2 Anti-Kickback Developments Hold Lessons for Biopharma

February 13, 2025 | By Mary Kohler in Law360

Last year ushered in new Anti-Kickback Statute concerns for biopharma companies after Ultragenyx Pharmaceutical Inc. paid $6 million to settle U.S. Department of Justice allegations about its free genetic testing program in late 2023.[1] As the industry asked why, prosecutors warned of more to come.[2] At year-end, they delivered.

In November, the DOJ inked a $47 million settlement with QOL Medical LLC and its CEO.[3]

In December, the U.S. Department of Health and Human Services Office of Inspector General ostensibly lit a path forward, issuing a favorable advisory opinion on a separate program.[4]

Manufacturer-funded diagnostic testing fills important access gaps for patients but poses complex AKS questions. We need candor, common sense and thoughtful policy. Instead, these seemingly coordinated year-end developments provide a study in contrasts.

This article explores them both and offers suggestions for manufacturers trying to navigate the vast space between them. Even though the recent administration change has prompted regulatory uncertainty, these year-end developments shape the current state of play.

The QOL Settlement

QOL sells Sucraid, which helps patients digest common sugars in food. The condition, congenital sucrose-isomaltase deficiency, is a genetic disorder. Approved in 1997, Sucraid was projected to help up to 1,000 seriously ill infants and toddlers who would otherwise fail to thrive.[5]

Today, CSID is estimated to affect 0.2% of the U.S. population.[6] Some patients with symptoms of irritable bowel syndrome may actually have undiagnosed CSID. QOL paid a lab to run free tests to help doctors diagnose them.

A precise genetic test is available, but QOL allegedly picked one that didn't identify the genetic cause and erred on the side of positive results. The U.S. Department of Justice also said reps misled doctors about how to interpret results and pressured them to try Sucraid for borderline patients. Company documents called the program a marketing cornerstone and showed that QOL tracked rep conversions of results into scripts.

This story has a market expansion feel. Medicare claims data show an eightfold spike in Part D spending that coincides with the testing.[7] But the CSID population has grown significantly in three decades, and tapping into an on-label market isn't wrong.

So, was it that the test was free? Was it the reliability? The way QOL positioned it? It's hard to say. But it's also hard to see the outcome differing if QOL had merely promoted this test, in this way, without paying for it.

The settlement hasn't stopped QOL from offering free testing, and while the company's current website suggests QOL has implemented safeguards, it still doesn't pay for the genetic test.[8]

Finally, the company's corporate integrity agreement outlines no specific oversight requirements,[9] but it dives deep on oft-scrutinized industry marketing practices.

The OIG Advisory Opinion

Where the QOL settlement leaves off, the OIG's opinion seems to pick up and reassure. The opinion was requested by a nephrology company that sells a product that treats an ultra-rare kidney condition that can progress to end-stage renal disease if left untreated.

Patients can face diagnosis delays because they present with common kidney stones, and many doctors don't know about the condition. And while newer genetic tests promise an improvement over traditional diagnostics, insurers limit their coverage.

The nephrology company aims to support timely diagnosis by educating providers about the disease and genetic testing options. The program covers several tests. Doctors select the best one for each patient, and the OIG stressed the quality and reliability of each test.

The OIG's favorable opinion rests on three fundamental ideas.

First, the company has operational controls that safeguard against abuse. Many echo an earlier OIG opinion, Advisory Opinion No. 22-06, issued in 2022.[10]

Second, the program is unlikely to skew clinical decisions or compromise patient care because it offers doctors no incentive to prescribe the product. Also, the company receives no information that would enable marketing based on results.

Third, the lab's fees are fixed, and it shares no data identifying providers or patients.

Deeper Issues Lurk

The QOL settlement illustrates legitimate concerns. And the OIG opinion outlines practical controls for manufacturers to study and follow. But advisory opinions can paint picture-perfect situations, and they offer no comfort on the wide variety of programs that can't match them exactly.

For example, neither of these recent developments speaks to one of the bigger questions for manufacturers. Namely, if targeting and sales conversations are wrong, would an unbiased medical conversation that's informed by results still be acceptable?[11]

The OIG opinion, which says the lab's genetic counselors won't discuss treatment options, suggests no. But rare disease patients describe frustration trying to understand promising yet risky new therapies well enough before taking them. Their doctors don't always know. Has anyone considered these patients and their doctors may actually welcome more dialogue?

More fundamentally, the remuneration question is tricky. The OIG considers free testing inherently valuable to patients, but a test that's diagnostically necessary would presumably be covered. On the surface, the payor — not the patient — gets the bulk of the value.

But as the nephrology company's scenario illustrates, payors can deny the testing. And this often drives the need for manufacturers to establish these programs.

Frustrations over insurers limiting access to diagnostic testing are growing. Several states have passed laws mandating coverage for biomarker testing.[12]

What Now?

Despite the prevailing political assumption that less regulation brings simplicity, the uncertainty of regulation by enforcement creates operational difficulty and inefficiency.

Last fall, the OIG announced plans to update its 20-year-old guidance to manufacturers. It's a welcome move, but now it's not clear where that stands.[13] Still, the impetus for these programs has not changed. We need a constructive public dialogue and meaningful guardrails.

Until we know whether — and how — the new administration's priorities might affect the industry, here are some tips to consider for the myriad programs that fall between the bookends.

Have a solid rationale.

The nephrology company identified a clear problem for providers, patients and payors. Then it designed a program to solve it.

Think critically about why business leaders want to provide free testing. Do patients face legitimate diagnostic barriers? How would this program improve quality or patient outcomes? Would it decrease overall spending on care?

