Federal Register / Vol. 70, No. 224 / Tuesday, November 22, 2005 / Notices 70623 

it to the agency. Thus, each firm 

submitting a compliance extension 

request will need 5 hours of employee 

time to complete the request. Given that 

56 businesses are expected to submit 

written requests in year one, the total 

burden hours for year one are 280. 

In year two, FDA expects about onehalf as many firms to request a labeling 

compliance extension. So for year two, 

28 firms are expected to file a request 

for an extension to the labeling 

compliance date. Again, assuming that 

it will take 5 hours to complete each 

request, the total burden hours for year 

two will be 140. 

Dated: November 14, 2005. 

Jeffrey Shuren, 

Assistant Commissioner for Policy. 

[FR Doc. 05–23040 Filed 11–21–05; 8:45 am] 

BILLING CODE 4160–01–S 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Food and Drug Administration 

[Docket No. 2005N–0343] 

Agency Information Collection 

Activities; Announcement of Office of 

Management and Budget Approval; 

Guidance for Requesting an Extension 

to Use Existing Label Stock After the 

Trans Fat Labeling Effective Date of 

January 1, 2006 

AGENCY: Food and Drug Administration, 

HHS. 

ACTION: Notice. 

SUMMARY: The Food and Drug 

Administration (FDA) is announcing 

that a collection of information entitled 

‘‘Guidance for Requesting an Extension 

to Use Existing Label Stock after the 

Trans Fat Labeling Effective Date of 

January 1, 2006’’ has been approved by 

the Office of Management and Budget 

(OMB) under the Paperwork Reduction 

Act of 1995 (the PRA). Elsewhere in this 

issue of the Federal Register, FDA is 

publishing a notice announcing an 

opportunity for public comment on this 

collection of information. Since this 

collection received emergency approval 

that expires on January 1, 2006, FDA is 

following the normal PRA clearance 

procedures by issuing that notice. 

FOR FURTHER INFORMATION CONTACT: 

Peggy Robbins, Office of Management 

Programs (HFA–250), Food and Drug 

Administration, 5600 Fishers Lane, 

Rockville, MD 20857, 301–827–1223. 

SUPPLEMENTARY INFORMATION: In the 

Federal Register of September 1, 2005 

(70 FR 52108), the agency announced 

that the proposed information collection 

had been submitted to OMB for review 

and clearance under 44 U.S.C. 3507. An 

agency may not conduct or sponsor, and 

a person is not required to respond to, 

a collection of information unless it 

displays a currently valid OMB control 

number. OMB has now approved the 

information collection and has assigned 

OMB control number 0910–0571. The 

approval expires on January 31, 2006. A 

copy of the supporting statement for this 

information collection is available on 

the Internet at http://www.fda.gov/ 

ohrms/dockets. 

Dated: November 14, 2005. 

Jeffrey Shuren, 

Assistant Commissioner for Policy. 

[FR Doc. 05–23041 Filed 11–21–05; 8:45 am] 

BILLING CODE 4160–01–S 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Health Resources and Services 

Administration 

Advisory Commission on Childhood 

Vaccines; Notice of Meeting 

In accordance with section 10(a)(2) of 

the Federal Advisory Committee Act 

(Pub. L. 92–463), notice is hereby given 

of the following meeting: 

Name: Advisory Commission on 

Childhood Vaccines (ACCV). 

Date and Time: December 12, 2005, 9 

a.m.—5 p.m., EST. 

Place: Audio Conference Call and 

Parklawn Building, Conference Rooms G & H, 

5600 Fishers Lane, Rockville, MD 20857. 

The ACCV will meet on Monday, 

December 12, from 9 a.m. to 5 p.m. The 

public can join the meeting in person at the 

address listed above or by audio conference 

call by dialing 1–800–369–6048 on December 

12 and providing the following information: 

Leader’s Name: Dr. Geoffrey Evans. 

Password: ACCV. 

Agenda: The agenda items for the 

December meeting will include, but are not 

limited to: A summary of the U.S. Court of 

Federal Claims’ 18th Judicial Conference; a 

report from the ACCV Workgroup looking at 

proposed guidelines for future changes to the 

Vaccine Injury Table; and updates from the 

Division of Vaccine Injury Compensation 

(DVIC), Department of Justice, National 

Vaccine Program Office, Immunization Safety 

Office (Centers for Disease Control and 

Prevention), National Institute of Allergy and 

Infectious Diseases (National Institutes of 

Health), and Center for Biologics and 

Evaluation Research (Food and Drug 

Administration). Agenda items are subject to 

change as priorities dictate. 

Public Comments: Persons interested in 

providing an oral presentation should submit 

a written request, along with a copy of their 

presentation to: Ms. Cheryl Lee, Principal 

Staff Liaison, DVIC, Healthcare Systems 

Bureau (HSB), Health Resources and Services 

Administration (HRSA), Room 11C–26, 5600 

Fishers Lane, Rockville, Maryland 20857 or 

e-mail clee@hrsa.gov. Requests should 

contain the name, address, telephone 

number, and any business or professional 

affiliation of the person desiring to make an 

oral presentation. Groups having similar 

interests are requested to combine their 

comments and present them through a single 

representative. The allocation of time may be 

adjusted to accommodate the level of 

expressed interest. DVIC will notify each 

presenter by mail or telephone of their 

assigned presentation time. Persons who do 

not file an advance request for a presentation, 

but desire to make an oral statement, may 

announce it at the time of the comment 

period. These persons will be allocated time 

as it permits. 

