Over the last several weeks, we’ve been following a number of developments around potential legal challenges to the use of drug coupons and co-pay cards. As many of our readers know, the battle between manufacturers and payers boils down to a fundamental issue: are manufacturers’ efforts to subsidize consumers’ out of pocket costs via drug coupons and co-pay cards as a means to promote new starts and/or product adherence appropriate when those approaches are viewed by insurers, plans and their PBM partners as a means to distort and skew formulary controls that may ultimately lead to higher overall costs for the entire healthcare system?

We’ve commented before about the tension between manufacturers and payers with respect to the availability of drug coupons and co-pay cards. Recently, however, several potential legal issues have come to light that have generated significant confusion within the industry, all of which collectively could undermine the administration of manufacturer programs involving drug coupons, co-pay cards and other offset strategies.

We’ll address one important issue in this post:  the possible use of drug coupons and co-pay cards by Medicare beneficiaries in connection with purchases of Part D covered drugs, which was addressed last week by OIG in its report and Special Advisory Bulletin.  We will follow up with a second post on another issue later in the week.

By way of background, regulators historically have viewed the subsidization of a beneficiary’s cost sharing amount as a prohibited inducement that could support a violation of the federal anti-kickback statute. Accordingly, manufacturers have been extremely sensitive to this issue, and typically include language and disclaimers on their materials stating that the coupons or co-pay cards cannot be used for prescriptions for which payment may be made in whole or in part under a federal or state health care program, like Medicare or Medicaid.

As our readers are aware, OIG confirmed this legal interpretation last week in its report.  The report, compiled after an investigation that spanned well more than a year, called into question whether manufacturers have implemented sufficient safeguards to ensure that Medicare beneficiaries do not use coupons or co-pay cards to obtain drugs paid for by the Part D program.

We’ll spare our readers a full recap of OIG’s report, but we think it’s important to highlight a few areas that did not get as much attention as may be warranted. In our view, OIG’s analysis could have benefited from a truly comprehensive evaluation of the types of coupon and co-pay card programs the office purported to review, including the assumptions that appear to have piqued OIG’s interest in the first place.

For starters, instead of conducting a comprehensive review of whether Medicare beneficiaries actually have used coupons or co-pay cards in connection with prescriptions that are paid for by the Part D program, OIG appears to have relied upon the findings of surveys concluding that approximately 6-7 percent of seniors reported using coupons to purchase prescription drugs paid for by Medicare. As OIG must have known, the conclusions drawn by the NCHC survey it cites, as well as the other surveys and studies relied upon, have been questioned by a number of industry participants.  See here for one example.

Which of course raises a fundamental question: shouldn’t OIG have conducted an independent review and analysis to determine whether Medicare beneficiaries actually do use drug coupons and co-pay cards to purchase drugs that are paid for by Part D plans? And further, if OIG verified instances of such coupon use, is the magnitude of the issue as significant as the 6 to 7 percent figure alleged in the surveys?

By taking a full and fresh look at the assumptions underlying its investigation, at least then OIG presumably would have been able to resolve a couple of key issues that continue to be the subject of discussion within the industry:

First, if Medicare beneficiaries are using drug coupons and co-pay cards, are claims for the covered Part D drugs actually submitted by a pharmacy to a Part D plan for reimbursement?

Or, in other words, do Medicare beneficiaries using coupons present to a pharmacy as cash paying customers, such that a claim for reimbursement for the drug is never submitted by a pharmacy to the Part D plan?  A typical example would be where a patient’s out of pocket cost for the brand, using a coupon or co-pay card, is less than the out of pocket cost for the generic alternative.

The surveys cited by OIG do not appear to address such a scenario, which in turn may have led to an imprecise figure (6-7 percent) that potentially overstates the scope of the purported issue.

A second and related issue sidestepped by OIG is whether the growth of preferred or narrow pharmacy networks has had any impact on purported drug coupon or co-pay card use by Medicare beneficiaries.  According to estimates by Adam Fein, approximately 75% of Medicare beneficiaries in 2014 enrolled in a Part D plan with a preferred network design, up from 43% of beneficiaries that chose plans with narrow networks in 2013.

