OIG Issues First Positive Advisory Opinion for Free Genetic Testing

As compared to 2016 to 2019, the number of labs that have received over $1 million in Medicare payments for genetic tests has nearly tripled, while the number of providers ordering such tests has more than doubled. Naturally, these dramatic increases have caught the attention of federal fraud enforcers, including the Department of Health and Human Services (HHS) Office of Inspector General (OIG). But this stepped-up interest isn’t all negative. On April 11, the OIG did something it had never done before, namely, issue an Advisory Opinion approving a proposed arrangement involving the offering of free genetic tests and counseling services (OIG Advisory Opinion, No. 22-06).

The Proposed Arrangement

The request for the Advisory Opinion came from a biopharmaceutical company that manufactures two FDA-approved drugs for treatment of a rare disease that may occur as a result of a hereditary condition that can lead to heart failure and death. The company wanted to know if it could offer a free genetic test to screen patients for gene mutations associated with the disease and provide free genetic counseling. The offering would be limited to persons age 18 and older who’ve been diagnosed with the disease or who haven’t been diagnosed but either have a family member with a confirmed diagnosis of the disease or whose physician suspects the disease based on clinical evidence. Under the arrangement, any physician could order genetic testing for any patient who meets the criteria but must attest both that the patient is eligible for the test and that the test is clinically appropriate. Those eligible to receive a genetic test would also have the option of receiving genetic counseling, if requested by the ordering physician. The manufacturer/requestor wouldn’t in any way require or incentivize a physician who orders the tests to recommend or prescribe any of its other products. Nor would it provide information about the tests or counseling to patients or potential patients, other than to patient advocacy groups upon request or to patients already taking either of its two drugs. In addition, the requestor would contract with and directly pay the vendors that provide the tests and counseling services, while banning the vendors from billing the patients or any third-party payors. Vendors would also be banned from promoting their other services to the ordering physician, patients, or family members and be required to submit a monthly report to the requestor attesting to their compliance.

The OIG’s Determination

The arrangement would raise issues under the Anti-Kickback Statute (AKS) and Civil Monetary Penalty (CMP) law to the extent it results in remuneration to both eligible patients and their physicians, the OIG acknowledged. Free genetic tests and counseling could induce patients to buy the requestor’s other products or influence their selection of a provider, practitioner, or supplier; the arrangement also confers value to physicians that may induce prescriptions by creating an opportunity for physicians to bill for other services. Even so, the OIG concluded that the arrangement posed a low risk of fraud and abuse under the AKS and the CMP, based on three factors:

1. Unlikely to Lead to Overuse or Inappropriate Use

Results of the genetic test indicate only whether a patient has one of the gene mutations. By itself, presence of a gene mutation doesn’t determine whether a patient has, or will develop, the disease and is thus not a medically appropriate basis to prescribe the manufacturer’s medications. OIG also cited the manufacturer’s certification that it neither promotes use of the medications for patients who haven’t been diagnosed with the disease nor has any financial interest in any other items or services used to treat or diagnose the disorder or related disease.

2. Unlikely to Skew Clinical Decision-Making

OIG also downplayed risks of skewed decision-making and care quality and safety by noting that the manufacturer doesn’t require or otherwise incentivize providers who order the free testing to recommend, prescribe, or use the manufacturer’s products. Use of the genetic testing may actually help improve patient safety and quality of care by helping patients get to a correct diagnosis and avoid inappropriate or harmful treatments, OIG reasoned.

3. Safeguards Minimize Kickback Risks

Finally, OIG concluded that there were ample safeguards to manage the risks of the arrangement’s being abused as a sales or marketing tool, including:

• The manufacturer’s sales representatives don’t distribute materials or specimen collection kits so as to take into account a provider’s historical prescribing of the company’s products or any other therapy used for the disease;
• The manufacturer imposes caps on the number of kits a sales representative may distribute to any physician; and
• There are limitations on the exchange of data relating to the arrangement.

Takeaway

The practice of pharmaceutical companies to pay genetic testing companies to provide free genetic tests to patients who may subsequently decide to use pharma companies’ drug products has become a growing concern for the OIG in recent years. The amount of money to be made from these arrangements is particularly great for pharma companies that sell drugs for rare diseases associated with specific genetic mutations. Paying a lab or genetic test company to provide free tests can be quite a lucrative investment in customer development if the patient tests positive and needs the pharma company’s drug. The new Advisory Opinion suggests that such arrangements will be considered permissible to the extent the marketing risks are controlled and the free screening provided enhances the likelihood of diagnosis and treatment.