BACKGROUND
The U.S. Department of Health and Human Services Office of Inspector General (“OIG”) published favorable Advisory Opinion 24-02 on April 8, 2024, in response to a proposal by an independent charity (the “Requestor”) regarding patient assistance funds it operates associated with 12 specific diseases (the “Proposed Arrangement”). The OIG concluded that, provided certain safeguards are in place to ensure the patient assistance program (“PAP”) retained a sufficient degree of independence from the manufacturers, drug manufacturers may fund such programs for the benefit of patients in need. Although the analysis provides useful guidance to PAPs, there is one eye catching departure – the opinion is set to expire on January 1, 2027 – two years after the implementation of the Inflation Reduction Act (“IRA”). In the midst of the OIG’s review of the proposed arrangement, Congress implemented the restructured cost sharing imposed on Medicare Part D enrollees, eliminating the enrollees’ 5% cost sharing in the catastrophic phase beginning in 2024 and capping enrollees’ annual out-of-pocket costs for Part D drugs at $2,000 beginning in 2025 (with the cap updated annually thereafter). The OIG reasoned that the reduction in cost-sharing obligations, which typically burdens patients in need, might reduce demand for the type of subsidies provided for in the proposed arrangement. In fact, the OIG noted, the entire economics of the arrangement might shift, and took the unprecedented step of sun-setting the applicability of its analysis.
The Proposed Arrangement would allow the Requestor and its charitable operations to maintain a “Disease Fund” around each of 12 rare disorders that would generally assist patients with out-of-pocket costs associated with their disease, including costs of expensive medications and other care necessary for treatment of the patient’s disease. Each Disease Fund is funded by a single donor — a manufacturer that makes or markets a drug to treat the disease state addressed by the Disease Fund.
Under the Proposed Arrangement, drug manufacturers would indirectly fund three categories of expenditures:
(1) cost-sharing subsidies for prescription drugs and other items or services;
(2) financial support to cover, in whole or in part, medical expenses not covered by insurance;
(3) insurance premium subsidies; and
(4) emergency relief.
The proportion of funds spent to support the purchase of the donors’ drugs vary considerably – the Disease Funds do not act as mere conduits to support their donor’s own drugs. Assistance is awarded without regard to the treatment regime prescribed for a particular patient, there are limitations on the sharing of information with donors, and each recipient of assistance is required to go through a financial and medical eligibility application process.
The OIG’s concerns with PAPs are focused on the potential for cost-sharing subsidies funded by manufacturers to increase drug prices, resulting in concomitant increased costs to the Federal healthcare programs and certain patients, steering of Part D enrollees to certain drugs, and the potential for anti-competitive effects.
CONCLUSION AND GUIDANCE
At the outset, the OIG concluded that the arrangement did not implicate the Beneficiary Inducements CMP, because a patient’s eligibility is not contingent upon the selection of a particular treating physician or pharmacy, and accordingly, there is no influence on the patient’s selection of a provider or item or service paid for, in whole or in part, by Medicare or a state healthcare program. Although the OIG did conclude that the arrangement directly implicated the Federal Anti-Kickback Statute (“AKS”), it declined to impose administrative sanctions on the Requestor because (i) the program safeguards reduced the risk of fraud and abuse common to PAPs, and (ii) the OIG recognized the positive impact the Proposed Arrangement has on both the financial and medical well-being of patients with rare disorders. These safeguards include (i) implementing clear financial and medical eligibility requirements, (ii) ensuring that funds were provided to patients independent of the patient’s insurance or proposed treatment regimen, (iii) limiting the information shared with manufacturer donors, and (iv) providing an adequate variety of financial assistance to meet a wide range of needs.
While this opinion reflects the OIG’s continued regulatory concerns under the AKS arising from pharma manufacturers’ financial subsidization of costs associated with pharmaceuticals, it does offer helpful guidance that suggests that patient assistance programs to those in need, funded by large pharmaceutical manufacturers, are acceptable if the arrangements comply with guardrails designed to minimize the risk of fraud and abuse. The time-limited nature of the opinion does interject a considerable degree of future uncertainty into the structure of these arrangements because it clearly puts PAPs on notice that the OIG intends to reconsider in light of the IRA’s unfolding impact on Part D design and access.
How Frier Levitt Can Help
Navigating the dynamic regulatory landscape of healthcare and pharmaceutical law necessitates vigilance. Frier Levitt’s experienced attorneys consistently monitor updates from the OIG and other regulatory agencies to ensure that healthcare providers are adequately informed. Healthcare providers frequently engage us to analyze the potential impact of advisory opinions on their operations and establish patient assistance programs that comply with all applicable laws and regulations. If you have questions about this advisory opinion or any other regulatory updates with respect to the potential to impact your business, contact our office to speak with an attorney today.
