OIG Deems Free Drug Patient Assistance Program Low-Risk in Advisory Opinion 25-01

On January 15, 2025, the U.S. Department of Health and Human Services Office of Inspector General (“OIG”) posted Advisory Opinion 25-01, a favorable opinion analyzing a pharmaceutical manufacturer’s free product offering to qualifying patients under the federal Anti-Kickback statute (“AKS”) and the Civil Monetary Penalties Law beneficiary inducement prohibition (“Beneficiary Inducement CMP”).

The Drug

The manufacturer makes an Alzheimer’s drug (the “Drug”) designed to treat patients with mild cognitive impairment or mild disease-related dementia and the confirmed presence of amyloid pathology. The Drug targets the underlying disease process rather than treating the symptoms. At present, only two other drug products are available to treat the underlying disease.¹

The Drug is administered via intravenous infusion once every two weeks for approximately one hour in an outpatient setting, including a physician’s office, physician-affiliated outpatient clinic, or independent fusion center. The Drug’s entire course of therapy lasts approximately 3.6 years. There are no known clinical barriers to discontinuing the Drug or switching to an alternate therapy.

The Drug is covered under Medicare Part B as an outpatient infusion therapy. Medicare Part B also separately covers the physician’s administration of the Drug. As a Part B covered drug, the beneficiary is responsible for the standard 20% coinsurance after meeting their deductible.

The Arrangement

The manufacturer’s program provides the Drug at no cost to eligible patients, including federal healthcare program beneficiaries. To qualify, patients must (1) reside in the U.S.; (2) be at least 18 years old; (3) be prescribed the Drug for an on-label indication; (4) be uninsured, underinsured, or have Medicare coverage but attest to being unable to afford out-of-pocket costs; and (5) have a household income at or below 500% of the Federal Poverty Level (“FPL”). The manufacturer intends to validate income through a soft credit check or by reviewing income documentation. For patients exceeding the program’s FPL threshold, the manufacturer allows them to seek a financial hardship exception that is reviewed on a case-by-case basis. The manufacturer certified that eligibility determinations will be made under uniform, consistent assessment of financial need without regard to a patient’s insurance, physician, or infusion provider. Program participation would not be contingent on past, present, or future Drug purchases.

Federal beneficiaries who qualify for the program will receive the free Drug through the end of the calendar year, even if Medicare would cover the medication at an earlier date. Patients must reapply annually and may continue receiving the free medication if they satisfy the eligibility criteria. The manufacturer also certified it would maintain the free drug program indefinitely, regardless of changes in Medicare coverage or the introduction of therapeutic alternatives in the marketplace.

Qualifying patients would be required to certify that they (1) will not submit a request for payment for the free Drug to any payor, including a federal healthcare program, and (2) understand that no part of the free Drug, or associated costs, can be allocated to their out-of-pocket expenses. Additionally, the treating physician must certify in writing that they (1) prescribed the product for an FDA-approved indication based on independent professional judgment of medical necessity and (2) would not submit a request for payment for the free product from any insurer or the patient. However, if Medicare covers the Drug but the beneficiary cannot afford the cost-sharing amount, the treating physician or administering provider could seek reimbursement for the administration and collect the related copayment from the patient.

The manufacturer’s patient services organization will manage the program. This organization operates independently from the manufacturer’s sales and marketing department, and no employee managing the program receives incentive compensation tied to the Drug’s sales. The manufacturer has partnered with a non-commercial pharmacy to administer the free medication program, including facilitating the delivery of the Drug to the administration location.

The manufacturer also certified it would impose marketing restrictions on the free drug program. Neither the manufacturer nor anyone acting on its behalf (e.g., sales and marketing representatives, field reimbursement personnel, or hub personnel) would be allowed to promote the free Drug offering to prescribers as a reason to prescribe the Drug. The manufacturer would not promote the offer through any direct-to-consumer advertising. Program promotion would be limited to printed materials designed to provide general awareness, and reimbursement personnel would be allowed to educate pharmacists, physicians, and physician office staff on program eligibility and terms.

The OIG’s Analysis

Federal AKS

The OIG concluded that the free Drug program implicated the AKS because the manufacturer provided remuneration to federal healthcare program beneficiaries, which could induce them to continue using the Drug once covered by Medicare. The OIG also found that the program provided remuneration to administering providers because they would be eligible to receive reimbursement for the administration fee in the event the beneficiary could not afford their cost-sharing obligations. As a result, the OIG determined that the arrangement would constitute prohibited remuneration under the AKS if the requisite intent were present.

Nonetheless, the OIG concluded that the risk of fraud and abuse was sufficiently low for three reasons. First, the program was unlikely to increase federal healthcare expenditures because the Drug itself would not be billed to any federal program. The only cost payable by Medicare would be the administration fee, and only in cases where a beneficiary could not afford their cost-sharing obligation. Additionally, because there would be no clinical barrier to switching to another therapy, federal healthcare programs would not be required to continue coverage if the beneficiary no longer qualified to receive the free product from the manufacturer.

Second, the OIG determined that the free Drug program was unlikely to interfere with clinical decision-making because the prescriber would not receive any financial incentives tied to prescribing the Drug. Similarly, the administering providers would not receive any financial benefit tied to the free Drug. The OIG noted that any independent fusion center administering the drug would likely lose potential profits because they would not submit a claim for the medication.

Third, the OIG concluded that the free Drug offering was unlikely to result in any patient steering because program eligibility was agnostic to the specific provider or prescriber. Instead, the patient remained free to change physicians or infusion providers without impacting their eligibility to participate in the program.

Beneficiary Inducement CMP

The Beneficiary Inducements CMP imposes civil monetary penalties on any person who offers or provides remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know that the remuneration is likely to influence the enrollee’s choice of a provider, practitioner, or supplier for items or services covered, in whole or in part, by Medicare or a state healthcare program. The OIG determined that the manufacturer’s free drug program did not implicate the Beneficiary Inducements CMP for several reasons.

First, manufacturers are generally exempt from the Beneficiary Inducements CMP because they are not providers, practitioners, or suppliers under the statute. Second, the program would be administered by a non-commercial pharmacy that does not provide services to beneficiaries outside the free drug program. Third, the program would not steer patients toward any specific provider, as the drug would be available to all qualifying patients regardless of their prescribing physician or infusion center, and patients remain free to switch providers without affecting their eligibility.

Takeaways

Advisory Opinion 25-01 is instructive for pharmaceutical manufacturers considering patient assistance programs that include free product offerings to federal healthcare program beneficiaries. The favorable opinion reaffirms that low-risk assistance programs must safeguard against increasing federal healthcare program costs, interference with clinical decision-making, and patient steering. Designing assistance programs to protect against these risks is critical to avoiding exposure to the AKS.

Additionally, while the totality of the guidance offers valuable insight for pharmaceutical manufacturers, it is important to remember that the favorable opinion is only applicable to the specific facts presented. Manufacturers looking to implement a similar patient assistance program must exercise caution when establishing the specific eligibility, frequency, duration, and marketing criteria regarding a beneficiary’s ability to obtain financial support. Additional consideration must be given to all the safeguards necessary to maintain a low-risk compliance profile sufficient to withstand regulatory scrutiny.

For questions about this advisory opinion or any similar arrangement, please contact AGG Healthcare attorneys David Blank or Cody Davis or your regular AGG attorney.

[1] The opinion notes that there were at one point two alternative drugs to treat the underlying condition, but one was discontinued in 2024.