On May 21, 2014, the Department of Health and Human Services Office of Inspector General (OIG) released a Supplement Specialty Advisory Bulletin entitled “Independent Charity Patient Assistance Programs” (the Supplemental SAB, available here), to supplement its Special Advisory Bulletin on Patient Assistance Programs for Medicare Part D Enrollees (2005 SAB) (70 Fed. Reg. 70623) (Nov. 22, 2005, available here). The OIG was very clear that the additional guidance was not meant to replace the 2005 SAB or any other guidance. However, in several aspects, as explained below, Supplemental SAB modifies existing OIG advisory opinions provided to many bona fide independent charitable patient assistance programs (PAPs). As explained in the Supplemental SAB, the OIG has sent notices to all charitable PAPs currently holding favorable OIG advisory opinions requiring additional certifications from some and potential modifications for others.

The OIG states that the Supplemental SAB has been informed by its experiences with the Medicare Part D program from its inception in 2006 until present. In the recent past, some charitable PAPs have come under media scrutiny for allegedly favoring donor brand name drugs over generic equivalents and other therapeutic alternatives and in defining disease-specific funds too narrowly. In addition, some pharmaceutical manufacturer donors have received federal government inquiries related to their donations to certain charitable PAPs. The OIG has focused its supplemental guidance on three areas: Disease funds, eligible recipients, and the conduct of donors, which we review in turn below.

Disease Funds

Given recent media scrutiny, it is not surprising that the OIG focused the overwhelming majority of the Supplemental SAB on how charitable PAPs define disease-specific funds. The OIG states that the federal Anti-Kickback Statute (AKS) (42 U.S.C. § 1320-7b) is implicated if a pharmaceutical manufacturer donor is able to use a disease-specific fund as a conduit for payments to patients related specifically to the use of the manufacturer’s drug. As such, if a PAP defines a disease-specific fund too narrowly, such that only one drug is a potential treatment for the underlying disease, the fund could be a conduit for a pharmaceutical manufacturer donor to provide remuneration only to consumers utilizing its drug, which squarely implicates the AKS.

In its 2005 SAB, the OIG articulated that is would be concerned about disease-specific funds which were defined by reference to specific symptoms, severity of symptoms or the method of administration of drugs. The Supplemental SAB makes clear that those were merely examples and not “an exclusive list.” The OIG states it will scrutinize any narrowly defined disease-specific fund, particularly if the narrow definition results “in funding exclusively or primarily the products of donors…” Specifically, the OIG highlighted that funds which are defined by the stages of a particular disease or the type of drug treatment were too narrowly defined.

In addition, the OIG expressed concern about charitable PAPs that utilized high cost-sharing thresholds, such as $100 per prescription or the like, to narrow drug coverage under their funds, thus favoring coverage for high-priced brand drugs and often specialty products over lower cost generic drugs. While the OIG recognized that many charitable PAPs used these thresholds to preserve their resources for the neediest patients, its felt such a practice could result in steering patients to certain higher-priced drugs and facilitate the ability of manufacturers to charge higher prices for their products. As such, the OIG stated a fund would be subject to increased scrutiny “if it was limited to a subset of available products rather than all products approved by the Food and Drug Administration for treatment of the disease state(s) covered by the fund…”

Lastly, the OIG states emphatically in the 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.” Given the OIG’s declaration, it seems the OIG is suggesting that a charitable PAP — with a fund specific to an orphan disease where there is only one available drug treatment, manufactured by one pharmaceutical manufacturer who is also the fund’s sole donor — may violate the AKS.

Eligible Recipients

In the Supplemental SAB, the OIG affirmed that independent charitable PAPs with properly structured disease-state funds could operate funds that provide cost-sharing assistance only to Medicare and other Federal Health Care Program beneficiaries. It reiterated that eligibility for assistance must be determined using reasonable, verifiable and uniform measures of financial need, applied in a consistent manner. The OIG emphasized that the cost of a particular drug should not be considered in a vacuum when assessing financial need but, if considered at all, would have to be part of a broader assessment of financial need.

Conduct of Donors

In the Supplemental SAB, the OIG highlighted that advisory opinions issued to PAPs are binding solely upon the PAPs to which they were issued and not their donors. Charitable PAPs are not protected by their current advisory opinions, unless they follow all of the certifications that form the basis of their advisory opinions including defining all disease-state funds in accordance with widely recognized clinical standards and limited data provided to donors about fund distributions to aggregate information that cannot be correlated with the spending on any particular manufacturer’s drug. It also stated that any actions taken by donors to “correlate their funding of PAPs with support for their own products” may be “indicative of donor’s intent to channel its financial support to copayments of its own products, which would implicate the [AKS].”

The Supplemental SAB includes only the OIG’s opinions as to implications of charitable PAP practices under the AKS and beneficiary inducement statute, not the federal False Claims Act or other federal or state laws.

It is imperative that all charitable PAPs critically review how their disease-specific funds are defined to ensure compliance with their current OIG advisory opinions, if applicable, as well as the OIG’s 2005 SAB and this Supplemental SAB and respond to the OIG’s request for additional certifications or modification discussions in timely fashion. Pharmaceutical manufacturer donors to charitable PAPs should review their current donation practices, donor agreements and oversight of chartable PAPs to which they contribute for compliance with all OIG guidance, including this Supplemental SAB.