January 23, 2024 | By Mary Kohler in Law360
You've lost your wedding ring on the beach. Do you frantically comb the sand, or find a guy with a metal detector?
The U.S. Food and Drug Administration challenges biopharma companies to search for the rings. Precision medicine aims to target the right treatments for the right patients at the right time.[1] Just over half of all new drugs approved last year treat a rare disease.[2]
But a recent $6 million U.S. Department of Justice qui tam settlement warned startup Ultragenyx Pharmaceutical Inc. to beware the metal detector.[3]
Ultragenyx paid a genetics lab to test patients suspected of having X-linked hypophosphatemia, or XLH, a rare genetic disorder that causes rickets. It also bought the test results. And while the data excluded patient information, it named doctors whose patients carried the gene. Sales reps then targeted those doctors to promote the company's XLH treatment, Crysvita.
The DOJ alleged that Ultragenyx violated the federal Anti-Kickback Statute by: (1) paying the lab for data it used to target doctors; and (2) providing free testing to patients. Both allegedly induced the sale of Crysvita, leading to false claims.
The settlement follows a 2022 advisory opinion from the U.S. Department of Health and Human Services' Office of Inspector General. Although favorable for a genetic testing program, the OIG cautioned against using results to target patients and doctors.[4]
According to the settlement, Ultragenyx stopped using physician data for commercial purposes and aligned with the OIG's stance. That's where its AKS liability ends, and the program continues today.[5]
But a settlement is a blunt instrument that can leave more questions than it answers. Here, one of those questions is whether some tried-and-true AKS assumptions warrant a closer look.
PAP Underpinnings
The OIG's opinion and the Ultragenyx settlement draw on earlier AKS enforcement against patient assistance programs, or PAPs. Though the programs help needy patients, the DOJ and OIG see some industry support for PAPs as thinly veiled marketing that interferes with clinical decisions and increases federal program costs.
In the PAP cases, companies allegedly treated their donations as investments, and then demanded returns by using PAP prescription data to drive future funding decisions. The funds were seen as conduits for kickbacks to patients.
Two fundamental truths emerged. First, companies should separate PAPs from commercial interests. Second, the further the link between PAP benefits and products, the better. From a practical perspective, PAPs now share much less data with sponsors.
The allegations here follow naturally. Ultragenyx armed its reps with results and told them to focus on doctors with known patients. Liability seems a slam dunk.
But these programs aren't PAPs.
An Imperfect Fit
PAP donations involve funding nonprofits to give patients free products and financial help, typically in a competitive market. The transactions are fully exposed under AKS with no safe harbor protection.
By contrast, free testing involves paying the lab — a commercial entity — to provide a service. Both of Ultragenyx's payments seem protectable as fair market value exchanges. The safe harbor, however, wouldn't protect the patient's free test. And that makes the PAP cases seem analogous.
But there is another model.
In the 1990s, labs gave physicians free computers. Automation enabled customers to order online and print results. The OIG allowed the labs to provide computers that served their own needs exclusively.[6]
It reasoned that the labs had a valid business reason and the limited-use computers had no independent value to doctors. The OIG has since used this framework to evaluate other free goods it finds integrally related to a company's product.[7]
Many genetic testing programs seem more like the lab experience than the PAP cases. The OIG's opinion says physicians receive incidental benefits, like future billing opportunities for treatment, but concludes they pose low risk.
Patients get value. But unlike financial aid from a PAP, a test's independent utility is questionable. When diagnosis, prescription and coverage hinge on results, the test is part of a predetermined treatment path. Even if the biologically curious can seek genetic testing, programs' eligibility criteria rule them out.
The OIG's opinion suggests the agency might see this distinction. But it still calls the free tests and counseling inherently valuable without explaining why, and the settlement says nothing.
A Closer Look at Attenuated Connection
Both the settlement and OIG opinion recognize that genetic testing affects clinical decision making. As with PAPs, they manage risk by urging a weak link between test and product, and then curbing promotion. The goal is to prevent companies from using free programs to increase sales.
This resonates. The OIG analyzed a program that also tested healthy family members who may only learn they carry a disease-causing gene. No disease, no prescription. But doctors start monitoring them. And in this case, promotion could foreseeably expand the market toward prevention.
But when the test confirms a suspected genetic link for a patient's present illness — and a single product is clearly indicated — the FDA says the patient should get the product. Promotion seems unlikely to alter decision making. So, does an attenuated connection always mean lower AKS risk?
Also, by framing this as a promotion problem, are we ignoring education?
