Proposed Federal Guidance Threatens Patient Access to Medication

November 26, 2002


Office of Inspector General
Department of Health and Human Services
Attn: OIB-8-CPG
Room 5246, Cohen Building
330 Independence Avenue, SW
Washington, D.C. 20201

RE: OIGB - 8 - CPG

Dear Sir or Madam,

On October 3, 2002, the OIG published a draft Compliance program guidance for pharmaceutical companies in the Federal Register. As a health care policy organization, Citizens' Council on Health Care is very concerned about the proposed guidance.

In general, the Council is concerned that the guidance will lead to higher costs and more limited access to medication for all citizens, especially the elderly, the poor, those in health plans with restrictive drug formularies, and patients with limited finances.

The guidance appears to have two goals, and one plan to accomplish those goals. The OIG appears to want to lower the federal government payment for medications, and to limit medication access for Medicare recipients. To do so, they have created a plan that could eliminate the free-market for pharmaceutical products. In other words, the processes which have been used over the last 35 years to force physicians to provide care to Medicare patients for free or lower-than-cost rates-and which has precipitated the recent escalation of physician refusal to participate in Medicare-are now being used in an attempt to bring pharmaceutical companies under federal control. This does not bode well for patients who are increasingly dependent on medications rather than hospitalization for care.

Importantly, in the drive to limits federal payments for pharmaceuticals, the guidance may lead to limited access to medication for all citizens, not just those patients in federal programs.

We understand that pharmaceutical companies are not technically required to follow the guidance. However, it is clear that lack of compliance with the OIG's guidance may lead to federal investigation or prosecution of those companies. As such, the program is not voluntary because federal investigation is something to be avoided at all costs. Not complying would be fraught with potential for federal legal proceedings, a process entailing great costs and energy, even if the company is innocent of any wrong doing. Therefore, the guidance will act as an unofficial but fully enforceable regulation on the pharmaceutical industry.

Our specific concerns are as follows:

Comprehensive Decrease in Access to Medication
The OIG asserts that creation of a compliance program "may require a reallocation of existing resources" (page 62059, column 1) but states that the long-term benefits "outweigh the initial costs." However, ongoing programs require ongoing costs which will result in ongoing "reallocation of existing resources." Those resources include funds that pay for new drug research and development, or provide medication at reduced prices, or provide for free medications in third world countries and clinics. One way or the other, this reallocation adds up to limited access to medications for those who need them.

Restricting Senior Access to New Medications
In correlating switching of medications with the anti-kickback statute, the OIG moves to place fear into the heart of any physician who wants to switch his or her patient to another medication (page 62062, column 2). It also moves to prohibit advertisement or promotion of medications that may better the lives of recipients of Federal programs. This is likely to mean little or less access to advanced medication for the elderly and the poor. Nowhere in the guidance is there an exception for patients whose health would be improved by switching medication. OIG is clearly focusing on cost, not on care.

Charity Discouraged; Price Controls
The OIG wants to lower the government's payment for medications. In essence to create price controls. To do so, it suggestion pharmaceutical firms decrease the reported price of the drug because it charitably distributes medications, according to page 62060, column 3. In so doing, OIG is discouraging charity. If the reported price of the drug is lowered for the large group of Medicare and Medicaid recipients because the price has to be based on the low or no cost of the drug when provided charitably, there will be fewer free distributions of medication to patients in need and few distributions of drug samples to clinics in the future.

Free Drug Samples in Jeopardy
The guidance virtually forbids sales of pharmaceutical products when it says, "Any compensation arrangement between a pharmaceutical manufacturer and a sales agent for the purpose of selling health care items or services that are directly or indirectly reimbursable by a Federal health care program potentially implicates the anti-kickback statute, irrespective of the methodology use to compensate the agent" (page 62063, column 1). It then says that the companies should track, compile and review information about the sales force activities (page 62063, column 2).This essentially places broad restrictions on American citizens doing honest work. It is also likely to discourage pharmaceutical companies from providing patients with information on new medications, or furnishing clinics with free samples of drugs.

Indeed, the guidance states "The provision of drug samples is a widespread industry practice that can benefit patients, but can also be an area of potential risk to a pharmaceutical manufacturer." (page 62063, column 2)

Higher Costs for Consumers:
The expense of producing, marketing, and distributing medication is always born by the consumer. Therefore, the additional costs of this "regulation" will be born as well by consumers and patients who need medication, not by the pharmaceutical companies. Additional expense incurred to follow the guidance would seem to include costs for writing new policies, creating a compliance committee, establishing a new position (compliance officer), training and educating employees, internal monitoring and auditing, developing an enforcement plan and carrying it out, reporting to the federal government, monitoring drug sales representatives, obtaining additional legal assistance to assure full compliance, fulfilling all paperwork obligations, and potentially defending against a federal allegation of non-compliance or fraud. In addition, the guidance makes it clear that this guidance is not complete or fully inclusive of what pharmaceutical companies should do to comply (page 62058, column 2).

To state that the expense of the program will lead to reducing the cost of health care (p 62059, col. 1) dismisses regulatory history. Regulations have repeatedly been shown to increase the cost of doing business, and therefore the cost of the end product, and the drain on the consumer's pocketbook. At a time when health care costs are rising at least 10% per year, significantly more than the standard of living, the agency is implementing a program to further increase the cost of health care.

No Assessment of Costs or Paperwork
Since there is no estimate of costs or paperwork requirements for following this guidance, it appears that the OIG has skirted the Unfunded Mandates Reform Act of 1995 and the Paperwork Reduction Act of 1995 by proposing a guidance rather than a regulation. However, the cost and paperwork related to following the guidance remain. Not accounting for the costs and paperwork requirements under the guidance leaves the public without a proper understanding of how the guidance will impact them financially. Without it, the agency is not held accountable for rationalizing the costs.

