The OIG recently issued an Advisory Opinion Letter to an anonymous pharmacy that relates to a hot-topic Pharmacy Law Issue—Copayment Assistance. The OIG advised that it would not take any action against the pharmacy for a “proposed arrangement” involving a rewards program under which patients would receive gasoline cards for amounts spent at the pharmacies, including copayments for Federally covered medications. This Advisory Opinion could provide an avenue for pharmacies to create copayment assistance programs.
The OIG evaluated whether the proposed arrangement constituted an actionable violation of the Anti-Kickback statute. The proposed arrangement could potentially generate prohibited remuneration under the anti-kickback statute if the requisite intent to induce or reward referrals of Federal health care program business were present. However, the OIG ultimately held that it would not impose administrative sanctions on the pharmacy in connection with the proposed arrangement. This represents a somewhat lenient stance taken by the OIG with respect to rewards or rebates for dollars spent on Medicaid or Medicare reimbursable services.
Pursuant to Section 1128(D)(b) of the Social Security Act (42 U.S.C. § 1320a-7d(b)) and 42 C.F.R. § 1008, the OIG issues advisory opinions about the application of OIG’s fraud and abuse authorities to a requesting party’s existing or proposed business arrangement. Here, the pharmacy requesting the Advisory Opinion (believed by some to be CVS Pharmacy) sought the blessing of the OIG to implement a rebate or reward program whereby customers would earn gasoline discounts based on the amount spent on purchases in retail stores and pharmacies, and including cost-sharing or copayment amounts paid by the customer in connection with items covered by Federal health care programs. Essentially, the program allows customers to earn discounts on gasoline purchases at participating gas stations wherein for every $50 that a customer spends in the stores on “allowable purchases,” the Customer is entitled to a discount of 10 cents per gallon on a single purchase of gasoline, up to a maximum of 20 gallons. The pharmacy sought to include co-payments for prescriptions covered under Federal health care programs as an “allowable purchase.” The pharmacy sought the OIG’s opinion whether the proposed arrangement would constitute grounds for the imposition of sanctions (i) under the civil monetary penalty provision prohibiting inducements to beneficiaries (section 1128A(a)(5)); (ii) under the exclusion authority (section 1128(b)(7)); or (iii) the civil monetary penalty provision (section 1128A(a)(7)).
The anti-kickback statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. Where remuneration is paid purposefully to induce or reward referrals of items or services payable by a Federal health care program, the anti-kickback statute is violated. The anti-kickback statute provides for the imposition of civil monetary penalties and exclusion from participation against a pharmacy who offers or transfers remuneration to a Medicare or Medicaid beneficiary that the pharmacy knows or should know is likely to influence the beneficiary’s selection of a particular pharmacy for which payment may be made, in whole or in part, by Medicare or Medicaid. Remuneration has been defined as including transfers of items or services for free or for other than fair market value.
The OIG has previously taken the position that “incentives that are only nominal in value are not prohibited by the statute,” and has interpreted “nominal in value” to mean “no more than $10 per item, or $50 in the aggregate on an annual basis.” However, the Affordable Care Act created an exception for “retailer rewards,” such that retailer rewards do not constitute “remuneration” under the statute if: (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. These statutes and opinions potentially provide pharmacies with legitimate methods to address copayment assistance.
In its Advisory Opinion Letter, the OIG found that the proposed arrangement would implicate both the civil monetary penalty and the anti-kickback statute, but that the proposed arrangement satisfied the terms of the exception to the definition of remuneration in the statute related to retailer rewards and, would pose a low risk of fraud and abuse under the anti-kickback statute. The reasons for finding that this proposed arrangement was not actionable are as follows:
- The rewards consist of coupons, rebates, or other rewards from a retailer because the pharmacy operates supermarkets and pharmacies that sell items directly to the public, and allows customers to earn discounts on gasoline as a reward for purchases in the stores
- The proposed arrangement program would be offered on equal terms to all customers at the pharmacy’s supermarkets and pharmacies
- The offer of the rewards under the proposed arrangement would not be tied to the provision of other items or services reimbursed in whole or in part by the Medicare or Medicaid programs (i.e., customers could redeem rewards only on their purchase of gasoline, which is not Medicare/Medicaid item; Medicare/Medicaid prescription purchases would not be required nor would they be treated differently than any other purchase in the pharmacy’s stores for purposes of earning the rewards)
- The risk that the proposed arrangement would steer beneficiaries to the pharmacy’s supermarkets or pharmacies to purchase Federally reimbursable items or services is low because the majority of the pharmacy’s stores are general supermarkets, selling a broad range of groceries and other non-prescription items, and customers would not be required to purchase any prescription items to earn rewards, and there would be no specific incentive for transferring prescriptions to the pharmacy
- The proposed arrangement would be unlikely to result in overutilization or otherwise increase costs to Federal health care programs, because any cost-sharing amounts counting towards a customer’s rewards would result from prescription drugs already prescribed
- The proposed arrangement would not involve a waiver or reduction in any cost-sharing amounts; only the amount actually paid out-of-pocket by a customer would count towards earning rewards
What This Means for Pharmacies
Notably, this Advisory Opinion Letter by the OIG demonstrates the OIG’s mindset that a rewards or rebate program, like the one at issue here, would not involve a waiver or reduction of copayments for Medicare/Medicaid beneficiaries, in violation of Federal law. The OIG noted that because only the amount actually paid out-of-pocket by a customer would count towards earning rewards, and because the customer would redeem the “modest” rewards in the form of discounts on purchases outside of the pharmacy’s stores on gasoline (an item for which the Customer could not be reimbursed by Federal health care programs) there was no waiver of copays. This may open the door to additional programs using rebates or rewards to customers for amount spent on copays for prescriptions covered by Medicare or Medicaid.
However, while this may suggest the OIG’s intent and inclination to enforce certain provisions of the anti-kickback statute, it is important to note that this Advisory Opinion is binding only on the requesting pharmacy, and only with respect to the exact facts as laid out before the OIG by the pharmacy. Thus, a similar program by a different pharmacy would not be entitled to the same legal protection as an Advisory Opinion issued by the OIG to the requesting pharmacy. Nonetheless, the Advisory Opinions allow experts to peer into the mind frame of the OIG to determine whether certain action will be taken against providers engaged in various actions.
