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New HHS-OIG Advisory Opinion Highlights Kickback Risks – And Whistleblower Opportunities – When Pharmaceutical Companies Provide Free Genetic Testing

On April 11, 2022, the Department of Health and Human Services Office of Inspector General (OIG) issued an advisory opinion, Advisory Opinion 22-06, highlighting the risks pharmaceutical companies may encounter if they try to incorporate free genetic testing into their marketing plans. Indirectly, the opinion also shows how whistleblowers can identify promising False Claims Act qui tam cases involving the provision of free genetic testing to patients.

In recent years, an increasing number of pharmaceutical companies have paid genetic testing companies to provide free genetic tests to patients who might use the pharmaceutical companies’ drugs. This practice can be particularly remunerative for pharmaceutical companies that sell drugs for rare diseases associated with specific genetic mutations. If a genetic test confirms a diagnosis for such a disease, and there is only one branded drug approved to treat that disease (albeit amongst several alternative non-drug or generic drug therapies), then a positive test result creates a potentially lucrative selling opportunity for the pharmaceutical company that paid for the test.

In a June 2021 Law360 article, two Ropes & Gray lawyers, Eve Brunts and Alison Fethke, discussed some of the compliance issues that may arise when pharmaceutical companies provide free genetic tests, either directly or through a third party testing company. Brunts and Fethke, who presumably are very familiar with current marketing practices in the pharmaceutical industry, observed that “[v]arious pharmaceutical companies” now offer genetic tests that “can detect rare genetic conditions” susceptible to treatment with the companies’ drugs. The authors warned that providing such testing at no cost can implicate the anti-kickback statute because it “may provide value to a patient and generate business for the sponsoring company by helping to identify patients for whom a company’s product is appropriate.” They further noted that a pharmaceutical company could mitigate the compliance risks if, among other things, “[t]he availability of the test at no cost is not used to promote the product or leverage access to a health care provider.”

OIG’s latest advisory opinion on free genetic testing largely concurred with the cautionary advice that Brunts and Fethke expressed, even though OIG concluded that, under the particular circumstances presented, it would not impose sanctions on the pharmaceutical company that requested the advisory opinion.

The requesting pharmaceutical company sells two forms of a drug approved to treat two forms of a rare cardiovascular disease that is associated with certain genetic mutations. The requestor has retained a vendor to offer free genetic testing that screens for those mutations. The requestor represented to OIG that “genetic testing to identify [the mutations] cannot diagnose the Disease, but it nonetheless may have potential value for certain categories of patients.” The requestor further assured OIG that it does “not provide any data about utilization of the [genetic testing] to its sales representatives.”

OIG began its legal analysis by stating that “the [free genetic testing] implicates the Federal anti-kickback statute because it results in remuneration to Eligible Patients and their physicians that may induce Eligible Patients to purchase, or their physicians to prescribe, the Medications or other products manufactured by Requestor.” Nonetheless, OIG concluded that the free genetic testing in this instance poses “a low risk of fraud and abuse” under the anti-kickback statute for several reasons, including that:

  • the test results, “standing alone,” do not provide “a sufficient basis” to prescribe the requestor’s drugs, because the test results do not definitively indicate whether a patient has the disease the drugs are approved to treat;
  • the testing vendor does not tell the requestor which providers ordered the tests;
  • the requestor “does not allow its sales force to access any data that Requestor receives from the Testing Vendor;” and
  • the requestor “does not use data from the Testing Vendor . . . for sales and marketing activities, including sales targeting.”

Under these circumstances, OIG found, it was unlikely that the requestor would be able to use the genetic testing as “a marketing or sales tool to induce physicians to order additional items and services, including further testing or Requestor’s products, or to induce beneficiaries to purchase the Medications.”

Thus, although OIG issued a favorable advisory opinion to this requestor, the opinion identifies a number of potentially problematic sales and marketing tactics that could give rise to anti-kickback statute violations when a pharmaceutical company provides free genetic testing. Specifically, if a pharmaceutical company offers free genetic testing that reveals whether a patient has a certain disease, and the company obtains even de-identified test results, it can use that information to target the physicians who ordered the tests. Especially with a rare disease drug, there is huge value to the pharmaceutical company when it can identify the few physicians in the country who have patients that may benefit from the company’s drug. To the extent a pharmaceutical company pays a third party testing company and receives testing data in return, that payment, too, may constitute illegal remuneration in exchange for a referral.

Thus, like the Brunts and Fethke article that came before it, the OIG opinion is not only an important source of advice to pharmaceutical companies, it also provides a roadmap for potential whistleblowers who know about pharmaceutical companies that improperly obtain genetic testing data to support their sales and marketing activities. Both the use and provision of such data can create excellent opportunities for whistleblowers to bring False Claims Act qui tam cases predicated on violations of the anti-kickback statute.