Last month, in the last advisory opinion issued by the Office of Inspector General (“OIG”) in 2023 – Advisory Opinion No. 23-11 (the “Opinion”) – OIG “blessed” an arrangement involving a medical device manufacturer (the “Requestor”) and its proposed payment of cost-sharing subsidies. Maintaining its position from similar opinions issued in recent years, OIG said that it would not impose sanctions under the Federal Anti-Kickback Statute (the “AKS”) or the Beneficiary Inducements Civil Monetary Penalty (the “CMP”) against the Requestor for paying cost-sharing subsidies to clinical trial participants to cover the participants’ share of costs for reimbursable, study-related items and services that the participants would otherwise be required to pay out of pocket.[1] This Opinion illustrates that OIG appears to remain willing to permit arrangements that do not fall squarely within an AKS safe harbor in order to incentivize participation, especially diverse participation, in clinical trials for medical devices.

Statutes in Question

The AKS makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to any person to induce such person to purchase or arrange for any item or service reimbursable under a Federal health care program.[2] For purposes of the AKS, “remuneration” includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind. An arrangement that fits within the AKS may be exempt from liability if the arrangement fits within one of the safe harbor regulations or if OIG determines that the arrangement presents only a minimal risk of fraud, in which case the agency can exercise its enforcement discretion and decline to impose sanctions.

On the civil side, the Beneficiary Inducements CMP imposes civil monetary penalties against any person who offers or transfers remuneration to the beneficiary of a federal or state health care program that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier.[3]

Proposed Arrangement

The Requestor manufacturers a medical-device based therapy that is designed to modulate the strength of a cardiac muscle contraction in patients experiencing heart failure and is intended to be implanted as a one-time treatment. Although the Requestor’s product is already FDA-approved for a specific population (i.e., heart failure patients with a left ventricular ejection fraction ranging from 25%-45%), the product is currently being tested for safety and efficacy in an expanded population (i.e., heart failure patients with a left ventricular ejection fraction ranging from 25%-45%) under a Category B Investigational Device Exemption (“IDE”) study (the “Study”). As a Category B IDE study, the cost of the device being studied, as well as the cost of routine care items and services associated with the study, are paid for by the Medicare program, pursuant to a cost-sharing arrangement with Study participants.[4]

Under the proposed arrangement, the Requestor would pay cost-sharing obligations that Medicare beneficiaries participating in the Study otherwise would owe for Study-related, Medicare-reimbursable items and services provided during the Study, up to a maximum of two-thousand dollars ($2,000) per Study participant. The Requestor would pay the cost-sharing amount directly to the Study site and investigator, to whom the participant would otherwise owe the amount. The Requestor proposes to implement this arrangement to ensure that Medicare beneficiaries incur no cost-sharing expenses for participating in the Study, unless those expenses exceed two-thousand dollars ($2,000).

The Requestor asserts that the proposed arrangement is beneficial in three ways. First, the Requestor asserts that the proposed arrangement will reduce financial barriers to enrollment and prevent attrition from the Study due to financial hardship. According to the Requestor, Study participants who are Medicare beneficiaries would likely incur cost-sharing obligations for billable items and services, which could be cost-prohibitive for such individuals. Second, and related to the first point, the Requestor asserts that the proposed arrangement will facilitate socioeconomic diversity of the Study population. And finally, the Requestor asserts that the proposed arrangement will preserve crucial blinding of participants. Participants who are members of the control group will not be billed for associated, reimbursable items and services because they do not have the potential to receive any therapeutic benefit during the initial period of the Study, but the failure to charge participants in the control group for cost-sharing while, at the same time, charging cost-sharing to participants in the treatment group could alert the former that they are in the control group, which could un-blind the Study.

Proposed Arrangement Is Acceptable Under AKS and CMP

Although OIG acknowledged that the proposed arrangement would, in fact, implicate the AKS and/or CMP, and would not fit within a safe harbor regulation, it ultimately concluded that it would not be improper for the Requestor to subsidize cost-sharing obligations for Medicare beneficiaries who participate in the Study. In justifying the proposed arrangement, OIG provided three key considerations that differentiate the proposed arrangement from other arrangements involving manufacturer-furnished subsidies that OIG has determined to be improper under the AKS and CMP.

First, OIG agreed with the Requestor that the proposed arrangement is a reasonable means of promoting enrollment in the Study for Medicare participants who otherwise would not be able to afford the cost-sharing obligations, which, in turn, is a reasonable means of facilitating enrollment of a socioeconomically diverse set of participants.

