OIG Issues Medicare Part D Guidance: Addresses Patient Assistance Programs.

By Carl Rosenfield and Lena Robins

Summary

Action: On November 7, 2005, the HHS Office of Inspector General ("OIG") issued a Special Advisory Bulletin warning of potential fraud and abuse issues in connection with patient assistance programs under Medicare Part D, the new voluntary prescription drug program.

Impact: The Special Advisory Bulletin represents the OIGEs first major guidance on fraud and abuse issues under Medicare Part D, which becomes effective January 1, 2006. The Bulletin provides important guidance on the structure of patient assistance programs and the potential compliance risks associated with such programs under Medicare Part D.

Effective Date: Immediately.

On November 7, 2005 the HHS Office of Inspector General ("OIG") issued a Special Advisory Bulletin ("Bulletin") warning of potential fraud and abuse issues under patient assistance programs ("PAPs") for Medicare Part D enrollees. The Bulletin, titled "Patient Assistance Programs for Medicare Part D Enrollees," focuses on PAPs that are sponsored by pharmaceutical companies. The OIG warns that PAPs operated and controlled by pharmaceutical companies could risk running afoul of fraud and abuse laws, particularly the federal Anti-Kickback Statute, if they subsidize only their own products that are reimbursable by the Medicare Part D prescription drug program. However, cash donations to independent, charitable PAPs that subsidize drugs regardless of the manufacturer should not be problematic. The Bulletin represents the first major fraud and abuse guidance from the OIG under Medicare Part D.

PAP Guidance

Medicare Part D, which becomes effective January 1, 2006, will provide comprehensive prescription drug coverage to beneficiaries who elect to enroll in a Part D plan. However, such beneficiaries will have substantial cost sharing obligations. Beneficiaries are responsible for a $250 deductible and must pay 25% of the cost of their prescription drugs between $250 and $2,250. More significantly, beneficiaries are responsible for the next $2,850 in costs after the initial $2,250 threshold is reached. This coverage gap is typically known as the "doughnut hole." This means that when beneficiaries are in this gap, they must pay 100% of their prescription drug costs until their True Out of Pocket Costs ("TrOOP") reach $3,600. Once this catastrophic limit has been reached, Medicare payment for drugs resumes, and the beneficiary is only responsible for a copayment, which is 5% in most cases.

Historically, PAPs existed prior to the enactment of Part D and are designed for low-income individuals who do not have insurance and need help with high drug costs. PAPs generally provide cash subsidies and free or discounted drugs. Some PAPs are affiliated with pharmaceutical manufacturers, while others are independent charitable organizations.

The Bulletin advises that when pharmaceutical manufacturer-sponsored PAPs assume cost sharing subsidies only for there own products (either directly or indirectly), then it raises substantial concerns under the federal Anti-Kickback Statute. The OIG identifies a number of concerns with pharmaceutical-sponsored PAPs. In the OIGEs view, manufacturers might use subsidies to help beneficiaries meet the TrOOP amounts, with the result of increasing the number of patients who use the manufacturerEs product who reach the catastrophic limit. The OIG believes that this would be problematic because reimbursement for drugs is cost-based under the catastrophic benefit and in the OIG.s view costbased reimbursement is inherently prone to abuse, because it does not provide any incentive to limit costs.

For example, subsidies could insulate beneficiaries from the economic effects of drug pricing, thus eliminating a safeguard against price inflation. This potentially would increase Medicare costs because increased prices would be reflected in increased beneficiary subsidies and other payments made by Medicare under Part D in subsequent years. Of equal concern to the OIG is the potential for subsidies to lock Part D beneficiaries into the manufacturer.s product even if equally efficacious and less costly alternatives are available.

The Bulletin also distinguishes manufacturer-sponsored PAPs that offer cost sharing subsidies to a dispensing supplier, which may be suspect, from a providerEs or supplierEs non-advertised and non-routine waiver of cost sharing amounts based upon an individual patientEs financial need, which is generally permissible. The manufacturerEs PAP subsidies result in full payment of the product and eliminates the supplierEs risk of non-collection. According to the OIG, this provides suppliers with an incentive to favor the manufacturerEs product over alternatives, which may be available at lower cost. Additionally, PAP programs are customarily advertised, which may affect which drug is prescribed, because the physicianEs choice of medication presumably is influenced by the patientEs preferences, as well as the availability of coverage.