The First Rare Disease Challenge: It's Rare
XLH affects about one in 20,000 people.[8] Patients rely on primary care physicians first to understand the genetic link, and then order a test. By one estimate, these doctors number about 300,000, or 30% of doctors nationwide.[9]
Unless a company can narrow the field, it must launch a massive educational campaign and blanket the provider community with reps. The OIG's position on targeting seems to assume this broad approach. And traditionally, that's what well-funded companies have done.
But Ultragenyx is a startup. It has about 1,100 employees and focuses on clinical development. It's still operating at a loss.[10] Could such a company realistically overcome the massive educational barrier?
Notably, Ultragenyx later transferred commercial responsibility to Kyowa Hakko Kirin Co. Ltd.[11] But rare disease startups can lack a partner to shoulder the commercialization burden. As capital dries up, this issue looms.
But even for well-funded companies, pinpointing doctors who need education might not be bad. The OIG's opinion acknowledges early diagnosis can eliminate unnecessary care, improve quality and reduce costs. Would sending medical liaisons rather than sales reps have yielded Ultragenyx a different result?
No one can say. The settlement agreement cuts off liability when Ultragenyx stopped using the data to target doctors. But the program's website says the lab no longer shares ordering physician data for any purpose. This suggests not.
The Second Rare Disease Challenge: It's Expensive
Crysvita is a lifelong therapy for a previously unmet medical need. Its annual price is $200,000. Patients who don't qualify for Crysvita are managed with vitamin D, which is less costly, but also of questionable efficacy.
According to the settlement, some payors require a positive genetic test for coverage. But what if a payor denies the test that proves the need? For high-cost breakthrough therapies, access limitations abound.
And the issue transcends rare disease. Targeted oncology therapies also require an upfront diagnostic test. The breast cancer experience shows doctors and payors can disagree on appropriate testing criteria for gBRCAm, a genetic mutation that informs treatment decisions.[12]
Payors' scrutiny of genetic testing is understandable. In 2021, the OIG observed that Medicare payments quadrupled from 2016-2021.[13] It's easy to see how a manufacturer's help might feed the spiral.
But for gBRCAm, repeated denials have led some oncologists to shy away from testing. And without the information, diagnoses get missed. Preventable deaths occur.
Here again, the OIG's independent value model may be useful. The OIG drew on its free computer analysis when radiologists wanted to perform prior authorizations for referring providers. These downstream providers' legitimate reimbursement turns on accurate approvals up front.
But referring physicians can get it wrong or miscommunicate. So, even though the radiologists assumed work from referral sources, their reasons lowered the risk that the program was "a stalking horse for illicit payments," according to the OIG's opinion.[14]
Genetic testing seems analogous — especially where a result could just as easily rule out a company's product as call for its use. The Ultragenyx settlement agreement acknowledges that XLH can be confused with other disorders and a genetic test is often necessary to diagnose it definitively.
A payor denying a necessary diagnostic tool is no longer ensuring cost sensitivity; it's foreclosing a decision on the care. Manufacturers — whose labeled indication calls for a test — start looking more like the radiologists, and villainizing them for stepping in becomes harder.
Ironically, the OIG's attenuated connection requirement may end up cutting the opposite way, favoring manufacturer support for tests that are broader and less useful.
Another Possible Framework
Factoring in the FDA's precision medicine goals might improve the AKS analysis for free genetic testing. Blinding companies to PAP data made sense when the information drove a company's funding decisions.
But here, the value patients receive is less clear. And there are valid reasons for connecting companies with the right patients at the right time for the right reasons. Finally, AKS has a secondary goal to level the playing fields. Limiting market intelligence may disproportionately affect small companies.
The table illustrates how scenarios vary and proposes a risk-based model that might help thread the needle for thoughtful post-testing company interactions.
The first scenario outlines the OIG opinion's attenuated connection. A positive result that only signals potential for future disease might have independent value to patients. And, like the PAP cases, a company could foreseeably grow its market through inappropriate use.
Healthy women who get a bad gBRCAm result illustrate this. Some skip straight to the surgeon for a preventive mastectomy when they need skilled, unbiased genetic counseling. We wouldn't want surgeons funding the test. Targeted promotion here carries risk.
But doctors still need to understand developments that post-date their training. Companies often have the best information. So here, scientific exchange conversations — like disease education — seem proper. The OIG's opinion doesn't forbid education, but blinding the company to relevant doctors impedes it.
This blinding also erects a barrier to a potentially beneficial use — connecting willing patients with researchers.
Diagnostic Test Scenarios
The diagnostic scenarios are more compelling. When a test justifies medical need, it becomes a necessary step on the treatment path and seems more integrally related to the product.
