Life Science Compliance Update

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May 27, 2014

HHS-OIG Releases Updated Advisory on Independent Charity Patient Assistance Programs

Back in 2005, OIG concluded that pharmaceutical manufacturer patient assistance programs (PAPs) that subsidize Part D cost-sharing amounts present heightened risks under the anti-kickback statute. However, because the Part D program benefit had not begun in 2005, OIG admitted that their assessment of fraud and abuse was "necessarily speculative." On May 21, 2014, OIG released a Supplemental Special Advisory Bulletin focused on Independent Charity PAPs. While OIG continues to believe that Independent Charity PAPs can provide a valuable resource to financially needy patients when properly structured, they "also believe that Independent Charity PAPs raise serious risks of fraud, waste, and abuse if they are not sufficiently independent from donors."

OIG focuses on two specific violations when it comes to what they deem "sham" independent charities to operate PAPs: the Anti-Kickback Statute and Beneficiary Inducement civil monetary penalties (CMPs).

Anti-Kickback Statutes

If a pharmaceutical company donates to a PAP to induce the PAP to recommend or arrange for the purchase of the donor's federally reimbursable items, the anti-kickback statute could be violated. Similarly, if a PAP's grant of financial assistance to a patient is made to influence the patient to purchase (or to induce the patient's physician to prescribe) certain drugs, the statute also could be violated. OIG notes that whether a particular arrangement violates the anti-kickback statute requires an "individualized evaluation of all of the relevant facts and circumstances, including the parties' intent," including the nature, structure, sponsorship, and funding of the particular PAP.

Beneficiary Inducement Civil Monetary Penalties

A subsidy for copayments provided by a pharmaceutical manufacturer through a PAP may implicate the Beneficiary Inducements CMP if the subsidy is likely to influence a Medicare beneficiary's selection of a particular provider, practitioner, or supplier. An example would be where companies make eligibility dependent on the patient's use of certain prescribing physicians or certain pharmacies to dispense the drugs. The penalty is meant to discourage companies who induce beneficiaries to use their product through any sort of transfer of value.

2014 Guidance

OIG states that pharmaceutical manufacturers and their affiliates should not exert any direct or indirect influence or control over the charity or its assistance program. They split their guidance up into three categories of particular concern: (1) Disease Funds; (2) Eligible Recipients; and (3) Conduct of Donors. We have made a chart highlighting the takeaways from each section.

Improperly Narrow Approaches to Defining Disease Funds

OIG is chiefly concerned that narrowly defining disease funds or limiting disease funds to provide assistance only for expensive drugs can result insteering patients to the drugs for which assistance is available. This type of steering increases the likelihood that the donors could use the PAPs as improper conduits to provide a subsidy to patients who use the donors' own products. This potentially increases costs to the Federal health care programs in cases where a lower cost, equally effective drug is available.

Thus, OIG requires disease funds not be defined for the purpose of limiting the drugs for which the Independent Charity PAP provides assistance. OIG recommends disease funds be defined in accordance with widely recognized clinical standards and in a manner that covers a broad spectrum of products.



A charity with narrowly defined disease funds may be subject to scrutiny if the disease funds result in funding exclusively or primarily the products of donors, or if other facts and circumstances suggest that the disease fund is operated to induce the purchase of donors' products.



Funds are too narrow if they reference:

-Specific symptoms

-Severity of symptoms

-Method of administration of drugs

-Stages of a particular disease

-A disease fund including only one drug made by one manufacturer wouldn't not alone be enough to violate the AKS, but it would be subject to scrutiny



A fund will be subject to more scrutiny if it is limited to a subset of available products, rather than all products approved by the FDA for treatment of the disease states covered by the fund or all products covered by the relevant Federal health care program when prescribed for the treatment of the disease states.



Funds are improperly limited to a subset of available products where they cover:

-only expensive drugs

-only specialty drugs


Improperly Narrow Approaches to Defining Eligible Recipients


OIG recommends that Independent Charity PAPs determine eligibility according to a reasonable, verifiable, and uniform measure of financial need that is applied in a consistent manner.



Independent Charity PAPs may base their eligibility criteria on:

-Poverty guidelines, which take into account family size

-Cost of living

-Scope and extent of a patient's total medical bills

-Cost of particular drug for which the patient is applying is NOT an appropriate standalone factor in determining financial need

-OIG notes that "generous" financial need criteria, particularly when a fund is limited to a subset of available drugs or the drugs of a major donor, could be evidence of intent to fund a substantial part of the copayments for a particular drug for the purpose of inducing the use of that drug, rather than for the purpose of supporting financially needy patients diagnosed with a particular disease.



Conduct of Donors


OIG notes that their opinions have focused on the conduct of Independent Charity PAPs, not donors. In requesting an opinion, a charity certifies to actions it will take to ensure the independence of the PAP from the donors—for example, charities certify they will not give a donor information that would enable the 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."

OIG states that The procedures described in charity certifications are a critical safeguard and a material fact upon which OIG has relied in issuing favorable advisory opinions regarding Independent Charity PAPs. They note: "These opinions do not address actions by donors to correlate their funding of PAPs with support for their own products. Such actions may be indicative of a donor's intent to channel its financial support to copayments of its own products, which would implicate the anti-kickback statute."

"Independent, Bona Fide Charities"

Pharmaceutical companies can provide donations to a truly "independent, bona fide charity" that provides cost-sharing subsidies for Part D drugs. In the 2005 guidance, OIG provided an outline for structuring independent charities that avoid anti-kickback violations.

OIG Recommendations for Independent Bona Fide Charities


Neither the pharmaceutical manufacturer nor any affiliate of the manufacturer (employee, agent, officer, shareholder, or contractor—wholesaler, distributor, or pharmacy benefits manager—can exert direct or indirect influence or control over the charity or the subsidy program.


The charity must award assistance in a truly independent manner that severs any link between the pharmaceutical manufacturer's funding and the beneficiary (i.e., the assistance provided to the beneficiary cannot be attributed to the donating pharmaceutical manufacturer);


The charity must award assistance without regard to the pharmaceutical manufacturer's interests and without regard to the beneficiary's choice of product, provider, practitioner, supplier, or Part D drug plan;


The charity must provide assistance based upon a reasonable, verifiable, and uniform measure of financial need that is applied in a consistent manner;


The pharmaceutical manufacturer must not solicit or receive data from the charity that would facilitate the manufacturer in correlating the amount or frequency of its donations with the number of subsidized prescriptions for its products.

The increased scrutiny to patient assistance programs will probably mean fewer patients will receive cutting edge medicine and be forced to receive older medications. This may be alright for some chronic diseases, but for cancer patients and those who do not tolerate certain medications this could prove to be disastrous.

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