Posted: 14 Dec 2016 10:12 PM PST
By Alan M. Kirschenbaum & David C. Gibbons –
On December 7, 2016, the U.S. Department of Health and Human Services Office of Inspector General (“OIG”) published a Final Rule amending the safe harbor regulations under the Federal health care program antikickback statute (“AKS”) (42 U.S.C. § 1320a-7b(b)) and established exceptions to the Civil Monetary Penalty (“CMP”) prohibiting remuneration to Medicare and Medicaid beneficiaries (42 U.S.C. § 1320a-7a). This Final Rule changes existing safe harbors and adds new ones, while also adding new exceptions to the beneficiary inducement CMP. We previously discussed the Proposed Rule issued by OIG in 2014 here. All of the proposed AKS safe harbor regulations and beneficiary inducement CMP exceptions were finalized (some with modifications), with the exception of the gainsharing CMP regulation. The Final Rule is effective January 6, 2017. We describe the finalized changes to the regulations below, with particular focus on those of most interest to drug and device manufacturers.
Proposed Changes to the AKS Safe Harbors
Cost-sharing waivers by pharmacies: In the Final Rule, the OIG added a safe harbor to protect the waiver or reduction by a pharmacy of cost sharing under a Federal health care program if: (1) the waiver or reduction is not advertised or part of a solicitation; (2) the pharmacy does not routinely waive cost-sharing; and (3) the pharmacy either makes a good faith determination of the patient’s financial need or fails to collect the cost-sharing after a reasonable effort to do so. The Proposed Rule, consistent with the statutory provisions of section 101 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”) (see 42 U.S.C. § 1320a-7b(b)(3)(G)), originally limited this safe harbor protection to Part D cost sharing, but OIG expanded the scope to all Federal health care programs in the Final Rule. This safe harbor protects the waiver of co-insurance, copayments, or deductibles by a pharmacy under any Federal health care program as long as such waivers are unadvertised, not routine, and made after an individualized determination of financial need (or reasonable effort to collect the cost-sharing amount). OIG declined, in the Final Rule, to provide specific guidelines as to the method in which pharmacies must determine financial need, but it is expected that pharmacy guidelines would be “reasonable and applied uniformly.” 81 Fed. Reg. at 88,374.
OIG received a comment that proposed restrictions on advertising and solicitation impinged on pharmacies’ protected commercial speech under the First Amendment. OIG defended this safe harbor requirement by explaining that advertising is not a per se violation of the AKS. Rather, programs that advertise a cost-sharing waiver are ineligible for protection under the safe harbor and would be evaluated on a case-by-case basis under the AKS. Furthermore, OIG stated that Congress explicitly included an advertising prohibition in the Health Insurance Portability and Accountability Act of 1996 (see 42 U.S.C. § 1320a-7a(i)(6)(H)(i)), which OIG cannot ignore. Finally, OIG concluded that “interpretation of the statutory prohibition on advertising is no broader than necessary to preclude communications that create a high risk of abusive steering arrangements under the fraud and abuse laws.” 81 Fed. Reg. at 88,372.
We note that subsidization of a patient’s copayment or co-insurance by a third party, such as a drug manufacturer, will not be protected under the safe harbor and there was no indication in the Final Rule or its preamble that the OIG would interpret the safe harbor broadly to protect third party subsidies. The OIG has previously made clear that co-pay subsidies provided by drug manufacturers to Federal program beneficiaries are problematic under the AKS.
Medicare Coverage Gap Discount Program: To implement another existing exemption in the AKS—one that was added in 2010 by section 3301 of the Patient Protection and Affordable Care Act (“ACA”)—the OIG added a safe harbor protecting brand drug discounts provided by drug manufacturers to Part D enrollees in the coverage gap under the Medicare Coverage Gap Discount Program. We previously described this Program here. As originally proposed, this safe harbor regulation would protect “a discount in the price of an ‘applicable drug’ of a manufacturer that is furnished to an ‘applicable beneficiary’ under the Medicare Coverage Gap Discount Program . . . as long as the manufacturer participates in and is in full compliance with all requirements of the Medicare Coverage Gap Discount Program.” 81 Fed. Reg. at 88,378 (emphasis added). OIG revised this provision of the safe harbor in the Final Rule so that mere technical noncompliance with the Medicare Coverage Gap Discount Program by the manufacturer will not remove the arrangement from safe harbor protection.
