Medicare Part D creates problems for drug giveaway programs

March 1, 2006

WASHINGTON, D.C. -- Some pharmaceutical companies are dropping Patient Assistance Programs (PAPs) for seniors who enroll in the Medicare drug benefit program. They fear they'll be hit with fraud charges by the Office of the Inspector General (OIG) at HHS if they provide free or low-cost drugs to Medicare beneficiaries enrolled in prescription drug plans.

WASHINGTON, D.C.-Some pharmaceutical companies are dropping Patient Assistance Programs (PAPs) for seniors who enroll in the Medicare drug benefit program. They fear they'll be hit with fraud charges by the Office of the Inspector General (OIG) at HHS if they provide free or low-cost drugs to Medicare beneficiaries enrolled in prescription drug plans.

As a result, elderly patients have complained to Medicare and congressional officials about drug makers cutting access to prescription drug subsidies.

In response, the Centers for Medicare and Medicaid Services (CMS) sent a memo to House and Senate leaders in January stating that "nothing in the law" prevents pharmaceutical manufacturers from making free drugs available to Medicare beneficiaries-even those enrolled in Part D plans.

LEGAL ISSUES

Many pharmaceutical companies still are wary of continuing their PAPs due to an OIG advisory issued in November addressing the legality of PAPs under Part D.

The OIG stated that because PAPs would be covering a portion of the usual cost-sharing paid by a Medicare beneficiary, this could induce the patient to use a specific drug. Therefore, sponsors of such subsidy arrangements could be violating anti-kickback and other fraud statutes. The OIG suggested that pharmaceutical companies could give money to independent charities that subsidize prescription drug costs as an alternative to their own programs.

Pharmaceutical companies have established PAPs as a safety net, generally for individuals with limited income and no insurance who can't afford critical medicines. Seniors who enroll in Medicare drug plans thus gain drug coverage and often no longer qualify for the PAPs. However, it's the pharmaceutical companies' call on how to design the drug giveaway program arrangements.

Merck says it will continue to offer free drugs to members of Part D plans, as it would to other patients with insurance who still might not be able to obtain a necessary Merck medicine, possibly because of caps on coverage, high deductibles or formulary limitations.

Pharmaceutical companies are talking to CMS and the OIG about arrangements for continuing PAPs, particularly during this year's transition to Part D. "There are hoops for industry to jump through," says CMS deputy director Leslie Norwalk, but she suggests that CMS-industry data matching agreements might help.