On February 28, 2023, OIG posted Advisory Opinion 23-02, responding to a request by a pharmaceutical company (the Company) regarding its proposal to offer a free 14-day supply of an enzyme replacement therapy drug to patients experiencing a delay in coverage determination for the drug. Although OIG considered this arrangement to be “remuneration” within the meaning of the Federal Anti-Kickback Statute (AKS) and the Civil Monetary Penalty Law (CMP), OIG ultimately determined the proposed arrangement presented a low risk of fraud and abuse. Citing several factors that mitigated the risk of abuse in the arrangement, OIG determined that it would not impose administrative sanctions on the Company in connection with the AKS or CMP.

The Arrangement

The drug, which the Company acquired in November 2020, is FDA-approved with a sole indication for the treatment of a specific genetic condition that is typically diagnosed within a few months of birth and is fatal if left untreated. According to OIG, the Company certifies that the drug is the only currently available enzyme replacement therapy approved in the United States for treatment of the condition, and only about six to fifteen new patients are diagnosed with the condition per year in the United States.

Under the Arrangement, the Company provides a free 14-day supply of the drug to patients who are diagnosed with the condition, have received a prescription for the drug but have not previously treated with the drug, and have experienced a delay in coverage determination for a least 48 hours after the insurer received all required information. Patients are eligible for one additional 14-day supply if they are still awaiting a coverage determination or appealing a denial of coverage.

OIG Determination

OIG stated that the proposed arrangement implicates the AKS because the remunerative value of the free drug could induce purchases of the drug, which may be paid by Medicare or Medicaid. However, OIG determined that because the arrangement presents a low risk of fraud and abuse under the AKS, OIG would not impose sanctions under the AKS. OIG identified several factors supporting its decision:

1. The arrangement is unlikely to lead to overutilization of the drug because the drug’s sole FDA-approved indication is for treatment of a specific genetic condition, the arrangement is limited to a 14-day supply and possible refill to patients diagnosed with the condition and experiencing a delay in coverage determination, and patients who receive the free drug supply would be subject to any cost-sharing after the free doses.
2. Because the arrangement is available only in the event of a coverage delay, patients and prescribers likely assume that the patient’s insurance will cover the drug and that the patient will be subject to applicable cost-shares. OIG thus considers the arrangement is distinguishable from “seeding” programs where a manufacturer might offer a free or discounted drug to induce a patient onto the drug for future purchases.
3. Under the arrangement, the prescriber receives no financial benefit, because the drug is dispensed directly to the patient and the prescriber is prohibited from billing an administration fee.
4. The arrangement involves no cost to Medicare, and no patient, pharmacy, payor, or other third party is billed for the free drug supply or administration of the drug.
5. The arrangement does not obligate the patient to continue obtaining the drug or any other service from the pharmacy that dispenses the drug to the patient.

OIG also determined that the proposed arrangement would not generate prohibited renumeration under the CMP because it is not likely to influence a patient to purchase the drug from a particular pharmacy, given that there is only one pharmacy that dispenses the drug, and all patients prescribed the drug must obtain it from the pharmacy.

OIG advises that the Advisory Opinion may not be relied upon by anyone other than the Company. A copy of Advisory Opinion 23-02 is available here.