Local transportation: The OIG established a new safe harbor protecting free or discounted local transportation made available by an “Eligible Entity” to “Established Patients” for the purpose of obtaining “medically necessary items or services.” Id. at 88,379. Eligible Entities do not include individuals or entities that primarily supply health care items, such as pharmaceutical companies, pharmacies, and durable medical equipment (“DME”) suppliers. OIG explained that free or discounted transportation services provided by a pharmaceutical manufacturer to a physician who is a referral source for the manufacturer’s products could influence the physician’s decision-making to use the manufacturer’s products, which may increase costs to Federal health care programs. The Proposed Rule excluded laboratories from the definition of “Eligible Entity,” however, this exclusion was not maintained in the Final Rule. To be protected under this safe harbor, Eligible Entities cannot provide air, luxury, or ambulance transportation services. Vouchers or other reimbursement for transportation services can be provided by Eligible Entities who do not provide transportation directly to their Established Patients. The Final Rule also adds protection for shuttle transportation services, in certain circumstances.
Under the safe harbor, free or discounted transportation services cannot be used as a marketing tool. Therefore, while Eligible Entities can inform their patients that free or discounted transportation services are available, such services may not be advertised or marketed. If the transportation services are provided through donations to the Eligible Entity, acknowledgements of the donation are prohibited if the donor is a health care provider or supplier or an entity that “makes, markets, or sells health care items or supplies.” Id. at 88,387.
Other safe harbors: In addition, the OIG made a technical correction to the referral services safe harbor and:
The beneficiary inducement CMP (Id. § 1320a-7a(a)(5)) prohibits an individual or entity from offering or transferring remuneration to a Medicare or Medicaid beneficiary that such individual or entity knows or should know is likely to influence such beneficiary to order or receive from a particular “provider, practitioner, or supplier” any item or service for which payment may be made, in whole or in part, under Medicare or Medicaid. The Final Rule provided interpretive guidance to a beneficiary inducement CMP statutory exception and added several exceptions to that CMP as well.
Access to care/low risk of harm: The CMP statute provides an exception for remuneration “which promotes access to care and poses a low risk of harm to patients and Federal health care programs.” Id. § 1320a-7a(i)(6)(F). If an activity or arrangement is not protected under a more specific statutory exception or regulatory safe harbor, an individual or entity may assert this as a defense. As in the Proposed Rule, OIG provided its interpretation of “promotes access to care” and “low risk of harm” in the Final Rule.
OIG clarified its interpretation of the term, “promotes access.” In the preamble, OIG stated that promoting access means “giving patients the tools they need” to remove socioeconomic, educational, geographic, mobility, or other barriers to receiving items and services covered by Medicare or Medicaid. OIG explicitly stated that this would not include rewards or inducements to receive care. As an example, OIG indicated that a health care provider could offer free childcare to a patient so that the patient could attend a smoking cessation program. However, according to OIG, movie tickets or other rewards for attending the smoking cessation program would not be protected under OIG’s interpretation of “promotes access.”
The preamble also explained that remuneration that promotes compliance with a treatment plan may promote access to care, as long as there is no reward for accessing care (as discussed above). OIG gave several examples of items that promote access to care: programs that promote adherence to medication therapy, such as an item that dispenses medication at specific times; a web-based food and activity tracker for diabetic patients; reimbursement for parking; and free child care.
It is important to note that, in conjunction with the publication of the Final Rule, OIG has increased the limits applicable to providing nominal gifts to Medicare or Medicaid beneficiaries. In its 2002 Special Advisory Bulletin, OIG stated that it would exercise enforcement discretion for inexpensive gifts or services provided to Medicare or Medicaid beneficiaries as long as such items or services had a retail value of no more than $10 individually, and no more than $50 in the aggregate annually per patient. On December 7, 2016, OIG issued a notice increasing those amounts, based on inflation, to no more than $15 individually, and no more than $75 in the aggregate annually per patient. In the Final Rule preamble, OIG explained that the exception for items or services that promote access to care may protect remuneration that exceeds these nominal value thresholds.
