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.
Patient assistance programs (PAPs) emerged to help patients who lack health insurance or prescription drug coverage obtain critical, and often, life-saving medications. This is especially true for rare disease patients, whose medications are typically costly, such that even affording copay or coinsurance payments can be a prohibitive challenge. However, for various reasons, PAPs have come under intense scrutiny from the US Department of Health and Human Services Office of Inspector General (HHS OIG) under theories that the subject programs run afoul of, among others, the anti-kickback statute, and civil monetary penalties laws, which expressly prohibit any person from offering or transferring anything of value to a government beneficiary that the person knows or should have known is likely to influence a beneficiary’s selection of a particular provider, practitioner, or supplier.
And while manufacturers may have the purest of intent in funding PAP programs to help patients with financial need, these programs pay for the very products they manufacture and market, and thus, the risk of potential misuse of such programs attracts whistleblower attention and government scrutiny and oversight. This blog covers HHS OIG’s most recent guidance on PAPs and provides key bullets for stakeholders to evaluate when considering the design and implementation of these programs.
HHS OIG Advisory Opinion 24-02
In AO 24-02, issued on April 8, 2024, HHS OIG evaluated a sponsor’s rare disease PAP. According to the sponsor, it has established several disease funds that are designed around clinically recognized disease states. And under the program, each disease fund has a single donor, and each donor is a pharmaceutical manufacturer that manufactures or markets a drug to treat the disease state addressed by the disease fund.
For a patient to access financial assistance through the program, the patient must apply for enrollment and be admitted by the sponsor into the program based on the patient meeting certain pre-determined financial need criteria as established by the program sponsor. To demonstrate financial need, applicants are required to submit detailed financial information, including, but not limited to, income, assets, number of dependents, and other aspects of the patient’s financial circumstances. In short, applicants must clearly demonstrate a financial need for assistance.
Under the program, disease funds assist with (1) cost-sharing subsidies, (2) medical assistance (e.g., medical consults or office visits, infusion services, infusion supplies, durable medical equipment, prescription drugs, radiology services, medical alert subscription service, medical foods, travel and lodging expenses associated with treatment), (3) insurance premium assistance for patients unable to afford insurance, and (4) emergency relief (i.e., short-term, limited financial assistance associated with essential, nonmedical expenses that arise unexpectedly or in an emergency situation, including, but not limited to, utility costs, electrical generators, repair or replacement of an automobile, major home appliances, or other home repairs, rent or mortgage payments, lodging assistance not directly related to medical appointments, and dental care).
In an apparent attempt by the sponsor to mitigate anti-kickback and false claims act risks, contracts between sponsors and donors specify that donors will not exert, directly or through an affiliate, any influence or control over the identification, delineation, establishment, or modification or any specific disease fund. Nor will the sponsor modify disease funds at the request or suggestion of a donor or potential donor.
Rather, the sponsor makes wholly independent funding determinations based on its own independent analysis of patient needs. Further, patients are never made aware of the funding source, donors have no influence or control over what types of drugs or other items of service their contributions will be used to support, and donors do not receive any information about the recipients of assistance or how fund money is allocated or spent.
While HHS OIG acknowledges that PAPs provide remuneration to patients, it resolved not to impose administrative sanctions on the sponsor for these reasons: (1) the disease funds vary substantially in the proportion of funds spent to support the purchase of donors’ drugs, (2) disease funds are defined using established disease states, (3) assistance is awarded without regard to treatment regimen prescribed, (4) limited information is shared with donors, (5) enrollment requires a financial eligibility assessment, (6) disease funds are provided to rare disease patients who have demonstrated a financial need, and (7) the majority of disease funds spent are in the form of other categories of assistance, not the purchasing of donor drugs.
Given that HHS OIG’s opinion is based on current legal frameworks, and that it is unable to know at this time how full implementation of the Inflation Reduction Act’s $2,000 out-of-pocket cap, which took effect January 1, 2025, will impact its analysis of PAPs, its opinion will terminate, if not sooner, on January 1, 2027, two years after full implementation of the out-of-pocket cap on Part D cost-sharing obligations.
Key Takeaways
Despite recent and ongoing enforcement activity, HHS OIG has recommitted to its criteria for compliant independent charitable PAPs in this advisory opinion and approved the proposed arrangement. However, with enforcement actions on the rise and manufacturer settlements ranging from millions to hundreds of millions of dollars, sponsors and donors would be well advised to review all such programs, consult outside counsel as appropriate, and evaluate whether they are consistent with the framework outlined by HHS OIG.
How We Can Help
Our lawyers provide strategic counseling to pharmaceutical and biological drug manufacturers on complex patient assistance program matters and can assist with review of existing programs and development and operationalization of new programs.