Print Plan to Offer Free Anti-Seizure Drugs to Hospitals Could Violate Anti-Kickback Statute

On November 16, 2018, The Department of Health and Human Services Office of Inspector General posted an advisory opinion regarding a drug company's proposal to provide free product ("drug") to hospitals for the hospitals to use exclusively to treat inpatients who have been diagnosed with a form of epilepsy ("Syndrome") that may occur through the end of the second year of life.

Under the Proposed Arrangement:

• The drug company would give free doses of the drug to hospitals for the hospitals to use exclusively for inpatients who are diagnosed with the Syndrome and are prescribed a course of therapy with the drug.
• The drug company would stock the drug at participating hospitals on a consignment basis, at no cost to the hospital or any payor.
• If a physician diagnoses an inpatient with the Syndrome and desires to prescribe the drug, the physician would submit a referral to the drug's reimbursement hub and then would initiate therapy using the free vial(s). A single vial is equivalent to three to five days of treatment.
• During this initial treatment time, the reimbursement hub would complete a benefits investigation on the patient's behalf and facilitate shipment of additional vials of the drug to the patient's caregiver for the caregiver to administer at home following discharge.
• If the patient's caregiver is unable to secure insurance coverage for the drug, then the patient would continue to receive the drug for free until either coverage is obtained or the therapy (including, as necessary for safe treatment termination, the two-week taper period) is complete.

Based on the facts provided, OIG determined that under the Proposed Arrangement:

• The Arrangement could function as a seeding arrangement. This seeding arrangement seems to be the primary concern associated with the otherwise altruistic and clinically efficacious act of prescribing the drug for free. A hospital could influence or arrange for a physician to prescribe the drug for inpatients when the hospital receives the drug for free. Once patients are discharged, if their insurance covers the drug, then insurers (including Federal health care programs) and patients would be charged for the drug. Moreover, giving the drug for free to this specific patient population in the inpatient setting facilitates the drug company's high price for the drug's other indications
• The free drug would be remuneration that the drug company would provide to hospitals, which could serve as referral sources for the drug.
• Hospitals could be direct referral sources for the drug if the hospitals' employed physicians prescribe it for inpatients or outpatients. In addition, hospitals often establish formularies that limit or influence the drugs that physicians may administer or dispense at the hospitals and thus are in a position to arrange for or recommend purchases of the drug.
• If a hospital refuses to stock a drug for a certain reason (e.g., if the drug is too expensive when dispensed for inpatients), then it may be difficult for a doctor to prescribe the drug for any hospital patient. Giving the drug for free to hospitals for inpatients diagnosed with the Syndrome could induce the hospitals to arrange for or recommend future purchases of the drug.
• The anti-kickback statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. Where remuneration is paid purposefully to induce or reward referrals of items or services payable by a Federal health care program, the anti-kickback statute is violated.
• The Proposed Arrangement therefore would violate the anti-kickback statute.
• Takeaways: 1. Free + clinically efficacious is no defense to conduct that implicates the kickback statute; and 2. Free product (DME, drugs, med-surg) that plants the seed for near term and necessary future purchases implicating federal health care programs must be carefully assessed in light of this OIG opinion.

Violation of the anti-kickback statute constitutes a felony punishable by a maximum fine of $100,000, imprisonment up to ten years, or both. Conviction will also lead to automatic exclusion from Federal health care programs, including Medicare and Medicaid.