The preamble cautions that, “if a pharmaceutical manufacturer offered rewards or incentives for treatment compliance (without regard to any provider or supplier furnishing treatment), it might not implicate the beneficiary inducements CMP because the rewards would not incentivize the beneficiary to receive items or services from a particular provider or supplier, but it would implicate the [AKS] because the remuneration could induce the beneficiary to purchase a federally reimbursable item.” 81 Fed. Reg. at 88,395. The beneficiary inducement CMP would not be implicated by an inducement to use a particular manufacturer’s drug because OIG’s long-standing interpretation of the CMP is that pharmaceutical manufacturers are not “providers, practitioners, or suppliers” for purposes of the CMP.
To qualify for this exception, items or services must not only “promote access,” but also must also “pose a low risk of harm” to Federal programs and beneficiaries. Consistent with the Proposed Rule, the Final Rule defines a “low risk of harm to Medicare and Medicaid beneficiaries and the Medicare and Medicaid programs” as meaning that the remuneration: (1) is unlikely to interfere with, or skew, clinical decision-making; (2) is unlikely to increase costs to Federal health care programs or beneficiaries through overutilization or inappropriate utilization; and (3) does not raise patient-safety or quality-of-care concerns. The preamble cautions that an incentive to use a higher cost brand drug instead of a lower cost generic would not be low risk. In addition, OIG explained that it does not consider educational items or informational materials alone to fall within the definition of remuneration.
Coupons or rewards from a retailer: To implement another exception to the beneficiary inducement CMP added by the ACA, the OIG would exclude from the definition of “remuneration” a coupon, rebate, or other reward offered by a retailer, if it is offered on equal terms available to the general public regardless of health insurance status, and if it is not tied to the provision of other items or services reimbursed under Medicare or Medicaid. OIG considers a retailer to be any entity that sells items directly to consumers. “Other rewards” may be, for example, gasoline discounts, frequent flier miles, or other items purchased from the retailer, but may not be earned by the purchase of federally reimbursed items, or redeemed for such items. OIG noted that coupons offered to patients who transfer their prescriptions from another pharmacy would not be protected under this statutory exception.
Free or discounted items or services where financial need exists: To implement a statutory provision added by the ACA (see 42 U.S.C. § 1320a-7a(i)(6)(H)), the OIG proposed and finalized a CMP exemption for “the offer or transfer of items or services for free or at less than fair market value after a determination that the recipient is in financial need and meets certain other criteria.” These “items or services” cannot include cash or instruments convertible to cash (i.e., cash equivalents). The Final Rule sets out four requirements that must be met: (1) the items or services may not be offered as part of any advertisement or solicitation; (2) they may not be tied to the provision of other items or services reimbursed in whole or in part by Medicare or Medicaid; (3) there must be a reasonable connection between the items or services and the medical care of the individual; and (4) there is a good faith determination of financial need. To be protected under this provision, providers and suppliers may not advertise the free or discounted item or service in the media or via some other public display, such as a website, but may inform patients that a such an item or service is available on a “targeted” basis.
The “reasonable connection” requirement includes both a medical and a financial component. Free or discounted items or services must be reasonably connected to the patient’s medical care, which may include treatment or prevention of illness or injury. In addition, although OIG declined to provide a threshold retail value, items or services with a value that is disproportionate to the benefit—for example, a smart phone loaded with an app for management of blood sugar levels—would not be considered to have a “reasonable connection” to medical care. Financial need is not defined, but the preamble explains that a good faith determination requires use of a reasonable set of income guidelines, uniformly applied. Financial hardship need not be limited to indigence.
The preamble provided examples of items or services that may qualify as reasonably connected to medical care under this proposed exception. These included:
Other CMP provisions: In addition, the Final Rule implemented:
On December 7, 2016, the U.S. Department of Health and Human Services Office of Inspector General (“OIG”) published a Final Rule amending the safe harbor regulations under the Federal health care program antikickback statute (“AKS”) (42 U.S.C. § 1320a-7b(b)) and established exceptions to the Civil Monetary Penalty (“CMP”) prohibiting remuneration to Medicare and Medicaid beneficiaries (42 U.S.C. § 1320a-7a). This Final Rule changes existing safe harbors and adds new ones, while also adding new exceptions to the beneficiary inducement CMP. We previously discussed the Proposed Rule issued by OIG in 2014 here. All of the proposed AKS safe harbor regulations and beneficiary inducement CMP exceptions were finalized (some with modifications), with the exception of the gainsharing CMP regulation. The Final Rule is effective January 6, 2017. We describe the finalized changes to the regulations below, with particular focus on those of most interest to drug and device manufacturers.
