In its September 19, 2014 Special Advisory Bulletin (SAB), the Office of Inspector General (OIG) of the Department of Health & Human Services (HHS) noted the potential risks to federal health care programs presented by pharmaceutical manufacturers’ coupon programs designed to reduce or eliminate patient copayment requirements for brand-name drugs, and emphasized that coupon program sponsors and pharmacies are at risk of sanctions if they fail to take appropriate steps to carve out federal health care program beneficiaries from using the coupons. The OIG points out these coupon programs – which may take different forms, such as print coupons, electronic coupons, debit cards, and direct reimbursements – are remuneration offered to consumers to induce the purchase of specific items, and therefore implicate the criminal federal anti-kickback statute, 42 U.S.C § 1320a-7b(b). Where remuneration is knowingly and willfully paid with the intent to induce or reward referrals of items or services payable by a federal health care program, the anti-kickback statute is violated. The OIG goes on to observe that a claim that includes items or services resulting from a kickback violation would also constitute a false or fraudulent claim under the False Claims Act, 31 U.S.C. § 3729, and grounds for civil money penalties for beneficiary inducement if offer or acceptance of copayment coupons may induce a beneficiary to use a particular practitioner or pharmacy, 42 U.S.C § 1320a-7a(a)(5). While the SAB’s focus is on manufacturer coupon practices, in a footnote, the OIG states that pharmacies accepting coupons for Part D copayments may also be subject to these sanctions.

Notwithstanding the potential benefits of coupon programs to provide access to brand-name drugs and adherence to drug regimens, the OIG claims that such coupon programs may interfere with federal health care program cost-sharing requirements to promote prudent prescribing and purchasing choices by physicians and patients based on the “true costs” of drug and price competition in the market. As a result, the OIG writes, “[w]hile copayment coupons provide an immediate financial benefit to beneficiaries, they ultimately can harm both Federal health care programs and their beneficiaries.”

In the SAB, the OIG acknowledges that the pharmaceutical industry is aware of the potential anti-kickback concerns and generally has implemented a variety of controls to exclude federal health care program beneficiaries from these programs. The OIG’s concern seems to be that these controls don’t go far enough or don’t always work. In other words, the OIG sees the glass as “half empty.” The OIG does not seem to acknowledge that the glass may actually be half-full – i.e., the industry's attempt to have some controls (even if imperfect) evidences manufacturers’ intent to comply with the statute, making it difficult to show criminal liability.

In fact, the OIG’s report, “Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs” (OEI-05-12-00540) http://go.usa.gov/pdYQ, issued concurrently with the SAB, describes in detail mechanisms used by various manufacturers, most notably through claims processing and “switches,” to prevent use of the coupons for drugs paid for by Medicare Part D. The report identifies the principal shortcomings identified with these mechanisms as stemming from the fact that CMS does not permit manufacturers to submit Part D enrollment verification requests (“E1 transactions”) to the Part D Transaction Facilitator because of privacy concerns, so that manufacturers must use various “proxies” to attempt to determine whether the individual using the coupon is enrolled in a Part D plan. The report finds that these proxies, which may include elements as inexact as beneficiary age, may not be accurate enough to guarantee exclusion of Part D claims. Consequently, the OIG appears to be asserting that manufacturers may have liability for having imperfect controls, even though the current claims-processing system does not make a perfect solution available to them. The report did not identify any specific Part D claims for which coupons had in fact been used contrary to coupon terms and conditions.

The OIG recommends that CMS cooperate with industry stakeholders to improve the reliability of pharmacy claims edits, and make coupons transparent. CMS concurred with the recommendation.