In an Advisory Opinion posted August 15, 2014, the Office of Inspector General (“OIG”) concluded that a proposed arrangement by a specialty pharmacy (“Requestor”) might generate prohibited remuneration under the Federal anti-kickback statute and would pose a risk of fraud and abuse.
Specialty pharmacies dispense drugs that retail pharmacies typically do not – sometimes because the manufacturer limits the pharmacy network authorized to dispense the specialty drugs, or because managed care companies limit how they reimburse for dispensing, or because the retail pharmacy cannot manage the specialty drugs’ specific handling and inventory management requirements. As a result, when a patient presents a specialty drug prescription to a non-specialty-drug-dispensing-pharmacy (a “Local Pharmacy”), the Requestor proposed to pay the Local Pharmacy a fee for certain “Support Services” the Local Pharmacy would provide when referring the patient and transferring the prescription to Requestor. The OIG did not look favorably on the Requestor’s proposed arrangement.
The Proposed Arrangement
The Requestor dispenses specialty drugs directly to patients and through its free-standing pharmacies nationwide. It proposed entering into contracts with Local Pharmacies to help patients obtain their specialty drugs from Requestor, and it would pay the Local Pharmacies for Support Services including:
Accepting new specialty drug prescriptions, Gathering patient and prescriber demographic information, Recording patient-specific medication history and use, Counseling patients on appropriate medication use, Informing patients about specialty drug access (including a drug’s availability at pharmacies other than Requestor) and the services specialty pharmacies generally provide, Obtaining patient consent to forward the specialty drug prescription to Requestor, and Coordinating with the patient and Requestor to transfer the specialty drug prescription and perform ongoing refill assessment and inform Requestor about changes in patient medication regimens.
The Requestor certified it would pay a fair market fee for the Support Services on a “per-fill basis,” so the Local Pharmacy is compensated first upon the initial transfer of a prescription to Requestor and then for all refills during the course of therapy for the patient.
The OIG found a risk of fraud and abuse in the arrangement, which could generate prohibited remuneration under the anti-kickback statute, and stated that the OIG may impose administrative sanctions for activities under the proposed arrangement. The OIG’s main concern with Requestor’s proposal was that the per-fill fee would only be paid when a patient was referred to this particular specialty pharmacy. The arrangement required Local Pharmacies to inform a patient if the specialty drug is available through pharmacies other than Requestor’s, and that he or she has the right to choose which specialty pharmacy would fill the prescription, but the OIG found the fees “inherently subject to abuse” since they would be “directly tied” to how many initial and refill prescriptions the Requestor filled for patients referred by the Local Pharmacy. The OIG noted that the care coordination Support Services might benefit patients, but the Local Pharmacy would not be compensated for providing those Support Services to a patient who ultimately transferred a prescription to a different specialty pharmacy, so the Local Pharmacy had an incentive to generate business for the Requestor. The OIG was also “skeptical” of the Requestor’s claim that many Local Pharmacies would “not have the information necessary” to direct patients to a pharmacy that could dispense the specialty drugs – noting the information is readily available from manufacturers, managed care companies, and providers, and suggesting that the Requestor could market its services to Local Pharmacies without offering remuneration in connection with referrals.
As always, the OIG acknowledged that the parties’ intent must be determined before concluding an anti-kickback violation occurred, which is beyond the scope of the advisory opinion process. But, this OIG Advisory Opinion is a reminder to avoid arrangements which directly link payments to referrals and business generation, particularly when federal healthcare dollars will be involved.