For Further Information Contact: Anyone 

requiring information regarding the ACCV 

should contact Ms. Cheryl Lee, Principal 

Staff Liaison, DVIC, HSB, HRSA, Room 11C–

26, 5600 Fishers Lane, Rockville, MD 20857; 

telephone (301) 443–2124 or e-mail 

clee@hrsa.gov. 

Dated: November 15, 2005. 

Tina M. Cheatham, 

Director, Division of Policy Review and 

Coordination. 

[FR Doc. 05–23042 Filed 11–21–05; 8:45 am] 

BILLING CODE 4165–15–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Office of Inspector General 

Publication of OIG Special Advisory 

Bulletin on Patient Assistance 

Programs for Medicare Part D 

Enrollees 

AGENCY: Office of Inspector General 

(OIG), HHS. 

ACTION: Notice. 

SUMMARY: OIG periodically develops 

and issues guidance, including Special 

Advisory Bulletins, to alert and inform 

the health care industry about potential 

problems or areas of special interest. 

This Federal Register notice sets forth 

the recently issued OIG Special 

Advisory Bulletin addressing patient 

assistance programs for Medicare Part D 

enrollees. 

FOR FURTHER INFORMATION CONTACT: 

Darlene M. Hampton, Office of Counsel 

to the Inspector General, (202) 619–

0335. 

SUPPLEMENTARY INFORMATION: 

Special Advisory Bulletin: Patient 

Assistance Programs for Medicare Part 

D Enrollees (November 2005) 

I. Introduction 

Patient assistance programs (PAPs) 

have long provided important safety net 

assistance to patients of limited means 

70624 Federal Register / Vol. 70, No. 224 / Tuesday, November 22, 2005 / Notices 

1See 42 CFR 423.782. 

2This Bulletin focuses on the application of the 

Federal anti-kickback statute. Other potential risk 

areas, including, for example, potential liability 

under the False Claims Act, 31 U.S.C. 3729–33, or 

other Federal or State laws, are not addressed here. 

Moreover, this Bulletin focuses on arrangements 

that involve pharmaceutical manufacturers directly 

or indirectly subsidizing Part D cost-sharing 

amounts. Programs that subsidize Part D premium 

amounts pose risks under the anti-kickback statute 

that are not addressed here. Similarly, PAPs 

established by health plans that subsidize cost 

sharing or premium amounts under Part D raise 

different issues and may require a different 

analysis. While this Bulletin may provide some 

useful guidance for other kinds of PAP 

arrangements, such PAPs are not specifically 

considered here. 

3For purposes of this Special Advisory Bulletin, 

a pharmaceutical manufacturer PAP includes any 

PAP that is directly or indirectly operated or 

controlled in any manner by a pharmaceutical 

manufacturer or its affiliates (including, without 

limitation, any employee, agent, officer shareholder, 

or contractor (including, without limitation, any 

wholesaler, distributor, or pharmacy benefits 

manager)). Moreover, for purposes of an antikickback analysis, we would not consider a 

charitable foundation (or similar entity) formed, 

funded or controlled by a manufacturer or any of 

its affiliates (including, without limitation, any 

employee, agent, officer, shareholder, or contractor 

(including, without limitation, any wholesaler, 

distributor, or pharmacy benefits manager)) to be a 

bona fide, independent charity, because 

interposition of the entity would not sever the 

nexus between the patient subsidies and the 

manufacturer. Indeed, in most cases, the foundation 

would receive all of its funding from the 

pharmaceutical manufacturer (or its affiliates) and 

would provide subsidies only for the 

manufacturer’s products. 

4See, e.g., section 1128A(i)(6)(A) of the Act; OIG 

Special Advisory Bulletin on Offering Gifts and 

Other Inducements to Beneficiaries, August 2002, 

http:oig.hhs.gov/fraud/docs/alertsandbulletins/ 

SABGiftsandInducements.pdf. The Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) included a safe 

harbor specifically incorporating these criteria for 

waivers of cost-sharing amounts for Part D drugs. 

Additionally, the safe harbor protects cost-sharing 

waivers offered to individuals who qualify for the 

low income subsidy, even if the waivers are routine 

and do not follow an individualized determination 

of financial need, provided they are not advertised. 

See Section 1860D–42 of MMA, codified at 42 

U.S.C. 1320a–7b(b)(3)(G). 

who do not have insurance coverage for 

drugs, typically serving patients with 

chronic illnesses and high drug costs. 

PAPs are structured and operated in 

many different ways. PAPs may offer 

cash subsidies, free or reduced price 

drugs, or both. Some PAPs offer 

assistance directly to patients, while 

others replenish drugs furnished by 

pharmacies, clinics, hospitals, and other 

entities to eligible patients whose drugs 

are not covered by an insurance 

program. Some PAPs are affiliated with 

particular pharmaceutical 

manufacturers; others are operated by 

independent charitable organizations 

(such as, for example, patient advocacy 

and support organizations) without 

regard to any specific donor or industry 

interests. 

Many pharmaceutical manufacturers 

have historically sponsored PAPs that 

assist patients whose outpatient 

prescription drugs are not covered by an 

insurance program (including some 

Medicare beneficiaries), in obtaining the 

manufacturer’s products for free or at 

greatly reduced cost. Beginning on 

January 1, 2006, Medicare Part D will 

offer Medicare beneficiaries who elect to 

enroll broad coverage for outpatient 

prescription drugs. Accordingly, 

Medicare beneficiaries who enroll in 

Part D will no longer qualify under 

traditional PAP eligibility criteria. Part 

D enrollees will incur cost-sharing 

obligations (including deductibles and 

copayments), although many lowincome beneficiaries will qualify for 

subsidies that will reduce or eliminate 

their financial obligations.1

Pharmaceutical manufacturers have 

expressed interest in continuing to 

assist Medicare Part D enrollees of 

limited means who do not qualify for 

the low-income subsidy. 

