science iStock_000034258574_Full“You scratch my back, I scratch yours” arrangements are common in business transactions. These agreements are risky in the healthcare space, however, with the potential to implicate civil and criminal sanctions. Whether involving a patient, provider, or industry, the government closely scrutinizes quid pro quo arrangements when the government foots the bill.

Clinical trial sponsors often have motivation to cover copayment obligations of trial enrollees. Sponsor coverage of copayments allows subjects to participate in trials without incurring costs directly, while permitting sponsors to minimize trial costs by relying on insurance coverage of routine items and services instead of conducting fully sponsor-paid research. Such practice can raise regulator concerns when trial subjects are also beneficiaries of federal healthcare programs.

In a 2002 Special Advisory Bulletin, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) focused on waivers of copayments and deductibles in clinical trials where well-established treatments were already available. While acknowledging the advantages of copayment and deductible waivers for patients, the Special Advisory Bulletin noted that when sponsors waive cost-sharing obligations to encourage subjects to participate in such trials, the sponsors may actually induce subjects to forgo equally effective or more appropriate nonexperimental care.

Since 2002, the OIG has contemplated soliciting public comments on establishing a regulatory safe harbor to the anti-kickback statute for free goods and services (including copayment waivers) provided to beneficiaries in connection with clinical trials sponsored at least in part by the National Institutes of Health or other governmental organizations. To date, no such request for comments has been issued. Instead, clinical trial sponsors who wish to cover copayments of Medicare beneficiaries subject themselves to OIG scrutiny.

In early June, the OIG again published an Advisory Opinion addressing copayment waivers in the clinical trial setting. Advisory Opinion 15-07 represents the first time the OIG has explicitly indicated that it will not impose civil monetary penalties or administrative sanctions for an arrangement whereby a commercial trial sponsor may routinely cover the copayment obligation of clinical trial enrollees who are also Medicare beneficiaries and provide other subsidies for participation in the trial. It is yet to be determined whether this Advisory Opinion suggests a sea change in the government’s position or simply demonstrates a narrow set of facts where such remuneration arrangements are permitted.


Advisory Opinion 15-07 provides an analysis and enforcement decision on a medical device manufacturer’s request to waive copayments and offer related subsidies for Medicare beneficiaries who participate in a clinical trial involving the manufacturer’s product. The product is designed to assist in performing a type of minimally invasive spinal surgery known as percutaneous image-guided lumbar decompression for lumbar spinal stenosis (PILD). The manufacturer’s request arose from the particular, and less common, coverage mechanism applicable to the product.

Generally, for Medicare to cover an item or service for its beneficiaries, CMS must find the item or service to be “reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.” (42 U.S.C. 1395y(a)(1)(A)). CMS typically makes this determination by conducting a National Coverage Determination (NCD), which involves discussion of relevant medical and scientific information and request for public comment.

In the NCD for PILD, CMS determined that the procedure was not “reasonable and necessary” for blanket coverage authorization. Instead, CMS agreed to cover PILD through the Coverage with Evidence Development Program, a mechanism by which CMS may support innovative technologies that may benefit Medicare beneficiaries but the basis for coverage requires more data (in the form of a clinical trial) before CMS is persuaded of its reasonable and necessary nature. CMS coverage was limited to beneficiaries enrolled in certain clinical trials meeting specified criteria. Specifically, the clinical trial must answer whether PILD (1) provides a clinically meaningful improvement of function and/or quality of life compared with other treatments, (2) provides clinically meaningful reduction in pain compared with other treatments, or (3) affects the overall clinical management and decision making, including use of other medical treatments or services, compared with other treatments. CMS required that the clinical trial utilize a randomized, controlled design with appropriate comparator treatments or a sham controlled arm.

Proposed Clinical Trial and Copayment Coverage

Under CMS’s trial parameters and with CMS’s input, the manufacturer developed a clinical trial to evaluate the effectiveness of PILD using its product compared with a sham procedure. The trial design included prospective, multicenter, randomized, controlled, blinded measures with the goal of determining whether the manufacturer’s product meaningfully improved health outcomes following PILD. Treatment group subjects would receive PILD with the manufacturer’s product; control group subjects would receive sham surgery involving the same anesthesia and skin incision as the PILD group but with no therapeutic treatment.

Because the trial followed CMS’s prescribed requirements, those subjects who were randomized to the treatment group and were enrolled in Medicare could have Medicare coverage for their PILD and would be subject to copayment through their insurance coverage. By comparison, those subjects randomized to the control arm would not be eligible for Medicare coverage because they would not receive a procedure with any therapeutic intent. Thus, billing Medicare and collecting a copayment from the subject would be prohibited. The manufacturer expressed concern that a failure to collect copayments from subjects randomized to the control arm would compromise the trial design – subjects would know their group by virtue of their copayment obligation. To prevent any unintended unblinding, the manufacturer sought to pay the copayments on behalf of Medicare beneficiaries enrolled on the treatment arm.

Further, during follow-up, any subject for whom the PILD is deemed a failure would be unblinded; those originally in the control group would be given the opportunity to undergo PILD using the manufacturer’s product and at the manufacturer’s expense. The manufacturer believed that subsidizing the PILD procedure for control group subjects was necessary to encourage trial enrollment despite the risk of being randomized to a sham surgery.

OIG’s Analysis

The manufacturer’s proposal involved two potential areas of improper remuneration: (1) paying copayments of Medicare beneficiaries randomized to the treatment arm, and (2) paying the costs of the PILD procedure for control group subjects. None of the regulatory exceptions available under the anti-kickback statute or the Civil Monetary Penalties Law applied to the proposed arrangement. Nevertheless, using the rationale below, the OIG determined that the manufacturer’s proposed arrangement posed minimal risk of fraud and abuse under the anti-kickback statute:

  • The proposed arrangement would further CMS’s policy objectives. The manufacturer designed the trial in consultation with CMS and in alignment with CMS’s parameters. Any results would be shared with CMS to determine whether PILD is reasonable and necessary for broader Medicare coverage.
  • CMS required a randomized, controlled, blinded trial with appropriate comparator mechanisms. The manufacturer’s proposed arrangement was reasonable to encourage trial enrollment and to properly assess the true impact of PILD using the manufacturer’s product.
  • The manufacturer certified that the arrangement was independent of any other arrangement or agreement between or among manufacturer and investigators, trial sites, and trial participants. Further, any compensation paid was in conjunction with the fair market value for necessary trial services.
  • The risk of overutilization or increased costs to federal healthcare programs was minimized because subjects would be required to meet predetermined enrollment criteria and execute an informed consent document before participating in the trial, and investigators would be required to adhere to the trial protocol and report to an institutional review board.