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The Problem with the New OIG Safe Harbor Regulations


As Otto Von Bismarck once said, "If you like laws and sausages, you should never watch either one being made." That's true for new Safe Harbor regulations.

Otto Von Bismarck was Germany's Winston Churchill.  An aristocrat and statesman, Prime Minister of Prussia (1862–1890), and the first Chancellor of Germany (1871–1890), he is remembered for his aphorisms.  On Dec. 7, 2016, the HHS OIG Issued set of revised Safe Harbor final regulations, which seem to prove Bismarck's most famous quote:  "If you like laws and sausages, you should never watch either one being made."

With great sophistry and amazing pretzel logic, the OIG adopted new rules effective Jan. 7, 2017, creating new Safe Harbors under both the Anti-Kickback Statute (AKS) and the Civil Monetary Penalties Statute (CMPS). The purpose of the changes is to codify certain exceptions to the AKS and CMPS, which were introduced by several federal statutes, including the Affordable Care Act and the statute creating Medicare Part D, particularly with respect to waiver of copayments.   These changes include:


• A correction to the existing Safe Harbor for referral services;

• Protection for certain cost-sharing waivers, including:

• pharmacy waivers of cost-sharing for financially needy beneficiaries; and

• waivers of cost-sharing for emergency ambulance services furnished by State- or municipality-owned ambulance services;

• protection for certain remuneration between Medicare Advantage (MA) organizations and federally qualified health centers (FQHCs);

• protection for discounts by manufacturers on drugs furnished to beneficiaries under the Medicare Coverage Gap Discount Program; and

• protection for free or discounted local transportation services that meet specified criteria.


The OIG amended the definition of "remuneration" in the CMPS regulations by interpreting and incorporating certain statutory exceptions for:

• Copayment reductions for certain hospital outpatient department services;

• certain remuneration that poses a low risk of harm and promotes access to care;

• coupons, rebates, or other retailer reward programs that meet specified requirements;

• certain remuneration to financially needy individuals; and

• copayment waivers for the first fill of generic drugs.

 The rules are fairly convoluted, but it is the method by which the OIG convinced itself, and then attempts to convince the rest of us, that the rules make perfect sense, which is truly stultifying.  As an example, the first requirement created by the OIG for meeting the new Safe Harbor for Medicare Part D waivers of patient responsible portions (waiving copayments), is that you can't advertise the availability of waivers.  One commentator to the proposed Safe Harbor objected that this ban on advertising might not be constitutional under principles of Free Speech guaranteed by the First Amendment. In fact the United States Supreme Court reached this exact conclusion in 1976 in a case called Virginia State Board of Pharmacy vs. Virginia Citizens Consumer Council, Inc., holding that the government cannot ban the advertisement of prices by a pharmacy.  Specifically, Justice Blackmun wrote, the poor, elderly, and infirm (precisely the people covered by Medicare Part D) need access to pricing information to make informed decisions about how to get their prescriptions filled inexpensively. Therefore, the government cannot ban advertising of prices, which has the effect of "keeping the public in ignorance of the lawful terms that competing pharmacists are offering." 

 Despite this, the OIG defies all logic as well, as any internal or external consistency, with the following laughable reply:  "We do not believe that the restriction on advertising, as a condition of an exception to a statutory provision, is unconstitutional. The exception does not require or prohibit any conduct."  The logic then follows, since the rule banning advertising does not require or prohibit any conduct, it is constitutional for the OIG to create a law which does precisely what the Supreme Court held the government cannot do.   Sadly, Bismarck was right.

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