OIG is mindful of the importance of 

ensuring that financially needy 

beneficiaries who enroll in Part D 

receive medically necessary drugs, and 

OIG supports efforts of charitable 

organizations and others to assist 

financially needy beneficiaries, as long 

as the assistance is provided in a 

manner that does not run afoul of the 

Federal anti-kickback statute or other 

laws.2 We have been asked whether the 

anti-kickback statute will be implicated 

if pharmaceutical manufacturer PAPs 3

continue to offer assistance to 

financially needy Medicare beneficiaries 

who enroll in Part D by subsidizing 

their cost-sharing obligations for 

covered Part D drugs. For the reasons set 

forth below and consistent with extant 

OIG guidance, we conclude that 

pharmaceutical manufacturer PAPs that 

subsidize Part D cost-sharing amounts 

present heightened risks under the antikickback statute. However, in the 

circumstances described in this 

Bulletin, cost-sharing subsidies 

provided by bona fide, independent 

charities unaffiliated with 

pharmaceutical manufacturers should 

not raise anti-kickback concerns, even if 

the charities receive manufacturer 

contributions. In addition, we believe 

other arrangements described in this 

Bulletin, if properly structured, may 

pose reduced risk. Thus, we believe 

lawful avenues exist for pharmaceutical 

manufacturers and others to help ensure 

that all Part D beneficiaries can afford 

medically necessary drugs. 

Given the importance of ensuring 

continued access to drugs for 

beneficiaries of limited means and the 

expedited time frame for 

implementation of the Part D benefit, we 

are issuing this Special Advisory 

Bulletin to identify potentially abusive 

PAP structures, as well as methods of 

providing assistance that mitigate or 

vitiate the potential for fraud and abuse. 

This Special Advisory Bulletin draws 

on the government’s prior fraud and 

abuse guidance and enforcement 

experience. However, because the Part D 

benefit has not yet begun, and any 

assessment of fraud and abuse is 

necessarily speculative, this Bulletin 

cannot, and is not intended to, be an 

exhaustive discussion of relevant risks 

or beneficial practices. 

At the outset, it is important to note 

the following: 

• PAPs need not disenroll all 

Medicare beneficiaries from their 

existing PAPs to be compliant with the 

fraud and abuse laws. Enrollment in 

Part D is voluntary; therefore, existing 

PAPs may continue to provide free or 

reduced price outpatient prescription 

drugs to Medicare beneficiaries who 

have not yet enrolled in Part D. The 

Centers for Medicare & Medicaid 

Services (CMS) anticipates instituting 

procedures that will help PAPs 

determine if PAP clients have enrolled 

in Part D. 

• Occasional, inadvertent costsharing subsidies provided by a 

pharmaceutical manufacturer PAP to a 

Part D enrollee should not be 

problematic under the anti-kickback 

statute (e.g., where, despite due 

diligence, a pharmaceutical 

manufacturer PAP does not know and 

should not have known that a 

beneficiary has enrolled in Medicare 

Part D). 

• Nothing in the Part D program or in 

any OIG laws or regulations prevents 

pharmaceutical manufacturers or others 

from providing assistance (e.g., through 

cash subsidies or free drugs) to 

uninsured patients. Nothing in this 

Bulletin impacts programs that assist 

uninsured patients. 

• Nothing in this guidance should be 

construed as preventing pharmacies 

from waiving cost-sharing amounts 

owed by a Medicare beneficiary on the 

basis of a good faith, individualized 

assessment of the patient’s financial 

need (or failure of reasonable collection 

efforts), so long as the waiver is neither 

routine, nor advertised. Financial needbased waivers that meet these criteria 

have long been permitted.4 However, a 

pharmacy has not waived a cost-sharing 

amount if the amount has been paid to 

the pharmacy, in cash or in kind, by a 

Federal Register / Vol. 70, No. 224 / Tuesday, November 22, 2005 / Notices 70625 

5 42 U.S.C. 1320a–7b(b). 

6 42 U.S.C. 1320a–7(b)(7); 42 U.S.C. 1320a–

7a(a)(7). 

7 In some cases, a subsidy for Part D cost-sharing 

obligations provided by a pharmaceutical 

manufacturer may also implicate the prohibition on 

offering inducements to beneficiaries, as set forth in 

section 1128A(a)(5) of the Act, if the subsidy is 

likely to influence the beneficiary’s selection of a 

particular provider, practitioner, or supplier, such 

as a physician or pharmacy. We have interpreted 

‘‘provider, practitioner, or supplier’’ to exclude 

pharmaceutical manufacturers unless they also own 

or operate pharmacies, pharmaceutical benefits 

management companies, or other entities that file 

claims for payment under the Medicare or Medicaid 

programs. See Special Advisory Bulletin on 

Offering Gifts and Other Inducements to 

Beneficiaries, supra note 4. 

8See 42 CFR 423.100; 42 CFR 423.464; 70 FR 

4194, 4239 (January 28, 2005). We note that CMS 

is the proper agency to address questions about the 

mechanics of calculating TrOOP. In certain 

circumstances, knowing improper TrOOP 

calculations may give rise to liability under the 

False Claims Act, 31 U.S.C. 3729–33. 

9See 70 FR 4194 at 4239. 

10See, e.g., OIG Advisory Opinion Nos. 02–13 

and 03–3 (unfavorable opinions involving proposals 

from pharmaceutical manufacturer PAPs to 

subsidize Part B cost-sharing amounts). We note 

that the cost and utilization management features of 

the Part D program, while important, do not 

sufficiently mitigate the risks. 

