Key Takeaways:
- The Department of Health and Human Services Office of Inspector General (OIG) has issued a long-awaited, favorable advisory opinion regarding certain single-donor rare disease state patient assistance funds operated by an independent charity.
- In an unprecedent move, OIG set a time limit for the advisory opinion, terminating it two years after the full implementation of the Medicare Part D benefit redesign established through the Inflation Reduction Act of 2022 (IRA).
- Unlike several recent unfavorable opinions, OIG responded favorably to several factors in the arrangement, including: the rare disease patient population; the use of funds for expenses beyond cost-sharing subsidies; and safeguards limiting information about patients and use of funds to the manufacturer donors.
On April 8, 2024, the Department of Health and Human Services Office of Inspector General (OIG) issued a long-awaited favorable Advisory Opinion (AO 24-02) for a charitable patient assistance program (PAP) focused on rare disorders. AO 24-02 is notable due to OIG’s decision not to impose sanctions under the Federal Anti-Kickback Statute (AKS) in connection with disease funds supported by a single pharmaceutical manufacturer donor that assists with the cost of the manufacturer’s drug. AO 24-02 is also unprecedented in that OIG set a time limit for the Advisory Opinion of January 1, 2027, terminating it two years after the full implementation of the Medicare Part D benefit redesign established through the Inflation Reduction Act of 2022 (IRA). Unlike previous unfavorable Advisory Opinions such as AO 22-19, in which a group of oncology manufacturers worked to form a new organization to provide cost-sharing subsidies for their drugs, OIG found in AO 22-04 that the benefits of the arrangement outweigh its risks (at least for the next two years). The following overview summarizes OIG’s analysis and offers key considerations for interested stakeholders tracking PAP guidance in the midst of the largest changes to the Medicare Part D program since its inception in 2006.
Prior OIG Bulletins and Regulatory Landscape
PAPs operated by Section 501(c)(3) public charities that provide assistance to patients have long been a focus of OIG review under the AKS, which prohibits a person from knowingly and willfully offering, paying, soliciting, or receiving anything of value to induce a referral for an item or service reimbursed under a Federal healthcare program. In 2005, OIG released a special advisory bulletin on PAPs (2005 SAB), prior to the implementation of the Part D prescription drug program. OIG noted in the 2005 SAB that bona fide independent charities may reasonably focus their efforts on patients with specific diseases and the fact that a particular PAP “disease fund” covers only one drug or one manufacturer’s drugs would not, on its own, constitute an AKS violation. However, OIG stated its concern that a charity may define its disease fund so narrowly that the earmarking effectively results in a manufacturer’s subsidization of its own products. OIG also observed that manufacturers should not exert any influence over a charity or specific disease fund, and that it would be concerned if disease funds were defined by reference to specific symptoms, severity of symptoms, or the method of administration of drugs.
In a follow-up special advisory bulletin issued in 2014 (Supplemental SAB), OIG reiterated: “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.” OIG determined that a disease fund may pose a higher level of risk under the AKS if it is limited to a subset of available drugs as opposed to all drugs that are FDA-approved for a disease state. OIG also stated the level of risk is lower where patient eligibility for assistance is determined based on a “reasonable, verifiable, and uniform measure of financial need” that is applied consistently to each patient. Additionally, a charity generally should not share information that would enable a manufacturer to correlate the amount or frequency of its donations with the number of patients receiving assistance from a disease fund who take the manufacturer’s drug.
OIG’s review of the new PAP arrangement in AO 24-02 is informed by this past guidance and considerations related to risk under the AKS.
PAP Limited to Rare Disorders
AO 24-02 involves a charity that operates 12 separate disease funds, each of which is designed around a clinically recognized “rare disorder” disease state that affects fewer than 200,000 Americans. Each disease fund has a single donor, which is a manufacturer that makes or markets a drug to treat the specific rare disorder. Patient eligibility to receive assistance is dependent on financial need and medical necessity, as opposed to the selection of a particular drug, physician, pharmacy, or treatment approach. The charity does not solicit information about what drugs a patient takes in connection with the application process. Participation is also open to patients regardless of whether they are enrolled in a Federal healthcare program, have commercial insurance, or lack insurance. Once enrolled, a patient may receive various categories of assistance depending on the disease fund: (i) cost-sharing subsidies for prescription drugs; (ii) financial support with medical expenses not covered by insurance; (iii) subsidies for insurance premiums; and (iv) emergency relief.
Each participating manufacturer agrees in writing that it will not exert any influence over the operation of the disease funds, including with respect to patient eligibility criteria and available categories of assistance. Manufacturers cannot specify that their donations may only be used for drug cost-sharing subsidies. The charity also does not notify patients of the identity of any manufacturer that supports a disease fund. Similarly, the charity does not provide the manufacturer with information about how funds from a disease fund are spent, including how much money is spent on a particular drug (or on drugs in general as opposed to other assistance categories).