Second, OIG concluded that the proposed arrangement poses a low risk of over-utilization of federally-reimbursable items and services because the arrangement encompasses five key guardrails to prevent such over-utilization: (i) the Requestor will not advertise the availability of cost-sharing subsidies; (ii) individuals must satisfy the enrollment criteria set forth in the Study protocol and execute an informed consent document to be eligible to participate in the Study; (iii) investigators and sites must comply with the Study protocol and are subject to oversight and monitoring by an Institutional Review Board (“IRB”); (iv) Study enrollment is capped at 1,500 participants; and (v) CMS approved the Study as a Category B IDE study, meaning that CMS evaluated the Study and determined that it meets criteria to ensure appropriate patient protections and that it is appropriately designed to answer questions of importance to the Medicare program and its beneficiaries.

Third, OIG concluded that the proposed arrangement is distinguishable from problematic seeding arrangements, in which drug and device manufacturers initially offer subsidies for the purpose of locking in future utilization of a federally-reimbursable item or service, because the Requestor’s product is intended to be used as a one-time treatment. 

Takeaways

OIG’s analysis of the fraud and abuse risk presented by manufacturer-provided subsidies for investigational products and/or services, as communicated in this Opinion and similar, recently-issued opinions,[5] appears to turn on one high-level consideration – the presence of sufficient safeguards facilitated, at least in part, by the clinical trial context. Here, OIG acknowledges that the Requestor’s provision of cost-sharing subsidies to Medicare beneficiaries isn’t free from implicating the AKS and CMP, but rather that the investigational nature of the reimbursable product/services lends itself to the inclusion of sufficient safeguards that appropriately limit the risk of fraud and abuse. Specifically, OIG cites the fact that the clinical trial is limited to 1,500 participants, the Requestor’s product is intended to be administered only one time during the clinical trial period, and the subsidy is capped at $2,000, each of which limits the potential for overutilization – a key risk that the AKS is intended to prevent. These specific safeguards are possible due, at least in part, to the investigational, rather than commercial, nature of the reimbursable product/services.

As industry knows well, OIG is more willing to allow manufacturers to provide cost-sharing subsidies to Medicare beneficiaries in the investigational, rather than the commercial, context. As explained by OIG, subsidies provided in the investigational context are not only susceptible to stronger safeguards, but also support the participation of socioeconomically diverse participants in clinical trials, which aligns with FDA’s initiative to increase diversity in clinical trials and ultimately supports the development of medical products better suited to treat a larger portion of the population.[6] By contrast, OIG and enforcing courts, alike, have for a variety of reasons historically taken a hard stance against manufacturers’ provision of cost-sharing subsidies to Medicare beneficiaries, specifically through nonprofit, copay-assistance organizations, for commercial drug products.[7] OIG has explained that subsidies provided in this context present a high risk of fraud and abuse, in part because the commercial nature of the products in question, and the related potential for Medicare beneficiaries to require future units of the products, simultaneously increase the risk of over-utilization and prevent the inclusion of safeguards necessary to offset such risk.[8]

Industry participants might find this Opinion as a helpful—albeit fact-specific—guide regarding OIG’s position on funding for trial-related costs. Industry participants may also find this Opinion helpful as a potential indicator to consider other narrow contexts in which OIG might permit the payment of cost-sharing subsidies to Medicare beneficiaries. Regardless of the takeaway gleaned from the Opinion, manufacturers should remain cognizant of the importance of fraud and abuse safeguards when contemplating the potential payment of subsidies to Medicare beneficiaries for federally reimbursable products and/or services.

FOOTNOTES

[1] See Adv. Op. 21-13, OIG (Oct. 4, 2021); Adv. Op. 21-17, OIG (Nov. 19, 2021); Adv. Op. 22-05, OIG (March 16, 2022).

[2] 42 U.S.C. § 1320a–7b(b).

[3] 42 U.S.C. § 1320a–7a(a)(5).

[4] When the Centers for Medicare and Medicaid Services (“CMS”) approves a study as a Category B IDE study, CMS may cover all costs associated with the study – including the cost of the drug and/or device being furnished to study subjects and items/services associated with the treatment – as long as certain criteria are met. See FAQs About Investigational Device Exemption, U.S. Food & Drug Admin. (current as of Sept. 18, 2023); see also 42 CFR Part 405, Subpart B.

[5] See supra FN 1.

[6] See FDA Guidance on Diversity Plans to Improve Enrollment of Participants From Underrepresented Racial and Ethnic Populations in Clinical Trials, U.S. Food & Drug Admin. (April 2022).

[7] See, e.g., DOJ Journal of Federal Law and Practice, Vol. 70, No. 3 (Aug. 2022) at p. 42; 2005 Bulletin, 70 Fed. Reg. at 70627; 2014 Bulletin, 79 Fed. Reg. at 31112; OIG Advisory Opinion No. 22-19.

[8] See id.