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On Thursday, February 23, the Office of the Inspector General for the Department of Health and Human Services (“OIG”) issued its first Advisory Opinion (“AO”) of the new year – OIG AO No. 23-01 – permitting a drug manufacturer to provide financial assistance for transportation, lodging, meals, and other out-of-pocket expenses to eligible patients receiving the manufacturer’s drug (the “Arrangement”). Overall, OIG concluded that: (1) the risk of fraud and abuse presented by the manufacturer’s Arrangement was sufficiently low under the Federal anti-kickback statute; and (2) the remuneration offered under the Arrangement was not likely to influence a beneficiary to order the manufacturer’s drug (the “Drug”) from a particular provider and therefore did not constitute grounds for the imposition of sanctions under the Beneficiary Inducements CMP. Ultimately, the crux of this decision came down to the unique manufacturing and distribution of the Drug, which (i) is the only available potentially curative treatment for an ultra-rare disorder; (ii) pursuant to its FDA approval, can only be manufactured at a single facility, located on the campus of a treatment center (the “Treatment Center”); (iii) can only be administered within 3 hours after being manufactured; and thus, can only be administered at the single Treatment Center site.

Factual Background

The requestor (“Requestor”) in AO 23-01 manufactures a regenerative tissue-based therapy that is indicated for immune reconstitution in pediatric patients with an ultra-rare primary immunodeficiency disorder (the “Condition”). The Condition is characterized by the absence of a thymus at birth, which is an organ that plays an essential role in the development of T cells, a type of infection-fighting white blood cell. Newborn screening for severe combined immunodeficiency, a screening that is required nationwide, can identify possible causes of the Condition, which can then be confirmed by further testing. The Condition is considered ultra-rare in that it affects approximately 17 to 24 out of every 4 million children born each year in the United States. For those affected patients, supportive care involves prolonged inpatient hospitalizations, frequent outpatient visits, home health care, significant diagnostic and monitoring testing, both treatment and prophylactic medications, and diagnostic and surgical procedures. Thus, individuals with the Condition may be characterized as having high health care utilization which, in the first 3 years of life, may have an average total economic burden between $5.5 million to $11.7 million.

Requestor’s drug (the “Drug”) is a one-time, potentially curative treatment and the only treatment available to rebuild the immune system of a patient diagnosed with the Condition. To make the Drug, Requestor first obtains donor thymus tissue from donors who are 9 months of age or younger and undergoing cardiac surgery. The Requestor next aseptically processes and cultures the thymus tissue for 12 to 21 days, and the Drug is then administered via implantation in the thigh muscle of pediatric patients with the Condition. Depending on the patient’s condition (as determined by Treatment Center physicians and the patient’s prescribing doctor), a patient receiving the Drug typically arrives 5 to 11 days before implantation for testing, clinical evaluations, and immunosuppressive therapy; absent any complications, patients typically remain inpatient at the Treatment Center for 2 to 7 days following implantation.

There are several notable limitations on the administration of the Drug, including where and who may administer it and the timeline within which it must be administered following manufacture. First, the Biologics License Application approval letter from the U.S. Food and Drug Administration (“FDA”) approved only a single manufacturing facility, which is located on the campus of the “Treatment Center.” Second, the Drug must be administered within 3 hours after manufacturing, and therefore must be implanted in close proximity to the site of manufacturing. Requestor does not have and would need FDA approval to transport the Drug to other treatment facilities aside from the Treatment Center. Thus, the Drug can be administered only at the Treatment Center by a qualified surgeon.

Under the Arrangement, eligible patients may receive: “(i) round-trip medical flights for the patient diagnosed with the Condition and up to two caregivers who accompany the patient on the flights; (ii) ground ambulance travel to and from the airport; (iii) modest lodging in a single hotel room with a private bathroom up to $150 per night, if charitable housing is not available; and (iv) coverage for out-of-pocket expenses up $50 per day for one caregiver (or $100 per day for two caregivers) to cover ground transportation and meals while staying near the Treatment Center.” The rationale for providing medical flights as opposed to other forms of travel is due to the high-risk of infection that is present with all patients with the Condition. Such flights are expensive and are often not covered by insurance, and thus may inhibit patients from otherwise seeking treatment with the Drug or cause patients to risk their safety in traveling to the Treatment Center.[1] That being said, Medicaid and some commercial plans sometimes cover non-emergency medical flights, and some plans cover some lodging and other out-of-pocket expenses. Additionally, eligible patients are not required to take a medical flight and Requestor does not control flight vendor decisions; rather, decisions about mode of transportation are made in conjunction with the patient’s caregiver(s) and treating physician.

