Vertex’s Attempt to Redefine AKS Falls Short: Key Insights for Pharma Manufacturers

In a ruling issued on March 31, a federal judge upheld the OIG’s interpretation of the AKS, which formed the basis for the agency issuing an unfavorable advisory opinion to Vertex Pharmaceuticals Incorporated regarding the company’s proposed fertility assistance program. The court’s ruling is the latest blow to the pharmaceutical industry’s efforts to narrow the scope of the AKS.

Manufacturers’ Arguments

Over the past several years, pharmaceutical manufacturers have been making a concerted effort to narrow the interpretation of the AKS’ intent requirements, which we previously wrote about here, arguing that a violation of the AKS requires corrupt intent. Manufacturer challenges to OIG’s interpretation of the AKS have stemmed from manufacturer efforts to provide certain types of financial assistance, such as copay assistance, directly to federal health care program beneficiaries or via entities controlled by manufacturers. The OIG, however, has consistently maintained that manufacturer-operated patient assistance programs constitute renumeration that may unlawfully induce patients to purchase the manufacturers’ drugs in violation of the AKS.

Vertex’s Proposed Fertility Program

Vertex manufactures CASGEVY, a treatment for sickle-cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT). In conjunction with CASGEVY treatments, patients must undergo chemotherapy to maximize the efficacy of the treatment. Accordingly, many SCD and TDT patients lose fertility when undergoing treatment for their conditions.

To address fertility issue among sickle-cell and TDT patients, in its advisory opinion request, Vertex proposed to offer financial assistance to both federal health care program and commercial beneficiaries. The financial assistance would be capped at $70,000 for essential fertility support to eligible patients prescribed CASGEVY, whose insurance plans do not include fertility coverage (the Proposed Fertility Program). To be eligible for the Proposed Fertility Program, patients would have to reside in the United States or a US territory, have an annual household income at or below 670% of the Federal Poverty Level, be prescribed CASGEVY for an on-label indication, and lack insurance coverage for fertility services. Additionally, patients or their caregivers would agree not to seek reimbursement from any insurance provider or third-party source for fertility services paid for by Vertex. Vertex asserted that the Proposed Fertility Program would operate with the following safeguards to prevent an unlawful quid-pro-quo:

• The Proposed Fertility Program would only be available to patients who have already been prescribed CASGEVY and meet eligibility criteria.
• Patients would choose their preferred fertility treatment.
• All CAGEVY patients, regardless of their physician, could benefit from the Proposed Fertility Program.
• Vertex would only furnish physicians and patients with nonpromotional materials about the Proposed Fertility Program’s terms, conditions, and eligibility criteria.

OIG’s Unfavorable Advisory Opinion Regarding the Proposed Fertility Program

In July 2024, the OIG issued an unfavorable advisory opinion in response to Vertex’s request, concluding that the Proposed Fertility Program could amount to prohibited renumeration under the AKS and could violate the Beneficiary Inducement Statute (BIS). With respect to the BIS, remuneration that improves a beneficiary’s ability to obtain services payable by Medicare or Medicaid and poses a low risk of harm is protected by the Promotes Access to Care Exception (the BIS Exception) and thus is not unlawful. According to the OIG, the Proposed Fertility Program would constitute remuneration to patients that may induce them to purchase CASGEVY, as the Proposed Fertility Program would eliminate the financial barrier posed by the high cost of fertility services and could potentially influence patients’ decisions to undergo treatment. The OIG also concluded that the Proposed Fertility Program would provide remuneration to physicians through the opportunity to earn fees related to CASGEVY treatment, which could induce physicians to recommend CASGEVY over other treatments for SCD and TDT.

The OIG’s decision to issue an unfavorable opinion was partly based on insufficient data regarding, among other things, the impact of fertility support services on access to health care, costs to federal health care programs, and the risk of patient steering. The OIG also concluded that neither the BIS Exception nor any other exception to the AKS would protect the Proposed Fertility Program, primarily due to a lack of data demonstrating that it improves patients’ access to care. According to the OIG, there is no statutory basis for a broad exemption from the AKS or BIS based solely on patients’ financial need, as financial need alone does not justify valuable gifts, and the lack of data prevents a proper assessment of fraud and abuse risks associated with the Proposed Fertility Program.

Vertex’s Challenge to the OIG Advisory Opinion

Vertex challenged the OIG’s Advisory Opinion in the US District Court for the District of Columbia. Arguing that the Proposed Fertility Program would not implicate the AKS, Vertex contended that the AKS only criminalizes “corrupt quid pro quo transactions” that skew medical decision making, and the AKS is not implicated by financial assistance programs that remove financial or medical barriers to care. Vertex also argued that while the Proposed Fertility Program implicates the BIS, it also falls squarely within the BIS Exception.

