Based on OIG guidance from the United States Department of Health and Human Services Office of Inspector General (“OIG”), this article serves as a guide for non-profit, tax-exempt organizations under Section 501(c)(3) of the Internal Revenue Code (“Code”) wishing to administer a patient assistance program (“PAP”).  Such a program involves providing financial support to patients with specific medical conditions who demonstrate financial need.  This article summarizes OIG guidance on PAPs, including a recently-published OIG Advisory Opinion, and features a checklist of safeguards organizations should consider implementing to ensure a PAP is compliant.

1. April 2024 Favorable OIG Opinion
   1. The Arrangement
      On April 8, 2024, the OIG issued a favorable Advisory Opinion in which it concluded it would not impose administrative sanctions in connection with a patient assistance Disease Funds program.  OIG Advisory Opinion No. 24-02 (April 8, 2024).  The Requester was a nonprofit, tax-exempt organization eligible to receive tax-deductible charitable contributions under Section 501(c)(3).  It operated a patient assistance program through various “Disease Funds,” which assisted patients with costs related to the treatment of certain rare disorders.  Each Disease Fund had a single donor that was a pharmaceutical manufacturer that manufactured or marketed a drug to treat the disease covered by the Disease Fund.  More details of the arrangement are described in the Analysis Section below.
   2. Relevant Laws
      The OIG addressed whether this arrangement constituted grounds for the imposition of sanctions under: (i) the civil monetary provision at Section 1128A(a)(7) of the Social Security Act (“Act”), as it relates to Section 1128B(b) of the Act (“Federal Anti-Kickback Statute,” or “AKS”); (ii) the civil monetary penalty provision prohibiting inducements to beneficiaries (“Beneficiary Inducements CMP”), Section 1128A(a)(5) of the Act; or (iii) the exclusion authority at Section 1128(b)(7) of the Act.
      
      The Federal AKS generally prohibits one from knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce the referral of an individual to a person for the furnishing of any items or service reimbursable under a Federal health care program.  Remuneration is defined as anything of value.  Violation of the statute can result in a maximum fine of $100,000, imprisonment up to 10 years, and/or exclusion from Federal health care programs. 
      
      The Beneficiary Inducements CMP bars a provider from offering or transferring to a Medicare or Medicaid beneficiary any remuneration that the provider knows or should have known is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of Medicare or Medicaid payable items or services.  Remuneration includes services for free or other than fair market value.  Violations can result in CMPs of up to $10,000 for each wrongful act and exclusion from Federal health care programs.
   3. Previous OIG Guidance and Policy Concerns Regarding PAPs
      For decades, the OIG has acknowledged that PAPs can play a vital role in ensuring patients with financial need can access necessary prescription drugs, even when such programs are sponsored by drug manufacturers.  See, e.g., OIG, Supplemental Special Advisory Bulletin: Independent Charity Patient Assistance Programs, 79 Fed. Reg. 31,120 (May 30, 2014); OIG Special Advisory Bulletin: Patient Assistance Programs for Medicare Part D Enrollees, 70 Fed. Reg. 70,623 (Nov. 22, 2005).  In this April 8, 2024, Opinion, the OIG recognized that, in light of recent, dramatic increases in prescription drug costs, the OIG supports charitable organizations in their efforts to help financially needy beneficiaries, so long as such help does not violate the AKS or other laws.
      
