Kusserow’s Corner: Pharmaceutical Manufacturer Co-Payment Coupons May Violate the Anti-Kickback Statute

The HHS Office of Inspector General (OIG) issued a Special Advisory Bulletin regarding Pharmaceutical Manufacturer Coupons. The Bulletin put pharmaceutical manufacturers on notice that offering such coupons can be considered an improper inducement that could implicate the federal Anti-Kickback Statute (AKS). The AKS prohibits the knowing and willful offer or payment of remuneration to a person to induce the purchase of any item or service for which payment may be made by a federal health care program. Manufacturers may be liable under the statute if they offer coupons to induce the purchase of drugs paid for by federal health care programs, including Medicare Part D. The OIG Advisory Bulletin was released along with a report by their Office of Evaluation and Inspections (OEI) that focused on the fact that many pharmaceutical manufacturers are offering coupons to reduce or eliminate the cost of patients’ out-of-pocket copayments for specific brand name drugs. While the OIG acknowledged in the Bulletin that copayment coupons may encourage beneficiary adherence to medication regimens (particularly in cases of high copayment obligations), those benefits did not appear to outweigh its concerns, and the OIG reminded manufacturers that the manufacturers can donate to independent charities that provide financial support to patients without regard for the patient’s specific medication requirements.

OEI Report

The OEI focused on whether there are safeguards in place to prevent their copayment coupons from being used for drugs paid for by Part D, and identifying any vulnerability in those safeguards. Such use may cause beneficiaries to choose more expensive brand-name drugs over generics and therefore impose significant costs on the Part D program. The report assessed the safeguards that pharmaceutical manufacturers employ to prevent use of copayment coupons by Part D beneficiaries and identified two primary safeguards: (a) notices to federal health care program beneficiaries and pharmacists that the copayment coupon may not be used to purchase drugs paid for by a federal health care program; and (b) manufacturers’ use of pharmacy claims edits. OEI found:

  1. Use of coupons by Medicare beneficiaries could impose significant costs on the Part D program because many coupons encourage beneficiaries to choose more expensive brand name drugs over less expensive alternative drugs.
  2. Notices were by manufacturers inconspicuous and they had lack of access to Part D enrollment status data and resulting reliance on “proxies” to approximate Part D coverage.
  3. Manufacturers were unable to verify accuracy of claims edits because they do not audit the process.
  4. Current safeguards may not prevent all copayment coupons from being used for drugs paid for by Part D and as a result, pharmaceutical manufacturers are at risk of enforcement actions under the AKS.

A final point made by the reports was that primary insurers, including Part D plans, cannot undertake their own independent review of copayment coupon use by their beneficiaries because the coupons are typically processed as secondary insurance claims. The OIG recommended that CMS cooperate with industry stakeholders to identify potential solutions that will ensure coupons are not used for drugs paid for by Part D, including CMS’s facilitating verification of Part D enrollment and improving transparency of pharmacy claims data so Part D plans and other entities can more easily identify when coupons have been applied. CMS concurred in this recommendation. However, regardless of future actions by CMS, the offerors of coupons ultimately bear the responsibility to operate these programs in compliance with Federal law. Pharmaceutical manufacturers that offer copayment coupons may be subject to sanctions if they fail to take appropriate steps to ensure that such coupons do not induce the purchase of Federal health care program items or services, including, but not limited to, drugs paid for by Medicare Part D. Failure to take such steps may be evidence of intent to induce the purchase of drugs paid for by these programs, in violation of the AKS.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2014 Strategic Management Services, LLC. Published with permission.