OIG Advisory Opinion Regarding Possible AKS Violations. Part one.

Payments by a Medical Manufacturer for Travel, Lodging, and Other Costs – To Patients Who Are Prescribed the Manufacturer’s Drug. The Facts and the Law.

On December 28, 2020, the Office of Inspector General issued an advisory opinion on an “Arrangement.” The Arrangement is a program where the maker of a drug provides financial help for travel, lodging, and other expenses – to patients who are prescribed the medication. The manufacturer sought the advisory opinion to understand whether the financial arrangement will result in civil financially penalties which may be imposed when beneficiaries are improperly induced to use the medications – in violation of the federal Anti-Kickback statute

The OIG states in its opinion that the opinion relies on the truth of the facts and information the OIG received from the drug manufacturer.

DOJ Penalizes Doctors, Hospitals, & Medical Practices Millions to Settle Allegations of Anti-Kickback Statute Violations

The DOJ reported several new cases in which health care companies and doctors agreed to pay millions to settle claims of healthcare fraud due to AKS and Stark violations.

The opinion by the OIG

The OIG states that:

“although the Arrangement could potentially generate prohibited remuneration under the Federal Anti-Kickback Statute – if the requisite intent to induce or reward referrals of Federal health care program business were present, the Office of Inspector General (“OIG”) will not impose administrative sanctions on [the pharmaceutical company], under sections 1128(b)(7) or 1128A(a)(7) of the Act (as those sections relate to the commission of acts described in section 1128B(b) of the Act) in connection with the Arrangement. The “Act” refers to the federal Anti-Kickback Statute.

In addition, the OIG will not apply administrative sanctions – based on the Arrangement. The opinion does not apply to ancillary or other arrangements. The opinion only applies to the entity requesting the opinion.

New Proposed Rules from the CMS and the OIG-HHS on Stark Law and from the Anti-Kickback Statute

The CMS and HHA are proposing new rules, such as the Patients over Paperwork Initiative, where the focus of Stark and AKS will be on value-based arrangements

The facts behind the opinion

A pharmaceutical company makes a Drug – a therapy approved by the FDA for treating adult patients with a relapsed or refractory disease [Disease] – which is “a personalized medicine made from the patient’s own cells.” The Drug is delivered through a one-time infusion. It’s a “potentially curative treatment “for the Disease. The Drug, according to the Requestor – is individually made for each patient – which makes the Drug different than other treatments for the disease.

There are multiple steps required:

  1. The patients “undergo leukapheresis in which certain cells are removed from the patient’s body.”
  2. The cells are shipped to the manufacturing site of the Requestor. At the cite, the cells are engineered using retroviruses to insert the DNA for the [protein redacted] into the DNA of the patient’s T-cells.
  3. The cells are frozen and sent to the treating facility – where they are infused back into the patient’s bloodstream to treat the Disease.

These three steps take about 17 days. The pharmaceutical company in its request stated that a patient must make two visits:

  1. One to the leukapheresis facility – or an inpatient or outpatient facility
  2. A second visit to a Center that provides chemotherapy, the drug infusion, and post-infection monitoring

The Drug comes with a warning “of certain life-threatening or fatal reactions including [syndrome redacted] (the “Syndrome”) and certain neurological toxicities.”

The Food and Drug Administration (FDA) required that the pharmaceutical company requesting the advisory opinion – “implement a Risk Evaluation and Mitigation Strategy (“REMS”), which includes elements to assure safe use (“ETASU”) to mitigate the risks of the Syndrome and neurological toxicities associated with the use of the Drug.”

FDA approved the prescribing information for the drug which requires that the doctors and staff at the Center or a leukapheresis facility monitor patients for signs and symptoms of the Syndrome and neurological toxicities – after the infusion of the drug – and to have access to other drugs which may be needed to treat severe complications.

Patients are advised that they must stay within two hours of the administering Center – for at least four weeks after they receive the infusion.

The pharmaceutical company/Requestor has unilateral control of the Centers which are the only facility that administers the Drug. The Centers must meet specific requirements.

“Requestor certified that it does not require either Providers or Centers to prescribe its Drug exclusively and that any inpatient or outpatient facility that meets all REMS with ETASU requirements and Requestor’s criteria, which it uniformly applies, may become a Center. “

“Requestor’s process for qualifying Centers ensures that the leukapheresis facility is capable of correctly collecting, storing, packing, and shipping a patient’s cells and that the Drug can be properly matched to each individual patient. Requestor certified that it applies these requirements uniformly.”

The terms of the Arrangement

The Arrangement provides that the pharmaceutical company/the Requestor helps eligible patients and one caregiver with travel, hotel lodging, and certain out-of-pocket costs such as meals related to:

  • Obtaining leukapheresis
  • Receiving conditioning chemotherapy
  • Infusing the Drug
  • Monitoring after the infusion of the Drug

The Arrangement is run by the Requestor for patients (including beneficiaries of federal health care programs) who are “prescribed and administered its Drug in accordance with its label.” The pharmaceutical company states that the payment of these expenses is necessary to ensure the safety of the patient and to promote quality of care – especially for rural patients and poor patients.

