Medicare Compliance & Reimbursement

Drugmakers can’t use Medicare to subsidize patient assistance programs for financially needy beneficiaries, the HHS Office of Inspector General reaffirmed in an advisory opinion released Feb. 12 (No. 03-3).

In the opinion, the OIG considers a pharmaceutical manufacturer’s proposal to modify its existing PAP to pay Medicare Part B cost-sharing amounts for needy patients who use its post-organ transplant immunosuppressive products. A key problem with the plan, the watchdog agency says, is that while it takes patients off the hook financially, it still leaves Medicare with the obligation to pay its share for the drugs.

In concluding that the program could run afoul of the anti-kickback statute, the OIG argues that under the revised PAP, the drugmaker essentially would be “paying beneficiaries to use its product” since it would be relieving them of a financial obligation they would otherwise be required to bear.

Besides being flat-out prohibited by the anti-kickback law, the agency says, those “payments” also would give the drugmaker an unfair competitive advantage, since patients who considered choosing a competing drug would be faced with more out-of-pocket expenses.

In declining to green-light the proposal, the OIG also maintained that the program would increase costs to Medicare, since beneficiaries would have no incentive to use competing drugs, even if they were cheaper. In addition, the agency pointed out that there are alternatives for helping needy patients — giving the drugs to them for free (i.e., no payment from the beneficiary or from Medicare) or pooling contributions with other drugmakers into an independent foundation that would award grants to worthy applicants.

The agency noted, however, that despite its negative ruling, drugmakers are still free to waive copays on the basis of a good-faith, individualized determination of financial need.

To see the opinion, go to http://oig.hhs.gov/fraud/docs/advisoryopinions/2003/ao0303.pdf.