The Council therefore requests that a full accounting of the costs and paperwork requirements be published for full inspection before and if the guidance is finalized.

Disingenuous Claim
Although the OIG claims that following the guidance is voluntary, the agency has included a very specific list of elements for compliance that pharmaceutical companies should have to assure that the company fulfills federal expectations for compliance. Therefore, any words that infer that the program is voluntary are disingenuous (page 62059, column 3).

Federal Control
The goal of the agency appears to be oversight and control of the pharmaceutical industry. The promise of the department is essentially that increased regulation will prevent fraud and abuse, saving taxpayers millions of dollars. However, the OIG admits that following the guidance and creating a compliance program may not entirely eliminate improper conduct. It only states that having a compliance program reduces the risk of unlawful conduct and any penalties that result from such behavior. (page 62059, column 2).

It's basically a "comply and maybe we won't hurt you" initiative. But compliance means allowing the federal government to control the business in an attempt to avoid being charged with a felony. It's a bit like being asked to wear an electronic monitoring device before being charged with a crime. The suggested reporting of possible misconduct to the federal government will enable federal officials to indiscriminately make judgements about fraudulent behavior leaving the company actually more vulnerable to federal action and liable for the cost of defense.

Micromanagement and Vague Definitions
The OIG discourages 'non-price terms of sale" because it's difficult for government officials to "ensure that the value of the remuneration is appropriately apportioned and accurately reported and that costs are not shifted disproportionately from private payers to the Federal health care programs." The OIG intends to involve itself fully in the private pharmaceutical business. (page 62061, column 3).

Furthermore, the OIG says that "Arrangements that may increase the risk of overutilization, higher government program cost, inappropriate steering of Federal health care business, or unfair competition are particularly suspect" (page 62061, column 3). There are no definitions for these very ambiguous words. It is neither appropriate or right for the OIG or any government agency to have the authority to determine the definition of the terms "overutilization", "higher costs", "inappropriate steering", or "unfair competition" for the purpose of beginning federal action.

In essence, the OIG expects to limit the company's right to do business and promote medications that may be beneficial to patients. Such power could bring pharmaceutical innovation to a stand still or push the industry, its product, and its tax dollars out of the country.

Subtle Accusations
According to page 62062, column 3, the OIG appears to assume that most or all physicians in research, advisory or consulting positions with pharmaceutical companies are tools of profit-making drug referral and improper payments. Tools who are willing to put patients in danger if the price is right. We note how the OIG uses the words "act as" and places quotation marks around the words "consultants", "advisors" and "researchers." as though that definition is in question. In addition, the OIG allows only that there "may be" legitimate purposes for the involvement of these individuals. This is a rather subtle broad brush accusation.

The OIG also requires payments to these practitioners to be fair market value, a term it does not define (page 62062, column 3). As beauty is in the eye of beholder, the federal view of fair value may be different than the company's view. Federal officials should not be in the business of using fair market value as a tool for fraud detection. The cautionary tone in this section could lead to drug companies having NO interaction with knowledgeable physicians lest they be accused of fraud and abuse. No physician interaction may prove detrimental to the health of patients who are or could be on such medication.

Business Restriction
Waving the flag of fraud over the distribution of sponsorships, funding of educational seminars, research grants and gifts means that the pharmaceutical industry may no longer be able to act like any other business. In addition, "gifts, gratuities, and business courtesies" is rather broad and could include drug samples for physician clinics (page 62062, column 3). Such a definition may lead to limited supplies of medication for those who depend on free drug samples to meet their medication needs.

Subjective Expectations
The OIG first says that "Arrangements that fail to meet the minimum standards set out in the PhRMA Code are likely to receive increased scrutiny from government authorities." Then the guidance notes "it must be understood that compliance with the relevant sections of the PhRMA Code will not necessarily protect a manufacturer from prosecution or liability for illegal conduct. The list of bullet points that follows will lead to subjective determinations. We expect that the constraints applied here will lead to manufacturers providing fewer free medications to clinics (page 62063, column 1).

Disingenuous Statement
After spending most of the guidance in essence indirectly charging the pharmaceutical industry with improprieties worthy of massive federal oversight and control, the OIG pauses to say "Violation of a pharmaceutical manufacturer's compliance program failure to comply with applicable Federal or state law, and other types of misconduct threaten the company's status as a reliable, honest, and trustworthy participant in the healthcare industry. Detected but uncorrected misconduct can endanger the reputation and legal status of the company" (page 62066, column 2).

Intrusive Oversight
The OIG admonishes drug companies to investigate all allegations of misconduct and if necessary file a report or repayment with the government. The OIG suggests the company promptly report any conduct that may violate criminal, civil, or administrative law within at least 60 days (page 62066, column 3). The use of the word "may" essentially requires the company to report any and all incidents that the company thinks the agency would consider violations. This combines intrusive oversight with the threat of prosecution if the corporation doesn't report what the government thinks is a reportable incident.

The federal government appears to be using this guidance to discourage pharmaceutical companies from doing business, developing new products, and informing the public about those products. The guidance threatens freedom of speech. It will raise the cost of health care and decrease free drug samples at clinics, leaving the following vulnerable groups without access to free medications: Medicare recipients without outpatient medication coverage, the poor and low-income population, and those in health plans with restrictive drug formularies.

The OIG plans to eliminate the right of patients - all patients - to hear about and be offered all available medications. Clinics and hospitals are not divided into a Medicare division and a private insurance division. What the OIG plans with the Medicare program will occur with all patients.

We therefore oppose the implementation of this guidance.

Please feel free to call me if there are any questions. Thank you.


Twila Brase, RN