The Department of Health and Human Services Office of Inspector General (HHS OIG) issued Advisory Opinion 24-04, regarding two drug assistance programs and whether they would violate the Federal anti-kickback statute (AKS). The Requestor requested an advisory opinion regarding a (1) limited time program to refund, waive, or delay requiring receipt of payment for a drug in the event of an insurance reimbursement denial or delay (the “Refund Program”) and (2) certain discounts to the cost of the drug (the “Discount Program” and collectively with the Refund Program, the “Arrangement”).
The Requesting company provides support services for the supply chain of a drug, which is used to treat pediatric patients with a very rare immunodeficiency disorder that impacts only 17 to 24 of the 4 million children born annually in the United States, characterized by the absence of a thymus at birth. The drug is a one-time (potentially curative) regenerative tissue-based treatment and it is the only treatment for the diagnosed condition to rebuild the immune system for a patient diagnosed with the Condition. To make the drug, donor thymus tissue must be obtained from donors younger than nine months old undergoing cardiac surgery. the tissue is then aseptically processed and cultured for 12 to 21 days and is then administered via surgical implantation in the thigh muscle of the child with the condition. This procedure is performed at only one treatment center in the country that is authorized to administer the treatment and because the shelf life of the drug is only 3 hours after manufacturing, it must be implanted in close proximity to the site of manufacturing. Often, the treating physician of the patient does not work at the treatment center but refers the patients there. Additionally, the treatment center must purchase the drug prior to administering it to the patient.
The Refund Program
Based on the presumably high price of the drug, the treatment center can be hesitant to purchase the drug. Therefore, the Requestor wanted to create the Refund Program under which it will (1) waive or refund the wholesale acquisition cost (WAC) if the patient’s insurance company refused to reimburse the treatment center after initially approving the drug or (2) it will allow the treatment center to delay payment for the drug if there are reimbursement delays for a patient. To be eligible for a refund, the treatment center must comply with certain conditions.
In cases where the Requestor refunds the cost of the drug to the treatment center, the treatment center must refund any cost-sharing amounts to the patient. The refund will often result in the patient receiving the drug for free, as an insurance denial would often result in the patient having to pay out of pocket for the cost of the drug.
The Requestor is unable to advertise the Refund Program to patients or physicians and it is required to report the Refund Program on invoices for the drug and provide information about the Program to federal and state healthcare officials, if requested.
HHS OIG found that the Refund Program does implicate the AKS but because the Refund Program is limited in scope and time and that there is a low likelihood that it will interfere with clinical decision-making, it would not impose administrative sanctions as the risk of fraud and abuse is low under the AKS.
The Discount Program
The Discount Program serves to provide the treatment center with greater price predictability. The timeframe from when the treatment center first seeks approval from the treating physician and insurer to when the drug is administered to the patient can take many months. During those months, the wholesale acquisition cost of the drug may change. Under the Discount Program, if the wholesale acquisition cost is higher when the drug is delivered and administered than when the pricing agreement was signed, the Requestor can discount the wholesale acquisition cost.
HHS OIG found that while AKS is also implicated in this situation, it meets the safe harbor for discounts and does not, therefore, generate prohibited remuneration under the AKS.
Conclusion
HHS OIG found that it would not impose administrative sanctions for either the Refund Program or the Discount Program, despite the potential for prohibited remuneration under the AKS to be generated. As with all Advisory Opinions, the opinion is only applicable to the specific programs covered in the Opinion and cannot be relied upon by other companies.