Completing a project identified in its last two work plans, on 19 September 2014 the Office of Inspector General for the U.S. Department of Health and Human Services (OIG) released a report reviewing the effectiveness of safeguards that pharmaceutical manufacturers have in place to ensure that Medicare Part D beneficiaries do not use copay coupons. In conjunction with the report, the OIG also issued a Special Advisory Bulletin (SAB) that reiterates the legal risks presented by copay coupons under the federal Anti-Kickback Statute (AKS) insofar as they induce a beneficiary to purchase a drug reimbursable under a federal healthcare program, like Medicare Part D. The SAB warns manufacturers that they bear the ultimate responsibility to structure and administer their coupon programs in compliance with federal laws. Moreover, the SAB states that manufacturer failure to take appropriate steps to ensure that copay coupons do not induce the purchase of drugs through federal healthcare programs may be evidence of intent to induce within the meaning of the AKS. This statement is noteworthy particularly in light of the report’s chief finding that many of the measures that manufacturers currently undertake to prevent federal beneficiaries from using copay coupons are imperfect.   

OIG's findings

OIG’s report describes the results of a review of current manufacturer copay coupon programs, including survey responses from 30 manufacturers out of a pool of 34 companies OIG identified based on the top 100 drugs by cost to the Medicare Part D program.1 The survey involved several types of copay reductions processed in real time at the point of sale or shortly thereafter — print and electronic coupons, debit cards, and direct reimbursements or rebates. The report discussed three types of safeguards: (1) coupon notices to beneficiaries and pharmacies; (2) claim edits used in pharmacy claim processing; and (3) federal healthcare programs’ ability to recognize coupon-related claims for reimbursement.

Coupon notices

All surveyed manufacturers provide notices in some form to beneficiaries, pharmacists, or both, that copay coupons may not be used in connection with federal programs. However, the OIG report noted that beneficiary notices often were located on the back of the coupon or in its accompanying printout pages and/or appeared in small font. OIG also noted that manufacturers that distribute coupons through a website generally did not have a mechanism to prevent a patient from revising their initial answers to eligibility criteria to obtain the coupon. Moreover, OIG found that manufacturers did not always provide pharmacists with clear eligibility notices, and questioned the effectiveness of the alerts that were provided by noting that pharmacists exhibit “alert fatigue” given the volume of warnings they receive. OIG concluded that the beneficiary and pharmacy notices they reviewed do not “necessarily stop coupons from being processed to purchase drugs paid for by Federal healthcare programs.” 

Claims edits in coupon processing

OIG similarly found that claim edits utilized by manufacturers are imperfect in preventing Part D beneficiaries from using coupons because manufacturers lack access to federal program enrollment data and generally have limited access to patient information. Accordingly, manufacturers typically use proxies, such as date of birth and primary insurance coverage information through lists of payer Bank Identification Numbers (BINs) from previously adjudicated claims, to detect and screen out Part D beneficiaries. The report noted that some manufacturers have access to Part D benefit stage information, but recognized that such access is rare. OIG also remarked that only 30% of manufacturers surveyed audited their claim edit processes for implementation errors, suggesting that errors could be reduced through process reviews.

Recognition of coupon-related claims by FHCP payors
Finally, because manufacturers typically process coupon claims after the insurance claim is processed, OIG took note that the use of copay coupons is not transparent to federal healthcare program payors. This is especially true for coupons that are not presented by the patient at the point of sale such as electronic, direct reimbursement, or debit card coupons. Given the difficulty in identifying the use of copay coupons in pharmacy claims, OIG explained that it is difficult for Part D plans and others to determine how often federal beneficiaries have used them in connection with drug purchases.

Implications for coupon programs

The report calls on the Centers for Medicare & Medicaid Services (CMS), in coordination with industry stakeholders, to explore ways to make coupon processing transparent so that coupon use may be monitored. One example suggested by OIG might be to revise the electronic claim processing system for pharmacy claims to identify the use of copay coupons. The report invites manufacturers to reach out to CMS and offer their views.

Meanwhile, pharmaceutical manufacturers should closely review, and improve as necessary and if practicable, their coupon processing safeguards to ensure that federal beneficiaries are not relieved of copayment obligations. The findings in the report suggest a number of safeguards that manufacturers may consider implementing to help mitigate risk:

  • including more prominent notices to beneficiaries and pharmacies on the face of the coupons and consistently across all coupon formats;
  • including consistent eligibility questions across all coupon formats;
  • implementing additional safeguards to ensure that changes in answers to eligibility questions are corrections and not an attempt to circumvent the eligibility criteria; and
  • requiring affirmative certifications from beneficiaries and pharmacists that the patient is not a federal healthcare program beneficiary.

One particularly noteworthy safeguard may be for manufacturers to require that pharmacists submit for copay coupon claims a so-called E1 transaction, an optional enrollment verification request to the Part D Transaction Facilitator that provides pharmacists with real-time information about a patient’s Part D enrollment status based on the patient’s demographic information submitted by the pharmacy. According to OIG’s report, pharmacies pay less than 1 cent per transaction for such verification requests.2  

The practical considerations raised by these or other available safeguards will depend on the specific features of each coupon program. In deciding how to structure coupon programs, manufacturers need to weigh carefully the risks such programs present against the logistical challenges manufacturers face in implementing additional steps to ensure the coupons do not induce the purchase of drugs paid for by federal healthcare programs.

If you have any questions about this Special Advisory Bulletin or the structure of any copay coupon programs, please contact one of the lawyers listed in the “Contacts” section or another Hogan Lovells lawyer with whom you work.