OIG Issues Favorable Advisory Opinion Regarding Free Drug Provided by Pharmaceutical Manufacturer to Patients

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On March 18, 2021, OIG issued Advisory Opinion 21-01, addressing whether a pharmaceutical manufacturer may provide a personalized medicine made from a patient’s own cells as a one-time, potentially curative treatment (the Drug) to a patient. Under the arrangement, the pharmaceutical manufacturer offers the Drug at no charge to patients unable to afford the Drug who are either uninsured or insured under plans that will not cover the Drug (the Arrangement). OIG concluded that it would not impose administrative sanctions under the federal Anti-Kickback Statute and that the Arrangement does not implicate the beneficiary inducement provision of the Civil Monetary Penalties Law.

The pharmaceutical manufacturer’s patient eligibility requirements for the Arrangement are as follows:

  • The patient must be a United States resident;
  • The patient must have been prescribed the Drug by a physician, in accordance with the Drug label for an FDA-approved indication;
  • The patient must have (i) no health insurance, (ii) no insurance coverage for the Drug, (iii) received a denial of prior authorization and first-level appeal from their insurer, as determined by the administering healthcare facility, or (iv) a first-level appeal for coverage for the Drug that has been pending for at least 10 days; and
  • The patient must have an annual household income equal to or less than $75,000 for a single-person household and no more than an additional $25,000 per each additional household member.

Federal Anti-Kickback Statute

In concluding that although the arrangement would generate prohibited remuneration under the federal Anti-Kickback Statute if the requite intent were present, OIG would not impose administrative sanctions on Requestor, OIG relied on the following:

  • First, the Arrangement is distinguishable from other potentially problematic arrangements because the Drug is a potentially curative treatment, generally administered only once, and individually manufactured for the patient using the patient’s own cells. In addition, the free Drug is only available to patients who have been prescribed the Drug in accordance with the Drug label for an FDA-approved indication. Finally, the pharmaceutical manufacturer also certified that provision of the free Drug is not contingent on any future orders of the Drug by a physician.
  • Second, the Arrangement is available to patients for all of the Drug’s FDA-approved indications, making it distinct from a suspect arrangement where a manufacturer offers a free drug for one clinical indication to maintain a high price for all of the drug’s indications when paid for by federal healthcare programs.
  • Third, the pharmaceutical manufacturer provides the Drug to all eligible patients regardless of whether the Drug is administered in the inpatient or outpatient setting.
  • Fourth, there is limited risk that a physician would overutilize the Drug to earn a fee because: (i) the Drug is a one time, potentially curative treatment, and (ii) the free Drug is only available as a treatment of last resort.

Civil Monetary Penalties

OIG also evaluated whether the pharmaceutical manufacturer would know, or should know, that the remuneration it offers to beneficiaries is likely to influence their selection of a particular provider, practitioner, or supplier for the order or receipt of any item or service for which payment may be made, in whole or in part, by Medicare or a State healthcare program. OIG concluded that the remuneration offered by the pharmaceutical manufacturer under the Arrangement is not likely to influence a beneficiary to select a particular provider, practitioner, or supplier to administer the Drug, and therefore the beneficiary-inducement prohibition of the Civil Monetary Penalty Law is not implicated by the Arrangement. In reaching this conclusion, OIG reasoned that the pharmaceutical manufacturer does not make eligibility for the free Drug dependent on a beneficiary’s use of a particular provider, practitioner, or supplier.

As a reminder, the Advisory Opinion may not be relied upon by anyone other than the Requestor. A copy of Advisory Opinion 21-01 is available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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