Spotlight on compliance: OIG reaffirms its views on cost-sharing waivers

Commercial benefit influences process

By J. Mark Waxman, JD
General Counsel
CareGroup Healthcare System

In the year 2000, Health Care Financing Administration (now known as the Centers for Medicare & Medicaid Services) issued its National Coverage Determination (NCD) extending Medicare coverage to "routine costs of qualifying trials," as well as those items and services made necessary to diagnose or treat complications arising from clinical trial participation.1 The impetus behind the NCD was to put trial participants on the same footing as those who were not participants, as well as to encourage or at least not penalize trial participants, in the event complications arose as a result of trial participation, even if the costs incurred for the trial itself could not be reimbursed.

Given the encouragement the NCD gives Medicare beneficiaries to participate in clinical trials, the issue then arose as to whether those who might participate in such trials could be further induced to do so through a waiver (without consideration of financial hardships) of cost-sharing obligations as well. That, however, might well be crossing the line with respect to prohibited inducements applicable to the Medicare program generally.

In February, the Office of the Inspector General (OIG) addressed this question in an Advisory Opinion.2 It concluded that, at least in the case of a government-sponsored trial, it did not.

The Medicare and Medicaid programs prohibit payment or receipt of remuneration to beneficiaries whom the donor "knows or should know" is likely to influence the use of a provider or supplier of covered services.3 Remuneration is broadly defined as and generally includes anything of financial value, and in particular the waiver of all or a part of any beneficiary cost-sharing obligation (absent specific case by case financially needy or uncollectable cases).4

The anti-kickback statute5 also may have impact. It prohibits remuneration paid, offered, received, or solicited to induce referrals. The prohibition under this provision is similarly board, and would cover any "arrangement" where "one purpose" of the remuneration involved is to induce the referral. Clearly, it is quite possible that a waiver of a payment, otherwise due, would become such a referral.

The clinical trial at issue was a Bypass Angioplasty Revascularization Investigation Diabetes Trial (BARI2D). The trial was initiated, funded, and managed by the National Heart, Lung, and Blood Institute (NHLBI) of the National Institutes of Health. Its goals were twofold: 1) to compare the effectiveness of two-drug therapy approaches; and 2) to compare the effectiveness of drug therapy combined with early surgery to drug therapy without surgery.

The trial was to be conducted over a seven-year period, involving some 40 clinical centers and 2,800 patients. To participate in the trial, a patient was required to have both stable diabetes and coronary artery disease.

The arrangement in question stemmed from the need for trial participants to self-monitor their blood glucose levels. Supplies to do this, monitors, blood testing strips, and lancets, were to be supplied by a specific manufacturer. Under the arrangement, a nationwide supplier of blood glucose testing products would purchase the necessary supplies from the manufacturer and provide them to the trial participants.

The supplier then would bill Medicare, Medicaid, and private insurance programs. Uninsured patients would receive the supplies free of charge. Medicare patients would receive a waiver of cost-sharing obligations. The articulated goal of this approach was to encourage enrollment and enhance participation.

Of importance to the OIG, the study was not 1) a commercial study; 2) a product-specific study; or 3) a product-oriented study. Instead, it characterized the study as "scientific" in looking at public health and clinical issues in the study area. It also noted that the types of drugs and supplies to be used, as well as the treatment protocol, were developed by investigators in the centers and NHLBI scientists, whose work was in turn reviewed by an independent protocol committee. A Data Safety Monitoring Board also was appointed to provide additional independent advice.

The submission to the OIG certified that the arrangement would not be dependent upon or operate in any way in concert with any other arrangement between the supplier, the manufacturer, and/or others involved in the trial.

The NCD was designed to allow trial participation on "the same basis" as a beneficiary might otherwise have access to Medicare benefits. This, of course, would mean that program requirements, such as cost-sharing, are applicable. Accordingly, the blanket waiver proposed for BARI2D, would likely create a material inducement in some cases and certainly could influence the selection of a provider or supplier. As a result, the prohibitions of the Social Security Act could certainly be implicated. Nevertheless, the OIG concluded that sanctions would not be imposed.

Initially, the OIG recognized the risks that inducements pose in the clinical trial context. Inducements might lead participants to use items or services for which there are effective and more appropriate treatments readily available and also could affect referral patterns leading to fraud and abuse risks.

In evaluating the proposed cost-sharing waiver for this trial, however, a number of factors led OIG to conclude these risks were low enough to be counterbalanced by the positive goals of BARI2D. Those factors were:

  1. The role of a governmental agency in creating and managing the trial. The fact that the agency was in a position to control clinical questions and the treatment protocol to be followed mitigates exposure to the improper influences the statutory prohibitions are designed to prevent.
  2. The clinical centers involved were selected in accordance with governmentally determined specifications.
  3. The trial was not created to study or benefit any specific commercial product.
  4. Resolution of the issues at the heart of the study would likely benefit all affected patients, including Medicare beneficiaries.

These factors allowed OIG to distinguish this trial from those "initiated, organized, funded, managed, or otherwise sponsored" by pharmaceutical companies or "private interests" without substantive governmental involvement.

Not surprisingly, the OIG sanctioned a governmental study that appeared to have relatively little substantive decision making by other parties. Whether it is possible that in some other contexts, where a nongovernmental sponsor is involved, a waiver program would be approved, remains questionable. Indeed, the specific lengths to which OIG’s opinion distinguishes BARI2D from one that might have similar independent scientific decision making, but might be of a particular product or even a class of products, would not appear to make the prospects of an approval of a similar cost-sharing waiver, or even receipt of some other type of unpaid-for benefit very likely.


  1. See
  2. OIG Advisory Opinion Request No. 04-01 (
  3. Section 1128A(a)(5) of the Social Security Act.
  4. Section 1158A(i)(6) of the Social Security Act.
  5. See section 1128(B)(b).