11Some in the industry have asserted that costsharing subsidies for Part D drugs differ from costsharing subsidies for Part B drugs so long as the 

subsidies are given to patients who are in a Part D 

‘‘coverage gap’’ (i.e., a benefit period during which 

the beneficiary pays 100% of the cost of the drugs). 

To support their position, they contend either that 

beneficiaries in the coverage gap are functionally 

‘‘uninsured’’ or that the situation is comparable to 

providing free drugs to financially needy 

beneficiaries so long as no Federal health care 

program is billed for all or part of the drug, a 

practice we previously permitted in the context of 

subsidies for Part B drugs. See OIG Advisory 

Opinion Nos. 02–13 and 03–3. Under Part D, a 

‘‘coverage gap’’ is a period of insurance coverage. 

See CMS Frequently Asked Question ID 4855, 

http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/ 

php/enduser/std_adp.php?p_faqid=4855 (regarding 

prescription drug benefit coordination of benefits 

and TrOOP). During the coverage gap, beneficiaries 

remain enrolled in their Part D plans and have a 

continuing obligation to pay Part D premiums; Part 

D plans continue to receive the monthly perenrollee direct subsidy from the Medicare program. 

Moreover, subsidies during the coverage gap are not 

like furnishing free drugs where no Federal health 

care program is billed. Sufficient spending during 

the coverage gap qualifies the beneficiary to reach 

the catastrophic coverage portion of the Part D 

benefit, at which point the Medicare program 

resumes payment for most of the costs of the 

beneficiary’s drugs. In this regard, the different 

structures of the Part B and Part D benefits are 

crucial to the analysis. 

third party (including, without 

limitation, a PAP). 

II. The Federal Anti-Kickback Statute 

The Federal anti-kickback statute, 

section 1128B(b) of the Social Security 

Act (the Act),5 makes it a criminal 

offense knowingly and willfully to offer, 

pay, solicit, or receive any remuneration 

to induce or reward the referral or 

generation of business reimbursable by 

any Federal health care program, 

including Medicare and Medicaid. 

Where remuneration is paid 

purposefully to induce or reward 

referrals of items or services payable by 

a Federal health care program, the antikickback statute is violated. By its 

terms, the statute ascribes criminal 

liability to parties on both sides of an 

impermissible ‘‘kickback’’ transaction. 

For purposes of the anti-kickback 

statute, ‘‘remuneration’’ includes the 

transfer of anything of value, directly or 

indirectly, overtly or covertly, in cash or 

in kind. The statute has been interpreted 

to cover any arrangement where one 

purpose of the remuneration was to 

obtain money for the referral of services 

or to induce further referrals. Violation 

of the statute constitutes a felony 

punishable by a maximum fine of 

$25,000, imprisonment up to five years, 

or both. OIG may also initiate 

administrative proceedings to exclude a 

person from Federal health care 

programs or to impose civil money 

penalties for kickback violations under 

sections 1128(b)(7) and 1128A(a)(7) of 

the Act.6

A determination regarding whether a 

particular arrangement violates the antikickback statute requires a case-by-case 

evaluation of all of the relevant facts 

and circumstances, including the intent 

of the parties. For PAPs, the nature, 

structure, sponsorship, and funding of 

the particular PAP are necessarily 

relevant to the analysis. 

III. Patient Assistance Programs 

As described more fully below, costsharing subsidies provided by 

pharmaceutical manufacturer PAPs pose 

a heightened risk of fraud and abuse 

under the Federal anti-kickback statute. 

However, there are non-abusive 

alternatives available. In particular, as 

discussed below, pharmaceutical 

manufacturers can donate to bona fide 

independent charity PAPs, provided 

appropriate safeguards exist. Moreover, 

this Bulletin discusses several other 

alternatives that may pose a reduced 

risk of fraud and abuse. 

This section addresses in turn: 

pharmaceutical manufacturer PAPs, 

independent charity PAPs, 

manufacturer PAPs that operate 

‘‘outside of Part D’’; ‘‘coalition model’’

PAPs, and bulk replacement programs. 

A. Pharmaceutical Manufacturer PAPs 

Analytically, pharmaceutical 

manufacturer PAPs raise two main 

issues in connection with the Part D 

program: (i) Whether subsidies they 

provide can count toward a Part D 

enrollee’s true out-of-pocket costs 

(known as the TrOOP); and (ii) whether 

the subsidies implicate the Federal antikickback statute.7

As to the first issue, the Part D 

regulations make clear that beneficiaries 

may count toward their TrOOP 

assistance received from any source 

other than group health plans, other 

insurers and government funded health 

programs, and similar third party 

payment arrangements.8 The preamble 

to the Part D regulations explains that 

cost-sharing assistance furnished by a 

PAP, including a manufacturer PAP, 

will count toward a beneficiary’s TrOOP 

expenditures, even if the PAP does not 

comply with the fraud and abuse laws.9

This approach relieves beneficiaries of 

the financial risk of accepting assistance 

from an entity that may be improperly 

structured or operated. 

As to the second issue, the core 

question is whether the anti-kickback 

statute would be implicated if a 

manufacturer of a drug covered under 

Part D were to subsidize cost-sharing 

amounts (directly or indirectly through 

a PAP) incurred by Part D beneficiaries 

for the manufacturer’s product. 

Consistent with our prior guidance 

addressing manufacturer cost-sharing 

subsidies in the context of Part B 

drugs,10 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.11 Simply put, the subsidies 

would be squarely prohibited by the 

statute, because the manufacturer would 

be giving something of value (i.e., the 

subsidy) to beneficiaries to use its 

product. 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. 

