OIG Issues Special Advisory Bulletin on DTC Prescription Drug Sales to Federal Health Care Program Enrollees

The OIG concluded that when pharmaceutical manufacturers structure their DTC programs in accordance with the specific characteristics outlined in the Bulletin, the offer and sale of prescription drugs to federal health care program enrollees present a “low risk” under the federal Anti-Kickback Statute (AKS). This guidance provides pharmaceutical manufacturers with a compliance roadmap for participating in DTC programs while minimizing exposure to fraud and abuse.

The Rise of DTC Prescription Drug Programs

DTC prescription drug programs enable patients to purchase medications directly from manufacturers at prices that may be lower than those available through traditional pharmacy channels or insurance benefits. These programs have proliferated in recent years as manufacturers seek alternative distribution models and patients search for more affordable medication options.

For patients enrolled in federal health care programs such as Medicare Part D, Medicare Advantage, or Medicaid, the ability to purchase medications outside their insurance coverage raises questions under the AKS. The statute prohibits offering or receiving anything of value to induce referrals for items or services reimbursable by federal health care programs. Manufacturers offering discounted drugs to these enrollees could potentially face scrutiny if the discounts are viewed as inducements.

Overview of the AKS

The AKS makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for, the referral of an individual to a person for the furnishing of any item or service reimbursable under a federal health care program. The statute’s prohibition extends to remuneration intended to induce the purchasing, leasing, or ordering of any good, facility, service, or item reimbursable by a federal health care program.

For purposes of the AKS, “remuneration” includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind. Courts have interpreted the statute to cover any arrangement in which one purpose of the remuneration is to induce referrals for items or services reimbursable by a federal health care program.

Violation of the AKS constitutes a felony punishable by a maximum fine of $100,000, up to 10 years’ imprisonment, or both. Conviction also leads to exclusion from federal health care programs, including Medicare and Medicaid. The OIG may also initiate administrative proceedings to impose civil monetary penalties under section 1128A(a)(7) of the Social Security Act or exclusion under section 1128(b)(7) of the Act.

OIG’s Primary Concerns With DTC Programs

The OIG identifies two primary ways that pharmaceutical manufacturers’ DTC sales to federal health care program enrollees could violate the AKS:

• Marketing Inducement: The manufacturer might offer a federal health care program enrollee a prescription drug at a lower cost as a marketing tool to induce the enrollee to purchase other prescription drugs, items, or services manufactured or offered by that pharmaceutical manufacturer for which payment may be made, in whole or in part, by a federal health care program.

• Seeding Programs: The manufacturer might use the DTC program to influence enrollees to take that pharmaceutical manufacturer’s drug with an expectation that the enrollee’s federal health care program might be billed for the drug in the future, such as if the drug becomes more affordable through the enrollee’s federal health care program coverage.

Characteristics That Minimize AKS Risk

The OIG concluded that when a DTC program aligns with the following characteristics, there is a low risk that a manufacturer would violate the AKS:

• Valid Prescription: The individual has a valid prescription from an independent, third-party prescriber.

• No Federal Program Billing: When an individual purchases prescription drugs through the DTC program, no claims for these drugs are submitted to any insurer, including any federal health care program. Individuals obtain the drugs without using their Medicare outpatient prescription drug benefit or any other federal health care program benefit. The DTC program price that a Medicare Part D enrollee pays does not count toward their Medicare Part D true-out-of-pocket or total Medicare Part D spending for any purpose.

• No Cross-Marketing: The pharmaceutical manufacturer does not use the DTC program for one product as a vehicle to market other federally reimbursable products it manufactures or services it provides.

• No Conditional Pricing: The pharmaceutical manufacturer does not condition the DTC program price for any drugs offered through its DTC program on any future purchases of that drug or any other items or services.

• Duration Commitment: The pharmaceutical manufacturer makes the prescription drug available to the federal health care program enrollee through its DTC program for at least one full plan year.

• No Controlled Substances: The prescription drugs offered by the pharmaceutical manufacturer through the DTC program do not include controlled substances.

Patient Safety Considerations

The OIG recommends that manufacturers operating DTC programs establish mechanisms to communicate with the federal health care program enrollee’s plan, such as Medicare Part D, Medicare Advantage, or Medicaid. This communication facilitates appropriate drug utilization review and medication therapy management by insurers, helping to protect patient safety and reduce the risk of contraindicated or duplicative prescriptions.

Scope and Limitations of the Bulletin

The Bulletin addresses only the DTC sales transaction between the manufacturer and the cash-paying patient. It does not address the application of the AKS to any arrangements that the manufacturer may have with physicians, pharmacies, pharmacy benefit managers (PBMs), telemedicine vendors, marketers, or other individuals or entities. It also does not address any arrangements that those individuals or entities may have among themselves or with federal health care program enrollees.

The Bulletin does not address DTC sales to uninsured individuals or individuals insured solely by commercial health plans because, as a general matter, the AKS does not apply to such sales. The Bulletin also does not address the civil monetary penalty provision prohibiting inducements to beneficiaries, as it does not apply to arrangements between pharmaceutical manufacturers and beneficiaries.

The OIG notes that it will issue a separate request for information to seek public feedback on rulemaking or guidance that may be needed to apply fraud and abuse laws to such arrangements as they relate to DTC sales.

Key Takeaways for Pharmaceutical Manufacturers

• Structure Programs Carefully: Manufacturers should structure DTC programs to align with all characteristics identified by the OIG to minimize AKS risk. Programs that deviate from these characteristics may face heightened regulatory scrutiny.

• Maintain Clear Separation: DTC programs should operate independently from marketing efforts for other federally reimbursable products. Any appearance that discounted drugs serve as inducements for other purchases could trigger AKS concerns.

• Avoid Future Purchase Conditions: Pricing under DTC programs should not be conditioned on any future purchases. Each transaction should stand alone without creating obligations or expectations for future business.

• Commit to Program Duration: Making drugs available for at least one full plan year demonstrates that the program serves patient access rather than short-term marketing objectives.

• Implement Patient Safety Protocols: Establishing communication mechanisms with enrollees’ health plans supports appropriate drug utilization review and demonstrates good faith commitment to patient welfare.

• Document Compliance: Manufacturers should maintain contemporaneous documentation demonstrating that their DTC programs align with the characteristics outlined in the Bulletin.

• Seek Guidance for Related Arrangements: Because the Bulletin does not address arrangements with physicians, pharmacies, PBMs, or other entities, manufacturers should consult with health care counsel regarding the full range of relationships that may implicate the AKS. The OIG’s advisory opinion process and frequently asked questions process remain available for parties seeking assessment of specific arrangements. Protection through certain existing safe harbors may also be available for related arrangements, provided all conditions of the applicable safe harbor are satisfied.

Conclusion

The OIG’s Special Advisory Bulletin provides a significant compliance framework for pharmaceutical manufacturers seeking to offer prescription drugs through DTC programs to federal health care program enrollees. By aligning program structures with the characteristics outlined in the Bulletin, manufacturers can provide patients with lower cost medication options while minimizing exposure under the AKS.

The OIG acknowledges that DTC programs have only recently begun to proliferate and that the Bulletin cannot be an exhaustive or definitive discussion of all relevant risks. The agency indicates it may amend the Bulletin on a periodic basis as it gains more experience with these programs. Manufacturers should monitor for additional guidance and remain vigilant in structuring their programs to ensure ongoing compliance.

For questions about this Special Advisory Bulletin or assistance structuring DTC programs to comply with the AKS, please contact the authors.