Try Harder: The OIG Warns Drug Companies of Potential Liability for Medicare Beneficiaries’ Use of Copay Coupons, and Urges CMS to Work with Drug Companies and Other Stakeholders to Reduce Medicare Beneficiaries’ Use of These Coupons

September 22, 2014

By James C. Shehan

With the posting on Friday of a report, a special advisory bulletin and a podcast, the HHS OIG staked out some new ground in the healthcare fraud and abuse landscape.  The report shows that significant numbers of Medicare beneficiaries use copay coupons from drug companies.  The OIG believes that this situation could impose significant costs on the Medicare Part D program.  The OIG also believes that drug companies have the ability to change the situation.  Therefore, in the special advisory bulletin (SAB), the OIG cautions drug companies that they are at risk of sanctions if they fail to take “appropriate steps” to ensure that their copayment coupons do not induce the purchase of Medicare Part D drugs.  The SAB also recommends that companies work with CMS and other industry stakeholders to identify solutions, and that CMS coordinate such industry efforts.

Over the last decade, drug companies have dramatically increased their offering of copayment coupons.  This increased offering has paralleled the trend toward larger copayments for all drugs, but particularly for brand name drugs.  Copayment coupons have not been without controversy – in 2012 union health plans filed multiple lawsuits against nine drug companies alleging that their copay programs violated the antitrust laws and RICO (see our previous posts here and here).  The issue did not escape the notice of OIG, which it announced its plans to conduct a study in its 2014 work plan (see our post here).

The report bears the straightforward title of Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs.  Noting that two previous surveys by third parties found that 6-7 percent of seniors reported using copay coupons, the OIG interviewed 30 large drug companies about their copay programs.  The OIG also spoke with CMS and various entities involved in claims processing.

The report contains four significant findings.  First, all of the manufacturers provided notices to beneficiaries and pharmacists that copayment coupons may not be used by Federal health care program beneficiaries, although sometimes these disclaimers are present in some coupon formats (e.g., print, electronic) but not others.  Second, most manufacturers use pharmacy claims edits to prevent use of copayment coupons by Part D beneficiaries.  Third, despite these safeguards, some copayment coupons are presented by Medicare beneficiaries and processed by drug companies.  Fourth, Part D plans and other healthcare entities cannot identify when copayment coupons are being used in any individual drug reimbursement claims – only the drug companies that issue the coupons can, and Medicare claims are often paid before coupons are processed. 

The conclusions that the OIG draws from the report are that the reliability of pharmacy claims edits needs to be improved and that the use and existence of coupons needs to be made transparent within the whole pharmacy claim process.  OIG recognizes that making these changes requires the coordination and cooperation of multiple stakeholders in the process, including CMS (whose input and concurrence the OIG sought and obtained).  But in the SAB, the OIG places the responsibility for currently ensuring that copay coupons do not violate the antikickback statute squarely upon the shoulders of the drug companies that issue copay coupons.  Interestingly, a footnote in the SAB states that pharmacies that accept coupons from Medicare beneficiaries may also face sanctions 

What remains unknown is how and when CMS will take up the OIG’s call to lead effort to make changes, and whether OIG enforcement actions may occur in this area, either before or after CMS takes action.