It is impossible to predict with 

certainty the way in which abuse may 

occur in a new benefit program that is 

not yet operational. The following are 

illustrative examples of some types of 

abuse that may occur: 

• Increased costs to the program. We 

are concerned that a manufacturer might 

use beneficiary cost-sharing subsidies, 

which help beneficiaries meet their 

TrOOP requirement, to increase the 

number of beneficiaries using the 

manufacturer’s product who reach the 

70626 Federal Register / Vol. 70, No. 224 / Tuesday, November 22, 2005 / Notices 

12See 42 CFR 423.329. For purposes of 

calculating payments under catastrophic coverage, 

the cost of a beneficiary’s drug is based in part on 

the plan’s negotiated price (i.e., a price that is set 

by the plan based on negotiations with 

pharmaceutical manufacturers and pharmacies). 

13See 42 CFR 423.329; 42 CFR 423.336. 

14 In-kind donations of drugs to independent 

charity PAPs pose additional risks not yet directly 

addressed in prior OIG guidance, and we have 

insufficient experience with them to offer detailed 

guidance here. While in-kind donations have the 

potential benefit of increasing the value of 

donations (because marginal costs of drugs are 

generally low), they also have the effect of creating 

a direct correlation between the donation and use 

of a particular donor’s product, thereby weakening 

important safeguards of an independent charity 

PAP arrangement. Moreover, there would appear to 

be difficult accounting and valuation issues raised 

by the use of in-kind product to subsidize Part D 

cost-sharing obligations, both for purposes of 

calculating TrOOP and for purposes of determining 

the amount of in-kind drug that equals the Part D 

cost-sharing amount owed. 

15We recognize that what constitutes an 

appropriate determination of financial need may 

vary depending on individual patient 

circumstances. We believe that independent charity 

PAPs should have flexibility to consider relevant 

variables beyond income. For example, PAPs may 

choose to consider the local cost of living; a 

patient’s assets and expenses; a patient’s family 

size; and the scope and extent of a patient’s medical 

bills. 

16We have previously approved a bona fide 

independent charity PAP arrangement that 

included only limited reporting of aggregate data to 

donors in the form of monthly or less frequent 

reports containing aggregate data about the number 

of all applicants for assistance in a disease category 

and the number of patients qualifying for assistance 

in that disease category. See OIG Advisory Opinion 

No. 02–1. No individual patient information may be 

conveyed to donors. Moreover, neither patients nor 

donors may be informed of the donation made to 

the PAP by others, although, as required by Internal 

Revenue Service regulations, the PAP’s annual 

report and a list of donors may be publicly 

available. See OIG Advisory Opinion No. 04–15. 

Reporting of data that is not in the aggregate or that 

is patient specific would be problematic, as would 

reporting of any data, whether or not in the 

catastrophic benefit in any given 

coverage year and to hasten the point 

during the coverage year at which 

beneficiaries reach the catastrophic 

benefit. This is of particular import 

because Medicare will make cost-based 

payments during the catastrophic 

coverage benefit.12 We know from 

experience that cost-based 

reimbursement is inherently prone to 

abuse, including by vendors that sell 

products reimbursed on a cost basis. 

Similarly, we are concerned about the 

use of cost-sharing subsidies to shield 

beneficiaries from the economic effects 

of drug pricing, thus eliminating a 

market safeguard against inflated prices. 

Inflated prices could have a ‘‘spillover’’

effect on the size of direct subsidies, 

reinsurance payments, and risk corridor 

payments paid by Medicare to Part D 

plans in future years,13 potentially 

resulting in higher costs to the Medicare 

program. 

• Beneficiary steering and anticompetitive effects. Subsidies provided 

by traditional pharmaceutical 

manufacturer PAPs have the practical 

effect of locking beneficiaries into the 

manufacturer’s product, even if there 

are other equally effective, less costly 

alternatives (and even if the patient’s 

physician would otherwise prescribe 

one of these alternatives). Subsidizing 

Medicare Part D cost-sharing amounts 

will have this same steering effect. 

Moreover, as we have previously noted 

in the Part B context, cost-sharing 

subsidies can be very profitable for 

manufacturers, providing additional 

incentives for abuse. So long as the 

manufacturer’s sales price for the 

product exceeds its marginal variable 

costs plus the amount of the costsharing assistance, the manufacturer 

makes a profit. These profits can be 

considerable, especially for expensive 

drugs for chronic conditions. We are 

concerned that pharmaceutical 

manufacturers may seek improperly to 

maximize these profits by creating sham 

‘‘independent’’ charities to operate 

PAPs; by colluding with independent 

charity programs to ensure that the 

manufacturer’s contributions only or 

primarily benefit patients using its 

products (discussed in more detail 

below); or by manipulating financial 

need or other eligibility criteria to 

maximize the number of beneficiaries 

qualifying for cost-sharing subsidies. 

These risks are necessarily 

illustrative, not exhaustive, of the 

potential risks presented by 

pharmaceutical manufacturer PAPs that 

subsidize Part D cost-sharing amounts. 

Cost-sharing subsidies offered by a 

pharmaceutical manufacturer PAP to 

the dispensing supplier differ in two 

important respects from a provider’s or 

supplier’s unadvertised, non-routine 

waiver of cost-sharing amounts based on 

a patient’s financial need, which has 

long been permitted. First, the subsidies 

result in the dispensing supplier 

receiving full payment for the product 

and avoiding the risk of non-collection, 

thus providing the supplier with an 

economic incentive to favor the 

subsidized product and a disincentive 

to recommend a lower-cost alternative, 

such as a generic. In addition, the 

availability of PAP assistance is 

typically advertised and may influence 

a beneficiary’s choice of product 

(through the prescribing physician 

acting on behalf of the beneficiary). 

