The rub between the Medicare Part D program and PAPs affects the group of patients with income over 150 percent FPL. Seniors living above 150 percent FPL—$14,355 for an individual and $19,245 for a two-person household—will likely pay a monthly premium ranging from $20 to $35 plus a $250 deductible. After that first $250, patients will be responsible for 25 percent of the drug cost until out-of-pocket costs reach $2,250. Then comes the "doughnut hole," where patients bear the full burden of cost until they reach a total of $5,100 annual out-of-pocket cost. Patients will then be responsible for five percent of the cost of their prescription medicines. That's a lot of money for these patients, especially if they previously received free medications through pharma PAPs. After all, industry PAPs typically cast a wider net than Part D plans, covering patients with incomes up to 200 percent of FPL, with some, like Novartis' program for Gleevec (imatinib), extending well beyond.

"Part D Poverty Split" illustrates how people earning more than 150 percent of FPL pay substantially more for drugs than people whose incomes lie between 135 percent and 150 percent of FPL. However, the fact that these patients are a little better off, doesn't mean they can cope with drug plan deductibles, co-pays, and premiums. So companies are in a tough position: If all pharmas denied assistance to those eligible for Medicare, up to one million low-income patients could fall between the cracks, left with no option other than enrolling in Medicare, which they know they cannot afford.

The OIG Challenge

In particular, OIG has given guidance against direct co-pay assistance by pharma companies. In a November 2005 advisory bulletin, OIG stated, "Pharmaceutical manufacturer PAPs that subsidize Part D cost-sharing amounts present heightened risks under the anti-kickback statute." Instead, long-standing OIG guidance makes clear that pharmaceutical manufacturers should make cash donations to independent, bona fide charitable assistance programs, such as a non-profit co-pay relief program like the Patient Advocate Foundation, a national non-profit 501(C)3 patient-services organization.

The OIG rules aim to prevent any pharmaceutical company from convincing patients in the government program to take particular drugs. The compliance body reckons that pharmaceutical companies offering doughnut-hole or co-pay assistance to afford one of the company's own products potentially provide an incentive for the patient to stay on a more expensive product when less costly options exist.

Instead, companies that donate funds to foundations assist patients "without regard to the pharmaceutical company's interests and without regard to the beneficiary's choice of product, provider, supplier, or Part D drug plan," according to the November advisory. This type of donation offers protection by eliminating even the perception of improper inducements by any donor or co-pay assistance program. However, many drug manufacturers may hesitate to contribute money that might be used to purchase competitive products. If a company decides not to participate in such a foundation, it should seek an OIG advisory opinion for before designing an alternative program.

Across the Spectrum

In 2002, with the industry facing increasingly strong public pressure, several pharma companies joined together to create the TogetherRx discount card program. Abbott Laboratories, AstraZeneca, Aventis, Bristol-Myers Squibb, GlaxoSmithKline, Janssen Pharmaceutica, Novartis, and Ortho-McNeil offered seniors 20 to 40 percent discounts on 155 medicines, and at least a 15 percent savings on the cost of generic drugs. Similar discount programs were implemented by individual companies, such as Lilly, Merck, and Pfizer. However, these efforts were stopgaps, intended only to function until Medicare Part D took effect.

In mid-2005, news came that the TogetherRx program would end on December 31, 2005. Since then, individual companies have made decisions about the future of their PAPs. Company strategies for the PAPs cut across a wide spectrum.