Life Science Compliance Update

June 07, 2016

Jazz Pharmaceuticals Discloses DOJ Subpoena on Patient Assistance Program

Jazz Pharmaceuticals recently revealed, in a filing with the Securities and Exchange Commission, that it received a documents subpoena from the United States Attorney's Office for the District of Massachusetts. The subpoena requested documents related to Jazz' support of 501(c)(3) organizations that provide financial assistance to Medicare patients.

Jazz also received requests about documentation about the provision of financial assistance to Medicare patients who receive the prescription Xyrem, a narcolepsy drug and Jazz' top-selling product.

The patient assistance programs at issue in Jazz' case involved a free product voucher program for Xyrem and copayment coupon programs for Xyrem and other products. Jazz also makes grants to independent charitable foundations that help financially needy patients with their premium, copayment, and coinsurance obligations.

Jazz Isn't the Only Company to Face Subpoenas

In 2015, Valeant Pharmaceuticals International, Inc., received similar subpoenas from the U.S. Attorney's offices in Massachusetts and Southern District of New York, seeking information on its patient assistance programs, drug distribution, and pricing decisions.

Other industry companies that have received recent subpoenas include: Merck & Co., Johnson & Johnson, and Endo International. Those government subpoenas sought information on a different topic, however: their contracts with pharmacy benefit managers related to specific drugs. These subpoenas came from the U.S. Attorney's Office for the Southern District of New York.

Health and Human Services Office of the Inspector General Guidance

For companies who value providing patient assistance, the Health and Human Services (HHS) Office of the Inspector General (OIG) recently modified an existing advisory opinion, originally published in 2006, on manufacturer grants to independent charitable foundations that provide financial assistance to patients in need. The OIG has also issued recent opinions on how the government views such programs.

What Does This Mean?

This recent subpoena for Jazz is the latest sign of the government's increasing interest in drug pricing, including scrutiny of drug companies' financial assistance programs. Patient assistance programs, which help Medicare patients pay for their drugs, have been criticized by some for steering patients to use the more expensive, brand-name products, instead of less costly generics or other alternatives. We encourage companies to review HHS OIG guidance on the topic before drafting their own plan to provide patient assistance.

In the disclosure document, Jazz noted its intention to cooperate with the subpoena.

What's Next?

It is possible that the issue of patient assistance programs will be the next "big thing" that the media focuses on when it comes to pharmaceutical companies. Foreshadowing that idea is Bloomberg Businessweek. A few weeks back, the magazine had a cover story, "Big Pharma is Here to Help."

The story opened with the story of Martin Shkreli and Daraprim, as many anti-pharma critics are wont to do. The story then went on to discuss Patient Services, Inc. (PSI), a charity that helps people meet insurance copayments on costly prescriptions. Turing and PSI supposedly got together to make Daraprim more affordable, right after Shkreli decided to raise the price of Daraprim by more than 5000%.

The article continues, expounding upon PSI, other patient assistance programs, and Turing (and Valeant, too), and the way they work together to raise drug prices while "getting rich" off of patients and Medicare beneficiaries.

The article did eventually, however, recognize that patient assistance programs are not all bad. The authors spoke with Daniel Klein, chief executive officer of PAN Foundation, who stated that his organization has nothing to do with the pricing of drugs, and that industry does not coordinate with patient assistance programs to take advantage of the consumer. "We are unaware of any data demonstrating that the help provided by charitable patient assistance organizations such as PAN has any impact on drug prices." According to the authors of the article, the "heads of several other copay charities also stressed their independence from donors."

It will be interesting to see if other news outlets begin to run with this idea, or if Bloomberg will be the only one. In any event, it serves as a wakeup call to review your current policies and ensure you are in full compliance with federal and state regulations.


December 17, 2015

HHS OIG Modifies Advisory Opinion on Patient Assistance Programs

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) recently released a modification of OIG Advisory Opinion 07-11, concerning a non-profit, tax-exempt charitable organization's practice of providing financially needy cancer patients with grants to defray their out-of-pocket treatment costs. This modification is in response to guidance issued on May 21, 2014, in the Supplemental Special Advisory Bulletin regarding Independent Charity Patient Assistance Programs (PAPs).

The Supplemental Bulletin was sent along with targeted letters to all independent charities that had received favorable advisory opinions from HHS OIG to request certain clarifications and modifications to those favorable opinions.

On September 28, 2007, the OIG issued OIG Advisory Opinion 07-11 to the "Charity" – Charity and organization names are redacted as they are identifying information and can contain potentially privileged, confidential, or proprietary information – regarding Charity's operation of a PAP to help financially needy cancer patients pay for certain drugs used to treat certain types of cancer and certain conditions incident to cancer therapy. That AO approved certain features of the PAP that have since been determined to be problematic. The OIG asked Charity to modify certain areas of concern in order to retain its favorable AO, which Charity did and made appropriate certifications adhering to those modifications.

The modification of the original Advisory Opinion goes through each of the certifications Charity has made and explains in detail the changes that will be made to keep a favorable advisory opinion of its PAP.

One such change is that Charity "will not define its disease funds by reference to specific symptoms, severity of symptoms, method of administration of drugs, stages of a particular disease, type of drug treatment, or any other way of narrowing the definition of widely recognized disease states." Instead, Charity will "develop and maintain disease funds that would be limited to patients with certain metastatic cancers." Through those disease funds, Charity plans to cover all FDA-approved drugs for each particular type of cancer. Charity is not permitted to restrict coverage to FDA-approved products that are "expressly approved for the metastatic stage of the cancer."

Another change requires Charity to "not maintain any disease fund that provides copayment assistance for only one drug, or only the drugs made or marketed by one manufacturer or affiliates." However, if Charity establishes a fund for a disease that only has one FDA-approved drug, Charity "will provide support for other medical needs of patients with the disease, in addition to copayment support for the FDA-approved treatment of the disease." This means that Charity may be forced to provide copayment support for all prescription medicines used by a particular patient that are related to managing the disease or cancer.

Further, Charity is not permitted to limit its copayment assistance to only high-cost or specialty drugs. This means that generic or bioequivalent drugs must be given the same opportunities for assistance as expensive or specialty drugs, provided that they are approved by the FDA for treatment of the disease covered by the fund.

The screening process for eligibility determinations was also commented on in the modified advisory opinion: Charity must determine eligibility "according to a reasonable, verifiable, and uniform measure of financial need that is applied in a consistent manner." This screening process is applied uniformly across all funds and involves actions such as: verifying an applicant's financial resources through a third party service, collecting documentation of financial need from the applicant, or some combination of the two.

It is important to note that Charity's established disease funds provide assistance only to qualifying Federal health care program beneficiaries.

These changes in the Advisory Opinion show that when changes are made in the law, even through something as simple as guidance from HHS OIG, companies must pay attention and work to alter their existing programs so they are in full legal compliance. This modified Advisory Opinion can serve as a year-end reminder to ensure company policy is up-to-date and in full compliance with all laws and legal guidances.

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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