Introduction
Report

Special advisory bulletin
Comment


Introduction

On September 19 2014 the US Department of Health and Human Services' Office of Inspector General (OIG) issued a controversial report entitled "Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs", along with a companion special advisory bulletin. The report described an OIG survey of manufacturers' use of co-payment coupons and analysed the safeguards that manufacturers implement to guard against the use of coupons for drugs paid for by Part D beneficiaries. In both the report and the advisory bulletin, the OIG took the position that failure to implement effective safeguards for compliance with eligibility requirements and other terms and conditions may be taken by the agency as reflecting an intent to use coupons to induce federally funded purchase of drugs in violation of the Anti-kickback Statute and other fraud and abuse laws.

Report

The report is based on survey responses from 30 manufacturers of the 100 highest-cost Part D drugs for which manufacturer-sponsored coupons are available. The OIG stated that the purpose of its study was to identify the range of safeguards employed by manufacturers to prevent their coupons from being used by Part D beneficiaries. The OIG offered the following conclusions in the report:

  • Notices – all 30 survey respondents confirmed that they provide notices to beneficiaries and/or pharmacists stating that their coupon and co-payment programmes are invalid for use by federal healthcare programme beneficiaries. Two-thirds of the surveyed manufacturers responded that they provide notices to pharmacists for at least one of the coupon formats that they offer, and all respondents reported giving some form of notice to beneficiaries. However, the OIG contended that, based on its review, the actual prevalence of pharmacist notice is approximately 10% lower than that reported by manufacturers. The OIG was also critical of what it characterised as the "fine print" nature of notices placed on coupons. In offering this critique, the OIG did not suggest how, given space limitations, manufacturers might be able to provide notice that the OIG would find more effective.
  • Claims processing edits – the OIG acknowledged in its report that manufacturers use a variety of claims processing edits to reduce the potential for their coupons to be applied where the drug is paid for by a Part D plan:
    • Twenty-eight of the 30 manufacturers which responded to the survey indicated that they use claims processing edits to prevent coupons from being used for Part D drugs, although the OIG stated that only 13 provided information about the types of proxy used to screen out suspected Part D beneficiary claims.
    • According to the OIG, the most common claims processing edit, used by 30% of manufacturers, is to screen for claims based on whether the primary insurer's bank identification number (BIN) is assigned to a Part D plan. The BIN identifies the responsible payer. A smaller subset of these manufacturers rely on both BINs and processor control numbers (PCNs), a secondary identifier that is unique to a particular health insurer or manufacturer and that routes the claim. The OIG also said that 17% of manufacturers screen by patient date of birth – that is, pharmacy claims are held if the patient is older than a particular threshold age.
    • Finally, the OIG reported that 20% of manufacturers screen claims based on whether the Part D "benefit stage" field has data.
  • Mechanisms currently in use – the OIG concluded that the mechanisms currently in use may not prevent coupons being processed for drugs paid for by Part D plans. The only two studies cited by the OIG that have attempted to quantify the use of coupons for Part D drugs have estimated that use at just 6% or 7%. The methodologies used in these studies have been the subject of criticism. In particular, the OIG noted that the date of birth and BIN edits were, in its view, likely to be under-inclusive. The OIG also speculated that manufacturers might include only those BINs known to be exclusively used by insurance companies' Part D plans. In acknowledging that BIN/PCN combinations and benefit stage information might be a more accurate standard to apply, the OIG also recognised how few manufacturers have access to this information.
  • Recommendation to the Centres for Medicare and Medicaid Services (CMS) – the report took the position that only manufacturers, not Part D plans or pharmacies, can identify use of coupons within pharmacy claims. The OIG recommended to the CMS that it collaborate with Part D plans, pharmacies and manufacturers to create a transparent system that allows for easy coupon identification by payers and pharmacies, and easy tracking of Part D plans by manufacturers.
  • The OIG also suggested that the CMS consider all options to facilitate verification of Part D enrolment status before a coupon is processed or changes to the Part D programme itself to facilitate Part D enrolment verification, although it did not outline what those specific options or changes might be.
  • The CMS agreed with the OIG's recommendations without offering any indication of how or when it might be able to implement them.
  • Elsewhere in the report, the OIG suggested that pharmaceutical manufacturers engage the CMS and other stakeholders to identify a solution.

Special advisory bulletin

The special advisory bulletin highlighted the publication of the report, summarised its findings and stated the OIG's position that both pharmaceutical manufacturers and pharmacies may be subject to sanctions under the Anti-kickback Statute, the beneficiary inducement civil monetary penalties statute; or the False Claims Act if they "fail to take appropriate steps to ensure that [copay] coupons do not induce the purchase of Federal health care program items".

Comment

The report and the advisory bulletin reflect another example of the OIG's efforts to use transparency as a way to reduce what it considers to be a source of fraud and abuse. However, the lack of concrete suggestions from the OIG about how such a system may operate and be operationalised is a significant limitation. In the interim, manufacturers that offer coupons may wish to evaluate their programmes in light of the report and the advisory.

For further information on this topic please contact William Sarraille, James Stansel or Mark Langdon at Sidley Austin LLP' by telephone (+1 202 736 8600), fax (+1 202 736 8711) or email (wsarraille@sidley.com, jstansel@sidley.com or mlangdon@sidley.com). Alternatively, contact Hae-Won Min Liao at Sidley Austin LLP's San Francisco office by telephone (+1 415 772 1200), fax (+1 415 772 7400) or email (hminliao@sidley.com).The Sidley Austin website can be accessed at www.sidley.com.The Sidley Austin website can be accessed at www.sidley.com.