OIG Finds Commercial Drug Copay Coupons Are Being Used by Medicare Part D Beneficiaries and Warns of Anti-Kickback Statute Exposure

Under a manufacturer cost-sharing assistance or copay coupon program, the manufacturer of a brand name drug pays some or all of the copayment and/or co-insurance obligations of individuals under their health plans when they fill a prescription for the drug covered by the company’s program. Prescription drug claims submitted to coupon programs by dispensing pharmacies are adjudicated in a manner similar to secondary insurance coverage. The Report on Copay Coupons indicates prescription drug manufacturers collectively understand that the OIG views providing coupons to federal health care program beneficiaries as remuneration within the definition of the AKS. As such, manufacturers have historically excluded such patients from participation in their copay coupon programs.

Despite the fact that the terms and conditions of manufacturer coupon programs routinely state that federal health care program beneficiaries are not eligible participants, the OIG has long been concerned that such patients — and particularly those insured under Medicare Part D — are nonetheless sometimes able to utilize copayment cards to cover their cost-sharing obligations. The findings of the study underlying the Report on Copay Coupons seem to reinforce that concern. The OIG now estimates that 6-7 percent of Medicare Part D beneficiaries have used copay coupons to purchase prescription drugs under their Part D plans. Further, it is clear the OIG believes “[t]he use of coupons by Medicare beneficiaries could impose significant costs on the Part D program because many coupons encourage beneficiaries to choose more expensive brand-name drugs over less expensive alternatives.” Significant, the OIG blames the costly spillover of coupons intended for the commercially insured into Part D and, potentially, other federal health care programs as well, on the failure of manufacturers to incorporate adequate safeguards in coupon program operations.

The OIG surveyed 30 pharmaceutical manufacturers of drugs with associated cost-sharing assistance/coupon programs, purposefully selected because these companies offer the top 100 Medicare Part D covered brand name drugs by cost. The survey queried the types of safeguards that these manufacturers have in place to prevent the use of their copay coupons by Medicare Part D beneficiaries. The OIG also reviewed the terms and conditions associated with 40 manufacturer-sponsored cost-sharing assistance/coupon programs and interviewed staff at various entities and organizations involved in dispensing and claims processing (i.e., pharmacists, coupon vendors, switching companies, etc…).

According to the Report on Copay Coupons, the OIG confirmed that all surveyed manufacturers excluded federal health care program beneficiaries from their cost-sharing assistance programs in their programs’ terms and conditions. However, for those manufacturers that utilized a web-based screening and printing tool for coupons, only 3 percent employed mechanisms which prevented individuals from changing their responses to Medicare/federal health care program coverage questions so that they could print copayment coupons from the manufacturers’ websites.

The OIG also found that, while most surveyed manufacturers employ some pharmacy claim edits aimed at preventing Medicare Part D beneficiaries from using cost-sharing assistance cards or copay coupons, these edits were not completely effective in blocking program usage by Medicare Part D enrollees. Although the OIG acknowledges that manufacturers and the vendors administering their cost-sharing assistance/copay coupon programs are not permitted to verify a beneficiary’s Part D enrollment status, it noted that few programs require the pharmacies accepting coupons to do so. Rather, the cost-sharing assistance programs rely on claims edits based on proxy information that may be unreliable to screen out ineligible federal health care program beneficiaries.

Lastly, the OIG concluded that it was critical for Medicare Part D plans, pharmacy benefit managers, and other entities involved in the pharmacy claim adjudication process to be able to identify instances in which manufacturer-sponsored copay coupons are successfully used. The only entity that currently knows whether a claim has been routed to a coupon program for payment is the manufacturer sponsoring the program. In the OIG’s opinion, the lack of transparency that results when coupons are processed as secondary insurance after primary insurance claims have been finalized impedes federal health care programs — and Medicare Part D plans specifically — from identifying when an individual has inappropriate utilized a cost-sharing assistance card or copay coupon.

In the SAB accompanying the Report on Copay Coupons, the OIG stressed that pharmaceutical manufacturers — as the sponsors of the programs — are ultimately responsible for preventing spillover to federal health care programs and thus ensuring that such programs comply with applicable law, including the AKS. The OIG stressed that pharmaceutical manufacturers may be subject to sanctions if they fail to take the necessary steps to ensure that their cost-sharing assistance/copayment coupon programs do not induce the purchase of brand name drugs covered by federal health care programs, particularly Medicare Part D. The OIG’s final word — that a pharmaceutical manufacturer’s failure to act in response to the SAB and implement and maintain safeguards to prevent “spillover” of their cost-sharing assistance/copayment coupon programs would be deemed by OIG as evidence of “intent to induce” federal health care Program beneficiaries to purchase their drugs — leaves no question about the seriousness of the OIG’s message.

Arent Fox’s Health Care team routinely counsels pharmaceutical manufacturers, pharmacies, and other health care providers about potential arrangements that might implicate the AKS, including cost-sharing assistance/copayment coupon programs, and how to incorporate safeguards to mitigate risk. For questions about this alert, contact Larri A. Short, Stephanie Trunk, or Linda A. Baumann, or the Arent Fox professional who handles your matters.