Earlier this year, the Department of Health and Human Services Office of Inspector General (HHS OIG) issued an advisory opinion surrounding an arrangement whereby a pharmaceutical manufacturer offers free drugs to patients who meet certain criteria.
The drug in question is a personalized medicine that is made from the patient’s own cells and is intended to be a one-time, potentially curative treatment. The drug is subject to the Risk Evaluation and Mitigation Strategy (REMS) program of the Food and Drug Administration (FDA) and can only be administered by a healthcare facility that is certified by the manufacturer and prescribed only by a physician trained to meet the REMS requirements.
The manufacturer currently offers the drug at no cost to patients who satisfy certain criteria and aims to benefit patients who do not have insurance coverage for the drug and cannot otherwise afford it. To be eligible, a patient must meet the following criteria:
- A United States resident;
- Prescribed the drug by a Center Physician, in accordance with the label for an FDA-approved indication;
- Have no health insurance, no other insurance coverage for the drug, receive a denial of prior authorization and first-level appeal from their insurer (as determined by a Center), or a first-level appeal for coverage for the drug that has been pending for at least ten days (as determined by a Center); and
- Have an annual household income of $75,000 or less for a single-person household (and no more than an additional $25,000 per each additional household member).
The manufacturer providers the drug for free to all eligible patients for all FDA-approved indications, regardless of payor, and does not provide any cost-sharing assistance (direct or indirect) to any Federal health care program beneficiary who has been prescribed the drug. Additionally, while no Medicare beneficiary has qualified as an eligible patient and is not anticipated to become an eligible patient, Medicaid and TRICARE beneficiaries may qualify as eligible patients under the arrangement.
As the drug is usually administered just the one time, the majority of patients who receive the drug for free receive only one dose of the drug under the arrangement.
Under the Arrangement, the Center and the Center Physician prescribing the Drug must agree to follow certain guidelines established by Requestor, including attesting that neither the Center Physician nor the Center will submit any claim for payment to any Federal health care program for the cost of the Drug. However, Centers and Center Physicians may bill third-party payors, including Federal health care programs, for professional services, facility fees, or other fees for health care items and services provided to Eligible Patients related to administering the free Drug to Eligible Patients, if appropriate.
HHS OIG Analysis
HHS OIG concluded that providing the drug for free to eligible patients, Centers, and Center Physicians does constitute remuneration in the form of income-earning opportunities and therefore, implicates the anti-kickback statute. Such remuneration may induce Centers and Center Physicians to prescribe the Drug or arrange for or recommend future purchases of the Drug when payable by a Federal health care program. Similarly, the free Drug constitutes remuneration to Eligible Patients, some of whom may be Federal health care program beneficiaries, and may induce them to select the Drug and Federally reimbursed items and services related to Drug treatment.
However, HHS OIG concluded that the arrangement presents a “sufficiently low risk of fraud and abuse under the Federal anti-kickback statute.” One of the rasons for the low risk is that the drug is generally administered only one time and is individually manufactured using each patient’s own cells. This is very different from a free initial dose of a drug to treat a chronic condition and makes it unlikely that there will be inducements for future referrals of a drug payable by a Federal health care program.
HHS OIG also found that because the free drug is available to patients who are prescribed under either of the FDA-approved indications, it is distinct from other arrangements where manufacturers may offer a free drug for one clinical indication to maintain a higher price for all other indications when paid for by Federal health care programs.
Additionally, while a Center or Center Physician may receive a financial benefit under the arrangement (such as income, including professional service fees and facility fees in connection with administration of the free drug), the risk that a Center or Center Physician would overuse the drug to receive those fees are reduced because: (1) the drug is generally administered just one time and (2) the free drug is only available when prescribed on-label for patients who have already undergone two or more lines of systemic therapy and for patients who dd not respond to other initial treatment therapies.
HHS OIG Conclusion
Therefore, HHS OIG concluded that under these very specific circumstances, it will not subject the manufacturer to sanctions under the anti-kickback statute in connection with the arrangement.
Importantly, HHS OIG noted that the advisory opinion “has no application to, and cannot be relied upon by, any other person” and that it is limited in scope to this specific arrangement and “has no applicability to other arrangements, even those that appear similar in nature or scope.”