In honor of Rare Disease Day on February 28, 2025, we will publish a series of posts throughout the month on As Prescribed and Health Law Scan, focusing on issues impacting the rare disease community.
As we discussed in our blog post last week, 2024 saw the Department of Health and Human Services Office of Inspector General (HHS OIG) provide more concrete regulatory guidance for programs sponsored by pharmaceutical manufacturers that provide financial assistance and free genetic testing and counseling services to patients suffering from rare diseases. While the favorable treatment from HHS OIG is a positive development for stakeholders and patients, the Advisory Opinions should not be interpreted as permission slips for stakeholders to push the limits of facilitating testing, assistance, or treatment of federal healthcare program beneficiaries. Recent False Claims Act (FCA) enforcement developments demonstrate that stakeholders should carefully consider the structure and risk associated with providing assistance to patients, regardless of disease state.
Ultragenyx Settlement
In late 2023, the US Department of Justice’s Civil Division (DOJ) and the US Attorney’s Office for the District of Massachusetts (USAO) announced a six-million-dollar settlement with Ultragenyx Pharmaceutical Inc. to resolve allegations that the company had caused the submission of false claims to Medicare and Medicaid by providing kickbacks to induce referrals from physicians and patients to use its drug, Crysvita.
The drug is a Food and Drug Administration (FDA)–approved therapy used to treat a rare genetic disorder, X-linked hypophosphatemia (XLH), that causes low levels of phosphate in the blood, leading to soft and weakened bones. The disease affects approximately 1 in 20,000 individuals and is most often detected only via genetic testing. Not only was genetic testing often necessary to confirm a diagnosis of XLH, most insurers, including Medicare and Medicaid, required testing to determine a patient’s eligibility for Crysvita.
According to the settlement, Ultragenyx paid a genetic testing laboratory to (1) conduct genetic tests for XLH at no charge to healthcare providers (HCPs) and (2) send Ultragenyx the testing results in addition to sending them to the physicians, which included the name of HCPs that ordered the genetic test. Ultragenyx then sent the testing results to its salesforce, which used the test results to make sales calls to the HCPs listed in the results. The DOJ and USAO considered this conduct—which Ultragenyx admitted, acknowledged, and accepted responsibility for as now required by the USAO in all FCA settlements—to be kickbacks in violation for the federal Anti-Kickback Statute (AKS) made to induce HCPs to write prescriptions of Crysvita for their patients.
Interestingly, the settlement agreement covers conduct that occurred between February 1, 2019 to May 30, 2022, which brackets HHS OIG’s April 2022 issuance of Advisory Opinion 22-06 that addressed a similar arrangement proposed by a pharmaceutical manufacturer. According to the settlement, Ultragenyx stopped providing the testing results to its sales force and using them for marketing purposes after HHS OIG issued AO 22-06. The interplay between HHS OIG’s guidance and the settlement agreement is notable given the string of favorable opinions that HHS OIG has issued recently for pharmaceutical manufacturers that sponsor similar programs.
DOJ and the USAO ultimately concluded that Ultragenyx’s combination of paying for genetic testing and using those testing results as targeted marketing materials was a kickback to induce referrals of HCPs to prescribe its medication, in part because Ultragenyx initially had failed to implement the marketing safeguards presented in AO 22-06. Ultragenyx smartly modified its program in the wake of AO 22-06 when it apparently became aware of HHS OIG’s position that the use of the test results in such a manner was improper. The settlement is a clear signal from the DOJ and HHS OIG that they view the use of such data as consistent with a determination of fraud and abuse.
QOL Medical, LLC Settlement
In November 2024, the USAO announced it had reached a $47 million settlement with QOL Medical LLC for very similar conduct as the Ultragenyx case involving kickbacks in violation of the AKS to induce prescriptions of its drug, Sucraid. The drug was designed to treat a rare genetic disorder, CSID, that prevents patients from breaking down sucrose and sugars from other starches. As noted in the settlement agreement, CSID is caused by a genetic mutation that prevents the production of an enzyme that helps break down sugars.
The government alleged, and QOL admitted and accepted responsibility for certain facts, that the company distributed free “carbon-13” breath test kits to providers and asked them to provide them to patients in order to “rule in or rule out” CSID. QOL also entered into an agreement with a laboratory company to cover the cost of analyzing the carbon-13 tests. QOL then received data, including the name of the healthcare provider who ordered the test, the patient’s age, gender, symptoms, and test results from the lab company. Using this data, QOL’s sales force targeted healthcare providers who had patients with a positive test to promote Sucraid and tracked conversions of positive tests to sales of the drug.
In contrast to the Ultragenyx case, the settlement agreement does not address any impact of AO 22-06 during the course of the alleged conduct. However, the similarities between the cases demonstrate that DOJ and HHS OIG concluded that there were not sufficient guard rails in place at QOL for this program to reduce potential fraud and abuse.
Key Takeaways
At a high level, the Ultragenyx and QOL settlements reveal to stakeholders that there are limits on the extent to which DOJ and HHS OIG will be more permissive in the rare disease space when it comes to their interpretation of compliance with the AKS. Indeed, the settlements show that arrangements between pharmaceutical manufacturers and testing companies, HCPs, and/or beneficiaries will continue to be viewed with some amount of skepticism. Stakeholders would be well advised to proceed with caution, including consulting with outside counsel as appropriate, to ensure that any potential arrangements are carefully structured in light of the recent enforcement actions and HHS OIG’s ongoing string of pronouncements in the rare disease space mitigate the risk of e potential enforcement action.
Beyond arrangements for financial assistance and services like genetic testing, patient assistance programs designed to help patients who lack health insurance or prescription drug coverage loom large for rare disease stakeholders. Check out Health Law Scan next week for additional insight on the regulatory landscape on these programs and more.