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OIG Advisory Opinion Approves Drug Discount Program

Last week, the OIG posted favorable advisory opinion (16-07) regarding a proposed discount program for Part D beneficiaries who are prescribed a statutorily excluded erectile dysfunction drug.  The OIG concluded that while the proposed discount program could potentially generate prohibited remuneration under the anti-kickback statute (“AKS”) if the parties had the requisite intent, the discount program presented no more than a minimal risk of fraud and abuse under the AKS and therefore it would not impose administrative sanctions.

When analyzing the discount program, the OIG cited its September 2014 Advisory Bulletin on Pharmaceutical Manufacturer Copayment Coupons, and reminded readers that copayment coupons constitute remuneration and can implicated the AKS.  The OIG then explained that coupons may induce the purchase of federally reimbursable items in two ways: first, if the coupon reduces a beneficiary’s copayment on a federally reimbursable items, and second, if beneficiaries are induced to purchase other federally reimbursable products (not covered by the coupon) from the entity issuing the coupons.

The OIG concluded that the discount program presented no more than a minimal risk of fraud and abuse under the AKS for three reasons. First, the creator of the discount program established safeguards to ensure that Part D beneficiaries would not be able to submit claims for the ED drug to Part D plans.  Second, the drug covered by the discount program was statutorily excluded from Part D coverage.  This was an important fact because it confirmed that even if the safeguards established under the discount program failed and let a few claims through, all Part D plans would reject them because of the statutory exclusion.  And third, the creator of the discount program certified that it “does not, and will not use or arrange to use” the discount program as a vehicle to market other products to Part D beneficiaries, therefore addressing the second way a coupon can induce the purchase of federally reimbursable items.

This is not the first time that the OIG has approved discount arrangements that operate entirely outside of all federal health care programs. For example, in July of 2014, the OIG approved a direct-to-patient discount program for a brand name drug that was not included on most Part D formularies due to the availability of generic or other clinically equivalent products.  There too, the OIG carefully considered the safeguards in place and the requestor’s certification that it did not and would not communicate with participants about other products or services it or its pharmacy partner offered.  A full discussion of that advisory opinion can be found here.


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Tara advises managed care organizations, pharmaceutical services providers such as PBMs, and integrated delivery systems, and companies that invest in them, on matters relating to compliance with federal health care program regulations, federal and state fraud, waste and abuse laws and plan benefits.