On April 8, 2024, the Department of Health and Human Services Office of Inspector General (OIG) issued Advisory Opinion No. 24-02, involving independent charity patient assistance programs (PAPs) associated with 12 specific diseases (the Disease Funds) operated by the Requestor. Each Disease Fund has a single donor–a pharmaceutical manufacturer that manufactures or markets a drug to treat the disease state associated with the fund.

Although the arrangement generates remuneration prohibited under the federal Anti-Kickback Statute (AKS) if the requisite intent were present, the OIG determined it would not impose sanctions on the Requestor. In exercising its enforcement discretion, the OIG acknowledged the public policy benefits of independent charity PAPs while highlighting the importance of a charity’s independence from pharmaceutical manufacturer influence. Additionally, the arrangement does not implicate the federal Beneficiary Inducements Civil Monetary Penalties (CMP) law.

The OIG set an effective period for the opinion that expires January 1, 2027 due to upcoming reductions in Medicare Part D cost sharing associated with the Inflation Reduction Act. The reduction in beneficiary out-of-pocket expenses could ease demand for PAP subsidies and alter the OIG’s assessment of the benefits and risks of the arrangement.

Factual Background

The Requestor provides financial support to patients with certain medical conditions and demonstrated financial need through various PAPs. Each Disease Fund is designed around a disease state and is not limited to cover specific treatments, drugs, symptoms, stages of disease, or any specific product from a company that manufactures a drug to treat the disease associated with the fund.

Patients can apply for enrollment in a Disease Fund, and the application process requires documentation of financial and medical eligibility. Importantly, the Requestor certified that it does not solicit information about which drugs a patient is taking or has been prescribed and therefore, generally accepts patients into the Disease Funds without knowing what drugs the patient may be taking or may have been prescribed. Additionally, patient eligibility is not contingent on the selection of a particular physician or pharmacy or whether the patient has been prescribed a particular drug.

The Requestor provides two of the following categories of support for each of the Disease Funds: (i) cost-sharing subsidies for prescription drugs; (ii) financial support for medical expenses; (iii) subsidies for insurance premiums; and (iv) emergency relief. Prescription drug cost-sharing subsidies represent approximately 31% of all Disease Fund spending. The Requestor does not limit its assistance to a certain drug or to expensive or specialty drugs. In 2021, none of the Disease Funds spent more than 35% of their overall expenditures on cost-sharing subsidies for donors’ drugs.

The Requestor enters into agreements with each donor that specify that the donor will not exert, directly or indirectly, any control or influence over the Disease Funds. In addition, the Requestor certified that it makes decisions about the Disease Funds, and what categories of assistance to provide within each Disease Fund, based on patient need and without donor influence.

Additionally, the Requestor limits information shared. It does not inform patients or providers of a donor’s identity. Importantly, the Requestor does not provide individualized information to donors and does not relay information about how funds are spent or information that would allow donors to correlate the amount or frequency of donations with the number of recipients who use its products.

OIG Analysis

In its analysis, the OIG underscored its long-standing recognition that independent charity PAPs, including those sponsored by drug manufacturers, can provide important assistance to patients while acknowledging that such arrangements present significant fraud and abuse risks. The OIG identified certain risks related to cost-sharing subsidies funded by pharmaceutical manufacturers, including improperly increased drug prices, steering of Part D enrollees to certain drugs, and anti-competitive effects. In order to reduce these risks, independent charity PAPs must be independent of pharmaceutical manufacturer influence and “not function as a conduit for payments by the pharmaceutical manufacturer to patients.”

The Requestor certified that a patient’s eligibility is not contingent on the patient selecting a specific physician or pharmacy. Accordingly, the arrangement does not influence an enrollee’s selection of a particular provider or supplier and does not implicate the Beneficiary Inducement CMP.

Notably, the arrangement involves drug manufacturers that provide, through the Requestor, remuneration to federal health care program beneficiaries. Under the AKS, such remuneration could induce the purchasing or ordering of, or the arranging for the purchase or order of, a drug reimbursable by a federal health care program. Although such remuneration is prohibited by the AKS, the OIG stated that based on the facts provided it would not impose administrative sanctions on the Requestor for the following reasons:

• Initially, the OIG acknowledged that the Disease Funds vary greatly in the proportion of funds spent on the purchase of the donors’ drugs and those that spend a larger proportion of funding to support the donors’ drugs present a greater risk of fraud and abuse. However, in the aggregate, the arrangement includes characteristics that mitigate fraud and abuse risk in independent charity PAPs, including: (i) defining Disease Funds based on established disease states; (ii) awarding assistance without regard to the treatment prescribed; (iii) restrictions on sharing information with donors; and (iv) application of a financial eligibility process.

• The Disease Funds could be highly beneficial to financially needy patients with rare disorders. Further, more than two-thirds of the funds provide assistance that does not directly support the purchase of drugs manufactured by donors (i.e., medical assistance, premium support, and emergency relief).

Takeaway

Despite generating AKS-prohibited remuneration, the OIG has expressed a willingness to exercise discretion in imposing sanctions for donations and assistance provided through independent charity PAPs if the arrangement adheres to OIG guidance. Notably, that independent charity PAPs be truly independent from the donor, define disease funds more broadly, award assistance regardless of the treatment prescribed, and implement financial eligibility requirements for patients. Like all OIG advisory opinions, however, this opinion is applicable only to this particular situation and requestor.

Reed Smith will continue to follow developments in health care fraud and abuse enforcement. For more information on this advisory opinion or the impact of the OIG’s guidance on your business, please contact the author or a member of the Reed Smith health care team.