OIG's Issues Favorable Patient Assistance Program Opinion but Signals Potential Two-Year Follow-Up

The U.S. Department of Health and Human Services Office of Inspector General (OIG) recently issued an advisory opinion concluding that it would not impose administrative sanctions in connection with a proposed charitable patient assistance program, funded in part by pharmaceutical manufacturers, despite determining that the arrangement implicates the Federal Anti-Kickback Statute (AKS). 

The opinion provides important guidance for pharmaceutical manufacturers, charitable patient assistance programs (PAPs), and health care organizations navigating the increasingly complex compliance risks associated with premium and copayment assistance for Federal health care program beneficiaries.

The Proposed Arrangement

The arrangement involves a nonprofit, tax-exempt organization that provides financial assistance to patients diagnosed with certain rare and chronic diseases. The organization certified that most of the products used to treat the covered diseases are reimbursable under Medicare Part B rather than Medicare Part D. The organization proposed to expand an existing patient assistance program to create disease-specific funds that would provide both health insurance premium assistance and copayment assistance to eligible Federal health care program beneficiaries. Under the proposed arrangement, each Disease Fund would include both a premium-assistance component and a copayment-and-coinsurance assistance component. The beneficiaries would receive assistance on a first-come, first-served basis pursuant to a reasonable, verifiable, and uniformly administered financial need policy. 

Funding would come from multiple sources, including pharmaceutical manufacturers whose drugs are used to treat the covered diseases, as well as financially disinterested donors. Donors could earmark contributions for a specific Disease Fund, but the requestor would retain absolute discretion over the use of funds within that Disease Fund. Manufacturers would have no input into eligibility decisions or the distribution of assistance, and no manufacturer or affiliate would exercise direct or indirect control over the organization or the program. The organization certified that it would operate independently, maintain discretion over donor funds, and prevent manufacturers from obtaining data that could be used to correlate donations with utilization of their products.

The proposed arrangement also incorporated product-neutral features. Disease Funds would be defined according to widely recognized clinical standards and would not be narrowed by symptoms, disease severity, stage of disease, method of administration, type of treatment, or similar criteria. At a minimum, assistance would cover all FDA-approved prescription drugs for treatment of the relevant disease, including generic and bioequivalent drugs. For the one disease with only one FDA-approved treatment, the fund would also support prescription drugs used to manage the disease, its symptoms, and treatment side effects.

Patients would apply only after selecting their providers, products, and treatment regimen. The requestor would not refer patients to a donor, provider, practitioner, supplier, or product, and patients would remain free to change their providers or treatment while receiving assistance. 

OIG's Analysis Under the Anti-Kickback Statute

OIG's analysis reflects the agency's continued concern about manufacturer-funded cost-sharing assistance programs, even when administered through independent charitable organizations.

OIG concluded that the proposed arrangement implicates the AKS because pharmaceutical manufacturers would indirectly provide remuneration to Federal health care program beneficiaries through the charitable assistance program. According to OIG, such assistance could induce the purchase or ordering of federally reimbursable drugs manufactured by contributing companies.

At the same time, OIG acknowledged that independent charitable PAPs can play an important safety-net role for financially needy patients. Nevertheless, the agency reiterated its longstanding position that such programs must remain independent of pharmaceutical manufacturer influence and must not “function as a conduit for payments by the pharmaceutical manufacturer to patients.”

OIG also emphasized concerns that manufacturer-funded cost-sharing subsidies may contribute to increased drug prices, patient steering, and other anti-competitive effects. Drawing on its prior guidance and enforcement experience, OIG explained that narrowly defined disease funds or programs focused on only certain products increase the risk that a charity could effectively serve as an improper conduit for manufacturer subsidies.

The opinion reinforces guidance previously articulated in OIG's patient assistance program advisory bulletins: disease funds should not be narrowly defined in ways that limit assistance to specific products or classes of products, and charitable organizations must maintain independence from manufacturer influence.

OIG Found the AKS Risk Sufficiently Low

What makes AO 26-17 significant is not OIG's conclusion that the arrangement implicates the AKS, but rather OIG's determination that the program's safeguards sufficiently mitigated the associated fraud and abuse risks. Despite finding that the arrangement implicates the AKS, OIG identified a combination of features that reduced the risks of steering, overutilization, and increased costs to Federal health care programs. OIG ultimately exercised its enforcement discretion and issued a favorable opinion based on a combination of the following:

Independent control. The organization would exercise independent and autonomous discretion over donated funds. Funding manufacturers would have no direct or indirect control over program operations and would not receive patient-specific information or data that would facilitate correlating their donations with use of their products or services.

