Pharmacy Enforcement Alert: Federal Government Crack-Down Involving Medicare Advantage Over-the-Counter Cards

As a result of the increased marketing by payors of over-the-counter (“OTC”) cards to plan members, pharmacists are being placed in jeopardy by patients who do not know, or appreciate, the legal complexities around proper use of these cards. The risks are particularly high with respect to Medicare beneficiaries because federal regulators have ongoing prosecutions and investigations in this area. Accordingly, pharmacists need to understand their obligations with respect to the handling of these benefits.

Specifically, OTC cards are issued to members in the form of a pre-loaded or pre-paid card that may be used to purchase eligible, over-the-counter, non-prescription items. The qualified items may include vitamins, toothpaste, haircare products, cosmetics, and antihistamines. The dollar value of the benefits to members ranges between $100 and $150 per month, but any unused monies are forfeited unless they are used for the purchase of eligible items in that month.

Accordingly, patients often discover that their need for eligible items is far lower than the monthly OTC benefit amount, and therefore seek to maximize the value of the card through other means. All too often, this means that patients will demand that a pharmacy permit them to exchange the OTC card for non-eligible items, including cash-equivalents at a discount to value. Accordingly, well-intentioned pharmacists are faced with a difficult choice: either accede to patient demands or risk prescription flight to their competitors. In highly competitive markets, this practice appears rampant.

It therefore comes as no surprise that regulators have taken heed; their focus, however, is not the plans which foster this environment by marketing untenable OTC benefit levels, or the patients who attempt to leverage those otherwise restricted funds. Rather, regulators have cracked down on pharmacists who have caved to these pressures. Earlier this year, the Department of Justice’s Medicare Strike Force, a dedicated health care fraud unit that operates in regions across the country, announced the conviction of a pharmacist in New York City who paid kickbacks involving OTC cards to customers. Notably, that pharmacist faces up to 10 years in prison when sentenced.

How Frier Levitt Can Help

If you or your business handles OTC cards and/or has fallen victim to schemes, including those described above involving OTC cards, please contact us today for a complimentary consultation. We routinely advise clients on strategies for ensuring compliance with all applicable laws and correcting past instances of noncompliance, whether that be OTC-related or otherwise. Frier Levitt is a national health care boutique that has served community pharmacists for more than 20 years, and is grateful for your attention to this important matter.