Legal Intelligencer article by Lamb McErlane PC Health Law attorneys Vasilios J. Kalogredis, Esq. and Rachel E. (Lusk) Klebanoff, Esq.

OIG Determines Pharmaceutical Manufacturer’s Provision of Free Eye Drops to Eligible Patients Undergoing a Particular Treatment Does Not Violate the Federal Anti-Kickback Statute.

On December 6, 2021, the Office of Inspector General (“OIG”) issued an Advisory Opinion (No. 21-19) regarding whether a pharmaceutical manufacturer’s provision of free eye drops to patients who are prescribed one of the manufacturer’s drugs (the “Product”) to mitigate the side effects of the Product would be grounds for the imposition of sanctions under civil monetary penalties (“CMP”) related to the Anti-Kickback Statute and prohibition on beneficiary inducements. The OIG determined the arrangement poses a low risk of fraud and abuse under the federal Anti-Kickback Statute and does not trigger sanctions under the Beneficiary Inducements CMP.

Under the proposed arrangement, the Requestor, a pharmaceutical manufacturer, manufacturers the FDA-approved Product to treat a certain disease [which was redacted from the Advisory Opinion] in patients who have received at least four prior therapies. The Product causes approximately seventy percent (70%) of its users to develop certain ocular side effects including keratopathy (changes to the corneal surface). To reduce the risk of keratopathy, the FDA-approved literature for the Product (i.e., the Product’s label and the Medication Guide distributed with the Product, among other things), recommends that patients use preservative-free lubricant eye drops at least four times per day while undergoing treatment with the Product. The eye drops are non-prescription, cost up to $17 per month, and are not typically reimbursed by federal health care programs.

The pharmaceutical manufacturer offers the eye drops for free to certain eligible patients, without regard to the prescriber of the Product or the patient’s insurer. The physician or the eligible patient submits an enrollment application to a third-party vendor (known as a Risk Evaluation and Mitigation Strategy or “REMS” vendor) which is not a health care provider, practitioner, or supplier. The eligible patient interacts exclusively with the REMS vendor regarding the supply and shipment of the eye drops.

Importantly, the pharmaceutical manufacturer certified that it neither covers any patient costs for the Product in connection with the arrangement nor provides any remuneration to the physicians who prescribe the Product in connection with the arrangement.

The federal Anti-Kickback Statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for, the referral of an individual to a person for the furnishing of, or arranging for the furnishing of, any item or service reimbursable under a federal health care program. The statute’s prohibition also extends to remuneration to induce, or in return for, the purchasing, leasing, or ordering of, or arranging for or recommending the purchasing, leasing, or ordering of, any good, facility, service, or item reimbursable by a federal health care program. For purposes of the Anti-Kickback Statute, “remuneration” includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind.

The Beneficiary Inducements CMP provides for the imposition of civil monetary penalties against any person who offers or transfers remuneration to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary to receive any item or service reimbursed under those programs from a particular provider, practitioner, or supplier.

The OIG concluded that providing the free eye drops to patients using the Product poses a sufficiently low risk of fraud and abuse (even though it constitutes “remuneration” under the federal Anti-Kickback Statute), and, therefore, declined to impose administrative sanctions under the Beneficiary Inducements CMP. The OIG noted the following when reaching this conclusion:

First, the FDA-approved Product medication guide, and REMS guide recommend the use of the eye drops to mitigate the risk of keratopathy, which is a very common negative side effect of the Product.

Second, the eye drops are relatively low-cost, are non-prescription items, and receiving them for free will likely not lead to overutilization or inappropriate utilization of the Product or related items or services. The pharmaceutical manufacturer certified it does not cover any other patient costs associated with the Product in connection with the arrangement. Therefore, many patients, including federal health care program beneficiaries, are responsible for other medical expenses (e.g., cost-sharing for the Product and physician visits) when they use the Product. Because patients must consider all costs associated with treatment, and because the eye drops may be one of the less significant potential out-of-pocket costs inherent in treatment with the Product, the OIG determined it was unlikely that the provision of the eye drops would induce the patient to choose the Product.

Third, the provision of the free eye drops will not increase federal program costs because the eye drops are not reimbursed by federal health care programs. Further, the proposed arrangement should not corrupt medical decision-making since prescribers do not financially benefit from the Product.

Finally, the OIG also determined that neither the pharmaceutical manufacturer nor the vendor supplying the eye drops is a provider, practitioner, or supplier of health care items or services within the meaning of the Beneficiary Inducements CMP. Enrollment documents for the program make clear to the patient that the free eye drops program is sponsored by the pharmaceutical manufacturer, and not the prescriber. Under the program, all patients (including federal health care beneficiaries) are eligible to receive the free eye drops regardless of which physician prescribed the manufacturer’s Product. Based on these facts, the OIG concluded that the free eye drops offered by the pharmaceutical manufacturer will likely not influence a beneficiary to select a particular provider, practitioner, or supplier.

Although the Opinion is expressly limited to the Requestor and its circumstances, these circumstances can serve as some guidance for companies seeking to evaluate — or to initiate — their own programs.

Read the article online in the Legal Intelligencer here.

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Vasilios J. (Bill) Kalogredis, Esq. has been advising physicians, dentists, and other health care professionals and their businesses as to contractual, regulatory and transactional matters for over 45 years. He is Chairman of Lamb McErlane PC’s Health Law Department. bkalogredis@lambmcerlane.com.610-701-4402.

Rachel E. (Lusk) Klebanoff, Esq. is a senior associate at Lamb McErlane PC who focuses on health law and health care litigation. She represents physicians, dentists, medical group practices, and other health-related entities in transactional, regulatory, and compliance matters. rlusk@lambmcerlane.com. 610-701-4416.