On September 19, 2014, the U.S. 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 (Report), along with a companion Special Advisory Bulletin (SAB). The Report described an OIG survey of manufacturers’ use of copayment coupons and analyzed the safeguards manufacturers implement to guard against the use of coupons for drugs paid for by Part D beneficiaries. In both the Report and the SAB, 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 (AKS) and other fraud and abuse laws.
The Report is based on survey responses from thirty manufacturers of the one hundred highest-cost Part D drugs for which manufacturer-sponsored coupons are available. 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. 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 programs are invalid for use by Federal health care program beneficiaries. Two-thirds of the surveyed manufacturers responded that they provide notices to pharmacists for at least one of the coupon formats they offer and all respondents reported giving some form of notice to beneficiaries. However, OIG contended that, based on its review, the actual prevalence of pharmacist notice was approximately 10 percent lower than that reported by manufacturers. OIG was also critical of what it characterized as the “fine print” nature of notices placed on coupons. In offering that critique, OIG did not suggest how, given space limitations, manufacturers might be able to provide notice that OIG would find more “effective.”
- Claims Processing Edits: 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 who responded to the survey indicated that they use claims processing edits to prevent coupons from being used for Part D drugs, although OIG stated that only 13 provided information about the type of proxies used to screen out suspected Part D beneficiary claims.
- According to OIG, the most common claims processing edit, used by 30 percent 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, OIG stated, rely on both BIN and Processor Control Number (PCN), a secondary identifier that is unique to a particular health insurer or manufacturer and routes the claim. OIG also said that 17 percent of manufacturers screen by patient date of birth, i.e., pharmacy claims are held if the patient is older than a particular threshold age.
- Finally, OIG reported that 20 percent of manufacturers screen claims based on whether the Part D “benefit stage” field has data.
- Mechanisms Currently in Use: 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 OIG that have attempted to quantify the use of coupons for Part D drugs have estimated that use at just six or seven percent. The methodologies used in those studies have been the subject of criticism. In particular, OIG noted that date of birth and BIN edits were, in its view, likely under-inclusive. 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, OIG also recognized how few manufacturers have access to this information.
- Recommendation to CMS: The Report took the position that only manufacturers, not Part D plans or pharmacies, can identify use of coupons within pharmacy claims. OIG recommended to CMS that it collaborate with Part D plans, pharmacies, and manufacturers to create a transparent system that allows for easy coupon identification by payors and pharmacies, and easy tracking of Part D plans by manufacturers.
- OIG also suggested that CMS consider “all options” to facilitate verification of Part D enrollment status before a coupon is processed or changes to the Part D program itself to facilitate Part D enrollment verification, although it did not outline what those specific options or changes might be.
- CMS agreed with OIG’s recommendations without offering any indication of how or when it might be able to implement them.
- Elsewhere in the Report, OIG suggested that pharmaceutical manufacturers engage CMS and other stakeholders to identify a solution.
The SAB highlighted the publication of the Report, summarized its findings, and stated OIG’s position that both pharmaceutical manufacturers and pharmacies may be subject to sanctions under the AKS, the beneficiary inducement civil monetary penalties statute, and/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.”
The Report and SAB reflect another example of OIG’s efforts to use transparency as a way to reduce what the agency considers a source of fraud and abuse. However, the lack of concrete suggestions from OIG about how such a system may operate and be operationalized is a significant limitation in the Report and SAB. In the interim, manufacturers that offer coupons may wish to evaluate their programs in light of the Report and SAB.