On January 23, 2025, the United States Court of Appeals for the Fourth Circuit rejected a challenge to Advisory Opinion 22-19 (the “Advisory Opinion”) issued by the United States Department of Health and Human Services, Office of Inspector General (“OIG”). The case, Pharmaceutical Coalition for Patient Access v. United States, centered on whether the Advisory Opinion was appropriate when it found a proposed patient assistance program for Medicare Part D beneficiaries by the Pharmaceutical Coalition for Patient Access (the “Coalition”) could violate the Anti-Kickback Statute (“AKS”). In rejecting this challenge to the Advisory Opinion, the Fourth Circuit signaled the judiciary’s continued respect afforded to government agencies, including OIG’s issuing of advisory opinions, even in a post-Chevron world.

Factual Background

The Coalition, a charitable organization comprised of various drug manufacturers, sought to implement a patient assistance program to aid Medicare Part D beneficiaries unable to afford the extremely high out-of-pocket costs associated with many oncology medications. Funding for the proposed program would come from participating manufacturers and would be open to any manufacturer of oncology drugs reimbursed by Medicare Part D. Each participating manufacturer would cover the costs associated with subsidies for their own products. The proposed program would subsidize co-payments for patients who:

1. Had a cancer diagnosis.

2. Had a household income between 150% and 350% of the federal poverty line.

3. Had a prescription for a Part D-covered oncology drug produced by a participating manufacturer.

4. Received initial approval for coverage of the drug through their Part D plan.

The Coalition sought to structure their proposed program based on past OIG guidance, by including certain potential safeguards mentioned in a 2005 bulletin (the “2005 Bulletin”) discussing a similar proposed patient assistance program.

Legal Background

The Coalition sought an advisory opinion from the OIG to ensure their compliance with the AKS. The OIG issued an unfavorable advisory opinion, expressing two core concerns. First, the proposed program could violate the AKS by inducing patients to select specific drugs based on financial incentives rather than medical necessity. Second, the manufacturers would be free to charge significantly higher prices for the drugs, federal payors and non-qualifying Part D beneficiaries would entirely carry the price increase. The OIG expressed that due to the availability of the patient assistance program, that Part D plan copayment pricing policy considerations would be eliminated. The OIG also discussed the Coalition’s reliance on the 2005 Bulletin, noting that Part D did not go into effect until 2006, so any OIG guidance from 2005 was purely speculative on how Part D would work in practice, and second, that one critical safeguard mentioned in the 2005 Bulletin was not a feature of the proposed plan. The 2005 Bulletin noted that the risk of an illegal inducement under the AKS could be reduced if the program contained “features that adequately safeguard against incentives for card holders to favor one drug product,” while the OIG found that the program proposed by the Coalition “would ensure that each Funding Manufacturer can funnel its financial contributions for cost sharing through Requestor to only those eligible Part D enrollees who are taking that Funding Manufacturer’s drugs—thereby creating a fact pattern that collides with OIG’s prior warnings.” The combination of these factors led the OIG to dismiss the Coalition’s arguments based on prior OIG guidance.

In response to the unfavorable opinion, the Coalition filed a lawsuit in the Eastern District of Virginia, challenging the OIG’s opinion as improper under the Administrative Procedure Act (“APA”). The district court granted the government’s motion for summary judgment and the Coalition filed an appeal with the Fourth Circuit.

The AKS prohibits knowingly and willfully offering or paying any remuneration to induce or reward patient referrals or business payable by any federal health care program, such as Medicare or Medicaid. AKS is a criminal statute, and violations can result in significant fines and / or imprisonment. The central goal of the statute is to prevent financial incentives from unduly influencing medical decisions, ensuring that providers remain focused on patient care. Entities in the healthcare space can request guidance from OIG in the form of an advisory opinion before launching new programs that may implicate AKS. While these opinions only bind the requesting party, they give others valuable insight into potential OIG enforcement and decision-making processes.

Case Holding and Logic

In rejecting the challenge, the Fourth Circuit focused on the following rationales. The Fourth Circuit examined two critical words, “induce” and “remuneration” from the AKS. The Fourth Circuit referenced the Supreme Court’s decision in United States v. Hansen, which interpreted “induce” to mean “to lead on; to influence; to prevail on; to move by persuasion.” In the Advisory Opinion, the OIG noted that the proposed program “appears to be designed to induce the purchase of oncology drugs that are manufactured by a [Participating] Manufacturer.” Using the Hansen interpretation of the word induce, the Fourth Circuit agreed with the OIG contention that the Coalition’s proposed program, by offering financial subsidies to Part D beneficiaries, would likely influence patients’ purchasing decisions regarding specific drugs, thereby constituting inducement under the AKS.

The second key term from AKS the Fourth Circuit focused on is “remuneration.” The Fourth Circuit rejected the Coalition’s argument that “remuneration” as used in AKS is “limited to remuneration that corrupts the medical decision-making process.” Instead, the Fourth Circuit reasoned that a broader definition applied, one that encompassed any “payment or compensation,” not only “a corrupt payment that distorts the medical decision-making process.” Accordingly, the Fourth Circuit found inducement present in the proposed structure as “[t]he subsidies it proposed are valuable payments” and remuneration present as the proposed program would “offer subsidies to support the purchase of federally reimbursable healthcare goods and services, thereby plainly influencing patients towards such purchases.”

The Coalition also contended that the program’s structure, involving multiple manufacturers, negated the possibility of any quid pro quo arrangement. The Fourth Circuit dismissed this argument without much discussion, stating that there is “no persuasive argument on why a quid pro quo cannot exist with more than one offeror.”

Additionally, the Coalition raised concerns about disparate treatment, suggesting that similar programs had received favorable opinions from the OIG, who had stated there would be no AKS enforcement against these other programs. The Fourth Circuit found this claim unreviewable, stating that the Coalition’s argument was “directed against the inconsistent exercise of discretion” and emphasizing that decisions on whether or not to bring an enforcement action lie solely with the agency and are therefore not subject to judicial review under the APA since absolute discretion is granted to an agency’s decision “not to prosecute or enforce”, which is, at its core, what an advisory opinion constitutes.  

This decision highlights the judiciary’s strict interpretation of the AKS safe harbors and factual one-for-one advisory opinions. Organizations seeking to implement similar patient assistance programs must exercise caution, ensuring that their initiatives do not inadvertently violate federal statutes designed to prevent financial conflicts of interest in healthcare.

The Fourth Circuit’s affirmation serves as a critical reminder of the complexities inherent in navigating federal healthcare regulations. It also reminds organizations to design programs that prioritize patient interests, which can include those that do not participate in a program but could face impact.