A recent lawsuit and appellate division decision provide guidance to industry stakeholders on copayment assistance programs. Pfizer filed a lawsuit against the U.S. Department of Health and Human Services (“HHS”) Office of Inspector General’s (“OIG”) over an unfavorable advisory opinion regarding Pfizer’s drug copay assistance program. Pfizer claimed that its two copay assistance programs would not violate the Anti-kickback Statute (“AKS”)[1] or the Beneficiary Inducement Statute (“BIS”).[2] The copay assistance program is designed to provide patients affordable medication to treat Transthyretin Amyloid Cardiomyopathy. Pfizer had requested an advisory opinion from OIG to initially determine if their independent charity program and the direct program would violate the AKS, given that Pfizer sells this expensive treatment for $225,000 per year and developed a program to reduce those costs.
Because the threat of sanctions and criminal charges for violations of the AKS and BIS are severe, Congress enacted a process by which entities can seek advisory opinions from OIG about whether an anticipated program or course of action would violate either or both of the statutes.[3] An OIG advisory opinion is a legal opinion issued by OIG to the requesting party about applying OIG’s fraud and abuse authorities to existing or proposed business arrangements.[4] An advisory opinion is binding to the requesting party.[5] However, common practice is to analyze advisory opinions to understand how OIG might analyze another arrangement. The more similar an arrangement is to one described in an advisory opinion, the more likely the OIG would have a consistent interpretation. OIG issues advisory opinions concerning:(1) what constitutes prohibited remuneration under the Federal anti-kickback statute; (2) whether an arrangement or proposed arrangement satisfies the criteria in section 1128B(b)(3) of the Act, or established by regulation (i.e., safe harbors), for activities which do not result in prohibited remuneration; (3) what constitutes an inducement to reduce or limit services to Medicare or Medicaid program beneficiaries under section 1128A(b) of the Act; and (4) whether an activity or proposed activity constitutes grounds for the imposition of sanctions under sections 1128, 1128A or 1128B of the Act.[6]
As to Pfizer’s request, OIG cited that under the AKS and BIS, pharmaceutical manufacturers are prohibited from providing financial assistance to cover out-of-pocket costs for Medicare patients. OIG refused to provide an opinion on Pfizer’s proposal to fund an existing third-party charity’s copay assistance fund, which would provide financial support to qualifying patients to cover the costs of their copays. OIG claimed a Corporate Integrity Agreement (CIA) with Pfizer prohibited them from issuing an advisory opinion stating, “[t]he same, or substantially the same, course of action is under investigation, or is or has been the subject of a proceeding involving the Department of Health and Human Services or another governmental agency.”[7]
OIG issued an unfavorable advisory opinion that Pfizer’s proposed arrangement to provide cost-sharing assistance directly to Medicare beneficiaries would generate prohibited remuneration under the AKS if the requisite intent to induce or reward referrals were present. Pfizer’s existing controls and patient qualifications were insufficient to curb the risk of fraud and abuse due to Pfizer’s elimination of patient cost-sharing. Specifically, OIG took issue with the risk of patient steering and anti-competitive effects since off-label treatment alternatives already existed. Further, OIG stated the program circumvented one of HHS’s key pricing controls – i.e., requiring Medicare beneficiaries to cover some portion of the costs for their care to help ensure more considerate, comprehensive care decisions – thereby exposing beneficiaries to the economic effects of drug pricing.
Pfizer sought a declaratory judgment that HHS’s policy violated the law. Pfizer asserts four causes of action. First, Pfizer seeks a declaration that the Direct Program and the Charity Program do not violate the AKS or the BIS. Second, Pfizer seeks a declaration that OIG’s guidance regarding the Charity Program would infringe on Pfizer’s First Amendment rights. Third, Pfizer seeks a declaration that OIG’s guidance regarding the Charity Program would violate the Fifth Amendment Due Process Clause. Finally, Pfizer seeks an order vacating HHS’s guidance and advisory opinion as contrary to law under the Administrative Procedure Act (“APA”).[8]
Siding with HHS, the Southern District of New York concluded that while it had jurisdiction to consider Pfizer’s declaratory judgment claim, “the claim is far too remote, and the facts of the underlying program are far too undeveloped to satisfy the prudential ripeness criteria. Moreover, there is no hardship alleged here that overcomes these barriers to review. As a result, the Charity Program claims are dismissed.”[9] OIG has not purported the exact attributes of the Charity Program are indefinite and not concrete.[10] OIG’s guidance does not violate the Fifth Amendment because Pfizer’s claim is primarily concerned with the equal protection rights of middle-income Medicare beneficiaries, and because Pfizer is not such a person, the claim is not Pfizer’s to bring. [11] On appeal, the Second Circuit rejected Pfizer’s argument holding that OIG’s conclusion was supported by the existing Anti-kickback statute and not contrary to law. The AKS prohibits “all remuneration that induces purchases of drugs (unless payments fall into one of the safe harbors).” Here, Pfizer’s payment did not fall into a safe harbor because the program was intended to increase the number of Medicare beneficiaries who purchased the drug.
The advisory opinion and the Court’s holding showcase OIG’s justification for the need to develop a program that promotes access to care and presents a low risk of fraud and abuse. Any charity support or copay assistance program must adhere to significant controls when Medicare beneficiaries are involved. Moreover, OIG has the authority and discretion to enforce and interpret healthcare fraud and abuse laws. It is important for the federal government to issue clear standards to provide drug companies with notice of the rules surrounding copay assistance programs.
How Frier Levitt Can Help
Frier Levitt assists manufacturers, wholesalers and providers in obtaining Advisory Opinions from the OIG, as well as to structure valid copayment assistant programs.
[1] 42 U.S.C § 1320a-7b.
[2] 42 U.S.C. § 1320a-7a(a)(5); See also HHS Office of Inspector General Fact Sheet. https://oig.hhs.gov/reports-and-publications/federal-register-notices/factsheet-rule-beneficiary-inducements.pdf
[3] 42 U.S.C. 1320a-7d(b).
[4] HHS-OIG Frequently Asked Questions About Advisory Opinions https://oig.hhs.gov/compliance/advisory-opinions/faqs/
[5] Id.
[6]HHS-OIG Advisory Opinion Process https://oig.hhs.gov/compliance/advisory-opinions/process/
[7] 42 CFR § 1008.15 https://www.law.cornell.edu/cfr/text/42/1008.15
[8]Pfizer v. US Dep’t Health and Human Services et al., 1:20-cv-4920 (S.D.N.Y. Sept. 30, 2021).
[9] Id.
[10] Id.
[11] Id.
