On May 21, 2014, the Department of Health and Human Services Office of Inspector General (OIG) issued a Supplemental Special Advisory Bulletin for independent charities with patient-assistant programs (PAPs) for patients who cannot afford their cost-sharing obligations for prescription drugs.  The Bulletin addresses safeguards for PAPs to consider to avoid fraud risks.

The Bulletin supplements existing guidance in response to concerns about potential abuses relating to program donors.  According to the OIG, PAPs may harm patients and federal healthcare programs and “raise serious risks of fraud, waste, and abuse” unless properly structured and sufficiently independent from pharmaceutical manufacturer donors.  For example, the OIG notes that if assistance is limited to higher-cost drugs, patients may be steered to these drugs rather than to effective lower-cost alternatives.

The Bulletin reiterates and expands on concerns expressed in the OIG’s 2005 Special Advisory Bulletin about PAPs that assist patients unable to afford their cost-sharing obligations to purchase drugs.  The original bulletin anticipated likely questions related to the new Medicare Part D program, when the OIG could only speculate on potential fraud-and-abuse risk areas.

The newly-released Bulletin discusses two aspects of PAP arrangements that require scrutiny under the Anti-Kickback Statute: (1) donor contributions to PAPs, and (2) grants to patients by PAPs.  The OIG warned of a potential violation of the Anti-Kickback Statute “[i]f 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” or if a PAP’s grant to a patient “is made to influence the patient to purchase (or to induce the patient’s physician to prescribe) certain items[.]”  According to the OIG, it would analyze all relevant facts – including the parties’ intent, the nature, structure, sponsorship, and funding – to assess potential violations of the Anti-Kickback Statute.

The Bulletin also provides guidance on three areas identified by the OIG as subject to additional scrutiny: disease funds, eligible recipients, and the conduct of donors.

  • Disease funds may be scrutinized, according to the OIG, if defined so narrowly that the earmarking effectively results in a donor’s subsidization of its own products.  In the Bulletin, the OIG expresses concern about funds defined by reference to specific symptoms, severity of symptoms, method of administration of drugs, stages of a particular disease, the type of drug treatment, or any other ways of narrowing the definition of widely-recognized disease states.  According to the Bulletin, disease funds should be defined based on widely recognized clinical standards to cover a broad spectrum of products.  The OIG’s concern also includes charities that limit assistance to a subset of available products, such as by covering copayments only for expensive or specialty drugs.
  • Eligible recipients may be scrutinized if PAPs provide financial assistance only to federal healthcare program beneficiaries.  Although this practice is not prohibited, the Bulletin advises that eligibility should be determined by a reasonable, verifiable, and uniform measure of financial need that is applied in a consistent manner.  According to the OIG, the cost of the particular drug for which the patient seeks assistance is not an appropriate stand-alone factor in determining individual financial need.
  • Conduct of donors, as the OIG recognizes, cannot be verified by charities with respect to parties outside the arrangement.  The Bulletin recommends, however, that charities 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,” which “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 OIG anticipates that some of its advisory opinions will require modification to ensure that approved arrangements are consistent with the agency’s guidance.  According to the agency, it will post any modifications on the OIG website, along with the original opinions.

Read the OIG’s Supplemental Special Bulletin “Independent Charity Patient Assistance Programs.”

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