HHS OIG Announces New Guidance on Application of AKS to DTC Drug Sales

The US Department of Health and Human Services Office of Inspector General (HHS OIG) issued a Special Advisory Bulletin (SAB) concluding that pharmaceutical manufacturers’ direct-to-consumer (DTC) prescription drug sales/programs can be designed to present sufficiently low risk under the Anti-Kickback Statute (AKS). This new guidance reflects HHS OIG’s focus on reducing drug costs and responding to industry concerns over the implementation of DTC programs, but its limited scope will leave stakeholders with lingering questions.

KEY TAKEAWAYS

• The SAB concludes that DTC prescription drug sales/programs by manufacturers, even if government healthcare program beneficiaries are included, present a low risk of violating the Anti-Kickback Statute (AKS) if the programs have certain characteristics.
• The key characteristics identified in the SAB for DTC programs are (1) the patient has a valid prescription from an independent, third-party prescriber, (2) no claims are submitted to any insurer for the individual purchases of prescription drugs, (3) the program cannot be conditioned on sales of future purchases, and (4) the program must not be a “vehicle” for marketing other products reimbursable by government healthcare programs.
• Pharmaceutical manufacturers that are already operating a DTC program or are considering the development of a DTC program should review the SAB carefully, as its guidance and conclusions are expressly limited to the transaction between the pharmaceutical manufacturer and a cash-paying patient and not, for example, arrangements between manufacturers and third parties often involved in providing drugs directly to consumers, like telemedicine vendors.

ANALYSIS OF THE SAB

Manufacturer-sponsored DTC prescription drug programs, particularly those offering lower prices for cash-paying patients, have become a priority of the current administration in its push to lower drug prices in the United States. There has been uncertainty in the pharmaceutical industry about how such programs could potentially expose manufacturers to liability when the programs involve government healthcare program beneficiaries. HHS OIG issued the SAB, the agency’s first in nearly 12 years, to attempt to address these concerns and provide guidance for stakeholders involved in DTC drug programs.

The SAB identifies two primary risk scenarios for manufacturer DTC sales to government healthcare program beneficiaries: (1) using discounted drugs as a marketing tool to induce purchases of other reimbursable products, and (2) “seeding” programs—offering drugs with the expectation that future purchases may be billed to federal programs. These risks are similar to those identified by HHS OIG as associated with Patient Assistance Programs (PAPs).

To mitigate these risks, the SAB sets forth specific program characteristics that, if satisfied, minimize the likelihood of the DTC program implicating the AKS:

• The patient must have a valid prescription from an independent, third-party prescriber
• No claims for the DTC drugs may be submitted to any insurer, including government health care programs—as such, DTC prices do not count toward Medicare Part D out-of-pocket or spending limits
• The manufacturer must not use the DTC program for one product to market other federally reimbursable products or services
• The DTC price cannot be conditioned on any future purchases
• The drug must be available through the DTC program for at least one full plan year.
• DTC programs should not offer controlled substances

The SAB concludes that, if there are no claims to government healthcare programs and manufacturers do not use DTC programs as a vehicle to influence beneficiaries to use other reimbursable products, the benefits of lower-cost drug sales directly to patients outweigh AKS risk. These safeguards, in theory, ensure that the DTC programs do not directly or indirectly increase utilization and cost for government healthcare programs, a main policy concern undergirding the AKS and historic enforcement efforts by HHS OIG and the US Department of Justice.

The SAB’s guidance and conclusion of low risk are similar to a prior SAB issued by HHS OIG in 2005 that addressed PAPs for Medicare Part D enrollees. That guidance acknowledged that PAPs could elect to provide Medicare Part D beneficiaries free drugs without the beneficiary using their Part D insurance benefit, thus not counting towards the beneficiary’s true out-of-pocket or total Part D spending and reducing AKS risk. As with the DTC SAB, the 2005 guidance provides that PAPs should develop safeguards to ensure that no payment is made for the subsidized drug by any Part D plan, and the PAP provided assistance for the whole Part D coverage year for beneficiaries.

