News & Resources

Publications & Media

OIG Closes the Book on Rescinding Advisory Opinion 06-04

OIG Monitor David Blank, Sam Magnuson

Just after the new year arrived, the U.S. Department of Health and Human Services (HHS) Office of the Inspector General (OIG) sent a guidance letter to Pharmaceutical Research and Manufacturers of America (PhRMA) outlining parameters for drug companies to provide free prescription drugs in 2018 to federal health care beneficiaries who had been receiving financial assistance from Caring Voice Coalition (CVC). This letter closed the book on OIG's decision to rescind Advisory Opinion 06-04 issued in 2006 to CVC, one of the nation's largest non-profit charitable patient assistance programs ("Charity PAP”). As discussed below, OIG's decision to rescind the CVC advisory opinion, and OIG's subsequent settlement with a donor (drug manufacturer) reiterates OIG's strong position that a Charity PAP's operations must be completely independent from the perception of donor influence or risk violating the federal anti-kickback statute (AKS).

Prior OIG Guidance on Charity PAPs and Issuance of Advisory Opinion 06-04

While a one-size-fits-all definition of a patient assistance program (PAP) does not exist, a PAP generally provides financial assistance related to prescription drug costs to financially needy beneficiaries, such as free or discounted products, product coupons, or copay assistance. Historically, PAPs have focused on serving patients with chronic illnesses who rely on high-cost drugs. Prior to the expansion of Medicare Part D in 2006, some PAPs were affiliated with drug manufacturers offering free or reduced costs on outpatient prescription drugs not covered by insurance. Other PAPs were operated by independent charitable organizations, not affiliated with or tied to the drug industry.

With the enactment of Medicare Part D, the federal government became a payor for outpatient drugs, and concerns arose that PAPs would implicate the AKS, which prohibits any individual or entity from offering, paying, soliciting, or receiving any remuneration in return for a referral for an item or service payable by a federal health care program (42 U.S.C. § 1320a-7b[b]). In November 2005, OIG issued a Special Advisory Bulletin (“2005 Guidance”) concluding that a manufacturer-sponsored PAP subsidizing Part D drug costs presented heightened risks under the AKS, but that “cost-sharing subsidies provided by a bona fide, independent charity unaffiliated with pharmaceutical manufacturers should not raise anti-kickback concerns, even if the charities receive manufacturer contributions.”

The OIG set forth a list of five factors for Charity PAPs in structuring their programs to alleviate risk under the AKS. Soon thereafter, OIG issued Advisory Opinion 06-04 to a Charity PAP, later identified as CVC. Amongst other certifications, CVC was required to certify that no donor “has exerted or will exert any direct or indirect influence or control” over the charitable organization or any of its programs. CVC also certified that monthly data provided to donors upon request would “not contain any information that would enable a donor to correlate the amount or frequency of its donations with the number of subsidized prescriptions or orders” for the donor's products. Based on CVC's certifications, the OIG issued a favorable advisory opinion finding that CVC's proposed program, which included offering financial assistance to Medicare Part D beneficiaries on premiums and cost-sharing obligations, would not be subject to enforcement action under the Civil Monetary Penalties Law or the AKS.

Subsequent OIG Guidance on Charity PAPs and Modified Advisory Opinion 06-04

In May 2014, OIG issued a Supplemental Special Advisory Bulletin (“2014 Guidance”) regarding Charity PAPs that was intended to supplement the 2005 Guidance. The 2014 Guidance focused on: (1) Disease Funds; (2) Eligible Recipients; and (3) Donor Conduct. OIG also reiterated that the factors set forth in the 2005 Guidance were still “fundamental” to a properly structured Charity PAP and that many of the factors “relate to the independence of the charity.” On December 23, 2015, OIG issued a “Notice of Modification of OIG Advisory Opinion No. 06-04,” in which CVC certified compliance with the additional factors set forth in the 2014 Guidance. OIG clarified that it would “not proceed against the Charity with respect to any action taken in good faith reliance on OIG Advisory Opinion No. 06-04 and its modification up until the date of this modification, as long as the material facts were fully, completely, and accurately presented, and the arrangement in practice comported with that information.”

OIG's Rescission of Advisory Opinion 06-04 and Settlement with Donor Drug Manufacturer

On November 28, 2017, the OIG ultimately rescinded Advisory Opinion 06-04 after sending CVC a preliminary notice of rescission in August, 2017 and CVC responded. The OIG found that CVC had been operating in contravention to two certifications it made when the OIG initially issued the favorable opinion. Specifically, CVC (i) provided patient-specific data to one or more donors that would enable the donor(s) to correlate the amount and frequency of the their donations with the number of subsidized prescriptions or orders for the donor's products; and (ii) allowed donors to directly or indirectly influence the identification or delineation of CVC's disease categories. The OIG concluded that CVC's failure to comply with these certifications “materially increased the risk” that CVC acted as “a conduit for financial assistance from a pharmaceutical manufacturer donor to a patient, and thus increased the risk that the patients who sought assistance from [CVC] would be steered to federally reimbursable drugs that the manufacturer donor sold.”