With so many seniors now being exposed to narrow network designs having reduced or no co-payments for certain generic drugs, are OIG’s assumptions about the scope of drug coupon use by the Medicare population still accurate?

Third, OIG’s report also relies upon survey data suggesting that drug coupons and co-pay cards increase Part D program costs because they “encourage Medicare beneficiaries to obtain more expensive brand-name drugs when lower cost alternatives are available.”  In particular, OIG relies upon data from one survey to support its view that well more than half of drug coupons (58% according to OIG) are for brand drugs with an existing generic alternatives, thereby implying that in the majority of instances, drug coupons for brand drugs could sway a patient to choose the brand drug over a generic equivalent.

Again, OIG’s analysis merely recites the survey findings in support of its view, apparently without conducting an inquiry into the conclusions or even considering that different interpretations of the data may exist. For example, at least one commentator indicated that the survey results can actually be read to suggest that less than 10 percent of drug coupons (8.3%) are used to purchase brand drugs when an “FDA-approved therapeutic equivalent” exists (as opposed to an in-class generic that forms the basis for the 58% figure).

Again, without exploring the underlying survey data and findings, OIG does not consider other possible interpretations, but simply accepts the survey findings as evidence that a problem exists.

Against this backdrop, OIG’s conclusions about the scope of the issue, as well as its cautionary warning to manufacturers in the Special Advisory Bulletin, are rather unsettling:

Regardless of future action by CMS, the offerors of coupons ultimately bear the responsibility to operate these programs in compliance with Federal law. Pharmaceutical manufacturers that offer copayment coupons may be subject to sanctions if they fail to take appropriate steps to ensure that such coupons do not induce the purchase of Federal health care program items or services, including, but not limited to, drugs paid for by Medicare Part D. Failure to take such steps may be evidence of intent to induce the purchase of drugs paid for by these programs, in violation of the anti-kickback statute.

More troubling, however, is OIG’s reluctance to provide affirmative guidance to manufacturers as to what it considers “appropriate steps” to be, despite its willingness to do so in prior bulletins on inducement issues.    To be sure, OIG did appear to validate certain approaches taken by manufacturers, such as (i) the use of notices on coupons and related literature; and (ii) the use of claims edits in the processing of coupons.

But in OIG’s view, the efforts employed by most manufacturers fall short.

As a result, OIG’s report has caused manufacturers to assess their current practices and the potential risks of liability under the anti-kickback statute (and, as a result, the False Claims Act).  But while the principal focus of OIG’s report is the existence and scope of manufacturer safeguards, given the expansive interpretation that some enforcement authorities (not to mention qui tam relators) may give to the anti-kickback statute, it may be worthwhile for all industry participants (like PBMs, Part D plans and pharmacies) to evaluate potential liability issues in the context of their existing mechanisms for identifying and/or auditing coupon use by government beneficiaries.

In our view, the one silver lining in OIG’s report and bulletin lies in its ultimate finding that CMS already maintains the data necessary to allow manufacturers and other industry participants to preclude drug coupon and co-pay card use by Medicare beneficiaries.  Getting CMS to participate in such a discussion, however, may be a different story, in light of the agency’s apparent reluctance to provide relevant data in the past to facilitate the development of a technical solution to block coupon use by government program beneficiaries.

Specifically, it may be worthwhile for manufacturers to press CMS for access to one of the following data sources to effectively and quickly solve these issues:

  1. ongoing access to Part D beneficiary enrollment status; or
  2. ongoing access to a complete listing of all Part D plans’ BIN and PCN

If drug coupon and co-pay card use by Medicare beneficiaries is as significant of an issue as OIG and some industry stakeholders believe it to be, CMS and manufacturers should open an immediate dialogue to facilitate additional safeguards and solutions to the issues alleged by OIG.  

In the end, does CMS really want to be viewed as impeding industry efforts to preclude coupon use by government beneficiaries, and therefore hindering industry efforts to comply with applicable law?