DRUGMAKERS MUST PHASE OUT PART D ASSISTANCE PROGRAMS BY 2007, HHS SAYS

Manufacturer-sponsored patient assistance programs (PAPs) for Medicare Part D enrollees pose heightened fraud risks and must be phased out by 2007, the HHS Office of the Inspector General (OIG) said.

Drugmakers will have a one-year grace period following the Jan. 1, 2006, start of the Part D benefit to transition Medicare beneficiaries away from manufacturer-sponsored PAPs to independent programs, according to a OIG special advisory bulletin.

The elimination of drugmaker-funded PAPs will alleviate concerns that cost-sharing subsidies provided by the programs pose a heightened risk of fraud and abuse under the federal antikickback statute of the Social Security Act, the OIG said.

"Consistent with our prior guidance addressing manufacturer cost-sharing subsidies in the context of Part B drugs, we believe such subsidies for Part D drugs would implicate the antikickback statute and pose a substantial risk of program and patient fraud and abuse," the OIG bulletin states.

"Simply put, the subsidies would be squarely prohibited by the statute, because the manufacturer would be giving something of value to beneficiaries to use its product," the OIG adds. "Where a manufacturer PAP offers subsidies tied to the use of the manufacturer's products (often expensive drugs used by patients with chronic illnesses), the subsidies present all of the usual risks of fraud and abuse associated with kickbacks, including steering beneficiaries to particular drugs; increasing costs to Medicare; providing a financial advantage over competing drugs; and reducing beneficiaries incentives to locate and use less expensive, equally effective drugs."

The OIG notes that manufacturer-sponsored PAPs need not remove all Medicare beneficiaries from their existing programs to be compliant with federal fraud and abuse laws. Because enrollment in Part D is voluntary, existing PAPs may continue to provide free or reduced outpatient prescription drugs to Medicare beneficiaries who have not yet enrolled in Part D.

To view the OIG's special bulletin, go to http://oig.hhs.gov/fraud/docs/alertsandbulletins/2005/PAPAdvisoryBlletinFinal-Final.pdf.