On June 27, 2016, the OIG posted Advisory Opinion No. 16-07 stating that an erectile dysfunction (ED) drug manufacturer would not face sanctions for a planned discount-card promotion for the drug.
The OIG found that the fraud-prevention protocols put into place by the drug maker and the fact that ED drugs are not reimbursed through Medicare Part D were sufficient to minimize the risk of any fraud and abuse.
The opinion suggests that the OIG may scrutinize safeguard measures taken by drug manufacturers to mitigate fraud-and-abuse risks with respect to discount programs, and may focus on unique aspects of the arrangement when providing approval. As set forth below, the OIG focused on the lack of any Medicare Part D reimbursement related to the drugs involved in the discount program when finding the arrangement would not trigger kickback sanctions.
Discount Drug Program
The program card would give users discounts on out-of-pocket costs greater than $15, up to a maximum benefit of $75 per prescription, on up to 12 prescriptions for a drug. The program is open to Medicare Part D beneficiaries, who may use the savings card to receive discounts when they fill prescriptions for the ED drug. If an individual tries to use Medicare Part D for the ED drug coverage, the claim would be statutorily barred because the drug is not covered under the Part D plan, and the drug manufacturer would then treat these individuals as cash-paying customers.
Further, the ED drug maker stated that beneficiaries of Medicaid and TRICARE, two plans that reimburse ED medications, would also be excluded from the ED discount-card program. The OIG stated that its main concern with drug-discount programs and coupons that reduce beneficiary out-of-pocket costs is that these benefits overstimulate government reimbursements of the discount drug. Also, the OIG was concerned that these programs may reward beneficiaries who use other products that are reimbursable by the government and thus, lead to the overutilization of these products at the government’s expense.
The OIG found that the discount program does not significantly induce the purchase of the ED drugs under Medicare Part D. Although the discount card reduces the beneficiaries’ out-of-pocket costs for the ED drug and therefore leads to more purchases of the drugs, the drug maker is taking steps to make sure that claims for the ED drug are not submitted to Medicare Part D plans. The OIG also noted that the drug manufacturer is taking preventive actions such as using a vendor to screen claims data for attempted card use by ineligible individuals, requiring Part D beneficiaries to agree not to submit such claims, and by instructing the pharmacies that fill the Part D beneficiaries’ prescriptions for this drug to treat them as cash-paying customers.
Notably, the OIG stated that these preventive measures are not infallible and normally would not suffice for the OIG to allow the discount card to be used to purchase an item payable by Medicare Part D. But the OIG still issued a favorable advisory opinion because the ED drug is statutorily excluded from Medicare Part D coverage and therefore, any claim for the drug would be denied. The OIG explained that “this statutory exclusion serves as an effective backstop that prevents [the drug maker’s] coupon program from inducing the purchase of a drug payable by Medicare Part D.”
Lastly, the OIG found a low risk that the discount program induces Part D beneficiaries to purchase other federally reimbursable products manufactured, marketed, or distributed by the ED drug maker. This is because the drug maker has certified that it does not and will not use the discount program as a method to market any of their other products.
The OIG limited its findings to the Anti-Kickback Statute and did not express any opinion regarding the risk of the program under any other federal or state laws.