Reed Smith Client Alerts

Autores: Joseph W. Metro Peter Vogel

Introduction On May 21, 2014, the Office of the Inspector General (OIG) of the Department of Health and Human Services (HHS) issued its “Supplemental Special Advisory Bulletin: Independent Charity Patient Assistance Programs” (SSAB) to address recently observed risks stemming from the conduct of Independent Charity Patient Assistance Programs (PAPs). The SSAB does not replace, but rather expands on, the OIG’s guidance from 2002 and 2005, specifically focusing on PAPs’ definitions of disease funds and the identification of eligible recipients, as well as the conduct of donors with relation to Independent Charity PAPs.

Brief Background The anti-kickback statute prohibits any transaction in which remuneration is paid purposefully to induce or reward referrals of items or services payable by a federal health care program.1 Both donor contributions to PAPs and PAPs’ grants to patients present certain remunerative functions that could trigger the anti-kickback statute. Donations made to PAPs to induce a recommendation of a donor’s federally reimbursable items, for example, could violate the statute. On the other hand, if a PAP attempts to influence patients to purchase certain items via grant of financial assistance, the statute could also be violated.

Additionally, civil monetary penalties (CMPs) may be levied against any party that attempts to influence a beneficiary’s choice of provider, practitioner, or supplier, through the offer of remuneration.2 The Beneficiary Inducements CMP may be implicated if a pharmaceutical manufacturer provides a subsidy for cost-sharing obligations through PAPs where the patient must receive items from a particular supplier.

Expanded Guidance on Independent Charity PAPs As laid out in the OIG’s 2005 Special Advisory Bulletin and other previous advisory opinions, pharmaceutical manufacturers may make bona fide charitable contributions to properly structured assistance programs. The key to granting legitimate donations is the independence of the charity itself, and this current SSAB focuses the OIG’s guidance in that regard on (1) disease funds, (2) eligible recipients, and (3) conduct of donors.

(1) Disease States as Defined by PAPs:

In 2005, the OIG allowed manufacturer donations to disease funds that provided assistance for any product used within the disease state. Thus, in theory, a manufacturer’s assistance might subsidize a patient taking a competitor product. However, the OIG also expressed concern that, in certain circumstances, PAPs might define their disease funds too narrowly. This earmarking would effectively result in a manufacturer’s subsidization of its own product through donations. To curb Independent Charity PAPs from funneling donations directly from manufacturers to patients, and to prevent impermissible influence over beneficiaries’ drug choices, the OIG has now expanded on its guidance regarding the relationship between donors and charities.

First, the OIG notes that its 2005 suggestions of what might constitute overly narrow disease fund definitions are by no means exhaustive. Instead, the OIG questions the practice of defining disease funds by referencing certain stages of a particular disease, particular types of treatments, or anything narrower than a widely recognized disease status. These narrow classifications may indicate inducement, and manufacturers should be cautious with Independent Charity PAPs that utilize such categorizations.

Furthermore, the OIG has become concerned with Independent Charity PAPs that limit assistance to a subset of available products within an established disease fund. Limiting funds to expensive or specialty products in this manner is not beneficial to patients or health care programs because it binds them to certain treatments when more beneficial products may be on the market, and may also lead to higher federal program costs. Thus, for example, the exclusion of assistance for generic products would be suspect in the OIG’s view. As a result, in determining whether a particular manufacturer benefited from this structuring in violation of the anti-kickback statute, the OIG will subject funds that are limited to a subset of available products to more scrutiny than those that include all products approved by the Food and Drug Administration (FDA) for treatment of a disease state (including generic or bioequivalent drugs). However, the OIG does not mandate that Independent Charity PAPs provide assistance for drugs prescribed “off-label,” although allowing for such coverage might promote compliance. The OIG, however, expects truly independent charities to treat all its funds equally. Thus, limiting assistance for one fund to only FDA-approved drugs while, in another fund, offering assistance for all drugs covered by Medicaid, could subject a PAP to scrutiny.

(2) Eligible Recipients as Defined by PAPs:

With respect to eligibility criteria, the OIG noted that it has allowed funds dedicated only to federal health care program participants. PAPs should, however – regardless of whether a fund is available to all patients or simply to federal health care participants – “determine eligibility according to a reasonable, verifiable, and uniform measure of financial need that is applied in a consistent manner.”3 In so doing, Independent Charity PAPs may consider relevant factors such as family size, local cost of living, and total medical expenses of patients. Conversely, PAPs should not consider only the cost of a particular drug for which the patient is applying. Further, maintaining unduly generous financial need criteria may be indicative of a PAP’s intent to induce the use of a particular drug by funding its copayments.

(3) Conduct of Donors:

Finally, the OIG notes briefly that its advisory opinions issued to PAPs and charities do not address actions by donors to relate their funds to support for their own products. Such correlation or coordination, however, would implicate the anti-kickback statute. Because of this, donors should exercise care to maintain independence when coordinating referrals.

Conclusion The OIG noted that it would be working with PAPs that have previously received advisory opinions to identify potential changes. Thus, both PAPs and donors may expect some future follow-up adjustments to their relationships. The SSAB also underscores the importance of manufacturers’ independence from PAPs from both a negotiation process perspective and from a substantive perspective. Manufacturers may want to consider reviewing existing disease funding arrangements with PAPs.

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This Alert is presented for informational purposes only and is not intended to constitute legal advice.

  1. See 42 U.S.C. § 1320a-7b.
  2. See 42 U.S.C. § 1320a-7a.
  3. OIG, “Supplemental Special Advisory Bulletin: Independent Charity Patient Assistance Programs." 


Client Alert 2014-153