Health Law Daily No definitive conclusion if subsidizing of $225,000 drug would trigger AKS sanctions
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Thursday, September 24, 2020

No definitive conclusion if subsidizing of $225,000 drug would trigger AKS sanctions

By Jeffrey H. Brochin, J.D.

An arrangement, as structured, would not generate prohibited remuneration under a provision prohibiting inducements to beneficiaries, but could if the requisite intent to induce were present.

The HHS Office of Inspector General (OIG) issued an advisory opinion in response to the proposal of a drug manufacturer (requestor) to provide cost-sharing assistance directly to Medicare beneficiaries who are prescribed either of two formulations of its drug costing $225,000.00 per year. The OIG concluded that although the Proposed Arrangement, as structured, would not generate prohibited remuneration under the civil monetary penalty provision prohibiting inducements to beneficiaries, the Proposed Arrangement would generate prohibited remuneration under the anti-kickback statute (AKS) if the requisite intent to induce or reward referrals for, or purchases of, items and services reimbursable by a federal health care program were present. With the arrangement proposed but not yet implemented, the OIG could not reach a definitive conclusion regarding the existence of an AKS violation (OIG Advisory Opinion, No. 20-05-04, September 25, 2020).

Most expensive cardio drug in U.S. history. The drug (whose identity as well as that of the requestor was redacted as required for published advisory opinions) is used to treat a progressive, rare disease that can lead to heart failure and death and that is estimated to affect approximately 100,000 to 150,000 Americans. The drug is marketed in two forms (the Medications) and in 2019, the FDA approved the Medications for the treatment of both forms of the disease in adults to reduce mortality and hospitalization. The requestor certified that the majority of patients with the disease are Medicare beneficiaries, and the majority of patients who may be prescribed the Medications will be Medicare beneficiaries. The requestor set the list price at $225,000 for each one-year course of treatment with the Medications, making it the most expensive cardiovascular drug ever launched.

Motivation for Proposed Arrangement. According to requestor, at the set list price and based on cost-sharing requirements in the phases of the standard Medicare Part D benefit (i.e., deductible, initial coverage, coverage gap, catastrophic), a Medicare beneficiary enrolled in the standard benefit must pay approximately $13,000 in out-of-pocket expenditures annually for the Medications, and a significant portion of Medicare beneficiaries cannot afford to purchase the Medications because of the high annual out-of-pocket expenses. Therefore, the out-of-pocket costs operate as a financial impediment for a substantial portion of the Medicare population, preventing them from purchasing the Medications. The requestor further certified that, in 2019, many Medicare beneficiaries filling their first order for the Medications would face $5,100 in true out-of-pocket (TrOOP) spending, and therefore would reach the catastrophic phase (which had a threshold of $5,100 in 2019) with their first prescription.

Subsidy proposal. The requestor designed an assistance program to address the financial impediment of the out-of-pocket costs for the Medications. Specifically, under the Proposed Arrangement, the requestor would institute a cost-sharing assistance program specific to Medicare beneficiaries who are prescribed the Medications (the "Subsidy Program"). To be eligible for financial assistance under the Subsidy Program, the applicant must: (1) be a Medicare beneficiary enrolled in either a Part D plan or a Medicare Advantage; (2) be a United States resident; (3) meet the Subsidy Program’s criteria for financial need, which requestor would set as a household income between 500 percent and 800 percent of the Federal Poverty Level (FPL); and (4) have been prescribed one of the Medications on-label for the treatment of the disease. The requestor also certified that Medicare beneficiaries with household incomes up to 500 percent of the FPL would continue to be eligible for requestor’s existing free drug program for the Medications, except that the requestor has required, and would continue to require, that patients not be able to receive assistance from other funding sources, including the Medicare Low-Income Subsidy, in order to be eligible for requestor’s free drug program.

Factors weighed by the OIG. The OIG considered such factors as pharmacies that would dispense the Medications, providers authorizing the Medications, the HUB (third party vendor) administering the Subsidy Program, as well as the impact of all of those factors and others on the application of the AKS. It particularly noted that the AKS makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward, among other things, referrals for, or purchases of, items or services reimbursable by a federal health care program. Where remuneration is paid purposefully to induce or reward referrals or purchases of items or services payable by a federal health care program, the AKS is violated. By its terms, the statute ascribes criminal liability to parties on both sides of an impermissible transaction. For purposes of the AKS, "remuneration" includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind.

Inconclusive ruling. Based on the foregoing, the OIG reached the conclusion that based on the facts submitted by the requestor: (1) the Proposed Arrangement, as structured, would not generate prohibited remuneration under the civil monetary penalty provision prohibiting inducements to beneficiaries; and (2) the Proposed Arrangement would generate prohibited remuneration under the anti-kickback statute if the requisite intent to induce or reward referrals for, or purchases of, items and services reimbursable by a federal health care program were present and that, as a result, the OIG could potentially impose administrative sanctions on the requestor in connection with the Proposed Arrangement. However, any definitive conclusion regarding the existence of an AKS violation would require consideration of all of the facts and circumstances of the arrangement as implemented, including a party’s intent. Where, as in the present case, the arrangement was proposed but not yet been implemented, the OIG could not reach a definitive conclusion regarding the existence of an AKS violation.

MainStory: TopStory OIGAdvisoryOpinions CMSNews AntikickbackNews AuditNews BillingNews DrugBiologicNews FraudNews MedicareContractorNews PaymentNews PartCNews PartDNews ProgramIntegrityNews ProviderNews FedTracker HealthCare

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