Right before Christmas last year, the Department of Justice (DOJ) announced an ominous settlement: United Therapeutics, a manufacturer of pulmonary arterial hypertension drugs, agreed to pay more than $200 million to settle allegations it violated the Anti-Kickback Statute (AKS). United Therapeutics’ alleged kickback was supporting—and purportedly benefiting from—a Patient Assistance Program (PAP) charitable foundation that helped patients pay expensive co-pays for United Therapeutics’ drugs. DOJ’s message to drug manufacturers during the season of giving was clear: Be wary of giving. 

Given the heightened regulatory scrutiny and corresponding prosecutorial actions, companies seeking to donate to PAPs must proceed with caution. But while PAPs remain under scrutiny, as discussed below, there are several practical steps to minimize donating companies’ risk. 

Origin of Patient Assistance Programs

By now, it is recognized that PAPs can provide an important safety net to patients of limited means who do not have insurance coverage for drugs, especially those with chronic illnesses and high drug costs. While these programs come in different forms—some provide cash subsidies to needy patients, others offer free or reduced price drugs—they serve the same purpose of helping patients afford needed medication. For example, most insurance programs, including Medicare, require patients to pay a co-payment for their medications.  With some drugs having co-pays in the thousands of dollars, without financial assistance, many patients will either need to seek cheaper, less effective medications or need to forgo the medication entirely. 

That’s where PAPs can help—by providing that needed financial assistance. PAPs often cover the patient’s share of the medication, while the drug manufacturer receives the balance from the insurance company. Given the potential synergies, many pharmaceutical drug manufacturers have supported PAPs. Some data suggests that the eight biggest PAPs received $1.1 billion in donations from pharmaceutical companies in 2014, the most recent year for which data exists. 

Legal Overlay and Developments

Given these large donations by pharmaceutical companies and the breadth of financial assistance programs, the Department of Health and Human Services Office of Inspector General (HHS/OIG) and DOJ have suggested that some such programs could be conduits for illicit kickbacks. The thinking is that the subsidies by pharmaceutical companies to PAPs present all of the usual risks of fraud and abuse associated with kickbacks, including steering beneficiaries to particular drugs; increasing costs to Medicare; providing a financial advantage over competing drugs; and reducing beneficiaries’ incentives to locate and use less expensive, equally effective drugs.

In part, in response to those concerns, DOJ announced two notable False Claims Act settlements in the past year. The first resolved civil and criminal allegations associated with Aegerion Pharmaceuticals. Aegerion manufactures Juxtapid, a lipid-lowering agent for the treatment of homozygous familial hypercholesterolemia, an inherited disorder that can lead to aggressive cardiovascular disease. In September 2017, the company entered into a global settlement with DOJ related to multiple misbranding and kickback allegations. DOJ specifically alleged Aegerion violated the AKS by unlawfully inducing patients to purchase Juxtapid by channeling donations to a PAP.

Three months later, DOJ announced the second key settlement: a $210 million settlement with United Therapeutics. In that case, DOJ contended United Therapeutics used the PAP as a conduit to pay for Medicare patients’ copays, thus improperly inducing those patients’ purchasing choices and boosting United’s revenue. According to DOJ, United Therapeutics routinely obtained data from the PAP that specifically outlined how much the PAP had spent on each subject drug.  DOJ claimed that, in turn, United Therapeutics then used this data to decide how much to donate to the PAP. 

While these settlements are the most recent involving PAPs, they are unlikely to be the last. As of this writing, there appear to be at least half a dozen or more open investigations. 

Preventative Measures to Minimize Risk

While this area of the law is still evolving, a few practical tips can be gleaned from the recent settlements. These tips aren’t exhaustive, but they are a sound front-line defense against any allegation of fraudulent intent—a key requirement for any AKS case. 

• First, when giving to charitable organizations, be wary of giving to “improperly narrow” causes and organizations. HHS/OIG has gone to lengths to bemoan purportedly “improperly narrow” causes such as PAPs that only fund payment for one drug or one type of drug. HHS/OIG has emphasized that PAPs should generally not be “defined by reference to specific symptoms, severity of symptoms, or the method of administration of drugs.” Thus, as a practical matter, when giving to a PAP, be sure that the PAP has a broad-based mission.
• Second, exercise caution if giving to charities that provide assistance for “expensive” pharmaceutical drugs, a characteristic that appears to be a red flag to HHS/OIG. While HHS/OIG has apparently recognized that patients with prescriptions for more expensive drugs are in greater financial need for co-pay assistance, it has recently noted that PAPs that only subsidize “expensive” or “specialty” drugs will likely face additional scrutiny. Given this reality, donations should generally not be given to organizations that only provide financial assistance for a subset of an available product.
• Third, when giving to charities, ensure the charity has a reasonable, verifiable, and uniform manner of assessing financial need and eligibility for patient assistance. HHS/OIG appears to have a particular concern with charities who have inconsistent or non-articulable criteria for financial assistance. Thus, before donating to a PAP, ensure that the charity can articulate its basis for assessing financial need and be sure that the explanation does not solely address the price of the drug being covered. 
• Fourth, when giving, expect nothing in return. A key point of emphasis in early government enforcement actions has been concern with financial donors obtaining information about the value and volume of their contributions. As such, regulators are likely to view donors’ efforts to track and value their donations as suggestive of intent to violate the AKS’s prohibitions.

PAPs hold great promise for patients of limited means but carry risk for companies wishing to donate to them. While every situation is unique and companies cannot completely avoid that risk, the above measures are important first steps. As the adage suggests, no good deed goes unpunished.