Free Drug Program Avoids Sanctions Under AKS

April 6, 2021 | Ada (Kozicz) Janocinska | FDA | Fraud and Abuse | Legislation and Public Policy | Medicare and Medicaid | Pharmaceuticals

In a recent advisory opinion, the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) determined not to impose sanctions under the federal Anti-Kickback Statute (AKS) on a drug manufacturer program that offers a free drug to certain eligible patients. The manufacturer uses personalized medicine technology to make the drug from the patient’s own cells. To ensure safe use, the U.S. Food and Drug Administration (FDA) requires the drug to be prescribed by a properly trained physician and to be administered at a healthcare facility that meets certain safety requirements. Under the proposed program, the manufacturer offers the drug for free to patients who meet certain eligibility requirements, including lack of insurance coverage for the drug and inability to pay for the drug based on household income.

The AKS prohibits individuals from knowingly and willfully offering, paying, soliciting or receiving any form of remuneration to induce or reward referrals for items or services that are reimbursable under a federal healthcare program. The manufacturer in this case certified that certain beneficiaries of federal healthcare programs, including Medicaid beneficiaries, would be eligible to receive the free drug. OIG explained that the program would offer two types of remuneration: First, the free drug constituted remuneration to the eligible patients and, second, the providers and healthcare centers administering the drug would receive remuneration by receiving an opportunity to earn income when billing for their professional fees and facility fees associated with administering the drug without incurring costs for the drug itself. Nonetheless, OIG concluded that the arrangement presented a low risk of fraud and abuse under the AKS for the following reasons:

  1. There was a low risk of “seeding” (i.e., inducement of future referrals) because the patients typically received only one dose of the drug. This is distinct from other arrangements where a manufacturer may offer a free initial dose of a drug used for a chronic condition which is more likely to induce future doses that would be billed to federal healthcare programs.
  2. The drug would be available to all eligible patients for all FDA-approved indications for the drug.
  3. The drug would be available to all eligible patients irrespective of what type of center would administer the drug. In other words, ensuring that the drug would be accessible in all types of healthcare settings (including inpatient and outpatient centers) reduced the risk that availability of the drug might steer patients to one particular setting over another.
  4. Finally, there was a low risk of overutilization because the drug typically only required one dose and would only be offered to patients that received an on-label prescription in accordance with FDA requirements.
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