Compounding Semaglutide – What Stakeholders Need To Know

In the past several years, as a result of supply shortage issues and gaps in insurance coverage, GLP-1 medications are often ordered and compounded in the context of novel business work flows that include telehealth, cash-only arrangements, subscription payments, and various fulfillment mechanics such as in-office dispensing and administration, as well as vertically integrated pharmacies. When developing these medication-focused business models, there are many considerations that must be taken into account to address the regulatory issues that are potentially triggered, including corporate practice of medicine prohibitions, federal and state kickback and fee splitting prohibitions, self-referral prohibitions, FTC and FDA rules surrounding advertising, and rules for reimbursement.

Corporate Practice Prohibitions

The corporate practice of medicine doctrine (“CPOM”) generally prohibits a business corporation from practicing, or engaging a licensed practitioner to provide, professional services. CPOM is intended to prevent unlicensed individuals from exerting control over medical practices or licensees to preserve the integrity of the licensee’s independent professional judgment. As a result of CPOM, in many states, a non-licensee cannot own an entity that hires physicians or other practitioners—whether as employees or independent contractors—to provide clinical services. The impact of CPOM in GLP-1 models is typically implicated in the context of how a prescriber is introduced into a model and whether the applicable state adheres to any level of CPOM prohibition.

Anti-Kickback and Fee Splitting Prohibitions

The Federal Anti-Kickback Statute (“AKS”) prohibits exchanging remuneration (anything of value) in exchange for referring or arranging for a referral of an item or service reimbursable by a federal healthcare program. Often, states impose their own kickback prohibitions, and frequently these prohibitions apply irrespective of how and whether the referral results in a claim for payment to a particular payor. However, many of these states cite back to the AKS and its safe harbors by reference or have similar carve outs for particular compensation models.

In most GLP-1 focused models, kickback rules will be implicated based on (i) licensees’ arrangements with marketing or management companies, and/or (ii) arrangements between prescribers and pharmacies. It is essential for stakeholders to conduct a review of their compliance with applicable kickback rules, some of which can result in license revocation and/or criminal penalties.

Self-Referral Prohibitions

Self-referral prohibitions forbid providers from referring patients for designated health services, which can include outpatient prescription drugs, to an entity with which the provider has a financial relationship. Prescribers of GLP-1s, especially those who intend to have common pharmacy ownership or another financial relationship with the dispensing entity, must evaluate how their arrangements implicate self-referral prohibitions on a federal and state level. 

FTC/FDA Rules

When anticipating the advertising of any compounded prescription product, including semaglutide, there are FTC and FDA rules that must be followed.  These rules prohibit advertisements from being false or misleading and from including drug claims about compounded medications. When advertising any compounded medication, content must be evaluated for compliance with these advertising rules, as well as for any potential intellectual property infringement.

Payments and Reimbursement

The social security act (“SSA”) requires physicians and suppliers to submit claims to Medicare carriers for services furnished to Medicare beneficiaries within one year of the service date. In a model where a provider participates with Medicare, but does not bill for his or her services, this may be flagged and create liability for the provider within and beyond the GLP-1 model. Other payors may have similar requirements for participating providers, prohibiting them from charging covered beneficiaries on a cash basis. Failure to submit claims for otherwise covered services can result in various penalties, including termination from the applicable payor’s network.

Organizational Evaluation and Compliance

As the pharmaceutical landscape surrounding the compounding of GLP medications, including semaglutide, continues to evolve, taking action to ensure compliance and understanding the legal frameworks discussed above will be essential for marketers, prescribers, and 503A/B compounding facilities.

In part 2 of the Mastering GLP-1 Compounding Webinar Series, Frier Levitt partners Jesse Dresser and Arielle Miliambro provided an in-depth presentation that can help stakeholders navigate the regulatory concerns, recommended business strategies, and the legal considerations that impact models that anticipate compounding medications such as semaglutide. Contact Frier Levitt for assistance in determining how these federal and state rules impact your business and what measures your organization can appropriately take to operate within compliance.

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