Understanding the implications of OIG Advisory Opinion 16-07

The Office of Inspector General has posted a favorable Advisory Opinion (No. 16-07)1 today regarding a savings card program under which individuals who have prescription drug coverage under Medicare Part D and receive discounts on a drug that is statutorily excluded from coverage under the Program.

The Advisory Opinion analyzed whether or not the arrangement violated the exclusion authority at section 1128(b)(7) of the Social Security Act, the civil monetary penalty provision at section 1128A(a)(7), as both sections relate to the commission of acts described in section 1128B(b), the Federal anti-kickback statute.

According to the Advisory Opinion, the Requester (marketer and distributor of a U.S. Food and Drug Administration approved erectile dysfunction drug) has stated that the subject drug is covered by several private insurance plans and some Federal health care programs. However, the subject drug is currently excluded from coverage under Medicare Part D.

Under the subject arrangement, Medicare Part D beneficiaries may utilize a savings card provided by the Requestor to receive drug prescription discounts. Under the savings program, Medicare Part D beneficiaries are eligible to receive discounts on out-of-pocket costs greater than $15, but not more than $75 per prescription, on up to 12 drug prescriptions.

The advisory opinion makes it clear that co-payment coupons may induce the purchase of federally payable items in two ways which include:

1. Reducing and/or eliminating out-of-pockets costs for Federal health care program beneficiaries.
2. Purchasing other federally payable products manufactured, marketed, and/or distributed by the company that issued the co-payment coupon.

However, according to the Advisory Opinion, the subject arrangement does not induce the purchase of a specific item for which payment may be made under the Medicare Part D program. A key distinction regarding the subject drug is that it is currently excluded from the Medicare Part D program and the Advisory Opinion notes that appropriate safeguards are in place to ensure that claims for the subject drug are not submitted for payment under the Medicare Part D program. In addition, the Advisory Opinion denotes that because the Requestor attested that it does not/will not utilize the subject Arrangement as a means to market and/or distribute to Federal health care program beneficiaries, the subject arrangement poses no more than a minimal risk of fraud and abuse under the anti-kickback statute.

Bartt B. Warner, CVA is a Manager with VMG Health and is based out of VMG Health's Nashville office. Mr. Warner can be reached at (615) 777-7300 or by e-mail at BarttW@vmghealth.com.

1. OIG Advisory Opinion No. 16-07, http://oig.hhs.gov/fraud/docs/advisoryopinions/2016/AdvOpn16-07.pdf

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