Fourth Circuit Upholds OIG’s Unfavorable Advisory Opinion on Patient Assistance Program
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On January 23, 2025, the U.S. Court of Appeals for the Fourth Circuit affirmed a federal district court’s ruling against the Pharmaceutical Coalition for Patient Access (“Coalition”), rejecting its challenge to an unfavorable advisory opinion issued by the Office of Inspector General (“OIG”) of the U.S. Department of Health and Human Services.1 The advisory opinion concluded that the Coalition’s proposed drug subsidy program could violate the federal Anti-Kickback Statute (“AKS”).
The Proposed Program
The Coalition, a charity funded entirely by a collection of drug manufacturers, proposed a patient assistance program subsidizing the out-of-pocket expenses for certain oncology drugs. Under the terms of the program, Medicare Part D beneficiaries would be eligible for assistance if the individual (1) had a cancer diagnosis; (2) had a household income between 150% and 350% of the federal poverty level; (3) was prescribed a participating manufacturer’s drug; and (4) was approved for coverage under their Part D plan. The Coalition would allow any manufacturer to participate if it agreed to fund subsidies for its own products and contribute to other initiatives, including cancer screening and research.
Procedural History
In July 2022, the OIG notified the Coalition that it would issue an unfavorable advisory opinion unless it withdrew its request. The Coalition declined. On September 30, 2022, the OIG issued its unfavorable advisory opinion finding that the Coalition’s program was “highly suspect” and could generate prohibited remuneration under the AKS if the requisite intent was present because the cost-sharing subsidies were likely to induce the purchase of a participating manufacturer’s drug.2 The OIG believed the remuneration could increase federal healthcare program expenditures, steer beneficiaries to a specific subsidized drug, distort marketplace competition, and skew clinical decision-making.
The Coalition challenged the OIG’s advisory opinion in the U.S. District Court for the Eastern District of Virginia. On January 17, 2024, the court granted summary judgment in favor of the government, finding that the OIG’s advisory opinion was not arbitrary, capricious, or contrary to law.
The Fourth Circuit Decision
The Coalition appealed the district court’s ruling on three grounds. First, the Coalition contended that the OIG erroneously interpreted the meaning of “induce” and “remuneration.” The textual challenge centered on the following language:
Whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce a referral or the purchasing of an item or service paid for by a federal health care program.3
Second, the Coalition challenged the OIG’s characterization of the assistance program as a prohibited quid pro quo. Third, the Coalition argued that the OIG violated the Administrative Procedure Act (“APA”) because the advisory opinion was inconsistent with prior favorable opinions, examining similarly structured patient assistance programs.
The Fourth Circuit rejected the Coalition’s challenges and affirmed the lower court’s ruling on the following grounds:
Definition of “Induce”: The court held that the word “induce” should be construed according to its ordinary meaning of “to lead on; to influence; to prevail on; to move by persuasion or influence,” rather than requiring it to include a criminal solicitation element. Under the Coalition’s interpretation, an unlawful inducement would require the recipient of the remuneration to engage in a separate unlawful act. The court rejected the Coalition’s reliance on United States v. Hansen, a Supreme Court of the United States decision interpreting an immigration statute, distinguishing the holding because Hansen involved the inducement of inherently unlawful conduct.4 By contrast, the AKS prohibits offering remuneration to influence behavior related to legal activities, such as the purchasing of a drug paid for by the Part D program. The decision makes clear that the crux of the AKS is the improper inducement itself, not the legality of the recipient’s conduct.
Definition of “Remuneration”: The court held that the word “remuneration” should be interpreted according to its ordinary meaning of “payment or compensation,” rather than being limited to transactions that explicitly corrupt medical decision-making. The Coalition argued that “remuneration” must be narrowly confined to inherently corrupt payments because the word appears alongside the terms “kickback” and “bribe” in the statute. While the court acknowledged that kickbacks and bribes are inherently corrupt, it found the Coalition’s argument unpersuasive due to the statute’s inclusion of the word “rebate,” a form of payment lacking a corrupt intent. The court also rejected the narrow interpretation because Congress’ inclusion of the words “any” and “including” reflected its intent to broadly regulate payments or transfers of value offered to improperly influence the recipient’s behavior.