Proposed Changes to the AKS Safe Harbors
Cost-sharing waivers by pharmacies: In the Final Rule, the OIG added a safe harbor to protect the waiver or reduction by a pharmacy of cost sharing under a Federal health care program if: (1) the waiver or reduction is not advertised or part of a solicitation; (2) the pharmacy does not routinely waive cost-sharing; and (3) the pharmacy either makes a good faith determination of the patient’s financial need or fails to collect the cost-sharing after a reasonable effort to do so. The Proposed Rule, consistent with the statutory provisions of section 101 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”) (see 42 U.S.C. § 1320a-7b(b)(3)(G)), originally limited this safe harbor protection to Part D cost sharing, but OIG expanded the scope to all Federal health care programs in the Final Rule. This safe harbor protects the waiver of co-insurance, copayments, or deductibles by a pharmacy under any Federal health care program as long as such waivers are unadvertised, not routine, and made after an individualized determination of financial need (or reasonable effort to collect the cost-sharing amount). OIG declined, in the Final Rule, to provide specific guidelines as to the method in which pharmacies must determine financial need, but it is expected that pharmacy guidelines would be “reasonable and applied uniformly.” 81 Fed. Reg. at 88,374.
OIG received a comment that proposed restrictions on advertising and solicitation impinged on pharmacies’ protected commercial speech under the First Amendment. OIG defended this safe harbor requirement by explaining that advertising is not a per se violation of the AKS. Rather, programs that advertise a cost-sharing waiver are ineligible for protection under the safe harbor and would be evaluated on a case-by-case basis under the AKS. Furthermore, OIG stated that Congress explicitly included an advertising prohibition in the Health Insurance Portability and Accountability Act of 1996 (see 42 U.S.C. § 1320a-7a(i)(6)(H)(i)), which OIG cannot ignore. Finally, OIG concluded that “interpretation of the statutory prohibition on advertising is no broader than necessary to preclude communications that create a high risk of abusive steering arrangements under the fraud and abuse laws.” 81 Fed. Reg. at 88,372.
We note that subsidization of a patient’s copayment or co-insurance by a third party, such as a drug manufacturer, will not be protected under the safe harbor and there was no indication in the Final Rule or its preamble that the OIG would interpret the safe harbor broadly to protect third party subsidies. The OIG has previously made clear that co-pay subsidies provided by drug manufacturers to Federal program beneficiaries are problematic under the AKS.
Medicare Coverage Gap Discount Program: To implement another existing exemption in the AKS—one that was added in 2010 by section 3301 of the Patient Protection and Affordable Care Act (“ACA”)—the OIG added a safe harbor protecting brand drug discounts provided by drug manufacturers to Part D enrollees in the coverage gap under the Medicare Coverage Gap Discount Program. We previously described this Program here. As originally proposed, this safe harbor regulation would protect “a discount in the price of an ‘applicable drug’ of a manufacturer that is furnished to an ‘applicable beneficiary’ under the Medicare Coverage Gap Discount Program . . . as long as the manufacturer participates in and is in full compliance with all requirements of the Medicare Coverage Gap Discount Program.” 81 Fed. Reg. at 88,378 (emphasis added). OIG revised this provision of the safe harbor in the Final Rule so that mere technical noncompliance with the Medicare Coverage Gap Discount Program by the manufacturer will not remove the arrangement from safe harbor protection.