The Arrangement (setting up the travel, lodgings, and other items – and paying for them) is done through a third-party vendor. Eligible patients are reimbursed for:

  • Mileage-based travel costs
  • Tolls
  • Transportation by rail, bus, rental care, or air travel – for the patient and one caregiver
  • Some lodging expenses

The assistance is available for:

  • The trip from the residences of the patient and caregiver to the Center or leukapheresis facility
  • Round-trip costs to the Center for the Drug treatment

“Travel assistance is limited to the leukapheresis facility and Center closest to the patient’s residence and that accepts the patient’s insurance, if applicable.”

The vendor also arranges for “modest” hotel lodging for the patient and caregiver – under certain specific conditions. The Requestor of the advisory opinion pays up to $50 per day for meals, parking, taxi fare, and similar expenses. Patients and caregivers must provide receipts.

To be eligible for reimbursements, patients must:

  • “Have been prescribed the Drug for an FDA-approved indication”
  • Have a household income that isn’t more than 600% of the federal poverty level
  • Live more than two hours (or 100 miles) from the closest leukapheresis facility and Center that accepts the patient’s insurance, as applicable
  • Not have “third-party insurance coverage for the travel and lodging expenses associated with the patient’s treatment.”

The Arrangement is available regardless of the prescribing Provider and regardless of whether the patient is self-insured, commercially insured, federally insured, or doesn’t have insurance. The Arrangement is applied uniformly.

The pharmaceutical company also advised the OIG that the company doesn’t advertise the Arrangement. Patients only learn of the Arrangement – when the patients are diagnosed with the Disease and are prescribed the Drug treatment.

The legal analysis of the AKS

The Federal Anti-Kickback statute (AKS). This law:

“Makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward, among other things, referrals for, or purchases of, items or services reimbursable by a Federal health care program.”

The AKS “specifically prohibits the offer, payment, solicitation, or receipt of any remuneration to induce or reward referrals for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or the purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under Federal health care program.”

The AKS is violated, according to the advisory opinion, when remuneration is intentionally paid to “induce or reward referrals or purchases of items or services payable by a Federal health care program.”

The AKS provides for criminal liability for both parties to an illegal “kickback” transaction. Remuneration is essentially anything of value.

  • A violation of the AKS is a felony.
  • The penalties include fines up to $100,000 for each violation and/or imprisonment up to 10 years.
  • Companies and individuals who violate the AKS will automatically be ineligible to participate in federal health care programs such as Medicare and Medicaid.

Anti-Kickback Statute and Stark Law Settlements Worth Millions

The DOJ reported several new cases in which health care companies and doctors agreed to pay millions to settle claims of healthcare fraud due to AKS and Stark violations.

Does the Arrangement violate the AKS prohibitions regarding the Civil Monetary Penalty (CMP) law provision prohibiting inducements to beneficiaries (Beneficiary Inducements CMP?

If the AKS is violated, the US HHS may also seek to impose civil monetary penalties and start administrative proceedings to exclude the violator from federal health care programs. The OIG states:

Section 1128A(i)(6)(F) of the Act [AKS] provides that, for purposes of the Beneficiary Inducements CMP, the term “remuneration” does not apply to “remuneration which promotes access to care and poses a low risk of harm to patients and Federal health care programs (as defined in section 1128B(f) and designated by the Secretary under regulations)” (the “Promotes Access to Care Exception”). We have interpreted this provision to apply to:

items or services that improve a beneficiary’s ability to obtain items and services payable by Medicare or Medicaid, and pose a low risk of harm to Medicare and Medicaid beneficiaries and the Medicare and Medicaid programs by—

    • being unlikely to interfere with, or skew, clinical decision making
    • being unlikely to increase costs to Federal health care programs or beneficiaries through overutilization or inappropriate utilization; and
    • not raising patient safety or quality-of-care concerns

A pharmaceutical company, with the help of an experienced healthcare lawyer, may seek an advisory opinion for the Office of Inspector General for the US Department of Health and Human Services. In the case study presented, a pharmaceutical requested an advisory opinion on whether its financial arrangement with patients constitutes a violation of the Anti-Kickback Statute (AKS). The drug-maker sought to understand if the payments for travel, lodging, and other related expenses were justified because the patient needs to have the treatment at certain approved facilities and needs to be monitored according to approved FDA safety protocols are the treatment (the infusion of a drug) is provided.

Doctors and medical practices should contact Cohen Healthcare Law Group, PC for legal counsel on the federal Anti-Kickback Statute. Our experienced healthcare attorneys help healthcare providers understand the provisions of the AKS and what safe harbors may apply.

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