On December 17, 2019, the Office of Inspector General (OIG) issued an Advisory Opinion regarding a proposed supermarket loyalty program that would have provided customers with rewards points on out-of-pocket costs related to the purchase of pharmacy products. OIG determined that while the proposal would implicate the Federal anti-kickback statute (AKS) and the prohibition on beneficiary inducements under the civil monetary penalties (CMP) law, the arrangement would satisfy the CMP law’s exception for retailer rewards and pose minimal risk under the AKS.

The requester operates over 200 grocery stories, approximately half of which operate in-store, full-service pharmacies. The stores operate a loyalty program under which customers may earn points for every dollar spent on “qualifying” purchases. In particular, qualifying purchases do not currently include costs related to pharmacy items or immunizations. The requester inquired as to the permissibility under federal fraud and abuse laws of expanding the rewards program to include out-of-pocket costs paid in connection with pharmacy products. Rewards points earned on pharmacy products would be available to the general public and subject to the same restrictions (such as expiration dates and point limits) that apply to all other rewards points.

The OIG concluded that although the proposed arrangement would implicate the federal anti-kickback statute and the CMP statutes regarding beneficiary inducements, but would satisfy the requirements of an applicable exception to the definition of remuneration and pose a low risk of fraud and abuse. Specifically, the OIG reasoned that the proposed arrangement would fall under an exception for retailer rewards programs, where:

(1) the rewards consist of coupons, rebates, or other rewards from a retailer;

(2) the rewards are offered or transferred on equal terms available to the general public, regardless of health insurance status; and

(3) the offer or transfer of the rewards is not tied to the provision of other items or services reimbursed in whole or in part by the Medicare or Medicaid programs.

The OIG concluded that the proposed arrangement meets all of these criteria. Furthermore, the OIG concluded that the proposed arrangement would pose a low risk of fraud and abuse under the federal anti-kickback statute for two reasons. First, the risk that the proposed arrangement would drive customers to requester’s supermarkets to purchase federally reimbursable items or services is unlikely. Second, the proposed arrangement would not involve a waiver or reduction in cost-sharing amounts, therefore, the risk of over-utilization or increased costs to the federal health care programs is also small.

Accordingly, the OIG concluded that it would not impose administrative sanctions on the requester in connection with the proposed arrangement. As with all OIG opinions, this conclusion only applies to the proposed arrangement however, it is an informative illustration for those evaluating similar loyalty programs.