United States: OIG Issues Letter Declining To Impose Administrative Sanctions For Provision Of Certain Free Drugs

Jenna Bigornia is a Partner in the Boston office

On Jan. 4, 2018, the HHS Office of Inspector General (OIG) issued an open letter containing guidance regarding the provision of certain free drugs to federal healthcare program beneficiaries. Specifically, the OIG stated that it will not pursue administrative sanctions against drug companies who provide free drugs to federal healthcare program beneficiaries in 2018, if the beneficiaries were receiving cost sharing assistance from a patient assistance program called Caring Voice Coalition, Inc. (CVC) as of Nov. 28, 2017, and other conditions are satisfied. CVC recently announced that it will not be providing patient assistance in 2018.

This letter follows on the OIG's Nov. 28, 2017 rescission of advisory opinion 06-04. As described previously in this blog, the OIG stated in advisory opinion 06-04 that it would not impose sanctions in connection with a nonprofit, charitable patient assistance program's practice of providing financially needy Medicare beneficiaries assistance with their out-of-pocket drug costs, given that certain protections were in place. In November 2017, the OIG rescinded that opinion, stating that the charity had not fully implemented all of the safeguards that the charity had certified were in place. In its November 2017 rescission notice, the OIG noted that if the charity decided to cease operations because of the notice, drug companies wishing to provide free drugs to affected patients "may contact OIG if they have fraud and abuse concerns." 

In its January letter, the OIG explained that while the absence of a favorable advisory opinion does not require a company to discontinue its practices, CVC ultimately determined that it will not provide the financial assistance in question in 2018. Patients who previously received assistance from CVC may therefore be negatively affected. The OIG noted that it has in some instances approved of arrangements whereby drug companies would provide free drugs to patients, but those programs must be properly structured to avoid a heightened risk of fraud and abuse. 

The OIG stated that, in this narrow circumstance, it would not impose sanctions on drug companies who provide free product to federal healthcare program beneficiaries who were receiving financial assistance from CVC for those drugs as of November 28, 2017. Other safeguards must also be in place, including the following: the free drugs must be awarded without regard for the beneficiary's choice of provider or health plan (with some exception for direction to a particular pharmacy); the free drugs must not be billed to any federal healthcare program or counted toward the beneficiary's Part D true out-of-pocket costs (TrOOP); the provision of free drugs must not be contingent on any future purchase; and the drug company must maintain complete records of the free drugs that it provides.

The OIG specifically limited its January letter by stating that the letter does not provide general guidance to drug companies wishing to provide free drugs, and that it applies only to programs applicable to those beneficiaries who received financial assistance from CVC. Notwithstanding this limitation, it may be worth following the issue to see if it marks part of a trend toward an OIG preference for free drug programs over patient copay assistance programs.

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