On June 27, 2016, the Department of Health and Human Services Office of Inspector General (“OIG”) issued a favorable Advisory Opinion, No. 16-07, relating to a savings card program under which individuals who have prescription drug coverage under Medicare Part D receive discounts on a drug that is statutorily excluded from Part D coverage.
According to the Advisory Opinion, the Requestor markets and distributes a prescription drug that has been approved by the U.S. Food and Drug Administration for the treatment of erectile dysfunction (the “Drug”). While the Drug is covered by many private insurance plans and some Federal health care programs, including state Medicaid programs and TRICARE, the Drug is statutorily excluded from coverage under Medicare Part D.
Under the arrangement, the Requestor offers and provides coupons, in the form of a savings card, which Medicare Part D beneficiaries (“Beneficiaries”) may use to receive discounts on the purchase of the Drug. Specifically, Beneficiaries may receive reductions on out-of-pocket costs greater than $15, up to a maximum benefit of $75 per prescription, on up to 12 prescriptions for the Drug, when they present their savings card and Drug prescriptions to their pharmacist.
Citing to its Special Advisory Bulletin on Pharmaceutical Manufacturer Copayment Coupons (Sept. 2014),  the OIG noted that copayment coupons constitute remuneration that is offered to consumers to induce the purchase of specific items. When the item in question is one for which payment may be made, in whole or in part, under a Federal health care program (including Medicare Part D), the anti-kickback statute (the “AKS”) is implicated. The OIG determined that the savings card program may induce the purchase of federally payable items in two distinct ways:
- The savings card may induce Beneficiaries to purchase the Drug by reducing or eliminating their out-of-pocket costs.
- The savings card may induce Beneficiaries to purchase other federally payable products manufactured, marketed, or distributed by the Requestor.
The OIG concluded, however, that the arrangement presents a very minimal risk of fraud and abuse under the AKS for two reasons. First, the savings card program does not induce the purchase of a specific item for which payment may be made by Medicare Part D because the Requestor has employed several safeguards to ensure that claims for the Drug are not submitted to Medicare Part D plans including the following: (1) contractually requiring its claims processor to use claims data to detect attempted savings card use by ineligible individuals; (2) requiring Beneficiaries to agree not to submit claims to Medicare Part D; and (3) instructing the pharmacies that fill the Beneficiaries’ prescriptions to treat them as cash-paying customers. The OIG did note that although these safeguards are not infallible, the arrangement is likely permissible because the Drug is statutorily excluded from Part D coverage. Thus, even if the safeguards failed, claims submitted would not be paid by Part D due to the statutory exclusion. Second, because the Requestor attested that it would not utilize the arrangement to market other products it manufactures, markets, or distributes to Federal health care program beneficiaries, the OIG determined that the risk of fraud and abuse under the AKS is minimal.
According to this Advisory Opinion, companies that market or distribute prescription drugs and seek to offer discount programs to help defray the costs of these drugs may violate federal fraud and abuse laws if they do not take comprehensive steps to ensure that such programs do not induce the purchase of Federal health care program items or services including, but not limited to, drugs paid for by Medicare Part D. Failure to take such steps may be considered indicative of the intent to induce the purchase of drugs paid for by these programs in violation of the AKS.
The OIG stressed that the Advisory Opinion is limited to whether the arrangement presents no more than a minimal risk of fraud and abuse under the AKS. The OIG expressed no opinion as to whether the arrangement complies with any other Federal or state laws. For more information, please contact the professionals listed below or your regular Crowell & Moring contact.