Here, a manufacturer isn't giving money to a PAP and crossing its fingers. It's paying an arms-length fee so insurers don't obstruct an FDA-approved use. Far from interfering with a clinical decision, the manufacturer is enabling it.
In this scenario, a manufacturer's product information is usually welcomed. There's little to gain from making physicians and patients grope for answers by distancing the company and silencing its partners.
Notably, diagnostic tests may also run contrary to the PAP cases' assumption that multiple treatment options mean lower AKS risk. When competition exists, free programs can induce doctors and patients to favor the company that pays for the test. Even if the independent value is questionable, offering other free goods and services while decisions are being made could be problematic.
Still, cutting off the paying company seems a step too far. Instead, limiting it to educating relevant doctors about all possible treatments seems acceptable.
What's Next
In these early days of precision medicine, questions outnumber answers. And post-Ultragenyx, there are more. It's hard to know what concerned the government most, and what drove the company to get out.
Still, companies considering these arrangements must navigate current guidance. Until the conversation advances, tips for success include:
Study the OIG's opinion. It outlines a helpful path for meeting government expectations. Engaging the agency in more dialog may also be worthwhile, but any proposal would need to include thoughtful controls, as the AKS risk is real and the OIG's concerns are valid.
Carefully assess programs that use data to target marketing efforts. Yes, analytics are the future. But expect a bumpy ride as regulators — and prosecutors — assess comfort with new ideas.
Be disciplined when thinking about free genetic testing programs. The Ultragenyx case hints at confusion about structure and implementation. Lawyers and compliance teams should collaborate early to ensure key deal assumptions are understood — and executed.
These programs can involve startups and digital health companies. Healthcare newcomers can find AKS counterintuitive. Established players should help partners appreciate the nuances and monitor their execution.
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Mary Kohler is the founder and principal at Kohler Health Law.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] U.S. Dept. of Health and Human Services, Food and Drug Administration, Precision Medicine, https://www.fda.gov/medical-devices/in-vitro-diagnostics/precisionmedicine (accessed Jan. 15, 2024).
[2] FDA's Center for Drug Evaluation and Research (CDER) approved 55 new drugs in 2023; 28 of these had orphan drug designations. CDER, New Drug Therapy Approvals 2023, Jan. 2024.
[3] Department of Justice Press Release, Pharmaceutical Company Ultragenyx Agrees to Pay $6 Million for Allegedly Paying Kickbacks to Induce Claims for Its Drug Crysvita, Dec. 21, 2023.
[4] U.S. Dept. of Health and Human Services, Office of Inspector General, OIG Advisory Opinion No. 22-06, Issued Apr. 6, 2022.
[5] Invitae website, The Kyowa Kirin Sponsored Hypophosphatemia Program, https://www.invitae.com/us/sponsored-testing/hypophosphatemia (accessed Jan. 15, 2024).
[6] 56 Fed. Reg. 35952 at 35978, Jul. 29, 1991.
[7] See OIG Advisory Opinion No. 08-05, Issued Feb. 15, 2008 (favorable for pharmaceutical company providing patient education kiosks in doctors' offices); and OIG Advisory Opinion No. 11-07, Issued Jun. 1, 2011 (favorable for pharmaceutical company providing free vaccine booster reminders to patients).
[8] XLHLink, What is XLH, https://www.xlhlinkhcp.com/xlhoverview/?gclid=0c685a26833810f881973fbd92f929b6&gclsrc=3p.ds&&gclid=0c685a26833 810f881973fbd92f929b6 (accessed Jan. 15, 2024).
[9] Association of American Medical Colleges, 2022 Physician Specialty Data Report Executive Summary, https://www.aamc.org/data-reports/data/2022-physician-specialtydata-report-executive-summary (accessed Jan. 15, 2024).
[10] Ultragenyx Press Release, Ultragenyx Reports Third Quarter 2023 Financial Results and Corporate Update, Nov. 2, 2023.
[11] Ultragenyx Press Release, Ultragenyx Reports Second Quarter 2023 Financial Results and Corporate Update, Aug. 3, 2023.
[12] O. Foroughi et. al., J. Pers Med., Barriers to gBRCAmTesting in High-Risk HER2- Negative Early Breast Cancer, Aug. 3, 2023.
[13] OIG, Trends in Genetic Tests Provided Under Medicare Part B Indicate Areas of Possiblle Concern, A-009--03027 20-03027, Dec. 2021.
[14] See, e.g., OIG, OIG Advisory Opinion No. 10-20, Issued Sep. 21, 2010
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© Kohler Health Law, PC, 2024.
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