Programs serve necessary purpose, subject to fraud and abuse.

By Rene Savarise

The Department of Health and Human Services through its Office of Inspector General (OIG) periodically issues guidance alerting the healthcare industry of problems and special areas of concern. One such area warranting the OIG’s attention is Medicare Part D and financial assistance programs created to assist eligible patients with their
drug expenses. The OIG became concerned in 2005 that patient assistance programs (PAPs) could run afoul of the federal fraud and abuse laws and in particular, the antikickback statute. In November of 2005 the OIG issued a Special Advisory Bulletin (Special Bulletin) in which it raised its concerns about PAP arrangements. On May 21, 2014, after almost nine years of experience with PAPs, the OIG issued a Supplemental Special Advisory Bulletin:
Independent Charity Patient Assistance Programs (Supplemental Bulletin). In the Supplemental Bulletin, the OIG restates that PAPs fill an important role in funding uncompensated care and affirms and elaborates on its initial concerns that PAP arrangements can implicate the federal antikickback statute.

Pros and Cons of PAPs
In its 2005 Special Bulletin, the OIG recognized PAPs serve an important safety net purpose. PAPs provide financial
assistance to patients with limited financial means to help them defray the cost of expensive drugs not covered by insurance. While PAPs decidedly serve a necessary purpose, the OIG cautioned in 2005 that PAPs by their nature are subject to fraud and abuse. Consequently, the OIG advised the industry to structure and operate PAPs in conformity with the applicable fraud and abuse laws.

The nature, structure, sponsorship, and funding of PAPs, is critical to this analysis. PAPs that are funded by organizations that are not independent from the PAP caused particular concern to the OIG in 2005. PAPs created for or funded exclusively by a particular pharmaceutical manufacturer or its affiliate, for instance, were viewed
by the OIG as posing a heightened risk under the anti-kickback statute. This type of structure is inherently a problem because it incentivizes patients to use a particular manufacturer’s drugs in exchange for cost cuts or assistance in paying for those drugs. The OIG explained that non-abusive structural alternatives were available. Among these alternatives are bona fide independent charity PAPs that incorporate certain safeguards:

• The pharmaceutical manufacturer or affiliate exerts no direct or indirect control over the charity or subsidy
program.

• The charity or funding program awards assistance in a manner that completely severs the link between the funding
source and the beneficiary’s eligibility for the funds.

• The charity or funding program awards funding without regard to the beneficiary’s choice of product.

• The charity or funding program determines financial need objectively using criteria that is uniformly applied to
all applicants.

• The pharmaceutical manufacturer or donor neither solicits nor receives data from the charity or funding program
that enables the manufacturer or donor to link the donation to the frequency and types of products used.

These points and others from the 2005 Special Bulletin were affirmed by the OIG in its recently issued Supplemental Bulletin. The OIG continues to acknowledge that PAPs play an important role in funding healthcare as long as they are structured to comply with applicable fraud and abuse laws. Never the less, the OIG’s experience with PAPs since 2005 has lead it to identify some specific risks triggered by the remunerative aspects of PAPs. Those meriting scrutiny under the anti-kickback statute pertain to donor contributions and to grants made by the PAPs. Donations made for the purpose of influencing the PAP to directly or indirectly recommend or arrange for the purchase of the donor’s federally reimbursable products is a potential antikickback violation. Similarly, attempts made by a PAP to influence patient product choices by tying those products to financial assistance may violate the anti-kickback
statute.

Independent PAPs
In the Supplemental Bulletin, the OIG focuses its attention on independent charity PAPs with the emphasis on the
“independence” of the PAP. The OIG points out that PAPs or PAP funds targeted at specific diseases, specific symptoms, at the severity of symptoms, or at the method of drug administration raise suspicion. These are mechanisms used by pharmaceutical manufacturers or other funding programs and sources to narrow the type of drug or treatment in an effort to control which brand or type of drug the beneficiary purchases. Narrowly defined disease funds and PAPs that exclusively or primarily cater to certain diseases and drugs for the treatment of
those diseases may find themselves the subject of the OIG’s scrutiny.

Likewise, PAPs that limit assistance to a subset of available products, tie beneficiaries to particular products, or tie their continued assistance to the use of particular products raise serious concerns for the OIG. PAPs that are limited in this manner will be subject to more scrutiny than those that make funds available for all products covered by the applicable federal health benefit program or that cover all products approved by the FDA for treatment of a certain disease state. To reduce scrutiny, PAP funds should be available for a broad array of products by multiple manufacturers.

PAPs that serve Federal healthcare program beneficiaries exclusively are not, without more, a red flag to the
OIG. Independent charity PAPs serving a limited population like this should incorporate measures to ensure that
eligibility is determined objectively, consistently and in a reasonable and verifiable manner. In this regard the OIG
does not consider the cost of a particular drug an appropriate stand-alone factor in determining individual financial need. It is one of many elements to consider when determining financial eligibility.

Evaluating PAPs
Among the factors the OIG will use to evaluate a charity PAP’s independence is the type of data it provides to donors. Those providing detailed data to donors about brands and usage frequency of drugs or data that allows the donor to correlate the amount of its donations with the use of its products potentially implicate themselves under the anti-kickback statute. Conversely, those charity PAPs that supply aggregate data only, such as the aggregate number of applicants for assistance, the aggregate number receiving assistance, the aggregate amount dispersed, etc. would be viewed more favorably by the OIG because the opportunity for donors to draw specific conclusions from the data is significantly reduced.

In the Supplemental Bulletin the OIG recognizes that there may be some independent charity PAPs that have received favorable advisory opinions in the past but which PAPs may have some features that are now discouraged. As a consequence of this the OIG indicates it will contact all PAPs that received favorable advisory opinions to explain how it intends to work with those PAPs to ensure that their arrangements conform to this new guidance.

Rene Savarise is a shareholder with Hall Render Killian Heath and Lyman in Louisville, Ky.