Local transportation: The OIG established a new safe harbor protecting free or discounted local transportation made available by an “Eligible Entity” to “Established Patients” for the purpose of obtaining “medically necessary items or services.” Id. at 88,379. Eligible Entities do not include individuals or entities that primarily supply health care items, such as pharmaceutical companies, pharmacies, and durable medical equipment (“DME”) suppliers. OIG explained that free or discounted transportation services provided by a pharmaceutical manufacturer to a physician who is a referral source for the manufacturer’s products could influence the physician’s decision-making to use the manufacturer’s products, which may increase costs to Federal health care programs. The Proposed Rule excluded laboratories from the definition of “Eligible Entity,” however, this exclusion was not maintained in the Final Rule. To be protected under this safe harbor, Eligible Entities cannot provide air, luxury, or ambulance transportation services. Vouchers or other reimbursement for transportation services can be provided by Eligible Entities who do not provide transportation directly to their Established Patients. The Final Rule also adds protection for shuttle transportation services, in certain circumstances.
Under the safe harbor, free or discounted transportation services cannot be used as a marketing tool. Therefore, while Eligible Entities can inform their patients that free or discounted transportation services are available, such services may not be advertised or marketed. If the transportation services are provided through donations to the Eligible Entity, acknowledgements of the donation are prohibited if the donor is a health care provider or supplier or an entity that “makes, markets, or sells health care items or supplies.” Id. at 88,387.
Other safe harbors: In addition, the OIG made a technical correction to the referral services safe harbor and:
- Established a new safe harbor protecting waivers of cost-sharing or deductible amounts owed to ambulance services owned and operated by a state or political subdivision of a state;
- Implemented an existing statutory exemption protecting remuneration between a federally qualified health center and a Medicare Advantage organization (see 42 U.S.C. § 1320a-7b(b)(3)(H)).
The beneficiary inducement CMP (Id. § 1320a-7a(a)(5)) prohibits an individual or entity from offering or transferring remuneration to a Medicare or Medicaid beneficiary that such individual or entity knows or should know is likely to influence such beneficiary to order or receive from a particular “provider, practitioner, or supplier” any item or service for which payment may be made, in whole or in part, under Medicare or Medicaid. The Final Rule provided interpretive guidance to a beneficiary inducement CMP statutory exception and added several exceptions to that CMP as well.
Access to care/low risk of harm: The CMP statute provides an exception for remuneration “which promotes access to care and poses a low risk of harm to patients and Federal health care programs.” Id. § 1320a-7a(i)(6)(F). If an activity or arrangement is not protected under a more specific statutory exception or regulatory safe harbor, an individual or entity may assert this as a defense. As in the Proposed Rule, OIG provided its interpretation of “promotes access to care” and “low risk of harm” in the Final Rule.
OIG clarified its interpretation of the term, “promotes access.” In the preamble, OIG stated that promoting access means “giving patients the tools they need” to remove socioeconomic, educational, geographic, mobility, or other barriers to receiving items and services covered by Medicare or Medicaid. OIG explicitly stated that this would not include rewards or inducements to receive care. As an example, OIG indicated that a health care provider could offer free childcare to a patient so that the patient could attend a smoking cessation program. However, according to OIG, movie tickets or other rewards for attending the smoking cessation program would not be protected under OIG’s interpretation of “promotes access.”
The preamble also explained that remuneration that promotes compliance with a treatment plan may promote access to care, as long as there is no reward for accessing care (as discussed above). OIG gave several examples of items that promote access to care: programs that promote adherence to medication therapy, such as an item that dispenses medication at specific times; a web-based food and activity tracker for diabetic patients; reimbursement for parking; and free child care.
It is important to note that, in conjunction with the publication of the Final Rule, OIG has increased the limits applicable to providing nominal gifts to Medicare or Medicaid beneficiaries. In its 2002 Special Advisory Bulletin, OIG stated that it would exercise enforcement discretion for inexpensive gifts or services provided to Medicare or Medicaid beneficiaries as long as such items or services had a retail value of no more than $10 individually, and no more than $50 in the aggregate annually per patient. On December 7, 2016, OIG issued a notice increasing those amounts, based on inflation, to no more than $15 individually, and no more than $75 in the aggregate annually per patient. In the Final Rule preamble, OIG explained that the exception for items or services that promote access to care may protect remuneration that exceeds these nominal value thresholds.
