OIG Finds Drug Company’s Co-Pay Assistance Arrangement “Highly Suspect” Under the Federal Anti-Kickback Statute – Part Two

In Part One of this article, we discussed the Federal Anti-Kickback Statute and the underlying cost-sharing assistance program that prompted the Office of the Inspector General’s (“OIG’s”) advisory opinion, Advisory Opinion 20-05.  Part Two rounds out the discussion by providing the OIG’s analysis of the program and its potential Pharmaceutical Fraud.

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The pharmaceutical manufacturer (“Requestor”) that makes “the most expensive cardiovascular drug ever launched in history,” with a price tag of $225,000 for a one-year course of treatment, asked for the OIG’s opinion on its proposed cost-sharing assistance program.  The cost-sharing program would help Medicare Part D beneficiaries by paying for a substantial portion of the beneficiaries’ out-of-pocket co-pay expenses for the drug.  At issue was whether the arrangement could be Pharmaceutical Fraud.

The Applicable Law

The OIG began its legal analysis by noting that the Federal Anti-Kickback Statue makes it a crime to knowingly offer, pay, solicit, or receive any remuneration “to induce or reward” referrals for, or purchases of, items or services that are reimbursable under the Social Security Act.  Notably, “remuneration” includes anything of value, directly or indirectly.

With regard to possible punishment for a drug company such as the Requestor, the OIG could institute an action against a company under the Federal Anti-Kickback Statute and seek the company’s exclusion from Federal health care programs, including Medicare and Medicaid, a significant penalty indeed.

The OIG also noted that another portion of the Social Security Act, called the “Beneficiary Inducements CMP,” may be applicable in this case.  The Beneficiary CMP provides for civil monetary penalties (which is what “CMP” stands for) against a party that offers remuneration to a Medicare or Medicaid beneficiary when the party knows or should know that it is likely to influence the beneficiary’s selection of a “particular provider, practitioner, or supplier.”

As for the definition of “remuneration” in the Beneficiary Inducements CMP law, it specifically includes “the waiver of coinsurance and deductible amounts,” which touches directly upon the cost-sharing assistance proposed by the Requestor in this case.

The OIG’s Analysis – The Requestor’s Proposal is “Highly Suspect” Under the Federal Anti-Kickback Statute

  1. Federal Anti-Kickback Analysis

The OIG first noted that it is aware of how important it is that Medicare beneficiaries are able to obtain drugs and other products that are medically necessary for their health and wellbeing.  Further, the OIG recognized that there are no other FDA-approved pharmacological treatments for the cardiovascular disease addressed by the Requestor’s drug.

In that vein, the OIG cited to its prior guidance, related to a drug company’s ability to donate to independent charitable co-pay assistance foundations, that gives lawful avenues for drug companies to ensure that Part D beneficiaries are able to afford medically necessary drugs, even when only one drug is available to treat a disease.

The OIG went on to find that the cost-sharing assistance program proposed by the Requestor was far different than the charitable co-pay assistance discussed in its previous guidance.  The OIG then concluded that the Requestor’s cost-sharing program would be “highly suspect” under the Federal Anti-Kickback Statute.

The OIG stated that the Requestor’s program “would provide remuneration in the form of a valuable Subsidy Card [the cost-sharing assistance] to eligible Medicare beneficiaries.”  The OIG added that the cost-sharing assistance “would operate as a quid pro quo – Requestor would offer remuneration (the Subsidy Card) to the beneficiary in return for the beneficiary purchasing” the Requestor’s drug.  Therefore, the cost-sharing assistance would “induce” beneficiaries “to purchase a covered item by removing what would otherwise be an impediment that would deter such purchase;” and in so doing, the Medicare program would bear the costs for the Requestor’s very expensive drug.

In short, the OIG takes the position that cost-sharing assistance will “induce” Medicare beneficiaries to purchase the Requestor’s federally reimbursable drug.  It is that very inducement that violates the Federal Anti-Kickback Statute.

The OIG also provide a number of other fraud and abuse risks that will likely result from the Requestor’s proposed cost-sharing assistance:

  • Removing a Market Constraint. The OIG observed that co-payments for medications serve as a key pricing control for the Part D program.  Thus, the OIG opined that the proposed cost-sharing assistance allowed the Requestor to keep the price of its drug very high, at $225,000 per year.
  • Steer Patients to One Therapy. The OIG also feared that the Requestor’s proposal would lock patients into a particular treatment.  While the Requestor’s drug is the only FDA-approved medication, other treatment options like off-label drugs or an organ transplant could also address a patient’s disease.  Use of the Requestor’s drug, however, may foreclose those other options.
  • Potential to Influence Doctor Decisions. Even though the Requestor’s proposal does not involve giving remuneration to doctors, the availability of the cost-sharing assistance may still indirectly influence a doctor’s decision on whether to prescribe the Requestor’s drug.

In sum, the OIG found that the Requestor’s proposal would “present more than a minimal risk of fraud and abuse” under the Federal Anti-Kickback Statute and, thus, is “highly suspect” under that law.

  1. Beneficiary Inducements CMP Analysis

Interestingly, the OIG found that the Requestor’s proposal would not violate the Beneficiary Inducements CMP.  The OIG came to that conclusion because the Requestor is not a “provider, practitioner, or supplier,” which is required under the terms of the law.  Providers, practitioners, and suppliers are typically considered to be physicians or pharmacies.  Therefore, because the Requestor is not a physician or pharmacy, then the Beneficiary Inducements CMP law does not apply.

The OIG, therefore, found that the Requestor’s proposal would not trigger liability under the Beneficiary Inducements CMP, despite the fact that the Requestor’s cost-sharing assistance “is clearly remuneration to a beneficiary.”


This adverse opinion, rejecting the Requestor’s proposed cost-sharing assistance, is relatively far-reaching because it demonstrates the OIG’s willingness to see a co-pay assistance program as an “inducement” to use a particular medication.  If you have further questions on this or any healthcare subject, please contact the Whistleblower Firm – Nolan Auerbach & White, LLP.  We have the experience and resources to protect Healthcare Fraud whistleblowers.  Contact us online, or by calling 800-372-8304 today.

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