Client Alert: The Fourth Circuit Issues Sweeping Decision on Patient Assistance Programs and the Anti-Kickback Statute
Date: January 31, 2025
The Decision
The Pharmaceutical Coalition for Patient Access (“Coalition”), a charitable organization comprising various drug manufacturers, proposed a patient assistance program aimed at helping Medicare Part D beneficiaries afford certain oncology drugs. In short, the program sought to allow manufacturers to subsidize co-payments for beneficiaries who met specific criteria, including having a cancer diagnosis and a household income between 150% and 350% of the federal poverty line.
With the pieces in place, the Coalition sought an Advisory Opinion from OIG to ensure the program would not violate the Anti-Kickback Statute’s prohibition of “knowingly and willfully offer[ing] or pay[ing] any remuneration” to “induce” an individual to buy a federally reimbursable healthcare product. 42 U.S.C. § 1320a-7b(b)(2). OIG had, historically, issued favorable Advisory Opinions on this issue. But this time, it struck a different course, concluding the program would violate the Anti-Kickback Statute if the required intent were present.
The Coalition sued OIG, arguing the Advisory Opinion violated the Administrative Procedure Act. See 5 U.S.C. § 706(2). The Coalition claimed the Anti-Kickback Statute did not apply because the program didn’t involve any illegal remuneration, inducement, or quid pro quo that would corrupt the medical decision-making process. The Coalition also asserted it was treated differently from similarly situated entities that had received favorable Advisory Opinions in the past. The district court granted summary judgment to OIG on all the Coalition’s claims, except for the one alleging disparate-treatment, which the court dismissed for lack of subject-matter jurisdiction. See Pharm. Coal. for Patient Access v. United States, No. 3:22-cv-714, 2024 WL 187707, at *6 (E.D. Va. Jan. 17, 2024).
The Fourth Circuit affirmed. The Court rejected the Coalition’s arguments that the Anti-Kickback Statute’s use of the word “induce” had a specialized criminal law meaning requiring soliciting or facilitating a separate violation of law. The Court likewise rejected the Coalition’s argument that the word “remuneration” was limited to corrupt payments that distorted the medical decision-making process. See United States v. Hansen, 599 U.S. 762 (2023); Pfizer, Inc. v. U.S. Dep't of Health & Human Servs., 42 F.4th 67, 75 (2d Cir. 2022). All the same, the court acknowledged there was a circuit split on the issue, noting the Sixth Circuit in United States ex rel. Martin v. Hathaway, 63 F.4th 1043 (6th Cir. 2023), had read the term to encompass only corrupt payments. Even so, the Court held the Anti-Kickback Statute afforded these words their ordinary meanings. Against that backdrop, the Court concluded the Coalition’s program would offer remuneration in the form of subsidies to induce Part D beneficiaries to buy the funding manufacturers’ drugs.
The Court also held that the Coalition’s program would involve a prohibited quid pro quo, even if it did not link the subsidies to specific drugs or manufacturers, because it would still create an exchange of value between the parties. See United States v. Jennings, 160 F.3d 1006, 1014 (4th Cir. 1998).
Finally, the court agreed that the Coalition’s disparate treatment claim was unreviewable because it challenged OIG’s enforcement discretion, which is committed to the agency’s judgment and not subject to judicial scrutiny. See Heckler v. Chaney, 470 U.S. 821, 831 (1985); Speed Mining, Inc. v. Fed. Mine Safety & Health Rev. Comm’n, 528 F.3d 310, 317–19 (4th Cir. 2008).
Implications
The Fourth Circuit’s decision has significant implications for similar patient assistance programs and the pharmaceutical industry at large.
This decision may deter pharmaceutical companies from creating or participating in any patient assistance programs that could be perceived as violating the Anti-Kickback Statute, potentially limiting access to necessary medications for some patients. Additionally, the Court’s rejection of the specialized criminal law meaning of “induce” and the limited interpretation of “remuneration” underscores the broad scope of the Anti-Kickback Statute, reinforcing the need for compliance and caution in designing any assistance programs. The ruling also shows how important it is to understand agencies’ enforcement discretion, reinforcing the principle that challenges to such discretion are generally unreviewable by courts.
For guidance on any matters before the U.S. Court of Appeals for the Fourth Circuit or any Healthcare issues, please contact tdistanislao@whitefordlaw.com or jeatkinson@whitefordlaw.com.
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