The preamble cautions that, “if a pharmaceutical manufacturer offered rewards or incentives for treatment compliance (without regard to any provider or supplier furnishing treatment), it might not implicate the beneficiary inducements CMP because the rewards would not incentivize the beneficiary to receive items or services from a particular provider or supplier, but it would implicate the [AKS] because the remuneration could induce the beneficiary to purchase a federally reimbursable item.” 81 Fed. Reg. at 88,395. The beneficiary inducement CMP would not be implicated by an inducement to use a particular manufacturer’s drug because OIG’s long-standing interpretation of the CMP is that pharmaceutical manufacturers are not “providers, practitioners, or suppliers” for purposes of the CMP.
To qualify for this exception, items or services must not only “promote access,” but also must also “pose a low risk of harm” to Federal programs and beneficiaries. Consistent with the Proposed Rule, the Final Rule defines a “low risk of harm to Medicare and Medicaid beneficiaries and the Medicare and Medicaid programs” as meaning that the remuneration: (1) is unlikely to interfere with, or skew, clinical decision-making; (2) is unlikely to increase costs to Federal health care programs or beneficiaries through overutilization or inappropriate utilization; and (3) does not raise patient-safety or quality-of-care concerns. The preamble cautions that an incentive to use a higher cost brand drug instead of a lower cost generic would not be low risk. In addition, OIG explained that it does not consider educational items or informational materials alone to fall within the definition of remuneration.
Coupons or rewards from a retailer: To implement another exception to the beneficiary inducement CMP added by the ACA, the OIG would exclude from the definition of “remuneration” a coupon, rebate, or other reward offered by a retailer, if it is offered on equal terms available to the general public regardless of health insurance status, and if it is not tied to the provision of other items or services reimbursed under Medicare or Medicaid. OIG considers a retailer to be any entity that sells items directly to consumers. “Other rewards” may be, for example, gasoline discounts, frequent flier miles, or other items purchased from the retailer, but may not be earned by the purchase of federally reimbursed items, or redeemed for such items. OIG noted that coupons offered to patients who transfer their prescriptions from another pharmacy would not be protected under this statutory exception.
Free or discounted items or services where financial need exists: To implement a statutory provision added by the ACA (see 42 U.S.C. § 1320a-7a(i)(6)(H)), the OIG proposed and finalized a CMP exemption for “the offer or transfer of items or services for free or at less than fair market value after a determination that the recipient is in financial need and meets certain other criteria.” These “items or services” cannot include cash or instruments convertible to cash (i.e., cash equivalents). The Final Rule sets out four requirements that must be met: (1) the items or services may not be offered as part of any advertisement or solicitation; (2) they may not be tied to the provision of other items or services reimbursed in whole or in part by Medicare or Medicaid; (3) there must be a reasonable connection between the items or services and the medical care of the individual; and (4) there is a good faith determination of financial need. To be protected under this provision, providers and suppliers may not advertise the free or discounted item or service in the media or via some other public display, such as a website, but may inform patients that a such an item or service is available on a “targeted” basis.
The “reasonable connection” requirement includes both a medical and a financial component. Free or discounted items or services must be reasonably connected to the patient’s medical care, which may include treatment or prevention of illness or injury. In addition, although OIG declined to provide a threshold retail value, items or services with a value that is disproportionate to the benefit—for example, a smart phone loaded with an app for management of blood sugar levels—would not be considered to have a “reasonable connection” to medical care. Financial need is not defined, but the preamble explains that a good faith determination requires use of a reasonable set of income guidelines, uniformly applied. Financial hardship need not be limited to indigence.
The preamble provided examples of items or services that may qualify as reasonably connected to medical care under this proposed exception. These included:
- protective helmets and safety gear to hemophiliac children
- pagers to alert patients with chronic medical conditions to take their drugs
- free blood pressure checks to hypertensive patients
- free nutritional supplements to malnourished patients with end-stage renal disease
- provision of air conditioners to asthmatic patients
Other CMP provisions: In addition, the Final Rule implemented:
- A statutory exception to the definition of “remuneration” in the beneficiary inducement CMP for a waiver by a Part D Plan sponsor of the copayment owed by enrollees for the first fill of covered generic drug.
- Another statutory exception to the definition of “remuneration” for reductions in copayment amounts for covered hospital outpatient department services.
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