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OIG Issues Advisory Opinion Approving Biopharmaceutical Manufacturer’s Sponsorship of Free Genetic Testing and Counseling

The US Department of Health and Human Services Office of Inspector General (OIG) recently published a favorable determination, Advisory Opinion 22-06, on behalf of a biopharmaceutical company (the Requestor) regarding the Requestor’s provision of free genetic testing and counseling to patients who may be potentially eligible for treatment with the Requestor’s medications.

The Arrangement

The Requestor manufactures and markets two drugs for the treatment of a disease affecting the heart that may occur spontaneously or as part of a hereditary condition. Onset of the disease may lead to heart failure or death. 

Diagnosis of the disease requires a clinical assessment. The Requestor proposed to offer free testing to screen for genetic mutations, as well as counseling to patients who were diagnosed with or suspected of having the disease, or who have a family member with a confirmed disease diagnosis.

Any physician may order the test for any eligible patient and is required to attest to the patient’s eligibility and that the test is clinically appropriate. The Requestor does not require or incentivize a physician who orders the tests to recommend or prescribe any other products manufactured by the Requestor. The Requestor does not provide information regarding the tests or counseling to patients or potential patients, though the Requestor may provide such information to patient advocacy groups upon request, or to patients already taking either of the two drugs.

The Requestor contracts with, and pays directly, vendors for the provision of the testing and counseling services. The vendors are prohibited from billing the patients or any third-party payors, and are also prohibited from promoting their other services to the ordering physicians, patients, or family members. The testing vendor’s monthly report to the Requestor regarding physician and patient participation in the arrangement does not include individually identifiable health information and physician identifiers, nor is the data used for marketing or sales activities.

OIG’s Analysis

OIG concluded that the arrangement involved remuneration to the eligible patients and the ordering physicians, thus implicating the federal Anti-Kickback Statute (AKS) and the beneficiary inducement prohibition under the Civil Monetary Penalties Statute (CMP). 

The OIG stated that the free testing and counseling were of inherent value to eligible patients. Similarly, the ordering physicians received value by offering the service at no cost to them or the patients. This creates the potential opportunity for the physicians to order other services eligible for reimbursement under federal health care programs.

However, OIG ultimately concluded that the arrangement posed a low risk of fraud and abuse under the AKS and CMP for three primary reasons.

  1. No Significant Impact on Product Utilization: First, OIG found that the nexus between the remuneration offered and received under the arrangement and the ordering or purchasing of the Requestor’s drugs was attenuated and, therefore, unlikely to lead to overutilization or inappropriate utilization. The test result provides information regarding only whether a particular gene mutation was present, and held no other additional utility or value. Further, the presence of one of the genetic mutations does not determine whether the patient will develop the disease, and therefore is not, standing alone, a sufficient reason to prescribe one of the medications. OIG received additional assurances from the Requestor that: a) there is no data to support the use of the medications when the disease or a genetic mutation is not present, b) it is not medically appropriate to prescribe the medications for patients who have not been diagnosed with the disease, c) Requestor engages in no promotional activities for patients who have not been diagnosed with the disease, and d) the Requestor has no financial interest in any other items or services used to diagnose or treat the disease.

  1. No Improper Influence on Patient Care: Second, OIG concluded that the arrangement was unlikely to skew clinical decision-making or raise concerns regarding patient safety or quality of care, as the Requestor does not require or incentivize ordering of the drugs as a condition for the Requester providing the tests under the arrangement. On the contrary, the test’s expedited diagnosis of the disease may avoid other inappropriate or harmful treatments and obtain the maximum benefit to the patient through early ordering of the medications.

  1. Additional Safeguards Regarding Marketing and Sales Activities: Third, OIG determined that safeguards were in place to prevent the use of the arrangement as a marketing or sales tool that would induce physicians to order other products or services from the Requestor. Specifically, the Requestor’s sales representatives do not distribute specimen collection kits or other materials based on a physician’s ordering of the drugs, and are limited in the number of sales kits they may provide to a single physician. Additionally, there are limitations on the exchange of data, and contractual prohibitions regarding the vendors’ discussion of treatment options or promotion of the Requestor’s medications.

OIG made clear that, although it determined that it would not impose sanctions under the AKS because the arrangement posed a sufficiently low risk of fraud and abuse, the agency would likely have reached a different conclusion had there been a closer nexus between the free tests and services offered and the sales of the Requestor’s products.

This Advisory Opinion is the most recent in a line of opinions and other guidance addressing the growth in popularity of genetic testing. A December 2021 OIG report addressed the concerns related to the potential for fraud and abuse due to this growth. The report stated that, during the period 2016-2019, the number of laboratories receiving more than $1 million in Medicare payments per year for genetic tests almost tripled, and the number of providers ordering genetic tests more than doubled. The OIG stated that, although there are legitimate reasons for these increases, the increases indicate areas of possible concern, such as excessive and fraudulent genetic testing, which may negatively affect beneficiaries. Providers should be mindful of the increased governmental scrutiny that accompanies the rise in popularity of genetic testing.  

The Advisory Opinion can be found here.

© 2022 ArentFox Schiff LLPNational Law Review, Volume XII, Number 125

About this Author

Douglas A. Grimm Health Care Lawyer Practice Leader ArentFoxSchiff Washington DC

Douglas advises health care providers in a wide range of matters. He previously served as a former Chief Executive Officer of multiple acute-care hospitals throughout the United States, and remains active in health care administration as a Fellow of the American College of Healthcare Executives (FACHE), the premier certification institution in health care management. This unique background enables Douglas to provide legal counsel with a practical, pragmatic perspective gained from years of experience as a health care executive.

He represents a...

Gayland O. Hethcoat II Attorney Healthcare ArentFox Schiff Los Angeles

Gayland advises hospitals, physician practices, and other healthcare providers on transactional, regulatory compliance, and corporate matters.

Gayland is a strategic legal advisor to providers and stakeholders across the healthcare delivery spectrum. With years of experience as in-house legal counsel for some of the nation’s leading hospitals and health systems, Gayland offers a practical, business-minded approach to supporting his clients.

As regulatory counsel, Gayland develops solutions for complying with the complex...