United States: donating to an independent, charitable co-pay foundation: considerations for general counsel and chief compliance officers

During the past 18 months, more than 20 leading pharmaceutical and biotech companies have disclosed that they received subpoenas from the United States Attorney's Office for the District of Massachusetts regarding their patient assistance programmes. Of apparent particular focus for the Department of Justice (DOJ) are industry donations to independent, charitable co-pay foundations (ICCFs). ICCFs are organisations that provide financial support to patients who need assistance paying for their medication. Often, the financial support provided is focused on serious or rare diseases such as cancer or multiple sclerosis, for which medication is expensive and the co-payments or deductibles may be unaffordable for many patients. ICCFs are registered as 501(c)(3) charities and play an important role in improving patient access to therapy and thus clinical outcomes and overall public health. However, some ICCFs have, on occasion, been the subject of scrutiny because of their financial practices or relationships with the industry. Such media scrutiny has focused on a concern that certain companies may view donations to their ICCF as an ‘investment', that is, a means to drive prescription volume with a corresponding increase in cost to payors, including government healthcare programmes. Regulators could assert that if the purpose (or one purpose) of a donation was to increase sales, the donation could be deemed to be an ‘inducement,' which would violate the federal Anti-Kickback Statute (AKS).

The wave of recent subpoenas has not yet resulted in any disclosed enforcement action. In fact, many observers believe regulators will note that such programmes are of immense benefit to patients, that there is no evidence that these contributions affect what treatment physicians prescribe, and therefore reaffirm their support for them as a matter of public policy. Others have suggested that concerns about the potential impact on drug utilisation and resulting payor costs are better directed at health plan designs and cost-sharing structures - not at those donating money to these nonprofit organisations. It is worth noting that donors to ICCFs include not only pharmaceutical manufacturers, but also various governmental bodies, patient advocacy groups and other charities. There would be many legal obstacles to overcome for a regulator to make a case that a donation to an ICCF violated the AKS. Among these obstacles are the facts that donations are made to foundations and not patients or providers, contributions are not earmarked for any particular drug (in most cases), patients already have prescriptions from physicians and presumably are unaware of the ICCF's support, and the challenge of proving intent - not to mention potential First Amendment issues, as making a donation has been held in some contexts to be a form of free speech. In terms of a potential False Claims Act action, regulators would be challenged to prove the required elements, including that the conduct was ‘material' to the government's payment decision, that the donor caused a claim to be submitted and that the donor knew the claim was false. Nonetheless, the subpoenas have led many legal and compliance professionals to consider their own company's practices to ensure that they comply with legal requirements and regulatory guidance.

Elements of a well-structured programme

The Office of the Inspector General (OIG) issued guidance through Special Advisory Bulletins in 2005 and 2014 regarding how such donation programmes should be structured and operated. The OIG has also issued a significant number of advisory opinions to specific ICCFs endorsing their proposed structures and methods of operation, as set forth in the opinions.

Given the DOJ's recent interest in such donations, it is useful to summarise the guiding principles set forth in the OIG documents and related recommendations for leading practices often applied by companies to ensure adherence to the guidelines.

• Pharmaceutical companies and their affiliates should not have any direct or indirect influence over the ICCF or its co-pay subsidy programme. No persons associated with a donor organisation may serve on the board of directors of an ICCF to which the organisation is providing donations and no board members or employees of a charity can have financial ties to the donor. Donor companies should ensure that their organisation has no influence over the operations and decision-making of the ICCF, including selection of the disease states for which an ICCF decides to develop a fund.
• The ICCF must award assistance to all eligible, financially needy patients on a first-come, first-served basis. The assistance must be awarded in a truly independent manner that applies a consistent and verifiable process to determine financial need and should not establish any link between the pharmaceutical company's donation and the beneficiary.
• The ICCF must award assistance without regard to the donating pharmaceutical company's interests and do so equally without regard to the beneficiary's prescribed drug, medical practitioner, pharmacy or Part D prescription drug plan.
• While it is not unlawful for pharmaceutical companies to earmark their contributions to support patients who have a specific disease, the OIG warns companies against encouraging charities to narrowly define the patient populations to be supported in a way that effectively promotes the use of that company's product. For therapeutic areas in which there is only a single product available or the only drugs available are made by one manufacturer or its affiliates, it is not necessarily impermissible for an ICCF to fund support for that specific therapeutic area. However, such situations are not ideal and, when present, may require additional controls and processes to ensure that a fund does not inappropriately align with a single manufacturer.
• A donor company should not receive any data about which patients received financial support and the charity cannot provide identifying patient data to the company. While donors may receive information about the total monetary amounts disbursed from the fund, or the total number of patients supported by the fund, donors should not receive any information about how the funds disbursed, or the patients supported, relate to the donor's products. The general counsel and chief compliance officer should ensure that their organisations do not receive any information about other donors, except information the Internal Revenue Service requires to be disclosed in a charity's annual report.
• Pharmaceutical companies should ensure that ICCFs do not establish an artificially high minimum support amount that would have the effect of limiting the charity's co-pay assistance to higher cost, branded medicines. Charities must also provide assistance to pay for competing products and generic drugs. Claims filed by patients for subsidies to pay for older, potentially less expensive or generic drugs must also be reviewed and reimbursed.
• In the case of an ICCF that has multiple donors with approved prescription drugs or devices for treating patients with a disease, the company should ensure that all manufacturers' products are displayed in an equally visible manner in the charity's materials.
• Company decisions about donations to ICCFs should be made independent of the sales and marketing function. This may mean operating donor programmes within the public affairs, grants and donations, or patient support departments. It also may mean ensuring adequate review and oversight by the legal and compliance functions.
• A pharmaceutical company may not solicit or receive data from a charity that would allow it to correlate its donations with the number of subsidised prescriptions written for its products. That is, donors should not be considering the return on investment of their donations, or otherwise be creating documents and analyses suggesting that the intent of the donations was to increase sales.
• Donors should be careful how they describe their donations and how they treat them for reporting purposes. Allocating the cost of donations to specific products, categorising donations as sales expenses, treating them as marketing expenses instead of charitable donations on a tax return, including them in a brand promotional strategy document or managing them using a brand team's budget all could imply a purpose of using donations to drive sales.
• Donor companies should consider implementing a due diligence programme to assess whether foundations are operating their disease funds as agreed in contracts and in alignment with the OIG's guidance. A due diligence programme could include requiring foundations to retain an independent review organisation and provide the results of their assessments to the donors.
• Finally, companies should have appropriate written policies and training to educate employees about the appropriate structure, purpose and operation of such programmes.

As these cases evolve, it will be interesting to see how the government tries to establish the requisite elements of a False Claims Act or AKS violation. Until there is some additional guidance from Health and Human Services' OIG or the courts about these relationships, companies and their counsel would be well served by following closely the guidance set forth in the Special Advisory Bulletins, and documenting these relationships and the independent nature of the ICCFs.