasing drug prices," the OIG issued guidance on appropriate safeguards and "law avenues" it believed existed for pharmaceutical manufacturers and others to help ensure that all Part D beneficiaries can afford medically necessary drugs.

In evaluating the requestor's "coalition" model, the OIG appears to step back from its prior guidance and the 2005 statements, which it described as "preliminary commentary."5 The OIG recognized that such an arrangement essentially guarantees that each participating manufacturer would recoup its financial contributions for cost sharing because only those Part D enrollees who are taking that participating manufacturer's drugs would be eligible for help. The arrangement would allow the funding manufacturers to subsidize a patient's drug costs only for their own drugs and not for drugs of any other funding manufacturer. This creates a situation that, in the OIG's view, has the potential for abuse.6 In the 2005 Bulletin, the OIG warned that "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."7 The OIG also discussed similar concerns in a 2014 Bulletin by observing that "the ability to subsidize copayments for their own products may encourage manufacturers to increase prices, potentially at additional cost to federal healthcare programs and beneficiaries who are unable to obtain copayment support."8

Evaluating the arrangement under the AKS, the OIG found that the requestor and participating manufacturers would provide remuneration in the form of valuable cost-sharing subsidies (through a subsidy card) to eligible Part D enrollees who are specifically prescribed the participating manufacturers' drugs. By subsidizing a Part D enrollee's out-of-pocket costs for only the participating manufacturers' own drugs (and specifically for enrollees with a history medication non-adherence as a result of high cost-sharing obligations), the arrangement would allow these manufacturers to channel direct remuneration, via the requestor, to Part D enrollees that would remove a financial barrier so that eligible Part D enrollees will, or be induced to, purchase only the participating manufacturers' drugs. Further, the OIG stated that such cost-sharing subsidies would not meet the requirements of any statutory exception or regulatory safe harbor to the federal AKS.

Because the remuneration to a qualifying Part D enrollee would be contingent on the purchase of the contributing manufacturers' oncology products, such arrangement:

presents many of the hallmark risks of fraud and abuse that the Federal anti-kickback statute is designed to prevent, including the potential for inappropriately increased costs to Federal health care programs (e.g., through the ability of manufacturers to increase drug prices or set high launch prices as a result of the reduction of beneficiary sensitivity towards the price of the product); potential for beneficiary steering and anti-competitive effects; and possible interference with or skewing of clinical decision-making.9

Therefore, the OIG concluded that the "cost-sharing subsidies under the Proposed Arrangement would present more than a minimal risk of fraud and abuse under the Federal anti-kickback statute."10 The OIG also found that the proposed arrangement could essentially redesign the current Medicare Part D cost-sharing structure by circumventing a key pricing control and result in increased costs to federal healthcare programs. Additionally, the program could have anti-competitive effects by steering patients away from products made by manufacturers not participating in the program. Further, the proposed arrangement could affect patient care by discouraging doctors from prescribing drugs that were not part of the program.

The OIG also evaluated the requestor's arrangement under the "Beneficiary Inducements CMP," which is the civil monetary penalty provision prohibiting inducements to beneficiaries of a federal healthcare program that a person knows or should know is likely to influence the beneficiary's selection of a particular provider, practitioner or supplier for the order or receipt of any item or service for which payment may be made, in whole or in part, by Medicare or a state healthcare program (including Medicaid).11 The OIG concluded that because pharmaceutical manufacturers are not "providers, practitioners, or suppliers" unless they also own or operate, directly or indirectly, pharmacies, pharmacy benefits management companies or other entities that file claims for payment under the Medicare or Medicaid programs, the requestor's arrangement would not constitute grounds for the imposition of sanctions under the Beneficiary Inducements CMP.

The OIG stated that a party's intent is a necessary element of an alleged violation of the AKS, and the OIG could not reach a definitive conclusion regarding whether the arrangement would actually violate the AKS. Although the proposed program could enable patients to obtain drugs they otherwise might not be able to afford that could potentially save their lives, and access to those drugs "is of paramount concern to the OIG," these programs create significant potential risks and must be structured carefully.

Even with the OIG's "thumbs down" of the proposed program, the Inflation Reduction Act of 2022 (IRA) offers hope to some patients covered by Part D by allowing Medicare to negotiate prescription drug prices with manufacturers and capping out-of-pocket costs to $2,000 through 2025.12


1 42 C.F.R. §1001.952(d).

2 See OIG, Special Advisory Bulletin on Patient Assistance Programs for Medicare Part D Enrollees, 70 Fed. Reg. 70,623 (Nov. 22, 2005).

3 Id. at 70627.

4 Id.

5 OIG Adv. Op. 22-19 at 16.

6 Id.

7 OIG Adv. Op. 22-19 at 17 (citing 2005 Bulletin, 70 Fed. Reg. at 70,626).

8 OIG Adv. Op. 22-19 at 17 (citing OIG, Supplemental Special Advisory Bulletin: Independent Charity Patient Assistance Programs, 79 Fed. Reg. at 31,122 (May 30, 2014).

9 OIG Adv. Op. No. 22-19 at 17.

10 Id.

11 See Section 1128A(a)(5) of the Social Security Act.

12 See Fact sheet: The Inflation Reduction Act Lowers Health Care Costs for Millions of Americans, Centers for Medicare & Medicaid Services Newsroom, (Oct. 5, 2022).

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