On July 23, a federal district court in Ohio issued an opinion providing further guidance on how courts may view “swapping” arrangements under the Anti-Kickback Statute. The relator alleged that Omnicare, a pharmacy provider, gave a nursing home discounts on drugs provided to Medicare Part A patients in exchange for referrals of Medicare Part D business, a so-called “swapping” arrangement that the relator alleged violated the Anti-Kickback Statute. The relator moved for summary judgment on the basis of a contract with a nursing home in which Omnicare agreed to charge a nursing home a rate for certain drugs for Medicare Part A patients, but a higher rate (“usual and customary charge”) for the same drugs billed under Medicare Part D.

The court denied the relator’s motion for summary judgment on liability under the AKS for two reasons. The first issue was whether the prices that Omnicare offered under Medicare Part A constituted “remuneration.” The relator argued that the fact that prices for certain drugs were lower for Part A patients than for Part D patients was evidence that the Omnicare offered “discounts” for Part A business, and that such discounts qualify as remuneration. In essence, the relator argued that any prices less than “usual and customary charges” should be deemed to be “remuneration” under the AKS. Omnicare, by contrast, argued that whether the Part A prices qualify as “remuneration” depends on whether the prices were fair market value, not whether they were less than prices offered for services under Part D. The Court concluded that “fair market value” is the appropriate benchmark for determining remuneration. Given that, the court stated, it would be relevant whether Omnicare charges the same price for Part A services regardless of whether a nursing home refers Part D patients. Likewise, the court explained, Omnicare’s costs of providing services would be relevant “because no rational market participant would intentionally lose money on its Part A patients unless otherwise compensated.” The relator introduced evidence that Omnicare’s pricing was below its “invoice cost,” but Omnicare presented contrary evidence that invoice cost was not the appropriate measure of cost, in part because it failed to reflect discounts from suppliers. The court concluded that Omnicare’s evidence therefore raised a genuine issue of fact on the issue of remuneration. On the second issue, the court also held that Omnicare had raised a genuine issue of fact as to whether Omnicare intended “below-market” pricing on Part A patients to induce the nursing home to refer Part D business or rather, as Omnicare contended, its pricing “was merely the product of sloppy accounting and management at Omnicare.”

A copy of the court’s opinion can be found here.