On December 20, 2017, only a few weeks after the OIG's rescission of the CVC advisory opinion, the U.S. Department of Justice (DOJ) announced that it had entered into a $210 million settlement with United Therapeutics Corporation (UT), a manufacturer of drug products to treat pulmonary arterial hypertension. The settlement agreement, which required UT to enter into a Corporate Integrity Agreement with OIG, alleged that UT made donations to CVC's Charity PAP “as a conduit to pay the copay obligations” of thousands of Medicare beneficiaries taking UT's drugs. According to the allegations, UT used data it received from CVC to determine the amount of its donations to CVC, and verified that the revenue UT received from drugs taken by patients in the CVC program exceeded UT's donations to CVC. Further, while Medicare patients were not allowed to participate in UT's free drug program, they were referred to CVC's program which resulted in claims to Medicare to cover the costs of the drugs.

CVC's Announcement and the OIG's Subsequent Guidance to Drug Industry

Following the rescission of Advisory Opinion 06-04, CVC announced on January 4, 2018 that it would not serve as a Charity PAP in 2018. That same day, the OIG sent a letter to PhRMA regarding the impact of the rescission of Advisory Opinion 06-04 and CVC's announcement.

In the letter, the OIG clarified that entities manufacturing, selling, or distributing outpatient prescription drugs (“Drug Companies”) will not be subject to OIG administrative sanctions if they provide free drugs in 2018 to federal health care program beneficiaries who were receiving cost-sharing support from CVC as of November 28, 2017, under the following conditions:

  • The free drugs are provided in a uniform and consistent manner to federal health care program beneficiaries who: (i) were receiving cost sharing assistance from CVC for the same drug(s) as of November 28, 2017; and (ii) have been impacted by CVC's decision not to provide assistance in 2018;
  • The free drugs are awarded without regard to the beneficiary's choice of provider, practitioner, supplier, or health plan;
  • The free drugs are not billed to any federal health care program, counted toward the beneficiary's Medicare Part D true out-of-pocket costs (TrOOP), resold, or otherwise billed to a third-party payor;
  • The provision of the free drugs is not contingent on any future purchases or orders of the drugs or any other item or service; and
  • The Drug Company maintains accurate, contemporaneous, and complete records of the free drugs it furnishes to federal health care program beneficiaries.

In other words, the OIG provided parameters to the drug industry for providing short-term financial assistance to patients impacted by CVC's decision not to serve as a Charity PAP in 2018, despite the AKS implications.

The Takeaway

OIG's rescission of Advisory Opinion 06-04 provides several insights and reminders for both Charity PAPs and the drug industry:

  1. The framework for operating a Charity PAP in compliance with OIG guidance has not changed as a result of the rescission of OIG Advisory Opinion 06-04.
  2. The rescission highlights that a consequence of not complying with certifications in a favorable advisory opinion may be that the opinion is rescinded retroactively to the date of issuance.
  3. Requestors of favorable advisory opinions, including but not limited to Charity PAPs, must consider whether changes to the requestor's business operations materially change the facts that gave rise to the OIG's decision.
  4. The rescission of the CVC opinion, and subsequent settlement with United Therapeutics, illustrates the OIG's commitment to ensuring that Charity PAPs are completely independent from influence of the drug industry, and are not acting as a conduit for financial assistance from the drug manufacturer to the patient.
  5. OIG's guidance, provided to the drug industry in a January 2018 letter to PhRMA, is limited to assisting beneficiaries that CVC was supporting as of the rescission date, and only applies in 2018.

Following the rescission of the CVC advisory opinion, it will be interesting to monitor the OIG's approach to issuing advisory opinions. While the recession of Advisory Opinion 06-04 was warranted based on the requestors noncompliance with its certifications to the OIG, its remains to be seen whether this action will have a chilling effect on an organization's willingness to seek advisory guidance in the future. Notably, in the first four months of 2018, the OIG has only issued one advisory opinion, and it did not involve an analysis of the AKS. Please feel free to contact David Blank, Sam Magnuson, or your local Quarles & Brady attorney, to learn more about this matter, the OIG Advisory Opinion process, or other OIG enforcement initiatives.

Read more OIG Monitor insights from Jan-March 2018:

OIG Data Analytics Nab More Fraudulent Pelvic Floor Therapy Providers

OIG Blesses Arrangement Involving “Far Removed” Excluded Person

Second Acts: Exclusion, Reinstatement, and Revocation Oh My!

Problematic Physical Therapy Billing Remains an OIG Priority

OIG by the Numbers January – March, 2018