On Thursday, March 16, the Office of the Inspector General for the Department of Health and Human Services (“OIG”) issued OIG Advisory Opinion (“AO”) No. 22-05, relating to subsidization of certain Medicare cost-sharing obligations in the context of a clinical trial involving medical devices (the “Proposed Arrangement”). This is the third AO in a recent series of AOs (see AO 21-17 on November 19, 2021 and AO 21-13 on October 4, 2021) focused on Medicare cost subsidies in a clinical trial setting for serious conditions that affect large portions of the population in the US. Like these other AOs, OIG found that while the Proposed Arrangement could generate fraud and abuse risks under both the Federal anti-kickback statute (i.e., Section 1128A(a)(7) and 1128B(b) of the Social Security Act (“Act”)) and the Beneficiary Inducements CMP (i.e., Section 1128A(a)(5) of the Act), the Proposed Arrangement nevertheless presented a minimal risk of fraud and abuse under the law on the facts presented. Medical device manufacturers should pay close attention to this trend when considering trial designs and patient populations.

The requestor (“Requestor”) in AO 22-05 manufacturers an investigational, three-component “Therapy” for the treatment of ischemic systolic heart failure. Ischemic systolic heart failure is an ischemic cardiomyopathy that develops secondarily to a restriction of blood flow to the cardiac muscle. Heart failure develops when this is persistent and is characterized by systolic dysfunction, dilated left ventricle and decreased ability to pump blood. Millions of people in the US suffer from heart failure each year, resulting in billions of dollars in healthcare costs. The three-component Therapy includes the following: (1) a device to process patient bone marrow (after an extraction procedure); (2) a device to re-inject processed bone marrow into cardiac tissue; and (3) an FDA-approved guide catheter to facilitate placement of processed bone marrow into cardiac issue.

The Therapy is available only for clinical use under an FDA-approved, Category B Investigational Device Exemption (“IDE”) (see 42 CFR 405.211(b)-(c)). The Requestor is also the sponsor of the proposed study. The Category B IDE allows Medicare to make payment for the device and related services furnished in a clinical study, provided the study meets ten enumerated criteria (see 42 CFR 405.212). OIG focused on the following three criteria in the AO: (1) the principal use of the study is to test whether the device improves health outcomes of appropriately selected patients; (2) the rationale for the study is well supported by available scientific and medical information, or it is intended to clarify or establish the health outcomes of interventions already in common clinical use; and (3) the study results are not anticipated to unjustifiably duplicate existing knowledge.

OIG also noted that the Therapy is intended as a one-time treatment for the clinical trial itself, and while trial patients would continue to receive Medicare-reimbursable follow-up services related to the therapy, those services would not inure to the financial benefit of the Requestor or prompt utilization of any other Requestor products. The study would enroll approximately 260 patients with a 3:2 treatment/control arm ratio at about 40 sites and follow all standard human clinical trial rules and regulations (e.g., IRB approved protocols, enrollment criteria, informed consent process and other rules and regulations governing good clinical trial practice). According to the Requestor, participation in the study would involve about nine follow-up appointments over about two years after an initial treatment visit, resulting in nearly $1,300 in patient out-of-pocket costs for non-device related items and services–a cost-prohibitive amount for many prospective study participants.

The Proposed Arrangement would include the Requestor paying Medicare beneficiary cost-sharing obligations directly to study sites for costs of items and services owed as a result of participating in the trial, but only those out-of-pocket costs not including Part B deductible amounts. OIG underscored that the Requestor’s goal was threefold: (1) facilitate enrollment and retention of trial participants by reducing financial barriers; (2) ensuring the trial would be socioeconomically diverse; and (3) preserve study blinding. Notably, the Requestor would not advertise the arrangement but only denote it on trial informed consent forms.

OIG recognized that the Proposed Arrangement would trigger the Federal anti-kickback statute because the direct provider subsidies could induce Medicare beneficiaries to participate in the study, where they would receive health care items and services reimbursable by Federal health care programs. OIG also found that the Proposed Arrangement would trigger the Beneficiary Inducements CMP because remuneration would be likely to influence a beneficiary to receive Medicare-billable items and services from a particular provider/study site. However, OIG concluded the risk here to be minimal for three reasons.

First, OIG determined this to be a reasonable means of promoting enrollment of a socioeconomically diverse patient pool and minimizing attrition over the course of a two-year study horizon. OIG noted that the 3:2 study arm design would leave 40% of patients not receiving treatment – itself a deterrent to study participation, not to mention that $1,300 in out-of-pocket costs would reduce the socioeconomic cross-section of the patient cohort and thus negatively impact the validity of the study.

Second, OIG calculated there to be a low risk of overutilization or inappropriate utilization of items and services payable by Federal health care programs. Indeed, while OIG admitted that utilization generally would increase for an individual patient by virtue of study participation, this itself is not inappropriate because the study comes with all the standard human clinical trial regulatory guard rails, IRB approvals and was even bestowed the Category B IDE for a CMS coverage determination. Moreover, the study would be only 260 participants and not broadly advertised.

Third, OIG found the Proposed Arrangement to differ from so-called “seeding arrangements” because this one-time treatment would not require additional items or services from the Requestor. Patients could continue to receive Medicare-reimbursable items and services on follow-up visits, of course, but the financial benefit would not confer to the Requestor for those items or services.

For these reasons, OIG concluded there to be a minimal risk of fraud and abuse under the Federal anti-kickback statute and would not impose sanctions under the Beneficiary Inducements CMP.

It may not come as a surprise that OIG decided not to block the Proposed Arrangement here, given the recent activity by OIG over the past six months or so with requests for subsidies of certain Medicare cost-sharing obligations in the context of clinical trials. In both AO 21-13 and AO 21-17, OIG reached the same ultimate conclusion for two very similar arrangements, albeit on differing facts—most notably in AO 21-13. This shows a concerted willingness to allow for Medicare cost subsidies by various parties in the clinical trial space to promote learnings through clinical trials for costly and devastating conditions afflicting the US population. For device manufacturers, the takeaway here is flexibility in trial design and enrollment strategies from an OIG enforcement perspective.