Quid Pro Quo: The court deferred for a later case whether an AKS violation requires proof of a quid pro quo arrangement, but assumed for purposes of the appeal that such proof was required. The court considered a quid pro quo to mean “an action or thing that is exchanged for another action or thing o[f] more or less equal value[.]” The court found that the proposed assistance program included such an exchange because the Coalition’s subsidies would apply only to drugs from manufacturers that agreed to fund the program. While the Coalition argued it was agnostic to the specific drug purchased, the court found that tying subsidies to participating manufacturers inherently created a quid pro quo arrangement.
APA Challenge: The Coalition argued that the OIG’s advisory opinion was arbitrary and capricious because its conclusion was inconsistent with prior opinions evaluating similarly structured patient assistance programs. Specifically, the Coalition contended that the OIG issued favorable opinions of other programs with comparable designs, while its assistance program was subjected to stricter scrutiny. The Fourth Circuit rejected this argument, clarifying that although the OIG had issued favorable opinions regarding other programs, the different outcomes stemmed from the OIG’s enforcement posture rather than its interpretation of the AKS. The court emphasized that decisions related to enforcement discretion are generally unreviewable under the APA, and the OIG’s determination to potentially subject the Coalition’s program to sanctions did not amount to an arbitrary or capricious agency action.
Key Takeaways
The Fourth Circuit’s rejection of the Coalition’s challenge reinforces the government’s position that manufacturer-funded patient assistance programs will continue to face regulatory scrutiny. The decision marks a small victory for the OIG amid the tsunami of challenges to the administrative state. In the wake of the recent Supreme Court decisions in Loper Bright Enterprises, Jarkesy, and Corner Post, which collectively signal a judicial shift toward curbing agency authority and overreach, the Fourth Circuit’s decision affirms that the OIG retains broad interpretive authority over the AKS and is entitled to deference when issuing advisory opinions.5
Conversely, the decision is a setback for pharmaceutical manufacturers looking to reduce out-of-pocket expenses for low-income beneficiaries. The industry should remain cognizant that assistance programs designed to appear neutral or charitable may be subject to scrutiny where the financial support is tied to specific manufacturers.
Manufacturers seeking to establish compliant patient assistance programs must be diligent during the design phase. Considering the full spectrum of OIG advisory opinions and incorporating appropriate safeguards to mitigate AKS risks is essential. Any assistance program should be structured to avoid even the appearance of improper inducement or manufacturer-specific incentives, as regulators are focused on the potential for abuse stemming from such arrangements.
For questions about patient assistance programs or the OIG advisory opinion process, please contact AGG Healthcare attorneys David Blank or Cody Davis or your regular AGG attorney.
[1] Pharm. Coal. for Patient Access v. United States, 2025 U.S. App. LEXIS 1465 (4th Cir. 2025); citing Pharm. Coal. for Patient Access v. United States, 2024 U.S. Dist. LEXIS 8876. (E.D. VA 2024).
[2] See OIG Advisory Opinion 22-19 (Sept. 30, 2022).
[3] Pharm. Coal. For Patient Access, 2025 U.S. App. LEXIS 1465 (4th Cir. 2025); citing 42 U.S.C. § 1320a-7b(b)(2).
[4] United States v. Hansen, 599 U.S. 762 (2023).
[5] Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024); SEC v. Jarkesy, 603 U.S. 109 (2024); Corner Post, Inc. v. Bd. of Governors of the Fed. Rsrv. Sys., 603 U.S. 799 (2024).
- David M. Blank
Partner
- Cody B. Davis
Associate