Moreover, once a beneficiary is enrolled 

in a pharmaceutical manufacturer PAP, 

the beneficiary is effectively locked into 

using the pharmaceutical 

manufacturer’s product, since the 

beneficiary risks losing financial 

assistance if he or she switches 

products, even if an equally effective, 

but less expensive, product would be in 

his or her best medical interests. 

A definitive conclusion regarding 

whether a particular manufacturer PAP 

violates the anti-kickback statute would 

require a case-by-case analysis of all of 

the relevant facts and circumstances, 

including the intent of the parties. 

However, for the reasons noted above, 

we believe that pharmaceutical 

manufacturer PAPs that subsidize Part D 

cost-sharing amounts raise substantial 

concerns under the anti-kickback 

statute. 

B. Independent Charity PAPs 

Long-standing OIG guidance makes 

clear that pharmaceutical manufacturers 

can effectively contribute to the 

pharmaceutical safety net by making 

cash donations to independent, bona 

fide charitable assistance programs.14

Under a properly structured program, 

donations from a pharmaceutical 

manufacturer to an independent, bona 

fide charity that provides cost-sharing 

subsidies for Part D drugs should raise 

few, if any, anti-kickback statute 

concerns, so long as: 

(i) Neither the pharmaceutical 

manufacturer nor any affiliate of the 

manufacturer (including, without 

limitation, any employee, agent, officer, 

shareholder, or contractor (including, 

without limitation, any wholesaler, 

distributor, or pharmacy benefits 

manager)) exerts any direct or indirect 

influence or control over the charity or 

the subsidy program; 

(ii) The charity awards assistance in a 

truly independent manner that severs 

any link between the pharmaceutical 

manufacturer’s funding and the 

beneficiary (i.e., the assistance provided 

to the beneficiary cannot be attributed to 

the donating pharmaceutical 

manufacturer); 

(iii) The charity awards assistance 

without regard to the pharmaceutical 

manufacturer’s interests and without 

regard to the beneficiary’s choice of 

product, provider, practitioner, 

supplier, or Part D drug plan; 

(iv) The charity provides assistance 

based upon a reasonable, verifiable, and 

uniform measure of financial need that 

is applied in a consistent manner; and 15

(v) The pharmaceutical manufacturer 

does not solicit or receive data from the 

charity that would facilitate the 

manufacturer in correlating the amount 

or frequency of its donations with the 

number of subsidized prescriptions for 

its products.16

Federal Register / Vol. 70, No. 224 / Tuesday, November 22, 2005 / Notices 70627 

aggregate, related to the identity, amount, or nature 

of subsidized drugs. 

17For further guidance on establishing compliant 

independent charity PAPs, see OIG Advisory 

Opinion Nos. 04–15, 02–1, 98–17, and 97–1 

(favorable opinions issued to bona fide, 

independent charities that accept industry funding). 

18Nothing in this Bulletin should be construed as 

preventing a charity from obtaining educational 

materials from donors that the donors generally 

make available to practitioners or the general public 

(e.g., clinical information about drug products). 

19We recognize that, in rare circumstances, there 

may only be one drug covered by Part D for the 

diseases in a particular category or only one 

pharmaceutical manufacturer (including its 

affiliates) that makes all of the Part D covered drugs 

for the diseases in a particular category. In these 

unusual circumstances, the fact that a disease 

category only includes one drug or manufacturer 

would not, standing alone, be determinative of an 

anti-kickback statute violation. Such a 

determination could only be made on a case-by-case 

basis after examining all of the applicable facts and 

circumstances, including the intent of the parties. 

We note that it would be important for the PAP 

program to cover additional products or 

manufacturers as they become available. 

20See CMS Frequently Asked Question ID 6153, 

http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/ 

php/enduser/std_adp.php?p_faqid=6153 (regarding 

PAPs providing assistance with Part D drug costs 

to Part D enrollees outside of the Part D benefit and 

without counting towards TrOOP). 

21We note that our position that PAPs operating 

outside the Part D benefit should provide assistance 

for the remainder of the coverage year is consistent 

with our observation in several advisory opinions 

that manufacturers ‘‘may provide free drugs to 

financially needy beneficiaries, so long as no 

Federal health care program is billed for all or part 

of the drugs.’’ OIG Advisory Opinion Nos. 02–13 

and 03–3. 

Simply put, the independent charity 

PAP must not function as a conduit for 

payments by the pharmaceutical 

manufacturer to patients and must not 

impermissibly influence beneficiaries’

drug choices.17

We recognize that some bona fide 

independent charities reasonably focus 

their efforts on patients with particular 

diseases (such as cancer or diabetes) and 

that some of these charities permit 

donors to earmark their contributions 

generally for support of patients with a 

specific disease. In general, the fact that 

a pharmaceutical manufacturer’s 

donations are earmarked for one or more 

broad disease categories should not 

significantly raise the risk of abuse. 

However, we are concerned that, in 

some cases, charities may artificially 

define their disease categories so 

narrowly that the earmarking effectively 

results in the subsidization of one (or a 

very few) of donor’s particular products. 

