OIG Approves Pharmaceutical Manufacturer’s Proposed Free Genetic Testing

The Department of Health and Human Services, Office of Inspector General (“OIG”) recently released a favorable advisory opinion, OIG Advisory Opinion No. 24-12 (the “Opinion”) to a pharmaceutical manufacturer (the “Requestor”). In the Opinion, OIG analyzes whether the sponsorship of genetic testing, related counseling, and disease-state awareness education regarding certain hereditary conditions that may cause kidney stones (the “Arrangement”) would constitute grounds for sanctions under the civil monetary penalty provisions at section 1128A(a)(5) and (7) of the Social Security Act (the “Act”), as those sections relate to the commission of acts described in section 1128B(b) of the Act (the “Federal anti-kickback statute” or “AKS”) or prohibition of inducements to beneficiaries. The Requestor also sought confirmation that the Arrangement would not expose it to sanctions under the exclusion authority at section 1128(b)(7) of the Act. OIG concluded that though the Arrangement would generate prohibited remuneration if the requisite intent were present, the OIG would not impose sanctions.

The Advisory Opinion

The Opinion Requestor is a manufacturer of a drug approved by the U.S. Food and Drug Administration (“FDA”) for treatment of the most common and severe subtype of an ultra-rare genetic mutation that leads to recurrent kidney stones and chronic kidney disease, which in turn can progress to end-stage renal disease. The condition occurs in only three out of 1,000,000 people. Condition diagnosis is often delayed because its symptoms overlap with those of other diagnoses, and testing can be inconvenient, costly, and difficult. Also, there is a general lack of awareness about the condition due to its rarity, and limited insurance coverage available for genetic testing that would diagnose the condition. Multiple commercially available genetic testing panels can be used to identify patients with the condition. To determine the appropriateness of Requestor’s drug for a particular patient, the patient’s physician considers factors including the possibility of managing the condition through monitoring and lifestyle changes, or treatment with competing products or medications.

Requestor instituted a program to sponsor genetic testing, related genetic counseling, and disease-state awareness education regarding the condition. The education is provided via two websites—one geared toward the general public, the other to healthcare professionals—that give general guidance about condition management and resources, but neither discuss specific therapeutic options nor include branding for Requestor’s drug. Genetic testing is provided only when a healthcare professional certifies that the patient meets one of several criteria, including relevant family history, a lab result that was inconclusive regarding the presence of the genetic mutation, or the presence of certain kidney-related conditions. Requestor covers the entire cost of the testing and counseling, and takes steps to ensure that third parties do not shift any cost of the Arrangement to patients, health care providers, federal health care programs, or other third-party insurers. Receipt of the services is not conditioned on the use of Requestor’s drug or any other item or service sold by the Requestor or the genetic testing entities, but Requestor acknowledges that the Arrangement could result in a prescribing health care professional scheduling, conducting, and billing their payors for an additional patient visit to review the genetic testing results and update the patient’s treatment regimen. Neither the genetic testing entities nor the patients’ healthcare providers divulge any patient-identifying information to Requestor.

Before kicking off its favorable opinion, OIG cautioned that its conclusion would likely have been different if there were any sharing of data with Requestor that would allow it to target marketing of Requestor’s drug based on the Arrangement, or if there were a more direct nexus between the remuneration under the Arrangement and ordering or purchasing the drug.

Moving on, OIG concluded that the Arrangement implicates the AKS because the inherently valuable genetic testing and counseling provided to eligible patients, the possible creation of valuable opportunities for physicians to bill for additional services, and the possibility that the genetic testing entities could become referral sources for Requestor’s drugs each constitute remuneration. Nonetheless, OIG concluded that the risk of fraud and abuse under the Arrangement is sufficiently low for three reasons. First, the narrow eligibility criteria for Arrangement participation, the rarity of the genetic mutation, and the inability to bill any patient or payor for any component of the genetic testing reduce the risk of inappropriate utilization. Second, the Arrangement is unlikely to skew clinical decision-making or raise concerns about patient safety or care quality because the genetic testing panels are not created specifically for the Arrangement, Requestor does not incentivize healthcare providers to recommend or prescribe its drugs, and Requestor does not receive any information identifying the involved patients or providers that would enable it to target marketing of its drug based on the Arrangement. Finally, the risk that the genetic testing entities could become direct or indirect referral sources for Requestor’s drug is limited by: (i) Requestor’s payment of fixed fees for the genetic testing entities’ services; (ii) the counselors do not provide any information about treatment options; and (iii) the entities provide no data to Requestor allowing identity of the providers ordering their tests or the patients who receive them.

As to the Beneficiary Inducement CMP, OIG first noted that a pharmaceutical manufacturer is not a “provider, practitioner, or supplier” for the purpose of that statute. However, OIG found that the statute was implicated because Requestor provides remuneration to beneficiaries in the form of free genetic testing and counseling, which could influence a beneficiary to seek follow-up care from the health care professional who ordered the genetic testing. Nonetheless, OIG would decline to impose sanctions under the Beneficiary Inducements CMP for the same reasons for declining to sanction Requestor under the AKS.

Analysis

Provision of free services—including genetic testing and counseling—generally may implicate both the AKS and the Beneficiary Inducements CMP. In giving this pharmaceutical manufacturer a favorable Opinion, however, OIG seemed to give particular weight to the absence of data shared with the Requestor that would allow it to target marketing based on the Arrangement. This tracks with another OIG Advisory Opinion approving a similar arrangement. In AO 22-06, OIG evaluated another program in which a pharmaceutical manufacturer provided free genetic testing and counseling to patients diagnosed with (or suspected of having) a rare condition for which the manufacturer made FDA-approved medications. In AO 22-06 (as in AO 24-12), OIG focused on guardrails it found would reduce fraud and abuse risks, such as narrow eligibility criteria, no billing to patients or payors, and fixed fees paid for the genetic services. Like AO 24-12, the 2022 Opinion also noted that OIG likely would have come to an unfavorable conclusion had there been any data sharing with the manufacturer that enabled it to market the drug based on the arrangement.

In contrast, a settlement subsequent to AO 22-06’s publication provides a cautionary tale. In December 2023, the U.S. Department of Justice (“DOJ”) announced that pharmaceutical company Ultragenyx Pharmaceutical Inc. (“Ultragenyx”) agreed to pay $6 million to resolve allegations that it caused the submission of false claims to Medicare and Medicaid, in violation of the False Claims Act, by paying for free genetic tests to identify a rare disorder, plus a separate fee to receive test result information for marketing purposes. Per DOJ, Ultragenyx would receive the name of the test-ordering health care provider (“HCP”), de-identified patient information, and test results. Ultragenyx disseminated this information to its sales force with instructions to make sales calls for its FDA-approved medication for the disorder to HCPs who ordered a test or, in particular, who had a patient with a positive test result. Though Ultragenyx ceased sharing the test result information with its marketers soon after the release of AO 22-06, a whistleblower lawsuit had already been filed, ultimately leading Ultragenyx to settle allegations related to its pre-cessation conduct.

Taken together, the Ultragenyx settlement and the OIG Advisory Opinions illustrate that healthcare stakeholders should work with experienced counsel to carefully analyze contemplated arrangements and evaluate risks related to healthcare fraud and abuse authorities. For more information on OIG Advisory Opinion No. 24-12 or other issues addressed herein, please contact AGG Healthcare attorney Lisa Churvis.