On Tuesday, the Health and Human Services (HHS) Office of Inspector General (OIG) issued an Advisory Opinion regarding a program to provide a 30-day supply of cancer drugs free of costs to patients who experienced an insurance coverage determination delay of at least five business days (the Free Supply Program).  The OIG concluded that although the Free Supply Program could potentially generate prohibited remuneration under the federal health care program anti-kickback statute (AKS) (42 U.S.C. 1320a-7b(b), the OIG would not impose administrative sanctions against the two requestors, pharmaceutical companies that co-promote the drug, in connection with this arrangement.

The OIG noted in its analysis that a third-party vendor operates the Free Supply Program through its affiliated specialty pharmacy.  The specialty pharmacy does not fill prescriptions for the public, but only dispenses under various client supply programs like the Free Supply Program.

To receive the drug through the Free Supply Program, a patient must meet the following:

  1. Be a new patient;
  2. Received a prescription for the drug;
  3. Have an on-label diagnosis;
  4. Have health insurance coverage for through a private insurer or Federal health care program; and
  5. Have experienced a delay in a coverage determination of at lest five days.

Under the Free Supply Program, a free 30-day supply of the drug is provided by the specialty pharmacy to patients who meet all of the Free Supply Program criteria.  If the coverage delay persists or the patient is appealing the decision, one additional 30-day supply of the drug may be provided by the specialty pharmacy.

Participants are instructed that no patient, pharmacy, or payor may be billed for the free drug supply.  There is also no direct-to-consumer advertisement of the Free Supply Program.  Sales representatives provide approved materials describing the program to health care professionals only.

The OIG found that the Free Supply Program presents a low risk under the AKS.  This conclusion was reached by the OIG for the following reasons:

  • The risk of overutilization is limited because only on-label patients whose insurers do not provide a timely coverage determination are eligible for the program and the benefit is limited to two 30-day supplies.
  • The arrangement distinguishable from “seeding” arrangements, where a free drug is offered to induce the patient to obtain subsequent supplies billed to Federal health care programs.
  • Prescribers receive no financial benefit.
  • The Free Supply Program does not induce the patient to obtain other prescriptions from the specialty pharmacy that would be reimbursed by a Federal health care program.
  • There is no cost to Federal health care programs under this Free Supply Program.

Additionally, the OIG determined that the Free Supply Program arrangement does not implicate the beneficiary inducement civil monetary penalty (CMP), 42 U.S.C. 1320a-7a(a)(5), which prohibits the offer of remuneration to a Federal health care program beneficiary that the offeror knows or should know is likely to induce the beneficiary to use a particular “provider, practitioner, or supplier” for federally reimbursed products or services.   The OIG makes it clear that pharmaceutical companies, such as the requestors, are not a “provider, practitioner, or supplier” that would implicate the CMP  Further, because the specialty pharmacy in the Free Supply Program does not bill third party payors and does not serve the general public, thus beneficiaries would not be induced by the Free Supply Program to use the specialty pharmacy for other federally reimbursed products or services.

Although the OIG Advisory Opinion is may be relied on by the particular requestors only, it provides guidance to pharmaceutical manufacturers that have, or are considering the implementation of similar programs.