The 2005 SAB goes farther, however, and includes recommendations that the PAPs operating outside of Part D (1) notify Part D plans that the relevant drug(s) is being provided outside the Part D benefit and (2) maintain accurate and contemporaneous records of any free/subsidized drug so the government can verify that no Part D payment was made for the drugs. The DTC SAB does not include any such reporting or recordkeeping guidance for DTC programs while still requiring that manufacturers take sufficient steps to ensure that no claims are submitted to any government or commercial insurers.

SCOPE AND IMPLICATIONS

Issuing a SAB is a rare step for HHS OIG and reflects the administration’s focus on programs that have the potential to lower the cost of prescription drugs for patients. But stakeholders should note that the SAB addresses only transactions between the manufacturer and the cash-paying patient, who may be a government healthcare program beneficiary. It does not speak to the AKS risk presented by other, related arrangements between manufacturers and third parties, such as physicians, pharmacies, pharmacy benefit managers, telemedicine vendors, marketers, or other entities—or their respective relationships with government healthcare program beneficiaries.

Indeed, the first characteristic the SAB identifies as minimizing risk of fraud, waste, and abuse is that a patient using a DTC program should have a valid prescription from an independent, third-party prescriber. Many manufacturers rely on arrangements with telemedicine vendors to provide prescriptions for DTC programs. Given the SAB purposefully does not address such relationships—or define what HHS OIG considers to be an “independent, third-party” prescriber—the SAB is not clear as to how such relationships and arrangements could change HHS OIG’s AKS analysis.

The SAB raises similar questions with respect to how DTC programs and related arrangements would potentially implicate the Beneficiary Inducements CMP. In an interesting footnote, the SAB provides that it does not “address the civil monetary penalty provision prohibiting inducements to beneficiaries because the provision does not apply to arrangements between pharmaceutical manufacturers and beneficiaries.” The Beneficiary Inducement CMP prohibits an offer or transfer of value to a government healthcare program beneficiary that is likely to influence the beneficiary’s selection of a “provider, practitioner, or supplier.”

HHS OIG has acknowledged in the past that pharmaceutical manufacturers are not “providers, practitioners, or suppliers” for purposes of the Beneficiary Inducements CMP. It has, nevertheless, taken the aggressive position that arrangements between pharmaceutical manufacturers and beneficiaries still can implicate the CMP because they could “influence a beneficiary to seek follow-up care from a health care professional” who was involved in the arrangement.

As an example, in Advisory Opinion 2024-12, HHS OIG found that a pharmaceutical manufacturer’s arrangement to provide free genetic and metabolic assay testing (while sufficiently low risk that the agency would not seek sanctions) could influence a beneficiary who received the free testing to seek follow-up care from the healthcare professional who ordered the tests and, therefore, implicated the Beneficiary Inducement CMP. HHS OIG’s historical interpretation in its Advisory Opinions of the application of the Beneficiary Inducements CMP seems at odds with its seeming disregard of the risk in the DTC SAB.

The SAB avoids any analysis of how DTC programs and related arrangements between manufacturers and third parties could affect HHS OIG’s analysis under the AKS and whether they implicate the Beneficiary Inducement CMP. Stakeholders will no doubt need and likely seek additional guidance on these questions before including government healthcare program beneficiaries in DTC programs.

CONCLUSION

The SAB shows HHS OIG believes that DTC programs can lower the costs of prescription drugs and can be done in a manner that poses a low risk of fraud, waste, and abuse. It also attempts to provide a path for manufacturers to structure DTC programs that include government healthcare program beneficiaries and run them in a compliant manner.

But the SAB’s focus is so narrow that there remain significant unanswered questions. The SAB does not take into consideration the numerous other arrangements pharmaceutical manufacturers need to have in order to operate a DTC program that could implicate the AKS. And those risk assessments should remain front and center for stakeholders. 

HOW WE CAN HELP

Our lawyers stand ready to help pharmaceutical manufacturers and other stakeholders evaluate and structure DTC prescription drug programs, including with respect to managing enforcement risk and compliance considerations under the Anti-Kickback Statute.