• Objective eligibility. Assistance would be awarded based on financial need using uniform standards applied consistently across applicants. Eligibility would not depend on the patient’s product or provider, a referral source, donor interests, or the amount contributed by a manufacturer. 
• Broad disease fund definitions. Disease funds would be based on widely recognized clinical standards and would not be defined according to symptoms, treatment modalities, disease stages, or other factors that could effectively limit assistance to particular products.
• Product-neutral assistance. At a minimum, each Disease Fund would cover all FDA-approved prescription drugs for the treatment of the disease, including generic and bioequivalent products, and assistance would not be restricted to high-cost or specialty drugs. 
• Additional support where only one approved therapy exists. For the single disease fund covering a condition with only one FDA-approved treatment, assistance would also extend to medications used for symptom management and treatment-related side effects. 

Taken together, these safeguards made it unlikely that the program would operate as a “disguised conduit” for a Funding Manufacturer to induce patients to use its drugs. OIG also recognized that the assistance could increase access to care for patients with rare and chronic diseases who may otherwise be unable to afford needed treatment.

Beneficiary Inducements Civil Monetary Penalty Law

OIG reached a different conclusion under the Beneficiary Inducements Civil Monetary Penalty Law. The organization was not a provider, practitioner, or supplier and did not furnish federally reimbursable items or services. OIG also explained that pharmaceutical manufacturers generally are not providers, practitioners, or suppliers for this purpose unless they directly or indirectly own or operate entities (e.g. pharmacies or pharmacy benefit management companies) that submit Medicare or Medicaid claims. Because assistance would be available without regard to the beneficiary’s choice of provider, practitioner, or supplier, OIG concluded that the proposed arrangement would not be likely to influence such a selection and therefore would not constitute grounds for sanctions under the Beneficiary Inducements CMP. 

The Impact of the Inflation Reduction Act

One of the most noteworthy aspects of AO 26-17 is OIG's discussion of the Inflation Reduction Act (IRA) and its potential implications for the agency's future oversight of the PAP. OIG noted that recent Inflation Reduction Act (IRA) reforms eliminated Part D catastrophic cost sharing and imposed a $2,000 annual cap on Part D out-of-pocket spending, changes that could affect the demand for manufacturer-funded premium and cost-sharing assistance programs. As a result, OIG stated that it may seek additional information from the organization approximately two years after issuance of the opinion, including non-patient-identifiable data regarding donors, the allocation of donations, and the distribution of assistance. OIG explained that this information could help confirm that the program is operating as certified and allow the agency to assess whether its favorable analysis remains appropriate once the arrangement has been fully implemented and the effects of the IRA can be more fully evaluated.

Implications for Manufacturers and Patient Assistance Programs

For pharmaceutical manufacturers and charitable organizations, AO 26-17 reinforces the importance of maintaining a meaningful separation between donors and patient assistance decisions. OIG's favorable opinion rested heavily on the requesting organization's independence, broad disease-fund definitions, product-neutral assistance, objective financial-need criteria, and safeguards preventing donors from obtaining information that could be used to correlate contributions with utilization of their products. Features that erode those protections, such as donor influence over program operations, narrowly-defined disease funds, or eligibility criteria tied to product selection, may present heightened fraud and abuse concerns. 

The opinion also underscores the importance of ensuring that program operations align with written policies. Organizations considering similar arrangements should evaluate not only the design of their programs but also how funding decisions, eligibility determinations, donor communications, and reporting practices are implemented in practice. As always, advisory opinions are limited to the requesting party and the specific facts certified to OIG. 

Finally, OIG's statement that it may seek additional information approximately two years after issuance highlights the agency's continued focus on manufacturer-funded assistance programs and the evolving impact of the Inflation Reduction Act. Organizations operating similar programs may wish to maintain documentation demonstrating compliance with key program safeguards, including financial-need determinations, fund definitions, donor restrictions, allocation decisions, and reporting practices.

Conclusion

AO 26-17 provides a useful roadmap for structuring manufacturer-funded charitable patient assistance programs in a manner that mitigates Anti-Kickback Statute risk. At the same time, the opinion demonstrates that OIG remains concerned about manufacturer-funded cost-sharing assistance and will continue to scrutinize these arrangements to ensure they operate independently and do not function as conduits for manufacturer subsidies. Organizations considering similar programs should view AO 26-17 as both a favorable opinion and a reminder that OIG's assessment of such arrangements may continue to evolve as the effects of recent Inflation Reduction Act reforms become clearer.

Reed Smith will continue to monitor developments involving OIG advisory opinions and patient assistance programs. If you have questions about AO 26-17, patient assistance program design, or compliance with the Federal Anti-Kickback Statute and Beneficiary Inducements Civil Monetary Penalties Law, please contact the health care lawyers at Reed Smith.