Pharmaceutical manufacturers have primary responsibility for ensuring that Medicare Part D members do not redeem copay coupons that could trigger federal inducement prohibitions, according to a report and Special Advisory Bulletin released on September 19 by the Office of Inspector General at the US Department of Health and Human Services (OIG).
The OIG, relying on survey and other data, concludes that drug manufacturers may have permitted millions of Medicare Part D members to access copay coupons that could be viewed as improper kickbacks.
Through a Special Bulletin released with the report, the OIG also advises manufacturers on potential issues relating to the Anti-Kickback Statute, False Claims Act, and other fraud-and-abuse laws.
Among other concerns, the OIG states that the availability of copay coupons could incentivize Part D members to buy more costly brand-name drugs over generic options and increase the costs of federal healthcare spending.
As described below, the OIG concludes that safeguards employed by pharmaceutical manufacturers may not exclude all Part D members, and advises that manufacturers – rather than pharmacies – have the primary responsibility to ensure proper use of the coupons. The OIG notes, however, that pharmacies accepting coupons may also face exposure to certain fraud-and-abuse statutes.
Federal fraud-and-abuse laws prohibit offering coupons to Part D members
According to the OIG’s Special Advisory Bulletin, “manufacturers that offer copayment coupons may be subject to sanctions if they fail to take appropriate steps to ensure that such coupons do not induce the purchase of Federal health care program items or services, including, but not limited to, drugs paid for by Medicare Part D,” such as for violations of the Anti-Kickback Statute.
The Anti-Kickback Statute (AKS) prohibits providing or receiving remuneration from individuals for items or services where payment may be made under a federal or state healthcare plan. See 42 U.S.C. § 1320a-7b(b). Remuneration under the AKS includes the transfer of anything of value, and copay coupons would qualify as forms of remuneration because they have quantifiable economic values.
Further, the anti-inducement provision of the Civil Monetary Penalties (CMP) Law prohibits certain manufacturers, as well as pharmacies, from offering or transferring remuneration likely to influence an individual to order or receive an item or service from a particular provider, practitioner, or supplier any item or service for which payment may be made by a federal or state healthcare plan. See 42 U.S.C. § 1320a-7a(a)(5).
The OIG specifically cautions that any claim that includes items or services resulting from a violation of the AKS could lead to liability under the False Claims Act.
The OIG’s materials focus on the exclusion of Part D members; however, the use of drug coupons by other federal beneficiaries—such as Medicaid members or TRICARE members—could also trigger prohibitions, and although the AKS explicitly excludes Federal Employee Health Benefits Program (FEHBP) plans from potential liability, in past settlements, the Department of Justice has nevertheless taken the position that kickbacks to FEHBP beneficiaries can make claims for services provided to those beneficiaries false or fraudulent.
Pharmaceutical manufacturers have limited control over which coupons are redeemed at the retail pharmacy point of sale; the manufacturers’ program requirements typically are implemented through the pharmacist’s review and application of any proffered copay coupons to drug purchases. Nevertheless, the OIG takes the position that the drug manufacturers are often the only entities that can identify copay coupons during the claims process. The OIG concludes its Special Advisory Bulletin by asserting that “the offerors of coupons ultimately bear the responsibility to operate these programs in compliance with Federal law.” We would note, however, that any pharmacies that accept these coupons could also be held liable, both under the AKS and under the anti-inducement prohibition of the CMP Law. Accordingly, all entities involved in offering or processing copay coupons should review the legal risks and efficacy of safeguards – discussed below – to ensure compliance with federal fraud-and-abuse laws.
Current measures fail to exclude all Part D members
The OIG’s report focuses on the limitations of current efforts to exclude Part D members from using copay coupons. Although all 30 drug manufacturers who responded to the OIG’s survey stated that they took measures to inform Part D members that they were not eligible for co-pay coupons, the OIG found significant limitations on implementing and monitoring these practices. Based on survey data summarized in the OIG’s report, up to 7 percent of Part D members may have been able to use coupons despite their lack of eligibility.
According to the OIG, most pharmaceutical manufacturers use edits built into the national pharmacy-claims transaction systems to prevent inappropriate copay coupon use within the Medicare Part D program. The OIG maintains, however, that these claim edits may not reflect accurate and complete Medicare Part D enrollment information. Neither manufacturers nor claims-processing agents with whom they contract are able to access data that could clarify or confirm Part D enrollment status because of privacy reasons. And proxy measures, such as patient age, used to flag claims for additional screening may not always be reliable: for example, these measures may not capture younger Part D members eligible through a disability. The OIG noted that another common program integrity measure—alerts sent to pharmacists—may not succeed because pharmacists can suffer from “alert fatigue” based on receiving a high volume of alerts.
Although the OIG’s materials focus on coupon use by Medicare Part D members, based on the broad applicability of federal fraud-and-abuse laws, coupon use within other federal programs also requires sufficient monitoring and may pose additional challenges.
Next steps: work with government agencies; expect heightened scrutiny
As recommended by the OIG, the Centers for Medicare and Medicaid Services has agreed to work with industry stakeholders to improve the reliability of proxy data and increase the transparency and traceability of copay coupons. While working to improve safeguards – either internally or with federal regulatory agencies – drug manufacturers and other industry stakeholders, such as pharmacies, should prepare for potential government enforcement or whistleblower lawsuits based on the heightened awareness of this issue.
Read the report “Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs” (OEI-05-12-00540) and the Special Advisory Bulletin “Pharmaceutical Manufacturer Copayment Coupons” (both released September 19, 2014).