Federal Judge Rejects Pharma Manufacturers’ Challenge to Negative OIG Advisory Opinion

A Virginia Federal Judge recently rejected a challenge to a negative Advisory Opinion issued by the Department of Health & Human Services’ Office of Inspector General (OIG) that disapproved of a proposal where certain pharmaceutical manufacturers would fund financial assistance for the manufacturers’ Part D oncology drugs. The Advisory Opinion was requested by the Pharmaceutical Coalition for Patient Access (PCPA), which is a charitable organization formed and fully funded by pharmaceutical manufacturers of oncology drugs. Subsequently, PCPA brought the lawsuit alleging that the negative Advisory Opinion violated the Administrative Procedure Act (APA). 

Background on OIG Advisory Opinion 22-19

On September 30, 2022, the OIG issued a negative Advisory Opinion regarding the manufacturer’s proposal to form PCPA to fund cost-sharing subsidies for the manufacturers’ drugs, among other initiatives to increase health equity in clinical trial participation and subsidize insurance premiums for beneficiaries with cancer. For the cost-sharing subsidies, each manufacturer would subsidize eligible Part D beneficiaries’ cost-sharing amounts for their own products, and not for any other manufacturer’s drugs. Part D beneficiaries would pay $10-$35 per month for the drugs and 10-25% of the total coinsurance that would otherwise be owed for branded drugs during the catastrophic phase of coverage. 

The OIG issued a fairly harsh negative opinion, primarily focused on the fact that the cost-sharing subsidies would circumvent the Part D design, insulating beneficiaries from high drug prices or price increases and leaving the manufacturers’ drug prices unconstrained. Having determined that the arrangement as a whole presents more than a minimal risk of fraud and abuse, the OIG declined to provide an analysis of PCPA’s proposal to fund health insurance premiums or increase health equity in clinical trial participation.

Pharmaceutical Coalition for Patient Access v. U.S. 

On November 9, 2022, the PCPA filed suit in the Eastern District of Virginia alleging that OIG Advisory Opinion 22-19 violated the APA. Chief among the PCPA’s arguments was the contention that the Advisory Opinion incorporated an overly broad understanding of the AKS. The Court’s decision found that the OIG’s interpretation of the AKS was reasonable and not overbroad. The Court reasoned that neither the term “remuneration” or “inducement” requires a corrupt intent and that the program put forth by PCPA could be seen as an improper quid pro quo. 

In perhaps its strongest argument, PCPA alleged that the Advisory Opinion was arbitrary and capricious because it runs counter to the OIG’s 2005 Special Advisory Bulletin on Patient Assistance Programs. The manufacturers had structured PCPA based on the OIG’s somewhat favorable description of a “coalition model” program made up of a large number of manufacturers, each offering subsidies for all of its Part D products, though the OIG noted in the Advisory Opinion that the Special Advisory Bulletin was issued before the Part D program had even went into effect and characterized its description of a “coalition model” as preliminary commentary as opposed to definitive guidance. The court rejected PCPA’s argument, determining that the OIG did not change its position arbitrarily and in fact fully recognized that PCPA attempted to structure its proposal based on the Special Advisory Bulletin and provided a thorough explanation in that respect. 

The Court similarly rejected PCPA’s claim that the Advisory Opinion infringed on its First Amendment rights because it prevented charitable contributions and prevented PCPA from discussing with the public the ongoing oncology crisis. The Court found that the Advisory Opinion, and any subsequent enforcement, only targeted potentially criminal acts that were not protected charitable contributions. Further, although the PCPA could not move forward with its proposal, nothing in the Advisory Opinion would prevent the organization from discussing the challenges facing oncology patients.

Conclusion

The Court’s decision in this case is perhaps unsurprising. Pfizer had brought a very similar suit against the OIG, challenging a negative Advisory Opinion Pfizer received regarding its proposal to provide cost-sharing assistance directly to beneficiaries prescribed its drugs used for a rare cardiovascular disease. The Second Circuit rejected Pfizer’s claim and the Supreme Court declined to take it up. The OIG also continues to view cost-sharing subsidies with scrutiny, typically only approving discount or free drug programs that only provide drug supplies for a limited duration or under limited circumstances such as a delay in insurance coverage. 

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