OIG Analysis and Key Considerations for Manufacturers
OIG reviewed AO 24-02’s arrangement in light of the impending cap on Part D beneficiaries’ annual out-of-pocket costs for Part D drugs that Congress implemented through the IRA.1 The cap, which will be $2,000 beginning January 1, 2025, could “ease demand for the type of cost-sharing subsidies provided under” the arrangement. OIG stated it is “unsure” if its analysis in AO 24-02 will remain the same after the cap is implemented because an ease in demand might lead to practical changes in how the arrangement operates and, in turn, affect its “assessment of the balance of benefits and risks.” Based on this uncertainty, OIG determined AO 24-02 will expire on January 1, 2027 (two years after the cap is implemented).
As noted above, OIG’s review also followed an unfavorable Advisory Opinion issued in 2022, which was OIG’s “first opportunity to evaluate an arrangement involving a coalition of manufacturers subsidizing cost sharing for their own drugs” in the context of an implemented Part D Program (AO 22-19). AO 22-19 involved a PAP funded by manufacturers of approximately 50 oncology drugs, which represented 90% of all Part D oncology utilization. A patient’s eligibility to receive drug cost-sharing subsidies was contingent on their use of one of the funding manufacturer’s drugs. OIG found that the large scope of the PAP created risk under the AKS because it effectively redesigned Part D cost-sharing for oncology products in a manner that might provide a “potentially significant financial benefit” to the funding manufacturers. This new structure could result in increased drug prices and costs to Federal healthcare programs. The PAP also created a risk of patient steering as cost-sharing subsidies were only available for the funding manufacturers’ drugs, meaning physicians could be “dissuaded from prescribing a product for which a beneficiary would pay the full cost-sharing amount.” OIG also noted the PAP carried a risk of anti-competitive effects, since it could “unduly pressure” other manufacturers to participate out of fear of losing market share.
The arrangement in AO 24-02 differs from the one in AO 22-19 in that it involves a charitable PAP. OIG began its analysis by reaffirming its historical position that while charitable PAPs can provide meaningful support to patients with financial need, they continue to present “significant fraud and abuse risks” under the AKS where they rely heavily on donations from manufacturers. In particular, where manufacturers fund drug cost-sharing subsidies, the AKS risks include the potential for increased drug prices resulting in increased costs to Federal healthcare programs, possible steering of patients to certain drugs, and the prospect of anti-competitive effects. Despite these risks, OIG determined it would exercise its enforcement discretion and not impose administrative sanctions under the AKS in this case for the following reasons:
- Assistance is limited to patients with rare disorders that each affect fewer than 200,000 Americans. These patients often require multiple, high-cost medications and the receipt of assistance through a PAP could be “highly impactful” for them given the generally “increasing cost of prescription drugs.” This limitation further distinguishes AO 24-02 from AO 22-19, which involved a PAP funded by manufacturers of approximately 50 oncology drugs, which represented 90% of all Part D oncology utilization.
- Each manufacturer’s donations to its disease fund are used across several categories of assistance. The arrangement differs from one where the full donation is spent on cost-sharing subsidiaries for the manufacturer’s drug(s), which presents a greater risk of fraud and abuse because the contributions “are more likely to function as conduits between” the manufacturers and patients taking their drugs. In AO 24-02, OIG noted that for the year it reviewed, “none of the disease funds spent more than 35% of their overall expenditures on cost-sharing subsidies for donors’ drugs.”
- Assistance is awarded to qualifying patients without regard to a treatment regimen. This requirement is another way in which AO 24-02 differs from AO 22-19, which made eligibility contingent on a patient’s use of a funding manufacturer’s drug.
- Lastly, the arrangement includes numerous safeguards that OIG highlighted in the 2005 SAB, Supplemental SAB, and past Advisory Opinions:
- Disease funds are defined based on established disease states;
- Limited information about patients and the use of funds is shared with manufacturers (so a manufacturer cannot correlate the amount or frequency of its donations with the number of patients receiving assistance who take the manufacturer’s drug); and
- Eligibility depends on a patient demonstrating their legitimate financial need.
OIG’s analysis in AO 24-02 is limited in scope to the facts at hand. The determination may have been different if, for example, all PAP funds were spent on cost-sharing subsidiaries for a manufacturer’s drug or participation was not limited to patients with rare disorders.
2 Additionally, the inclusion of the time limit and the uncertainty OIG expressed on the redesign of Part D out-of-pocket costs suggest OIG will continue to review arrangements where PAPs offer cost-sharing subsidies during the Part D redesign implementation period. During this period, manufacturers and charities should watch for additional OIG guidance on PAPs and monitor how IRA implementation affects patient access to drugs and charitable independence. To further mitigate the level of risk under the AKS, a manufacturer or charity may also consider applying for its own Advisory Opinion.
1It is notable that OIG stated Congress enacted the IRA “during the course” of its review in connection with AO 24-02. This suggests OIG reviewed this PAP arrangement since at least summer 2022 before it arrived at a conclusion.
2Separate from its determination with respect to the AKS, OIG found the arrangement does not implicate the Beneficiary Inducements CMP, which prohibits a person from offering or transferring anything of value to a Federal healthcare program beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of an item or service reimbursed under a Federal healthcare program. OIG made this determination because a patient’s eligibility is not contingent on the selection of a particular drug, physician, pharmacy, or treatment approach. For this reason, the arrangement does not influence a patient’s decision-making.
