Recently, there has been an increase in the emergence of third-party companies specializing in assisting physicians and facilities obtain access to “unclaimed” rebates from manufacturers for prescription drugs. These rebates pertain to drugs either dispensed in-office or administered directly to a patient. Typically, these third-parties collect claims data from the physicians or facilities, reorganize the data, and submit it through intermediaries (including PBMs or PBM affiliates) for review by manufacturers. In many of these models, upon a manufacturer’s receipt of the data, it reviews the claim, evaluates whether to issue a rebate, remits the rebate to the PBM/PBM affiliate (who retains a portion of the rebate), then the PBM passes the remaining amount to the third-party rebate aggregator (who also keeps a portion of the rebate), and finally, the aggregator forwards the remaining sum to the healthcare practice. In these models, the healthcare practice is often unaware of (i) what drugs are eligible for rebate, (ii) whether an eligible claim will in fact result in a rebate being issued, and (iii) how much it will receive if the rebate is issued.
The Federal Anti-Kickback Statute (AKS) prohibits the exchange of remuneration in exchange for a referral. The AKS may be implicated by rebate aggregator models because the rebate is only available if the practice’s (or facility’s) physicians prescribe and administer certain drugs. A referral exists by virtue of the prescriber choosing that particular drug to administer or dispense over another. Thereafter, the manufacturer (through one or more intermediaries), remits payment to the practice/facility in exchange for the prescriber ordering that manufacturer’s product.
While the Discount Safe Harbor to the AKS is commonly available to rebate relationships, this safe harbor requires, in part, that the terms of a rebate be fixed and disclosed to the buyer of the drug at the time of the initial purchase to which the rebate applies. ‘‘Terms’’ of the rebate refer to the methodology used to calculate the rebate (e.g., a percentage of sales or a fixed amount per item purchased during a given period). Although failure to meet a safe harbor is generally not a per se violation of the AKS, it is unlikely that a rebate relationship outside the scope of a safe harbor can demonstrate a low risk of program abuse.
When a rebate aggregator model does not provide a practice or facility with a clear methodology for calculating an applicable rebate, the safe harbor cannot be met because the terms of the rebate are not fixed and disclosed in advance. In many circumstances, it is impossible for the rebate aggregator to disclose this information to the practice because the rebate aggregator does not have access to this rebate payment information until after the rebate is paid. The ambiguity in whether and how much a practice will earn as a rebate in these models prevents the arrangement from meeting a safe harbor.
Rebate aggregator arrangements pose heighted risks and must be carefully evaluated for regulatory compliance, including assessing (i) whether the arrangement meets a safe harbor and (ii) if it does not, what mitigating factors are present in the arrangement that may weigh in favor of the model not posing a heightened risk of fraud, waste and abuse.
Separate from AKS liability, many of these models present concerns related to fee splitting (because the aggregator retains a percentage of the rebate) as well as data privacy issues (because the upstream manufacturer will require claims-level data to process the rebate). These challenges are frequently able to be overcome but must be addressed in each iteration of a rebate aggregator model.
How Frier Levitt Can Help:
Healthcare practices and facilities involved in or considering these arrangements are strongly encouraged to obtain competent healthcare counsel to review these regulatory issues, especially in light of the Federal Trade Commission’s recent investigations into three major PBM-affiliated rebate aggregators. These investigations may lead to additional scrutiny of these models that operate downstream of the PBM affiliates. Frier Levitt frequently counsels clients in assessing and mitigating the risks associated with rebate aggregator arrangements.