After the healthcare provider confirms diagnosis and medical necessity to Requestor, the Requestor’s “hub.” makes an eligibility determination regardless of insurance coverage. In order to be eligible for assistance under the Arrangement, a patient must: “(i) have been diagnosed with the Condition; (ii) reside in the United States or a Western Hemisphere United States territory within the service area of the medical flight vendors and be more than a 2-hour drive from the Treatment Center, and (iii) satisfy gross annual household income limits to demonstrate financial need.” Furthermore, to obtain financial assistance for medical flights and ground ambulance transportation, patients must either have no insurance coverage or “insufficient”[2] insurance coverage for these services. In addition to eligibility requirements, Requestor has implemented other safeguards such as: (1) certification that it will not shift costs of the Arrangement to Federal health care programs and has priced the drug independently of the cost of the Arrangement; (2) not advertising the availability of assistance under the Arrangement; and (3) requiring patients and their caregivers, flight vendors, and ground transportation vendors to agree not to request reimbursement from Federal health care programs for any costs covered by Requestor.

Federal Anti-Kickback Statute Analysis

OIG recognized that the Arrangement would trigger the Federal anti-kickback statute because (1) the transportation, lodging, and meal expenses assistance constitutes remuneration to patients, that may induce them to purchase the Drug and to receive other federally reimbursable items and services provided at the Treatment Center; and (2) this assistance also could constitute remuneration to the Treatment Center and the treating surgeon in the form of the opportunity to earn fees related to administering the Drug. However, OIG concluded that the risk here to be minimal for six reasons.

First, OIG determined that the Arrangement facilitates safe access to the Drug for a patient population that cannot travel long distances safely by car or via commercial airlines and that lack the financial resources to travel in a safe manner. In so reasoning, OIG reiterated the unique manufacturing and distribution limitations of the Drug (i.e., that FDA has approved only one manufacturing site on the campus of the Treatment Center, the short shelf life of the Drug, resulting in the fact that it can only be administered at the Treatment Center). Additionally, because patients with the Condition are at high risk of infection and are limited in ability to travel under usual conditions, the high out-of-pocket costs associated with traveling to the Treatment Center could either (i) inhibit patients from receiving the drug; or (ii) cause them to take means of transportation that are unsafe given their lack of a functioning immune system.

Second, OIG found the Arrangement to differ from so-called “seeding programs” because this one-time, potentially curative treatment would not require additional items or services from the Requestor.

Third, OIG calculated there to be a low risk of interference with clinical decision-making, overutilization, or inappropriate utilization. OIG noted (1) given the infrequence of the Condition and that the Drug is made from donor thymus tissue and subject to time constraints in manufacturing, the Drug is not a mass-produced drug subject to risks of inappropriate utilization; (2) it is unlikely that the prescriber would receive any financial benefit from the implant of the Drug because it is only manufactured at the Treatment Center, eligible patients are only those who reside at least 2 hours away from the Treatment Center, and the Drug is implanted by a surgeon; and (3) the Condition affects so few children each year that it would be exceedingly rare that a doctor who practices at the Treatment Center would also be the physician who diagnoses the patient and prescribes the Drug.

Fourth, OIG found that the Arrangement is unlikely to increase costs inappropriately to Federal health care programs. If anything, given that the Arrangement helps facilitate access to the Drug and the potential curative treatment, it may instead offset the high health care costs that patients might otherwise incur for their supportive care. Regardless, OIG noted that the Drug is the only potentially curative treatment option for the Condition, so many patients with the Condition may try to access the Drug even in the absence of the Arrangement.

Fifth, OIG recognized the limitations built into eligibility for assistance under the Arrangement. For example, the patient must have either no insurance coverage or insufficient insurance coverage in order to receive assistance with medical flights and ground transportation. Furthermore, each element of assistance is available only if there is no other coverage option, which helps to ensure that Requestor does not provide a duplicate benefit.

