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On November 9, the Pharmaceutical Coalition for Patient Access (PCPA) filed an action against the U.S. Department of Health and Human Services (HHS) after HHS’s Office of Inspector General (OIG) determined that a proposed patient assistance model posed more than a minimal risk of fraud, waste, and abuse under the federal Anti-Kickback Statute (AKS). PCPA alleged in its complaint that OIG’s conclusions are “arbitrary and capricious, contrary to the law, beyond statutory authority, and an abuse of discretion.” PCPA is a not-for-profit corporation funded entirely by certain manufacturers of oncology drugs.

OIG’s Advisory Opinion 22-19 addressed a proposed arrangement under which PCPA would provide cost-sharing subsidies for the manufacturers’ Part D oncology drugs, specified programs, and eligible beneficiaries’ health insurance premiums, as well as finance PCPA’s operating costs. The Advisory Opinion reviewed what is known as a “coalition model” program in which multiple pharmaceutical manufacturers offer financially needy Part D enrollees a card (or similar vehicle) entitling them to subsidies of their cost-sharing obligations for the manufacturers’ products.

In 2005, the OIG had issued a Bulletin which stated that OIG was mindful of the importance of ensuring that financially needy beneficiaries who enroll in Part D receive medically necessary drugs. OIG also noted that it supports efforts to assist those beneficiaries, as long as the assistance is provided in a manner that does not run afoul of the AKS or other laws. At the same time, the 2005 Bulletin cautioned that it was premature to offer definitive guidance on coalition models and offered examples of particular safeguards that could reduce the risk of such an arrangement. PCPA based the structure of its proposed arrangement on the 2005 Bulletin.

The recent OIG Advisory Opinion determined that the proposed arrangement would generate remuneration that would violate the AKS if the requisite intent were present, including streams of remuneration under the cost-sharing subsidy. These streams of remuneration included indirect remuneration from manufacturers to qualifying Part D enrollees purchasing the drugs; remuneration from PCPA to the Part D enrollees purchasing the drugs; and the direct remuneration from manufacturers to PCPA to cover the cost-sharing subsidies for their drugs. OIG further concluded that manufacturers would provide financing to PCPA that PCPA would then allocate to patients — including federal healthcare program beneficiaries — in the form of premium subsidies, and use to fund other programs, which would create several other streams of remuneration. Equally, the “operating costs” category would result in remuneration from manufacturers to PCPA in the form of payment for their allocated shares of PCPA’s operating costs.

PCPA’s lawsuit alleges that the Advisory Opinion is arbitrary and capricious because it conflicts with the 2005 Bulletin with which the proposed arrangement materially complies, and that the 2005 Bulletin has not been rescinded or modified since it was issued. PCPA also alleges that it is arbitrary and capricious for OIG to conclude that prohibited remuneration is present in the proposed arrangement, because it involves a charitable program that is openly and transparently offering assistance to patients with documented financial need.

We will monitor this interesting case as it progresses.

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