OIG Proposes New Safe Harbors to Anti-Kickback Statute

On October 2, 2014, the Department of Health and Human Services Office of Inspector General (OIG) released a proposed rule adding new safe harbor provisions to the Federal Anti-Kickback Statute (AKS) and expanding exceptions to the Beneficiary Inducement Civil Monetary Penalty Statute (Proposed Rule). The Proposed Rule was published in the Federal Register on October 3, 2014. Of note, the OIG has proposed an exception to the Beneficiary Inducements Statute (BIS) that would permit pharmacies to offer rewards or incentives based, in part, on co-payments or co-insurance paid by federal health care program beneficiaries for prescription drug purchases.

Pharmacy Rewards Programs

In OIG Advisory Opinion 12-05 issued on April 24, 2012, the OIG positively opined on a proposal by a supermarket chain to offer gasoline rewards which accumulated, in part, on the basis of co-payments and co-insurance paid by federal health care program beneficiaries for prescription drugs dispensed at the supermarket’s pharmacies, in addition to other supermarket purchases. Prior to issuance of the OIG opinion, the supermarket chain offered the gas rewards on other non-pharmacy purchases, as well as pharmacy purchases by non-federal health care program beneficiaries, but federal health care program beneficiaries were not entitled to accumulate gas reward points related to their prescription drug purchases.

In the Proposed Rule, the OIG proposes an exception to the BIS similar to the program outlined in OIG Advisory Opinion 12-05, which will implement a statutory provision set forth in the BIS. Per the OIG’s proposal, “retailers” would be permitted to offer rewards in the form of coupons authorizing discounts on merchandise or services, rebates, or other similar rewards. “Retailer” does not include individuals or entities that primarily provide services, such as hospitals and physicians. Additionally, the reward must be “offered or transferred on equal terms to the public, regardless of health insurance status.” Finally, the reward cannot be tied to the provision of other items or services reimbursed in whole or in part by a federal health care program. This restriction applies to the manner in which the reward is both earned and redeemed. The OIG explains that it would not be appropriate for a retailer to only grant customers points under a rewards program for prescription drug purchases, nor would it be appropriate for customers to be able to redeem points only for cost-sharing on prescription drugs.

While the proposed exception would be specific to the BIS and not the AKS, the OIG appears likely to view careful compliance with the requirements of this proposed exception to the BIS related to general availability of the reward and the lack of tying of the reward, from both an earned and redeemed perspective to items or services reimbursed by federal health care program, as undermining its ability to establish the intent required to trigger an AKS violation.

Other Proposals of Interest

Part D Cost-Sharing Waivers by Pharmacies

The OIG has proposed to codify the statutory exception to the AKS added by the Medicare Modernization Act, which protects certain cost-sharing waivers provided by pharmacies to Medicare Part D beneficiaries in instances of financial need from ASK exposure. The OIG’s proposal adds safe harbor protection for pharmacies waiving Part D cost-sharing if (1) the waiver is not advertised or part of a solicitation; (2) the pharmacy does not routinely allow cost-sharing waivers; and (3) prior to allowing any cost-sharing waivers, the pharmacy establishes a good faith belief that the beneficiary has a financial need or the pharmacy attempts but fails to collect the cost-sharing amount after a reasonable effort. Requirements two and three are not required if the cost-sharing waiver is made to a dual eligible (an individual eligible for both Medicare or Medicare) or an individual eligible that otherwise qualifies for a low-income cost-sharing subsidy under Section 1860D-14(a)(3) of the Social Security Act.

Medicare Coverage Gap Discount Program

Section 3301(d) of the Affordable Care Act created the Medicare Coverage Gap Discount Program, pursuant to which pharmaceutical manufacturers enter into agreements with the Secretary of the Department of Health and Human Services to provide a 50 percent discount to Medicare Part D plans on the negotiated ingredient cost for single source and innovator multiple source drugs and biologic products that are on formulary (or provided through an exception or appeal under the beneficiary’s plan) and dispensed to Medicare Part D beneficiaries. The OIG has proposed to safe harbor such discounts paid by manufacturers under the Medicare Coverage Gap Discount Program from AKS exposure.