      The OIG reinforced its longstanding position that, in order to mitigate fraud and abuse risks present when relying on pharmaceutical manufacturer donations, independent charity PAPs must be independent of influence from pharmaceutical manufacturers and “not function as a conduit for payments by the pharmaceutical manufacturer to patients.”  OIG Advisory Opinion No. 24-02, at 8 (April 8, 2024) (quoting id.).
   4. Analysis
      For the following reasons, the OIG concluded that (i) it would not impose administrative sanctions, although the Disease Funds may generate prohibited remuneration under the Federal AKS if the requisite intent to induce referrals were established, and (ii) the Disease Funds did not implicate the Beneficiary Inducements CMP.
      1. No AKS Sanctions
         The OIG determined that the arrangement would implicate the AKS because drug manufacturers provided remuneration to patients through the Requestor’s Disease Funds, which provided financial assistance for drugs manufactured by the donors.  This remuneration, the OIG reasoned, could induce the ordering or purchasing of a prescription drug reimbursable by a Federal health care program.  However, the OIG concluded it would not impose administrative sanctions under the AKS for the following reasons:
         
         The OIG first found that the Disease Funds included several safeguards to reduce the potential for fraud and abuse:
         1. The Disease Funds varied substantially in the proportion of funds spent to support the purchase of the donor’s drugs;
         2. The Disease Funds were based on clearly established disease states;
         3. The Requestor awarded assistance without regard to the treatment regimen prescribed for a particular patient;
         4. The Requestor limited what information it shared with donors, such as how funds from Disease Funds were spent and what portion of the funds was spent on drugs manufactured by the donor;
         5. The Requestor limited what information it shared with patients, such as the identity of the donors;
         6. Patients had to undergo a financial eligibility process to qualify for assistance; and
         7. Only less than 1/3 of the Disease Funds donations were spent on purchasing drugs manufactured by donors, while over 2/3 of the funds provided other forms of assistance, such as cost sharing for items and services other than drugs, medical assistance, premium support, and emergency relief.
            
            Second, the OIG noted that the Disease Funds served an important purpose: assisting financially needed patients with rare disorders with accessing increasing expensive prescription drugs.
      2. No Implication of Beneficiary Inducements CMP
         The OIG concluded the Disease Funds did not trigger the Beneficiary Inducements CMP because a patient’s eligibility in the Disease Fund had no correlation to the selection of a particular treating physician or pharmacy.  Therefore, the arrangement did not influence an enrollee’s selection of a particular provider, practitioner, or supplier.
   5. Effective Period
      The OIG emphasized that this Opinion will terminate on, and is only effective through, January 1, 2027.  This limited period of immunity is because Congress recently enacted legislation that reduces the cost sharing obligations imposed on Medicare Part D enrollees.  Because the OIG is unsure how implementation of this legislation will impact the analysis and conclusions of the Disease Funds, the Opinion will expire two years after full implementation of the legislation, at which time the Requestor may submit a new request.
      
2. PAP Compliance Checklist
   Based on previous OIG guidance and the April 8, 2024, OIG Opinion, the following non-exhaustive checklist identifies characteristics of PAPs – particularly those with pharmaceutical manufacturer donors – that can reduce the risk of fraud and abuse and administrative sanctions:
   1. The organization administering the PAP is a nonprofit, tax-exempt organization eligible to receive tax-deductible charitable contributions under Section 501(c)(3) of the Code.
   2. The PAP is independent of pharmaceutical manufacture influence and does not function as a conduit for payments by the pharmaceutical manufacturer to patients.
      1. E.g., pharmaceutical manufacturer donors cannot direct or influence how the funds are spent.
   3. The PAP varies substantially in the proportion of funds spent to support the purchase of the donor’s drugs.
   4. The PAP is based on clearly established disease states.
   5. The organization administering the PAP awards assistance without regard to the treatment regimen prescribed for a particular patient.
   6. The organization administering the PAP limits what information it shares with donors, such as how PAP funds are spent and what portion of the funds is spent on drugs manufactured by the donor.
   7. The organization administering the PAP limits what information it shares with patients, such as the identity of the donors.
   8. Patients undergo a financial eligibility process to qualify for assistance.
   9. The minority of the donated funds for the PAP is spent on purchasing drugs manufactured by donors, while the majority of the funds provide other forms of assistance, such as cost sharing for items and services other than drugs, medical assistance, premium support, and emergency relief.