If business partners have a valid objective, challenge them to build a program that achieves it.

Watch the data flowing back to the company.

There are many good reasons for funding diagnostic testing, analyzing the results and perhaps even connecting with physicians and patients. But these ideas may become overshadowed by settlements that focus on sales activities connected to results.

The OIG opinion says — repeatedly — the company won't get results data that identifies physicians or enables marketing in any way. They mean it.

Teams should collect anonymized data necessary to operate the program and oversee the lab. Data collection beyond these essentials should be analyzed closely, and managed in execution.

Lean in on the test.

This may be harder than it sounds. Both Ultragenyx and the OIG's prior opinion urged a weak link between the test and a company's product. But the DOJ criticized QOL for picking a nonspecific test, and the OIG opinion analyzes three highly specific diagnostics. Do these situations point toward refined thinking?

It's hard to say. The OIG still says a test that leaves doctors with decision-making discretion presents less risk than one that points definitively toward a product. But wouldn't that test just as easily point away? That's why we need dialogue.

For now, make sure that the test is scientifically sound and provides meaningful information, and that prescribers will know how to interpret results to achieve the best outcomes for their patients.

Pick a reputable lab.

The QOL settlement agreement notes the test was not FDA-approved, but quickly concedes this is true of all lab-developed tests. That's curious.

Equally curious is the OIG's failure to redact the lab's identity. Was this an oversight? Or does the OIG's mention of Blueprint Genetics, and its owner Quest Diagnostics Inc., hint this played a role in its comfort? The OIG also mentioned the lab's certification and accreditation credentials.

It's hard to know whether these curiosities mean anything. But they suggest a growing interest in the lab and coincide with the U.S. Food and Drug Administration's efforts to oversee lab-developed tests. Keep this in mind. Probe on the lab relationship and urge teams to do their diligence.

Monitor implementation.

Lawyers can gravitate toward analyzing up-front structure while compliance sweats the downstream details. But managing risk requires effective, sustained collaboration from planning through execution.

New programs present novel issues. Assess them holistically. Ask curious questions. Watch how the program is positioned. Challenge monitors to look beyond what's measurable and ensure implementation matches the analysis. Consider whether a program might be affecting federal program payments unexpectedly.

That's what an investigator would do.

Don't assume rare disease is different.

In an industry that can be plagued by bad press, rare disease therapies are a source of optimism. But don't let this cloud judgment. Not all rare conditions are dire, and while the FDA's approval process can adapt for compelling need, the Anti-Kickback Statute can be less flexible, and counterintuitive to business partners.

QOL is a privately held company with fewer employees than many multinational companies' compliance departments alone, but it now has a corporate integrity agreement nonetheless.

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© 2025, Kohler Health Law, PC | Mary Kohler is the Founder and Principal of Kohler Health Law.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Department of Justice Press Release, Pharmaceutical Company Ultragenyx Agrees to Pay

$6 Million for Allegedly Paying Kickbacks to Induce Claims for Its Drug Crysvita, Dec. 21, 2023.

[2] B. Penn, Once-Renowned US Health Fraud Unit in Boston Gets an Inside Edge, Bloomberg Law, Feb. 27, 2024. Last February, BioMarin announced it faces similar allegations. Reuters, BioMarin Pharma Gets DOJ Subpoena on Sponsored Testing Programs for Two Therapies, Feb. 26, 2024.

[3] DOJ Press Release, Pharmaceutical Company QOL Medical and CEO Agree to Pay $47 M for Allegedly Paying Kickbacks to Induce Claims for QOL's Drug Sucraid, Nov. 15, 2024.

[4] HHS OIG, OIG Advisory Opinion No. 24-12, Issued Dec. 12, 2024.

[5] The Pharmaletter, Orphan's Sucraid Launched in the USA, Jul. 22, 1998. Orphan's Sucraid Launched In The USA - Pharmaceutical industry news | The Pharmaletter (accessed Jan. 13, 2025).

[6] Congenital Sucrase-Isomaltase Deficiency - Symptoms, Causes, Treatment | NORD, National Organization of Rare Diseases (accessed Jan. 31, 2025).

[7] According to CMS data, Medicare Part D spending on Sucraid grew from $6.3M in 2018 to $55.1M in 2022. CMS website, Medicare Part D Spending by Drug (accessed Jan. 31, 2025).

[8] QOL website, Order Sucrose Breath Test Kits for Your Office (accessed Jan. 19, 2025). [9] HHS OIG website (accessed Jan. 19, 2025). [10] HHS OIG, OIG Advisory Opinion No. 22-06, Issued Apr 6, 2022.

[11] M. Kohler, DOJ's Biopharma Settlement Raises Anti-Kickback Questions, Law360, Jan. 23, 2024.; D. Hallward-Driemeier, L. Hoey and A Fethke, Feds' Biotech Enforcement Efforts are Too Heavy-Handed, Law360, May 13, 2024.

[12] American Cancer Society, Access to Biomarker Testing | American Cancer Society Cancer Action Network (accessed Jan. 19, 2025).

[13] The HHS Inspector General was among the 17 IGs terminated by President Trump last month. Z. Miller et. al, Trump Fires More Than a Dozen Independent Inspectors General, AP News, Jan. 25, 2025. AP News (accessed Feb. 10, 2025). In addition, the DOJ is undergoing significant change as Joshua Levy, the US Attorney focused on these cases, is no longer the US Attorney for Massachusetts and the new Attorney General is currently realigning the agency's priorities. R. Lucas, New Attorney General Moves to Align Justice Department With Trump's Priorities, NPR, Feb. 5, 2025. NPR (accessed Feb. 10, 2025).