Pharmaceutical manufacturer patient assistance programs can be used to cover out-of-pocket costs for Medicare Part D enrollees, CMS says in its final implementing regulations for the drug benefit.

In the section of the rule defining "True Out-Of-Pocket Spending" by beneficiaries, the Centers for Medicare & Medicaid Services states that "any drug payment" made by a manufacturer on behalf of a beneficiary would count as out-of-pocket spending.

The concept of TrOOP is important in determining when a beneficiary becomes eligible for the catastrophic coverage portion of the benefit.

In the proposed Medicare Rx rule released last summer, CMS said it was considering how to treat patient assistance programs (¹ Also see "Patient Assistance Programs Have Uncertain Role In Medicare Rx" - Pink Sheet, 16 August, 2004., p. 17). CMS released the final regulations for Titles I and II of the Medicare Modernization Act Jan. 21.

"We noted in the proposed rule that we were considering whether assistance in paying enrollees' out-of-pocket cost-sharing obligations provided through prescription drug patient assistance programs sponsored by manufacturers would be allowed under federal fraud and abuse laws," CMS noted in the preamble to the ² final rule.

MMA defines TrOOP as "only costs paid by a Part D enrollee, or on behalf of a Part D enrollee by another person."

In the final rule, CMS defines "person" broadly, to encompass a beneficiary's family members as well as charitable organizations (including manufacturer assistance programs) and qualified state pharmaceutical assistance programs.

CMS states that financial assistance from manufacturers for Part D beneficiaries can count towards the TrOOP total, with the caveat that manufacturers must ensure compliance with federal fraud and abuse laws.

"We note that any arrangement according to which a charitable organization pays a Medicare beneficiary's cost-sharing obligations must comply with all applicable fraud and abuse laws," the rule states.

In the case of manufacturer-sponsored assistance programs, CMS makes it clear that the liability for compliance with kickback laws rests with the manufacturer.

"Regardless of whether a manufacturer patient assistance program is a bona fide charity for the purpose of federal fraud and abuse laws, any drug payment it makes on behalf of Part D enrollees would count toward TrOOP unless these organizations qualify as group health plans, insurance or otherwise, or similar third-part payment arrangements."

CMS received "a number of comments requesting clarification regarding whether assistance in paying enrollees' out-of-pocket cost-sharing obligations provided through pharmaceutical manufacturer-sponsored patient assistance programs would be permissible under federal fraud and abuse laws and request that we work with the OIG to develop guidelines," the rule states.

While the final rule endorses the use of manufacturer assistance programs as one way for beneficiaries to fill Medicare's coverage gaps, it does not provide clarification on manufacturer program compliance or state an intention to develop additional guidelines in the area.

Under the Medicare Part B program, manufacturers are able to provide funding support for beneficiary co-payments, provided the program is administered by a third party and the assistance is available to all patients who meet eligibility criteria that are not tied to an individual brand.

The final rule also clarifies that beneficiaries will be able to accept waived or reduced cost-sharing from pharmacies and count that amount toward their TrOOP limit.

"We will allow waivers or reductions of Part D cost-sharing by pharmacies to count toward TrOOP," the rule states.

Under a "pharmacy waiver safe harbor" in MMA, "pharmacies are permitted to waive or reduce cost-sharing amounts provided they do so in an unadvertised, non-routine manner after determining that the beneficiary is financially needy or after failing to collect the cost-sharing amount despite reasonable efforts."

The safe harbor also applies to reduced or waived costs for beneficiaries eligible for the low-income subsidy "provided the pharmacy has not advertised that the waivers or reductions of cost-sharing are available."

The final rule notes that it would be unrealistic to expect Part D plan sponsors to track whether beneficiaries actually paid the co-insurance due on individual prescriptions.

However, pharmacies that do not follow the safe harbor requirements are subject to penalties, CMS warned.

Payments made on behalf of beneficiaries by government programs will not count toward the TrOOP limit, the rule states.

MMA excludes payments from a "group health plan, insurance or otherwise, and other third party arrangements" from the TrOOP total.

CMS interprets the phrase to include any government-funded health programs that use federal money toward Part D drugs.

Payments on behalf of a beneficiary from a qualified state pharmacy assistance program using state-only funds will count as incurred costs, but payments from any other government program would not.

CMS acknowledged that the legislation only explicitly identifies Medicaid, Tricare, SPAPs and the Federal Employees Health Benefit Program as ineligible to count towards TrOOP.

However, "in the absence of a meaningful distinction between those entities specifically listed" in MMA "and other government health care programs, allowing payments from such other programs to count toward TrOOP would be arbitrary."

The final rule specifically lists Medicaid, "Pharmacy Plus" programs, AIDS Drug Assistance Programs, the VA health care program, the Indian Health Service, Federally Qualified Health Centers, the Federal Worker's Compensation Program, SCHIP, the Ryan White program and the black lung benefits program as ineligible to count towards TrOOP.

In addition, any entity that "pays for drugs using a mix of private and public funds...is considered a government-funded health program and all of its drug spending is excluded from TrOOP."

CMS encourages states that have pursued "Pharmacy Plus" waivers to expand Medicaid coverage to "restructure their programs as SPAPs."

The agency believes many IHS and ADAP beneficiaries will qualify for the low-income benefits in the new Medicare program; CMS suggests that ADAPs could use funds to cover the premiums for other beneficiaries.

In addition, programs unqualified for TrOOP payments can contribute to other beneficiary costs, including the deductible and cost-sharing above the out-of-pocket threshold, the rule notes.

"ADAPs, IHS, and other programs providing coverage that supplements the benefits provided under Part D may subsidize the costs incurred against a Part D enrollee's deductible for those patients unable to afford these costs."

"In addition, these entities are not precluded from paying for a Part D enrollee's cost-sharing above the out-of-pocket threshold once a beneficiary has accumulated incurred costs in excess of the out-of-pocket threshold."

In the first year of the benefit, once a beneficiary's out-of-pocket spending exceeds $3,600, he or she is responsible for 5% of costs.

Funds from personal health savings accounts can be used towards the TrOOP limit, the rule states.

CMS categorizes the accounts as "essentially analogous to a beneficiary's bank account" rather than an insurance plan, although the agency excludes funds from solely employer-funded health reimbursement accounts.

Allowing funds from health savings accounts, flexible savings arrangements, and medical savings accounts to count toward the TrOOP limit "will further our objective of encouraging beneficiaries to set aside their own money for drug expenditures," the rule states.

Rx Patient Assistance Programs Encouraged By Medicare Part D Final Rule

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