OIG Opinion: Drug Maker Can Provide Free Medication

On March 23, the Department of Health and Human Services Office of the Inspector General issued a favorable ruling to a drug manufacturer looking to provide a free medication to patients in need of a one-time treatment made from their own cells.

The drug maker (Requestor) makes the FDA-approved drug for two indications that is meant as a potentially curative treatment. The drug can only be administered at a healthcare facility certified by the drug manufacturer to meet specific safety requirements. The drug also must be prescribed only by a physician trained to meet the requirements of the drug’s safety protocols.

The drug manufacturer provides the medication at no cost to patients who meet certain medical and financial criteria. Among them: The patient has no health insurance or coverage for the drug and have a specified household income.

The drug is typically given only once. While the drug manufacturer typically only makes one dose from a patient’s cells, sometimes is able to manufacture more than a single dose. In the unlikely event a patient needs a second dose (as determined by their physician), the requestor offers a second dose for free. The requestor noted that only one person was in need of, and received, a second free dose in 2020.

The drug manufacturer said that while no Medicare beneficiary has qualified or received the drug for free, other federal healthcare beneficiaries (Medicaid and TRICARE) beneficiaries may qualify as eligible patients under the proposed arrangement.

Those administering the drug must promise that neither the physician administering the drug, nor the center where the drug is administered will submit any claim for payment to any federal healthcare program for the cost of the drug. However, the requestor said it is possible that the center and physician will bill for professional services relating to the administration of the medication.

At issue, is whether the arrangement violates either the federal Anti-Kickback statute or the Beneficiary Inducements Civil Monetary Penalties (CMP).

The federal Anti-Kickback statute makes it a criminal offense 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 CMP 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 health care program.

At face value, it may appear the arrangement violates both the Anti-Kickback statute and the CMP because it provides both the center and the physician remuneration in the form of earning money while administering the drug without incurring any acquisition cost for the drug. The OIG noted in its opinion that this remuneration might cause the center or physician to prescribe the drug or arrange for future purchases of the drug when payable by a federal healthcare program.

However, in this case the drug is generally given only once and is made using the patient’s own cells. In addition, the use of the drug is not contingent on future orders of the drug by the doctor or center where it is administered.

“The arrangement is distinguishable from problematic arrangements where, for example, a manufacturer offers a free initial dose of a drug for a chronic condition to induce the patient to continue to purchase the drug in the future when it would be billed to federal healthcare programs,†the OIG noted.

The OIG also gave several other reasons why this arrangement is distinguishable from those that would violate anti-kickback laws.

OIG stated that the arrangement would not violate Beneficiary Inducements Civil Monetary Penalties because under the arrangement the drug manufacturer “does not make eligibility for the free drug dependent on the beneficiary’s use of a particular provider, practitioner, or supplier.†Therefore, it is not likely to influence a patient’s selection of one center or physician over another.

Although in other circumstances, such an arrangement might violate the Anti-Kickback statute or the CMP, in this particular case, based on this set of circumstances, OIG said it would not constitute grounds for sanctions.

As always, advisory opinions are just that, opinions based on a particular set of circumstances. It’s always best to consult with legal counsel to ensure that any arrangements you are planning do not constitute a violation. The Health Law Offices of Anthony C. Vitale can assist. For more information call 305-358-4500 or send us an email to info@vitalehealthlaw.com and let’s discuss how we might be able to assist you.