Risks of Dispensing Dietary Supplements Online for Physicians and Pharmacists

The dietary supplement market has continued to be one that has captivated consumers and healthcare professionals alike.  While consumers can purchase certain dietary supplements and vitamins at a variety of retailers, an increasing number of healthcare providers – including physicians and pharmacies – are selling dietary supplements to their patients.  In many instances, these products are sold and dispensed online directly to consumers without a prescription or physician’s order.  Over recent months, Frier Levitt has encountered instances in which pharmacies and/or physicians attempt to get involved in this online market. 

In several models, a physician will refer a patient to order these dietary supplements online in exchange for a share of the profits of the sale.  Pharmacies participate in these arrangements by packaging these online supplements and delivering them directly to patients, or providing them to physicians (who in turn give them to the patients).  The goal of these arrangements it to make it easier for physicians to distribute the products directly to their patients.  In both instances, the physician and/or pharmacist typically confer these benefits upon online dispensaries in exchange for a share of the dispensary’s profits.  However, while these models may provide extra revenue for physicians and pharmacies alike, such models must be closely scrutinized to ensure legal and regulatory compliance.

Among the chief concerns of any relationship between referring physicians and dispensing pharmacies is the Federal Anti-Kickback Statute. The Federal Anti-Kickback Statute imposes criminal penalties against individuals or entities that knowingly and willfully offer, pay, solicit, or receive any renumeration either (A) “in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program” (e.g., Medicare and Medicaid), or (B) “in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal healthcare program.”[1]  While many of these arrangements contemplate patients paying cash, out of pocket (rather than claims being submitted to federal healthcare programs), the Anti-Kickback Statute has been interpreted broadly, and can even be triggered despite attempts to “carving out” federal healthcare beneficiaries.

Additionally, healthcare providers may face additional restrictions on a state level, such as fee-splitting limitations, which prohibit healthcare professionals from dividing part of their fees, earned from providing care to a patient, with another licensed or unlicensed individual/entity which has not contributed to the rendering of professional services.  As a result, many healthcare professionals may engage in these types of arrangements under a false belief that they are permitted under law, when in fact they are exposing themselves to civil, professional or even criminal liability.

That being said, however, there are multiple exceptions and safe harbors to both the Anti-Kickback Statute and other prohibitions such as fee-splitting restrictions which could permit physicians and pharmacies alike to engage in the aforementioned arrangements.  It is critical that healthcare providers are aware of these safe harbors and construct their arrangements and practices in accordance with the exceptions in order to comply with federal law and avoid potential liability.

How Frier Levitt Can Help

It is imperative that healthcare professionals, including physicians and pharmacies, are aware of the restrictions and prohibitions found in the Anti-Kickback Statute and other areas of federal law in order to avoid criminal liability.  If your practice plans on engaging in an arrangement with an online dispenser of dietary supplements, contact us today to speak to an attorney.  Our Life Sciences team has the tools and experience to assist healthcare providers construct and organize their arrangements in order to ensure compliance with applicable law and prevent imposition of liability.


[1] 42 U.S.C. § 1320a-7b(b)