More specifically, Vertex argued that the AKS only criminalizes the act of knowingly and willfully offering or paying remuneration to induce the purchase or recommendation of products paid for by federal health care programs when a pharmaceutical manufacturer demonstrates “corrupt” intent akin to criminal solicitation. The AKS includes terms like “kickback,” “bribe,” and “rebate,” which, according to Vertex, underscores the need for a corrupting influence that does not exist with respect to the Proposed Fertility Program.

Vertex argued that the BIS Exception applied as to the Proposed Fertility Program enhances care access, poses minimal risk to patients and federal health programs, and does not constitute remuneration likely to influence the choice of CASGEVY over other available SCD and TDT treatments. To support this argument, Vertex asserted that CASGEVY is a curative treatment in 94% of cases, offering advantages over other SCD and TDT treatments independent of the Proposed Fertility Program. Vertex also contended that the Proposed Fertility Program solely mitigates infertility side effects without skewing medical decision-making or providing unlawful renumeration to patients. According to Vertex, “the idea that a patient would undergo (and a doctor would prescribe) an arduous, multi-step, months-long process to receive medically unnecessary gene-editing therapy in order to obtain fertility services defies logic.”

Finally, Vertex also noted that while the AKS does not explicitly include the BIS Exception, the rationale behind the BIS Exception should apply to the AKS as well, to avoid criminalizing socially beneficial conduct that Congress has not subject to civil liability. Accordingly, based on the interpretation of the AKS requiring a corrupt or criminal intent and the policy rationale behind the BIS Exception, Vertex argued that it should receive a declaratory judgment that the Proposed Fertility Program would not violate the AKS and BIS.

The District Court’s Decision

On March 31, Judge James E. Boasberg ruled that the OIG reasonably determined that the Proposed Fertility Program could violate the AKS, rejecting Vertex’s arguments about corrupt intent under the AKS and the applicability of the BIS Exception.

Anti-Kickback Statute

The court upheld OIG’s interpretation of the AKS by affirming that “induce” and “remuneration” should be understood in their ordinary meanings, not as specialized criminal law terms. It rejected Vertex’s argument that “induce” should be limited to corrupt transactions, as this would make the AKS’ many statutory and regulatory safe harbors unnecessary. The court noted that the AKS’s broad language and structure, including the statute’s various safe harbors, indicate Congress’s intent to cover a wide range of transactions, not just those involving criminal intent. Despite Vertex’s argument that the Proposed Fertility Program merely facilitates access to treatment, the court concluded that the financial incentives could improperly influence both patients and health care providers, thus placing the Proposed Fertility Program within AKS’s scope. The court agreed with the OIG’s determination that Proposed Fertility Program constitutes remuneration intended to induce patients to choose CASGEVY, which may be reimbursed by a federal health care program. Accordingly, the court held that the Proposed Fertility Program potentially violates the AKS.

Beneficiary Inducement Statute

The court also upheld the OIG’s interpretation of the BIS and agreed that the statute prohibits remuneration likely to influence a beneficiary’s choice of provider, practitioner, or supplier. The court found that the BIS’s language, which focuses on the likelihood of influence rather than intent, supports a broad interpretation that encompasses any remuneration that could sway a patient’s decision. Additionally, the Proposed Fertility Program could violate the BIS because the offer of up to $70,000 for fertility services constitutes “valuable remuneration” likely to influence patients’ selection of physicians. The court rejected Vertex’s argument that the Proposed Fertility Program enhances patients’ access to treatments and thus falls within the BIS Exception. Rather, the court held that the Proposed Fertility Program’s financial renumeration is an attempt to influence patients to purchase CASGEVY by offsetting undesirable side effects. Upholding the OIG’s determination that the BIS Exception would not apply, the court concluded that there was insufficient evidence to show that the Proposed Fertility Program would enhance access to care without posing a risk of harm to patients and federal health care programs.

Takeaways

The status quo of the AKS intent and renumeration standards remains unchanged; a violation of the AKS does not require a corrupt intent. As such, manufacturers cannot avoid liability under AKS and BIS by asserting a “non-corrupt” purpose for proposed assistance programs, i.e., that the purpose of patient support programs is to remove financial barriers to treatment. In short, it continues to be difficult for pharmaceutical manufacturers to provide direct financial assistance to federal health care program beneficiaries without violating the AKS or BIS.

Navigating the creation of compliant financial support arrangements that benefit patients can be challenging. The attorneys at ArentFox Schiff routinely assist clients in developing such arrangements that meet clients’ goals while complying with applicable laws and relevant regulatory guidance.