OIG Issues Anti-Kickback and False Claims Warning to Pharmaceutical Manufacturers and Others Who Administer and Honor Copayment Coupon Programs

by MDM&C Attorney

On September 19, 2014, the OIG issued a Report and Special Advisory Bulletin warning of inadequacies surrounding manufacturer safeguards designed to prevent copayment coupon use for Medicare Part D beneficiaries.  The OIG warned that the acceptance and the use of co-payment assistance coupons for Part D (and other federal health care programs) beneficiaries is a potential  violation of the Anti-Kickback Statute and False Claims Act by the manufacturer, its coupon manager or administrator, and individual pharmacies.

Pharmaceutical manufacturer copayment coupons are designed to stimulate the use of specific products.  After a patient enrolls in a specific drug program, (usually online) and provides basic information, they receive a coupon card.  When the prescription and the coupon are presented to a pharmacist, the pharmacist transmits the information to the patient’s health insurance company or its pharmacy benefits manager (PBM).  The insurer or PBM respond by verifying enrollment and providing the pharmacist with the patient’s copayment obligation.  The pharmacist then processes the coupon as a form of secondary insurance, resulting in the patient paying only the out-of-pocket difference between their copayment and the amount subsidized by the coupon.  An insurer is never told, and has no way of knowing that a third-party has paid all or nearly the entire personal copayment obligation, and pays the full amount of its usual payment for the drug in question, but the patient only pays part (or none) of their ordinary copayment.

Although the OIG recognized that copayment coupons can “provide an immediate financial benefit to beneficiaries,” it nonetheless warned that ultimately, they result in higher overall costs because the availability of a coupon may cause physicians and beneficiaries to choose an expensive brand-name drug when a less expensive and equally effective generic or other alternative is available.  Further, in relieving consumers of copayment obligations, drug manufacturers are simultaneously relieved of a market constraint on drug prices, resulting in excessive costs to federal health care programs such as Medicare Part D in violation of the Anti-Kickback Statute and False Claims Act.

Moreover, the OIG observed that if manufacturers wanted to offer copayment support to needy beneficiaries, there are a plethora of independent charitable organizations that offer such services without regard to the particular medication involved.  The OIG has previously discussed the proper establishment and operation of such entities in Special Advisory Bulletins from 2014 and 2005.

The Report details measures that surveyed manufacturers claim they have in place to prevent the use of copayment coupons to fund copayments for drugs paid for by Part D and concludes that these measures may not prevent all such use.   These safeguards consisting of  manufacturer notices to beneficiaries and pharmacists along with claims edits in the processing of coupons were determined to be inadequate by the OIG because not all manufacturers used such notices, and claims edits cannot reliably identify all Part D claims.   As a result, the OIG Report found that coupons lack transparency in the pharmacy claims transaction system to entities other than the manufacturers themselves.  This lack of transparency prevents anyone except the manufacturers from fully identifying or  monitoring the use of coupons for drugs paid for by federal health care programs such as Part D, raising serious concerns under the Anti-Kickback Statute and False Claims Act.

In addition to warning pharmaceutical manufacturers, their vendors and pharmacies that use of copayment coupons for Part D and other federal health care program beneficiaries may potentially lead to criminal and civil liability under the Anti-Kickback Statute and False Claims Act, the OIG recommended that the Centers for Medicare and Medicaid Services (CMS) “cooperate with industry stakeholder efforts to improve the reliability of mechanisms to determine when copayment coupons are used in connection with the purchase of drugs paid for, in part, by Part D.”

Until CMS issues definitive guidance in this area, pharmaceutical manufacturers who provide patient co-payment assistance coupons, vendors who operate and administer such programs, and the pharmacies that honor drug coupons should insure that they take all reasonable measures to insure that coupons are not processed for claims involving beneficiaries of any federal health care program, including Medicare Part D.