HHS Office of Inspector General (OIG) recently clarified its guidance related to the provision of free or discounted prescription drugs in two contexts: (1) hospital discounts or waivers of self-administered drugs in outpatient settings, and (2) charity patient assistance programs for specialty drugs.

OIG Guidance on Hospital Discounts or Waivers of Self-Administered Drugs Dispensed in Outpatient Settings

In a Policy Statement dated October 29, 2015 (available here), OIG clarifies that hospitals will not be subject to administrative sanctions for discounting or waiving amounts owed by Medicare patients for self-administered drugs (SADs) in outpatient settings.  Medicare Part B covers drugs that are furnished “incident to” a physician’s service provided that the drugs are not usually self-administered by the patients who take them; therefore, SADs are typically not covered by the Part B program. 

The Policy Statement specifically addresses guidance issued by CMS in a 2003 Program Memorandum (outlining changes in the Outpatient Prospective Payment System) that provided in part that a hospital’s decision not to bill the beneficiary for non-covered drugs potentially implicates other statutory and regulatory provisions.  OIG clarifies that, in the limited circumstances set forth in the Policy Statement, a hospital is not subject to administrative sanctions for discounting or waiving amounts related to SADs that are not covered by Medicare Part B in outpatient settings (including SADs that may be covered under Medicare Part D), provided that the hospital complies with the following:

• Hospitals cannot market or advertise the waivers or discounts;
• The exception applies only to discounts on, or waivers of, amounts Medicare beneficiaries owe for non-covered SADs that the beneficiaries receive for ingestion or administration in outpatient settings;
• Hospitals must uniformly apply their policies regarding discounts or waivers on non-covered SADs (e.g. without regard to a beneficiary’s diagnosis or type of treatment); and
• Hospitals must not claim the discounted or waived amounts as bad debt or otherwise shift the burden of these costs to the Medicare or Medicaid programs, or other payers, or individuals.

OIG makes clear that its Policy Statement does not require hospitals to discount or waive amounts owed by Medicare beneficiaries for non-covered SADs received in outpatient settings. 

OIG Modifies Advisory Opinions on Cost-Sharing Assistance for Specialty Medications

On November 2, 2015, OIG posted modified advisory opinions related to two independent charity patient assistance programs in order to streamline the opinions (initially issued in 2006 and 2007) with guidance offered in a Supplemental Special Advisory Bulletin regarding Independent Charity Patient Assistance Programs on May 21, 2014 (the Supplemental Bulletin).  Patient Assistance Programs (PAPs) offer safety net assistance to patients typically suffering from chronic illnesses who cannot afford their cost sharing obligations for prescription drugs.  PAPs are often operated by independent charities that provide cost-sharing assistance for certain prescription drugs.  The Supplemental Bulletin offers guidance to reduce the risks associated with charity PAPs such as the potential implication of the Anti-Kickback Statute and patient inducement concerns. 

Consistent with the Supplemental Bulletin, OIG’s modified opinions center on safeguards that charity PAPs should implement in order to ensure that their assistance programs are sufficiently independent from donors, such as pharmaceutical manufacturers, and do not impermissibly influence patients’ drug choices.  The majority of OIG’s modifications are geared towards avoiding bias towards a certain manufacturer including, for example, the requirement for charity PAPs to provide assistance for all prescription drugs approved to treat a specified disease including generic and bioequivalent drugs and not only more costly specialty medications.

The Supplemental Bulletin is available here and the modified OIG opinions are available here (Modification of OIG Advisory Opinion 06-10) and here (Modification of OIG Advisory Opinion 07-18).

Reporter, Juliet M. McBride, Houston, +1 713 276 7448, jmcbride@kslaw.com.