The OIG recognizes the difficulties with disenrolling patients who currently receive medications or financial assistance through a PAP and advises that manufacturer affiliated PAPs do not have to immediately disenroll Medicare beneficiaries. Rather, because participation in Part D is voluntary, affected PAPs may continue to provide subsidies to beneficiaries until they enroll in Part D. Occasional inadvertent cost sharing subsidies to Part D enrolled beneficiaries also will not be problematic if the PAP did not know, and "should not" have known that the patient enrolled in Part D. Also, manufacturers are not prohibited from continuing to provide financial assistance to uninsured individuals, meaning patients who do not have Medicare or other coverage. However, patients who are enrolled in Part D, but do not have coverage because they have reached the doughnut hole limit, are considered insured by the OIG because they are still enrolled in Part D and are paying premiums.

For manufacturer affiliated PAPs that were in existence prior to the date of the BulletinEs publication, the OIG will exercise its enforcement discretion with regard to administrative sanctions under the Anti-Kickback Statute. The OIG will take into account whether the PAP is taking sufficient and prompt steps to transition beneficiaries to an acceptable PAP. In addition to transition efforts, the OIG suggests that manufacturer PAPs adjust financial need standards to reflect the lower costs incurred by Part D enrollees, subsidize other drugs in the same class as the manufacturerEs products if the beneficiaryEs physician prescribes the alternative, and check regularly, to the extent possible, to determine whether their patients have enrolled in Part D. The OIG, however, does point out that it will take enforcement action if there is evidence of unlawful intent to violate the Anti-Kickback Statute.

Under the BulletinEs guidelines, there are no constraints on the ability of pharmaceutical manufacturers to support cost sharing subsidies through cash contributions to independent, bona fide charities that do not discriminate among different drug manufacturersE. products. The OIG raises some concern about in-kind contributions to bona fide charities, suggesting such contributions may have the effect of increasing the use of a particular product. These contributions may also pose valuation and accounting issues in determining TrOOP amounts. The OIG acknowledges, however, that it has insufficient experience with in-kind PAP contributions to provide detailed guidance on this issue.

The Bulletin also expresses concerns with the potential for pharmaceutical companies to create and control charitable PAPs as a way to subsidize Part D cost sharing. To address these concerns the Bulletin reiterates guidance from previous OIG advisory opinions for determining whether PAPs receiving manufacturer contributions are, in fact, bona fide charities. Manufacturer contributions to a charity will not pose Anti-Kickback Statutory problems if neither the manufacturer nor any affiliates exert any direct or indirect control or influence over the charity or the assistance program. Awards of assistance from the charity must be made in a truly independent manner that does not attribute the assistance to the donating manufacturer.

In addition, charitable entities are obligated to award assistance without consideration of the manufacturer.s interests and without regard to the beneficiaryEs choice of product, supplier, or Part D plan. Manufacturers also should not solicit or receive data that would enable them to correlate the amount or frequency of their donations with the number of subsidized prescriptions for their products. In previous advisory opinions, the OIG has recommended that manufacturers limit themselves to the receipt of aggregate data in the form of monthly (or less frequent) reports of the total number of applicants in a particular disease category and the number of patients qualifying for assistance in that disease category.

Finally, manufacturers are permitted to make donations that are earmarked for one or more broad disease categories. However, the OIG notes

the potential for abuse if disease categories are defined narrowly, in a manner that results in the subsidization of just the manufacturerEs product or products. The OIG advises manufacturers to confine contributions to PAPs that define categories in accordance with recognized clinical standards and in a manner that includes a wide spectrum of products.

Conclusion

The OIG Bulletin provides important and needed guidance on PAPs. Such programs will likely play an increasing role under Part D due to the significant cost sharing obligations faced by beneficiaries who choose to enroll in a Part D plan. To date, some manufacturers have indicated that they intend to eliminate PAPs that they sponsor for Medicare beneficiaries, regardless of whether beneficiaries enroll in Part D. Other manufacturers will allow Medicare beneficiaries to decide whether to enroll in a Part D plan or continue to receive medications through the manufacturerEs PAP. Manufacturers who currently sponsor PAPs should carefully review the Bulletin to determine whether and how to restructure their PAPs once Part D becomes effective January 1, 2006. In particular, pharmaceutical manufacturers should consider establishing procedures to verify whether existing recipients of PAP assistance have enrolled in a Part D plan, and procedures to transition Part D enrollees out of pharmaceutical affiliated PAPs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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