On January 5, 2015, the Department of Health and Human Services Office of Inspector General (OIG) posted Advisory Opinion No. 14-11 (Advisory Opinion) addressing a charitable foundation’s request to provide cost-sharing assistance to financially needy patients diagnosed with either Crohn’s disease or ulcerative colitis, some of whom may be federal health care program beneficiaries. While the OIG ultimately concluded that the arrangement would not require imposition of civil monetary penalties, and that it would likely not impose sanctions pursuant to the anti-kickback statute, the Advisory Opinion is of particular interest to other charitable patient assistance programs (PAPs) and pharmaceutical manufacturers that donate to PAPs because 1) it represents the first time that the OIG has specifically referred to and applied its guidance found in the Supplemental Special Advisory Bulletin, Independent Charity Patient Assistance Programs, as published in the Federal Register on May 30, 2014 (May 2014 Supplemental SAB); and 2) it contains certain restrictions related to donors and their “affiliates” which some PAPs may find challenging to implement and monitor from an operational perspective.

The party requesting the Advisory Opinion is a charitable foundation dedicated specifically to individuals affected by Crohn’s disease or ulcerative colitis (Requestor) who sought to establish a PAP to provide cost-sharing assistance to patients with either of those diseases who can demonstrate financial need for such assistance (Proposed Arrangement).

The Proposed Arrangement would be structured consistent with the following parameters:

  • Any patient applying for assistance must first have selected his or her health care provider and have a treatment regimen in place;
  • Patients would maintain freedom to change their providers, practitioners, suppliers, drugs, or insurance plans while receiving assistance;
  • Financial eligibility would be based upon the Federal poverty guidelines and would utilize a sliding scale to determine the total amount of assistance provided;
  • Financial assistance would also be limited to a specific period of time (up to one year) and the recipient would be required to notify the Requestor if their financial situation changed during that period;
  • Assistance would be provided directly to the patient’s pharmacy whenever possible;
  • Eligibility determinations would not take into consideration the interest of any person or entity who contributes to the program (Donor) or any affiliate of a Donor, and no Donor or affiliate of a Donor would exert any influence or control over the Requestor’s program; and
  • While the Requestor could provide Donors with data regarding the program, only aggregate data would be provided to Donors (such as the number of requests for assistance, the average amount of patient grants, and so forth), such that no Donor would be able to identify individual patient information or the identity, amount, or nature of drugs involved in the assistance program.

In conducting its analysis of the potential for violation of the anti-kickback statute, the OIG reasoned that the Proposed Arrangement presented minimal risk that a Donor contribution would influence direct or indirect referrals by the Requestor. The OIG enumerated four specific factors in support of this position and also reasoned that its conclusion was consistent with the May 2014 Supplemental SAB. The OIG highlighted that 1) no Donor or “affiliate” of any Donor would be able to exert any control over the Requestor or the Proposed Arrangement; 2) any patient applying for assistance must have first selected their health care provider, and that the patient’s freedom to change their provider would remain unfettered; 3) any data provided to Donors regarding the program would be aggregated and could not “facilitate a Donor in correlating the amount or frequency of its donations with the amount or frequency of the use of its drugs or services” and that patients would not receive any information regarding Donors; and 4) the diseases available for assistance were described in a manner consistent with widely recognized clinical standards and in a broad enough fashion to prevent a “narrow” definition which could have the practical effect of providing a kickback to Donors.

Disease Funds Not Too Narrow

The Requestor proposed two separate disease funds from which assistance could be awarded — one fund for Crohn’s disease and the other fund for ulcerative colitis. Consistent with the May 2014 Supplemental SAB, the Requestor certified that the two disease funds are defined “in accordance with widely recognized clinical standards, and not by reference to specific symptoms, severity of symptoms, method of administration of drugs, stages of a particular disease, type of drug treatment, or any other way of narrowing the definition of widely recognized disease states.” The Requestor indicated that they would “not maintain a disease fund that would provide cost-sharing assistance for only one drug, or the drugs made or marketed by only one manufacturer or its affiliates.” Such a restriction is not mandated under the May 2014 Supplemental SAB, though the OIG did note in the May 2014 Supplemental SAB that “a disease fund that covers only a single product, or the products made or marketed by only a single manufacturer that is a major donor to the fund, will be subject to scrutiny.”

Restrictions on Donors and Donor “Affiliates”

Current OIG guidance for PAPs, including the May 2014 Supplemental SAB, along with current favorable advisory opinions for PAPs, have all articulated that in order for Donor contributions to not raise scrutiny under the anti-kickback statute, no Donors or “directors, officers or employees” of Donors could exert, or have the ability to exert, any control over the PAP. Specifically, in this case, Requester certified that “no Donor, or immediate family member, director, officer or employee or person otherwise affiliated with a Donor, would be eligible to serve” on the Requestor’s Board of Directors. In this Advisory Opinion, restrictions previously tied to Donors and directors, officers, and employees of Donors have been expanded to apply to “affiliates” of Donors. “Affiliate” is defined as “any employee, agent, officer, shareholder, or contractor (including, without limitation, any wholesaler, distributor, or pharmacy benefits manager) of a Donor.” The definition of “affiliate” of a Donor is quite broad. In addition to entities controlled by, controlling, or under the common control of a Donor, “affiliate” includes directors, employees, officers, and even shareholders and contractors of a Donor.

Under the broad definition of “affiliate,” therefore, an individual who holds stock in a publicly-traded Donor pharmaceutical company, even indirectly through a mutual fund, would not be able to serve on the PAP’s Board of Directors, regardless of the amount that the Donor pharmaceutical company donates to the PAP. This broad definition of “affiliate” raises some practical questions for PAPs. For example, how will the PAP monitor its Donors’ contractors to ensure that a Board member does not have a relationship with any contractor? Of note, the inclusion of contractors in the “affiliate” definition is not limited to contractors that are controlled by, controlling, or under common control with the Donor. As such, if a member of the Board of Directors was employed by a distributor that contracted with a Donor, the member would need to vacate the Board. How can the PAP operationalize this requirement when Donor contractors could change regularly?

Program Administration by Another PAP

Of note, the Advisory Opinion states that the Requestor contemplated working with another charitable organization to actually administer the Proposed Arrangement. The OIG acquiesced to this approach so long as the organization actually administering the PAP complied with the Requestor’s certifications supporting the Advisory Opinion. The OIG’s approval of this approach opens the door for existing PAPs to enter into similar administrative arrangements with other charitable PAPs and potentially for-profit entities.