Promoting Access/Low Risk of Harm

The Affordable Care Act added an exception to the Beneficiary Inducement Statute for the provision of remuneration to a federal health care beneficiary that promoted patient access to care and also had a low risk of harm. In the preamble to the Proposed Rule, the OIG has proposed defining “promotes access to care” as “improv[ing] a particular beneficiary’s ability to obtain medically necessary health care items and services.” Further, the OIG is considering whether to apply this standard to a particular beneficiary, versus a defined beneficiary population. The OIG has proposed defining a “low risk of harm” as remuneration that (1) is unlikely to interfere with or skew clinical decision-making; (2) is unlikely to increase costs through overutilization or inappropriate utilization; and (3) does not raise patient-safety or quality-of-care concerns.

In a somewhat unusual move, the OIG has refrained from providing regulatory text to implement the exception at this time. Instead, the OIG has solicited comments on its proposed definitions and posed a multitude of questions about the appropriate scope of the exception, including a request for specific suggestions about limitations and safeguards that should be incorporated into the regulation. The OIG also has asked stakeholders to submit examples of the types of remuneration to beneficiaries that would promote access to care without putting federal healthcare programs at undue risk.

Since cost-sharing assistance or coupon programs sponsored by a pharmaceutical manufacturer could, in certain circumstances, fit within the “promoting access to care” and “low risk of harm” definitions being contemplated by the OIG, the Proposed Rule presents an opportunity for manufacturers and other stakeholders in the pharmaceutical supply chain to comment on how such manufacturer-run programs might be structured to fit within the exception. Similarly, the Proposed Rule expressly invites input on whether the exception should be expanded to permit incentives to be used under certain circumstances to enhance compliance with treatment regimens and, if so, what limitations and safeguards should be imposed on such programs.

Financial Need-Based Exception

The OIG has also proposed regulations to implement another Affordable Care Act — established exception to the Beneficiary Inducement Statute for offers or transfers of items or services to financially needy recipients for free or less than fair market value. To qualify for this exception for exclusion from “remuneration,” the items or services must, in fact, be “items or services,” not cash or cash-convertible instruments, and cannot be offered as part of an advertisement or solicitation.  More importantly, the offer may not be tied to the provision of any other reimbursed services; tying a discount of one item on the purchase of another could fall into this category.

Finally, there must be a reasonable connection between the item or service and the medical care of the individual. The OIG provides a few examples of items or services which might qualify, including distribution of pagers to alert patients with chronic medical conditions to take their drugs and the provision of free blood pressure checks to hypertensive patients. Certain genetic testing, such as testing that indicates whether a particular drug therapy may be indicated for a certain federal health care beneficiary, seem in line with the OIG — provided examples and to fall within the criteria set forth above, but manufacturers vetted in the development of personalized medicine should consider commenting on this point.

Waiver for Cost-Sharing for the First Fill of a Generic Drug

The OIG has proposed to except the waiver of cost-sharing obligation by a Medicare Advantage-Prescription Drug Plan or Medicare Part D Prescription Drug Plan Sponsor related to the first fill of a covered Part D drug which is a “generic drug,” as that term is defined in Part D regulations. CMS has previously permitted these waivers in Medicare Part D plan benefit designs, so the OIG’s proposal is consistent with CMS’ guidance to Medicare Part D plans. The OIG also stated that it will not exercise its enforcement authority related to cost-sharing waivers, consistent with the CMS guidance prior to this proposal being finalized in regulation.

Comments are due on December 2, 2014.

If you have any questions about this alert, please contact Larri A. Short, Stephanie Trunk, or the Arent Fox professional who handles your matters.