Health Law Update

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For years, many drug manufacturers have issued coupons to help cover some or all of the cost of copayments (commonly referred to as a “copay”) for prescription medications.  While the Department of Health and Human Services (HHS) Office of Inspector General (OIG) has previously provided some guidance on the use of these coupons, there has been some confusion as to how far manufacturer’s actions must go when providing copay coupons, particularly for including and enforcing prohibitions on using coupons on medications paid for by federal healthcare programs.  Today’s actions by OIG provide another example of OIG’s clarification on these restrictions.  In addition, OIG’s actions provide guidance and recommendations for improving manufacturers’ copay coupon programs’ compliance with federal law.

Earlier today, OIG released a <a href="https://oig.hhs.gov/fraud/docs/alertsandbulletins/2014/SAB_Copayment_Coupons.pdf">special advisory bulletin</a> and <a href="https://oig.hhs.gov/oei/reports/oei-05-12-00540.pdf">report</a> addressing the prohibition on using copay coupons for medications that are paid for, even just in part, by Medicare Part D.  The report details the results of a study conducted by OIG’s Office of Evaluation and Inspections analyzing the measures drug manufacturers use to prevent their coupon programs from being used in connection with Part D.

The report made clear that, according to OIG, copay coupons constitute compensation or a payment offered to patients to encourage them to purchase specific items.  If that medication is paid for under a federal program, federal anti-kickback law may be implicated.

Specifically, OIG stated that a coupon being made available may encourage doctors and patients to choose an expensive name brand drug when a less expensive and equally effective generic is available. Said another way, if a patient no longer has to consider the cost of a copay because the patient has received a coupon, the patient’s doctor may be more inclined to prescribe drugs produced by manufacturers issuing coupons. Federal anti-kickback law makes it a criminal offense to knowingly and willfully offer, pay, solicit or receive any compensation to induce or reward referring or generating business that is reimbursed by any federal healthcare program. According to OIG’s thinking, a copay coupon used for the purchase of a medication, paid for by a federal healthcare program, is an effort to induce or reward the referral or generation of business that is reimbursed by the federal government – a violation of the anti-kickback statute. What’s more, submitting a claim to the federal government that seeks payment for goods or services resulting from a violation of the anti-kickback statute constitutes a violation of the False Claims Act.

Interestingly, while OIG acknowledged that “copayment support may benefit beneficiaries by encouraging adherence to medication regimens, particularly when copayments are so high as to be unaffordable to many patients,” OIG stated there are means for manufacturers to help provide pharmaceuticals to federal healthcare program beneficiaries in need – they should donate to charities that provide financial support to these patients.  According to OIG, this is particularly true when considering that “cost-sharing requirements promote: (1) prudent prescribing and purchasing choices by physicians and patients based on the true costs of drugs and (2) price competition in the pharmaceutical market.”

While the limitations on using coupons for drugs paid for by a federal program is not new news to pharmaceutical companies, today’s announcement makes clear that, according to OIG, those companies offering coupons ultimately bear responsibility for ensuring their programs comply with federal law.  This is true even if the copay coupons include some kind of statement notifying the user that it cannot be used by a beneficiary of a federal healthcare program. In fact, according to OIG “[p]harmaceutical manufacturers that offer copayment coupons may be subject to sanctions if they fail to take appropriate steps to ensure that such coupons do not induce the purchase of Federal health care program items or services, including, but not limited to, drugs paid for by Medicare Part D. Failure to take such steps may be evidence of intent to induce the purchase of drugs paid for by these programs, in violation of the anti-kickback statute.”

OIG Issues Special Advisory Bulletin Covering Manufacturer Copay Coupons and Medicare Part D