For example, we would be concerned if 

disease categories were defined by 

reference to specific symptoms, severity 

of symptoms, or the method of 

administration of drugs, rather than by 

diagnoses or broadly recognized 

illnesses or diseases. This type of 

arrangement would present an elevated 

risk of fraud and abuse because of the 

increased likelihood that the PAP would 

function as an improper conduit for 

manufacturers to provide funds to 

patients using their specific drugs. To 

avoid this risk, pharmaceutical 

manufacturers should not influence, 

directly or indirectly, the identification 

of disease or illness categories,18 and 

pharmaceutical manufacturers should 

limit their earmarked donations to PAPs 

that define categories in accordance 

with widely recognized clinical 

standards and in a manner that covers 

a broad spectrum of available 

products.19

C. PAPs Operating Outside Part D 

CMS has issued guidance stating that 

PAPs may elect to provide free drugs to 

financially needy Medicare Part D 

enrollees outside the Part D benefit.20 In 

these circumstances, the beneficiary 

obtains drugs without using his or her 

Part D insurance benefit. Beginning 

when a beneficiary’s assistance under a 

PAP became effective, no claims for 

payment for any covered outpatient 

prescription drug provided outside of 

the Part D benefit may be filed with a 

Part D plan or the beneficiary, and the 

assistance must not count toward the 

beneficiary’s TrOOP or total Part D 

spending for any purpose. For the 

reasons noted in connection with 

pharmaceutical manufacturer PAPs 

discussed above, PAPs that provide 

assistance outside the Part D benefit 

only during the coverage gap (i.e., 

‘‘wrapping around’’ the Part D benefit) 

pose a heightened risk of abuse. 

However, while it is difficult to assess 

the application of the fraud and abuse 

laws to PAPs that operate outside Part 

D absent a specific set of facts, it would 

appear that PAPs that furnish free 

outpatient prescription drugs entirely 

outside the Part D benefit pose a 

reduced risk under the anti-kickback 

statute, provided that: 

(i) The PAP includes safeguards that 

ensure that Part D plans are notified that 

the drug is being provided outside the 

Part D benefit so that no payment is 

made for the subsidized drug by any 

Part D plan and no part of the costs of 

the subsidized drug is counted toward 

any beneficiary’s TrOOP; 

(ii) The PAP provides assistance for 

the whole Part D coverage year (or the 

portion of the coverage year remaining 

after the beneficiary first begins 

receiving the PAP assistance);21

(iii) The PAP assistance remains 

available even if the beneficiary’s use of 

the subsidized drug is periodic during 

the coverage year; 

(iv) The PAP maintains accurate and 

contemporaneous records of the 

subsidized drugs to permit the 

Government to verify the provision of 

drugs outside the Part D benefit; 

(v) Assistance is awarded based on 

reasonable, uniform, and consistent 

measures of financial need and without 

regard to the providers, practitioners, or 

suppliers used by the patient or the Part 

D plan in which the patient is enrolled; 

and 

(vi) The arrangement complies with 

any then-existing guidance from CMS. 

In addition, to promote quality of 

care, we believe it would be important 

for PAPs that provide free drugs outside 

the Part D benefit to coordinate 

effectively with Part D plans so that the 

plans can undertake appropriate drug 

utilization review and medication 

therapy management program activities. 

D. ‘‘Coalition Model’’ PAPs 

We are aware of nascent efforts by 

some in the industry to develop 

arrangements through which multiple 

pharmaceutical manufacturers would 

join together to offer financially needy 

Part D enrollees a card or similar vehicle 

that would entitle the enrollees to 

subsidies of their cost-sharing 

obligations for the manufacturers’

products, typically in the form of 

discounts off the negotiated price 

otherwise available to the enrollee 

under his or her Part D plan. It is 

premature to offer definitive guidance 

on these evolving programs. Although 

these programs would operate so that 

the manufacturers effectively 

underwrite only the discounts on their 

own products, we observe that the risk 

of an illegal inducement potentially may 

be reduced if: (i) The program contains 

features that adequately safeguard 

against incentives for card holders to 

favor one drug product (or any one 

supplier, provider, practitioner, or Part 

D plan) over another; (ii) the program 

includes a large number of 

manufacturers, including competing 

manufacturers and manufacturers of 

both branded and generic products, 

sufficient to sever any nexus between 

the subsidy and a beneficiary’s choice of 

drug; and (iii) each participating 

pharmaceutical manufacturer offers 

subsidies for all of its products that are 

covered by any Part D plan formulary. 

Other safeguards may also be needed to 

reduce the risk of an improper 

inducement. Moreover, a program under 

which Part D enrollees pay a portion of 

their drug costs out-of-pocket would 

tend to reduce the risk of abuse by 

preserving the beneficiary’s incentive to 

locate and purchase equally effective, 

lower cost drugs. 

70628 Federal Register / Vol. 70, No. 224 / Tuesday, November 22, 2005 / Notices 

22Section 1128D(b) of the Act; 42 CFR part 1008. 

IV. Bulk Replacement Models 

Bulk replacement’’ or similar 

programs, pursuant to which 

pharmaceutical manufacturers (or their 

affiliated PAPs) provide in-kind 

donations in the form of free drugs to 

pharmacies, health centers, clinics, and 

other entities that dispense drugs to 

qualifying uninsured patients, are 

different from traditional PAPs that 

provide assistance directly to patients. 

These programs potentially implicate 

the Federal anti-kickback statute if the 

free drugs are given to a recipient that 

is in a position to generate Federal 

health care program business for the 

donor manufacturer. Whether a 

particular bulk replacement program 

complies with the fraud and abuse laws 

would require a case-by-case analysis. 

In undertaking any analysis, we would 

consider, among other factors, how the 

program is structured and whether there 

are safeguards in place: (i) To protect 

Federal health care program 

beneficiaries from being steered to 

particular drugs based on the financial 

interests of their health care providers 

or suppliers; (ii) to protect the Federal 

health care programs from increased 

program costs; and (iii) to ensure that 

bulk replacement drugs are not 

improperly charged to Federal health 

care programs. Additionally, bulk 

replacement as a means of subsidizing 

only the Medicare Part D cost-sharing 

amount potentially raises substantial 

risks related to accounting for the 

amount of replacement drug that would 

be equivalent to the cost-sharing amount 

owed by the beneficiary; properly 

attributing that amount to specific 

beneficiaries; and properly calculating 

TrOOP. 

