In a March 11 advisory opinion the Department of Health and Human Services’ Office of Inspector General (“OIG”) permitted a medical device manufacturer to pay Medicare-reimbursable costs for subjects enrolled in a clinical trial sponsored by the manufacturer and involving the manufacturer’s therapy.

The OIG indicated it would not impose administrative sanctions, despite the fact that the proposed arrangement would generate remuneration prohibited under the federal Anti-Kickback Statute (“AKS”) and the beneficiary inducement prohibition (“Beneficiary Inducement CMP”).

Arrangement addresses socioeconomic barriers for potential participants while maintaining study integrity

The therapy, which involves the injection of the subject’s bone marrow cells into the subject’s heart as a potential treatment for heart failure, is currently available for clinical use in the United States pursuant to an FDA-approved Category B Investigational Device Exemption (“IDE”).

Studies involving an IDE device qualify for Medicare coverage of the device and routine care services and items so long as the study is specifically approved by the Centers for Medicare and Medicaid Services (“CMS”). The study at issue here was approved for Medicare coverage and was required to meet a number of criteria for approval, including a determination that:

  • The principal purpose of the study is to test whether the device improves health outcomes of appropriately selected patients;
  • The rationale for the study is well supported by available scientific and medical information, or it is intended to clarify or establish the health outcomes of interventions already in common clinical use; and
  • The study results are not anticipated to unjustifiably duplicate existing knowledge.

Under the proposed arrangement, the manufacturer would directly pay an institution for the costs of the Medicare-reimbursable device and costs of routine care services and items that Medicare beneficiaries participating in the Study would otherwise owe. These costs per Medicare beneficiary (estimated as upwards of $1,300) were considered to be cost-prohibitive for many subjects due to their socioeconomic situations. As such, the proposed arrangement would ensure that Medicare beneficiaries participating in the study would incur no additional out-of-pocket expenses other than any unmet deductibles under Medicare Part B.

Additionally, the manufacturer represented that information regarding this proposed arrangement would not be shared with subjects until they received informed consent documents. This would preserve the study’s blinding procedures and ensure that subjects were unaware whether they were part of the study’s control group. This last aspect was a result of the manufacturer’s desire not to have providers collect cost-sharing amounts from control-group beneficiaries because the control group subjects do not have the potential to receive any therapeutic benefit during the study.

Arrangement qualifies as remuneration under AKS and Beneficiary Inducement CMP

OIG noted that the proposed arrangement involved remuneration that would directly implicate the federal AKS and the Beneficiary Inducement CMP.

AKS defines remuneration as “the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind”. Similarly, the Beneficiary Inducements CMP defines remuneration as “the transfer of items or services for free or for other than fair market value”. However, the Beneficiary Inducements CMP contains an exception to the term “remuneration” for waivers of coinsurance and deductible amounts by a person if: (i) the waiver is not offered as part of any advertisement or solicitation; (ii) the person does not routinely waive coinsurance or deductible amounts; and (iii) the person waives the coinsurance and deductible amounts after determining in good faith that the individual is in financial need or fails to collect coinsurance or deductible amounts after making reasonable collection efforts.

Here, OIG determined that the proposed arrangement implicated AKS as the remuneration offered could induce Medicare beneficiaries to participate in the study to receive reimbursable benefits, and such benefits could be from a particular practitioner, provider, or supplier. Additionally, the Beneficiary Inducements CMP was implicated because the proposed arrangement involved the opportunity for investigators and sites to bill Medicare for items and services related to the study and offered a guaranteed payment of beneficiary cost sharing, which, in some circumstances, an investigator or site may not be able to collect in full.

OIG determined proposed arrangement was reasonable and of minimal risk of fraud and abuse

OIG’s analysis determined that the proposed arrangement would present a sufficiently low risk of fraud and abuse and be unlikely to lead to overutilization of services and increased federal health care program costs for the following reasons:

  • The proposed arrangement appeared to be a reasonable means of promoting enrollment, particularly where a portion of participating beneficiaries would not have the potential to receive any therapeutic benefit during the study. The cost-sharing subsidies offered would help facilitate sufficient enrollment in the study that would otherwise be hindered due to a participant’s financial constraints. The cost-sharing subsidies would also encourage completion of the entire course of the study as required follow-up clinical visits would, absent the subsidy, require beneficiaries to pay. By removing this financial barrier, the study could achieve accurate results and reduced the likelihood that beneficiaries would not complete the study in its entirety.
  • The proposed arrangement would pose a low risk of overutilization or inappropriate utilization of items and services payable by Medicare. The proposed arrangement included various guardrails that mitigate the risk of inappropriate utilization or improper increased costs, and the manufacturer certified it would not advertise the availability of cost-sharing subsidies. Such guardrails included the fact that beneficiaries had to satisfy enrollment criteria set forth in the study and execute an informed consent agreement, investigators had to follow study protocol and were subject to IRB monitoring and the study’s enrollment being capped at 260 subjects. Moreover, CMS approval of the study meant that the study met criteria to ensure appropriate patient protections and that the study design was appropriate to answer questions of importance to the Medicare program and its beneficiaries.
  • The proposed arrangement was distinguishable from problematic seeding arrangements, such as those in which manufacturers initially offer subsidies to lock in future utilization of a reimbursable item or service. While beneficiaries participating in the study may continue to receive follow-up services related to the therapy, the manufacturer is in no position to benefit financially from these follow-up services. The manufacturer indicated that the therapy is intended to be a one-time treatment and that it did not anticipate future utilization of the therapy or its other products by Study participants.

Health Industry Washington Watch previously covered an advisory opinion issued by OIG on February 4, 2022 involving approval of a similar arrangement involving a testamentary gift to a nonprofit hospital to reduce costs for pediatric patients. Although OIG has permitted this proposed arrangement, there is no guarantee that similarly structured subsidizations of costs would be immune from administrative sanction. Nevertheless, the analysis of the arrangement outlined in this latest advisory opinion sheds some light on how similar future arrangements are likely to be reviewed and analyzed by the OIG.

Should you have any questions related to this advisory opinion, or any other health care compliance issues, please do not hesitate to reach out to the health care attorneys at Reed Smith.