Lastly, OIG concluded that any remuneration provided to patients under the Arrangement and any consequent opportunity for the Treatment Center to earn fees related to implanting the Drug is sufficiently low risk under the Federal anti-kickback statute. In so doing, OIG emphasized that this conclusion is based particularly on “the Drug’s current FDA-approval status [which] requires that all patients prescribed the Drug [] obtain it from the Treatment Center, regardless of the Arrangement.”

Beneficiary Inducements CMP Analysis

Next, OIG recognized that the provision of remuneration under the Arrangement potentially implicates the Beneficiary Inducements CMP because the Treatment Center is a provider and remuneration offered by a pharmaceutical manufacturer to a beneficiary that the manufacturer knows or should know is likely to influence the beneficiary to select a particular provider would implicate the Beneficiary Inducements CMP. However, OIG ultimately concluded that the remuneration offered under the Arrangement is not likely to influence a beneficiary to order the Drug from the Treatment Center. In so doing, OIG noted: (i) the 3-hour shelf life of the Drug; (ii) the fact that the only FDA-approved manufacturing facility is on the campus of the Treatment Center; and (iii) Requestor does not have the necessary FDA approval to ship the Drug offsite, making the Treatment Center the only facility where the Drug can be surgically implanted. Given these limitations on the manufacturing and distribution of the Drug, OIG held that these factors are more likely to influence a patient to select the Treatment Center rather than the remuneration offered under the Arrangement.

Takeaways and Comparisons to Similar OIG AOs:

Given the unique circumstances of the manufacturing and distribution of the Drug and the fact that this Condition affects such a small percentage of the population, it seems unsurprising that OIG would approve the Requestor’s plan. In previous Advisory Opinions involving patient assistance for transportation, lodging, and meals – including AO 21-08, AO 20-02, and AO 20-09 – OIG has treated such arrangements favorably where the drug was a one-time, potentially curative treatment and/or helped to facilitate increased access to care based on the constraints of the drug’s FDA approval.

So, on one hand, the circumstances presented here appear to be an easier case than that of previous opinions because there is only one site where patients can access treatment. On the other hand, while previous opinions did include potential assistance with airline travel, OIG did not weigh-in on the provision of assistance for extremely expensive medical flights. Given that OIG discusses these medical flights in such detail in AO 23-01, this could have been the key motivating factor for the manufacturer submitting their request for an Advisory Opinion and might provide a rubric for OIG’s thinking on the more expensive aspects of patient assistant for transportation, lodging and meals.

As a final note, even though the Requestor in AO 23-01 had myriad sympathetic facts in its favor, the manufacturer still proposed safeguards to mitigate potential risks under the relevant federal statutes. Similar to previous OIG-approved arrangements, the manufacturer limited the eligible pool of patients to those who lived more than 2 hours way, which, in this context, reduced the risk of overlap between the prescribing doctor and the surgeon performing the implantation. More traditional safeguards included not advertising the Arrangement, and requiring patients and vendors to agree to not request reimbursement under Federal health care programs. Going forward, manufacturers interested in instituting similar patient assistance programs for accessing therapy should consider the facts and programmatic limitations relied upon by OIG to make a favorable Advisory Opinion.


[1] Additionally, Requestor has evaluated 10 medical flight vendors to determine whether they: (i) serve pediatric and medically fragile patients; (ii) provide non-charity flights and bill insurance if insurance reimbursement is available; (iii) has a national footprint and can fly patients who live across the United States to and from the Treatment Center; (iv) can fly patients with the Condition and up to two caregivers safely; (v) has flexible scheduling to allow rapid deployment of flights when the Drug becomes available for the patient; and (vi) has planes with isolation options for patients. Out of the 10 vendors evaluated, only two vendors meet these objective criteria and are willing to transport patients under the Arrangement.

[2] A patient may be determined to have “insufficient” coverage if: (i) absent Requestor paying for the medical flights and ground ambulance transportation to and from the airport in full, the out-of-pocket costs to the patient for the flights and ground transportation would be equal to or exceed 3% of the patient’s gross annual household income; or (ii) the flight vendor is unable to seek reimbursement from the patient’s state Medicaid program. If a patient’s coverage is deemed “insufficient”, then Requestor pays the full cost of the transportation and the patient’s insurance is not billed.