V. Transitioning From Existing 

Pharmaceutical Manufacturer PAPs 

OIG is mindful of the importance of 

a smooth, effective transition for 

beneficiaries who are currently 

participating in pharmaceutical 

manufacturer PAPs and elect to enroll 

in Medicare Part D. While most such 

enrollees are likely to qualify for the 

low-income subsidies available under 

Part D, we are concerned that there may 

not be sufficient independent charity 

PAPs available before the January 1, 

2006 start date of the Part D program to 

accommodate beneficiaries of limited 

means who may need an alternative 

PAP arrangement. We recognize the 

importance of not unnecessarily 

burdening or alarming beneficiaries. We 

believe that manufacturers will play an 

important role in ensuring an effective 

transition. 

With respect to pharmaceutical 

manufacturer PAPs that are in existence 

prior to the date of publication of this 

Special Advisory Bulletin, during the 

initial calendar year of the Part D 

benefit, OIG will take into consideration 

in exercising its enforcement discretion 

with respect to administrative sanctions 

arising under the anti-kickback statute 

whether the PAP is taking prompt, 

reasonable, verifiable, and meaningful 

steps to transition patients who enroll in 

Part D to alternative assistance models, 

such as independent charities. 

In addition to taking steps to 

transition beneficiaries to other 

programs, pharmaceutical manufacturer 

PAPs can reduce their fraud and abuse 

exposure by taking one or more of the 

following steps: (i) Adjusting financial 

need criteria to reflect the lower drug 

costs incurred by Part D enrollees (i.e., 

liability for premiums and cost-sharing 

amounts only, instead of the total cost 

of the drugs); (ii) where possible, 

subsidizing other drugs in the same 

class as the manufacturer’s products 

covered by the PAP if a beneficiary’s 

physician prescribes an alternate 

product; and (iii) checking CMS 

eligibility files, to the extent available, 

on a reasonably regular basis to 

determine whether PAP patients have 

enrolled in Part D and should be 

transitioned to other assistance 

programs. Occasional, inadvertent costsharing subsidies provided to a Part D 

enrollee should not be problematic (e.g., 

where, despite due diligence, a 

pharmaceutical manufacturer PAP does 

not know and should not have known 

that a beneficiary has enrolled in 

Medicare Part D). Notwithstanding a 

pharmaceutical manufacturer’s 

compliance with the foregoing, the 

Government will take enforcement 

action in cases where there is evidence 

of unlawful intent. 

The potential variability of PAPs, the 

fact that the Part D program is not yet 

operational, and the fact that it is not 

possible to predict all future or potential 

fraud and abuse schemes with certainty, 

make it difficult to provide 

comprehensive general guidance on the 

application of the anti-kickback statute 

to PAPs for Part D enrollees at this time. 

We intend to monitor the situation 

closely and may issue further guidance, 

if needed. Nothing in this Bulletin 

should be construed as precluding any 

form of lawful assistance not described 

in this Bulletin. 

VI. OIG Advisory Opinion Process 

OIG has an advisory opinion process 

that is available to individuals and 

entities, including pharmaceutical 

manufacturers, that want assurance that 

they will not run afoul of the fraud and 

abuse laws.22 OIG advisory opinions are 

written opinions that are legally binding 

on OIG, the Department, and the party 

that requests the opinion. To obtain an 

opinion, the requesting party must 

submit a detailed, written description of 

its existing or proposed business 

arrangement. The length of time that it 

takes for OIG to issue an opinion varies 

based upon a number of factors, 

including the complexity of the 

arrangement, the completeness of the 

submission, and how promptly the 

requestor responds to requests for 

additional information. Further 

information about the process, 

including frequently asked questions, 

can be found on the OIG Web page at 

http://oig.hhs.gov/fraud/ 

advisoryopinions.html. The Office of Inspector General (OIG) was 

established at the Department of Health and 

Human Services by Congress in 1976 to 

identify and eliminate fraud, abuse, and 

waste in the Department’s programs and to 

promote efficiency and economy in 

departmental operations. OIG carries out this 

mission through a nationwide program of 

audits, investigations, and inspections. The 

Health Care Fraud and Abuse Control 

Program, established by the Health Insurance 

Portability and Accountability Act of 1996 

(HIPAA), authorized OIG to provide guidance 

to the health care industry to prevent fraud 

and abuse and to promote the highest level 

of ethical and lawful conduct. To further 

these goals, OIG issues Special Advisory 

Bulletins about industry practices or 

arrangements that potentially implicate the 

fraud and abuse authorities subject to 

enforcement by OIG. 

Daniel R. Levinson, 

Inspector General. 

[FR Doc. 05–23038 Filed 11–21–05; 8:45 am] 

BILLING CODE 4150–04–P 

DEPARTMENT OF HOMELAND 

SECURITY 

[DHS–2005–0054] 

Office of State and Local Government 

Coordination and Preparedness; 

SAFER Grant Program 

AGENCY: Office of State and Local 

Government Coordination and 

Preparedness, DHS. 

ACTION: Notice and request for comment. 

SUMMARY: Pursuant to the Paperwork 

Reduction Act, the Department of 

Homeland Security (DHS) solicited 

comments on the proposed collection of 

information in connection with the 

Staffing for Adequate Fire and 

Emergency (SAFER) Grant Application.