The HHS OIG Finds Remuneration That Does Not Warrant the Imposition of the AKS or the Beneficiary Inducements CMP

In a recent Advisory Opinion, the Department of Health and Human Services (“HHS”) Office of the Inspector General (“OIG”) stated that, although the Arrangement would generate prohibited remuneration, it would not impose administrative sanctions against the Requestor based on certain circumstances. While the Opinion contains the usual disclaimers and restrictions limiting it to the specific Arrangement and individual Requestor, it also provides insight into the kind of circumstances that the OIG considers to pose a sufficiently low risk of fraud and abuse to militate against the imposition either of the Anti-Kickback Statute (“AKS”) or the Beneficiary Inducements Civil Monetary Penalties (“CMP”).

The Requestor, a pharmaceutical manufacturer, has a Risk Evaluation and Mitigation Strategy (“REMS”) with Elements to Assure Safe Use (“ETASU”) to manage the risk of ocular side effects from using its Product. All patients prescribed the Product must be enrolled in the FDA-mandated REMS, which is managed by a third-party Vendor, to obtain the Product. To reduce the risk of ocular side effects, the FDA-approved literature recommends that patients: (i) receive ophthalmic examinations prior to each dose and (ii) use preservative-free lubricant eye drops at least four times a day while being treated with the Product. The eye drops are non-­prescription, cost up to approximately $17 per month, and typically are not reimbursed by federal healthcare programs.

Under the Arrangement, Requestor offers free eye drops to all qualified patients through the REMS Vendor, which confirms the patient’s enrollment in the REMS and seeks consent from the patient to use the patient’s REMS data to facilitate the eye drop shipments. Each eligible patient receives a 60-vial supply of eye drops for the initial phase of treatment and an additional 60-vial supply once every 50 days for as long as necessary. The patient’s only interactions with respect to the eye drops are with the REMS Vendor.

The OIG specifically noted that the Requestor had certified that it neither covers any patient costs for the Product in connection with the Arrangement nor provides any remuneration to the physicians who prescribe the Product in connection with the Arrangement.

Under the AKS, it is unlawful to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for, the referral of an individual to a person for the furnishing of, or arranging for the furnishing of, any item or service reimbursable under a federal healthcare program. The statute extends to remuneration to induce, or in return for, the purchasing, leasing, or ordering of, or arranging for or recommending the purchasing, leasing, or ordering of, any good, facility, service, or item reimbursable by a federal healthcare program. “Remuneration” covers the direct and indirect transfer of anything of value. As is now well understood, the statute covers any arrangement where one purpose of the transfer is to induce referrals for items or services reimbursable by a federal healthcare program.¹

The OIG found that the free eye drops constituted remuneration that could induce patients who are federal healthcare program beneficiaries to continue purchasing the Product or other federally reimbursable items manufactured by Requestor. The OIG also found, however, that the Arrangement poses a sufficiently low risk of fraud and abuse under the AKS.

First, the FDA-approved Product label, Medication Guide, and REMS Patient Guide all recommend that patients use eye drops at least four times a day. While the eye drops are not integrally related to the Product, they are recommended to mitigate one common side effect of the Product. Therefore, having ready access to the eye drops through the Arrangement mitigates a known safety risk for patients using the Product.

Second, the eye drops are relatively low-cost, nonprescription items, making it unlikely that the provision of the eye drops would induce the patient to choose the Product.

Finally, the Arrangement should not result in increased costs to federal healthcare programs because the eye drops are not billed to payors and are intended to manage or avoid a potential side effect to a prescribed treatment. The OIG specifically noted that the Arrangement should not corrupt medical decision-making because: (i) the Product is FDA-approved to treat patients in specified circumstances; and (ii) the free eye drops are not a financial benefit to prescribers and only a relatively small financial benefit to patients’ other costs.

The OIG also reviewed the Arrangement under the Beneficiary Inducements CMP, which provides for the imposition of civil monetary penalties against any person who offers or transfers remuneration to a Medicare or state healthcare program beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier for the order or receipt of any item or service for which payment may be made, in whole or in part, by Medicare or a state healthcare program.

As the OIG noted, under the CMP, pharmaceutical manufacturers are not “providers, practitioners, or suppliers” unless they also own or operate, directly or indirectly, entities that file claims for payment under the Medicare or Medicaid programs. Neither the Requestor nor the REMS Vendor qualified as a provider, practitioner, or supplier of healthcare items or services for purposes of the CMP.

However, as the OIG further clarified, a pharmaceutical manufacturer can be an offeror or transferor of remuneration in violation of the Beneficiary Inducements CMP if the remuneration is likely to influence the beneficiary to select a particular provider, practitioner, or supplier to receive the Product. Because the Arrangement provides that all patients, including Federal healthcare beneficiaries, are eligible for the free eye drops, regardless of which physician prescribed the Product, and the relevant documents specify that the Requestor — not the prescriber — provides the free eye drops, the OIG concluded that the remuneration at issue was not likely to influence a beneficiary to select a particular provider, practitioner, or supplier.

Although the Opinion is expressly limited to the Requestor and its circumstances, these circumstances can serve as some guidance for companies seeking to evaluate — or to initiate — their own programs.

[1] The statute carries criminal penalties of possible imprisonment for up to 10 years and possible fines of up to $100,000, with conviction also resulting in exclusion from federal healthcare programs.