BUSINESS OVERVIEW 6 hospitals, as well as ownership and investment interests held by government payor programs at the federal and state levels, physicians and their immediate family members; and including Medicare and Medicaid, private health insurers, • analogous state and foreign laws, such as state anti-kickback managed care plans and other third-party payors. Government and false claims laws, which may apply to sales or marketing authorities and other third-party payors, such as private health arrangements and claims involving healthcare items or insurers and health maintenance organizations, decide which services reimbursed by non-governmental third-party payors, medical products they will pay for and establish reimbursement including private insurers; state and foreign laws that require levels. A number of gene therapy products have been approved pharmaceutical companies to comply with the pharmaceutical over the past year by the FDA. Although the Center for Medicare industry’s voluntary compliance guidelines and the relevant and Medicaid Services, or CMS, subsequently approved its first compliance guidance promulgated by the federal government method of coverage and reimbursement for one such product, or to adopt compliance programs as prescribed by state laws the methodology has been subject to challenge by members of and regulations, or that otherwise restrict payments that Congress. CMS’s decision as to coverage and reimbursement may be made to healthcare providers; state and foreign laws for one product does not mean that all similar products will be that require manufacturers to report information related to eligible for analogous coverage and reimbursement. As there is no payments and other transfers of value to physicians and other uniform policy for coverage and reimbursement amongst third- healthcare providers or marketing expenditures; and state party payors in the United States, even if CMS approves coverage and foreign laws governing the privacy and security of health and reimbursement for any of our product candidates, it is unclear information in certain circumstances, many of which differ from what affect, if any, such a decision will have on our ability to obtain each other in significant ways and often are not preempted by and maintain coverage and adequate reimbursement from other HIPAA, thus complicating compliance efforts. private payors. Further, the ACA, among other things, amended the intent In addition, third-party payors are increasingly requiring that requirement of the federal Anti-Kickback Statute and the manufacturers provide them with predetermined discounts from healthcare fraud statute. A person or entity no longer needs to list prices and are challenging the prices charged for products. have actual knowledge of these statutes or specific intent to violate Coverage and reimbursement may not be available for any them. In addition, the ACA provided that the government may product that we commercialize and, even if these are available, assert that a claim including items or services resulting from a the level of reimbursement may not be adequate, which may violation of the federal Anti-Kickback Statute constitutes a false or adversely affect the demand for, or the price of, any product fraudulent claim for purposes of the federal civil False Claims Act. candidate for which we obtain marketing approval. Obtaining and maintaining adequate reimbursement may be difficult. Third- Efforts to ensure that our future business arrangements with third party payors are also increasingly chal lenging the price and parties will comply with applicable healthcare laws and regulations examining the medical necessity and cost-effectiveness of medical may involve substantial costs. It is possible that governmental products and services, in addition to their safety and efficacy. authorities wil l conclude that our business practices may not We may be required to conduct expensive pharmacoeconomic comply with current or future statutes, regulations or case law studies to justify coverage and reimbursement or the level of involving applicable fraud and abuse or other healthcare laws. If reimbursement compared to other therapies. If coverage and our operations are found to be in violation of any of these laws or adequate reimbursement are not available or reimbursement is any other governmental regulations that may apply to us, we may available only to limited levels, we may not be able to successfully be subject to significant civil, criminal and administrative penalties, commercialize any product candidates for which marketing including, without limitation, damages, fines, imprisonment, approval is obtained. disgorgement, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, additional Further, the United States government, state legislatures reporting requirements and/or oversight if we become subject to and other governments have shown significant interest in a corporate integrity agreement or similar agreement to resolve implementing cost containment programs to limit the growth allegations of non-compliance with these laws, and the curtailment of government-paid health care costs, including price controls, or restructuring of our operations, as well as reputational harm, restrictions on reimbursement and requirements for substitution which could significantly harm our business. of generic products for branded prescription drugs. There has been heightened governmental scrutiny recently over the Coverage and Reimbursement manner in which manufacturers set prices for their marketed Our ability to commercialize any product candidates successfully products, which have resulted in several Congressional inquiries will depend, in part, on the extent to which coverage and adequate and proposed and enacted federal and state legislation designed reimbursement for our product candidates will be available from to, among other things, bring more transparency to product 98 – GENSIGHT BIOLOGICS – 2017 Registration Document