The Office of the Medicare Inspector General Issues Advisory Opinion on a “Per-Fill” Arrangement Between a Specialty Pharmacy and a Local Pharmacy

On August 15, 2014, the Office of the Inspector General (OIG) published an advisory opinion (the “Advisory Opinion”) related to a Specialty Pharmacy paying local pharmacies on a “Per-Fill” basis for “Support Services” provided by the local pharmacy. The request for the Advisory Opinion was submitted by the Specialty Pharmacy.

The Specialty Pharmacy proposed the following arrangement (the “Proposed Arrangement”):

  • local pharmacy receives a prescription for specialty drugs that Local Pharmacy cannot fill
  • local pharmacy refers prescription to Specialty Pharmacy
  • Specialty Pharmacy fills prescription through its distribution channel
  • local pharmacy provides certain Support Services to patients receiving specialty drugs, including
  • accepting new specialty drug prescriptions from patients or their prescribers
  • gathering patient and prescriber demographic information
  • recording patient-specific medication history and use, including drug names, strength, and directions
  • counseling patients on appropriate use of their medications informing the patients about specialty drug access and services generally provided by specialty pharmacies
  • obtaining patient consent to forward the specialty drug prescription to Specialty Pharmacy
  • transferring the specialty drug prescription information to Specialty Pharmacy
  • providing ongoing assessments for subsequent refills, including transmitting information on any changes in the patients’ medication regimens to Specialty Pharmacy

The OIG determined that the Proposed Arrangement would implicate the anti-kickback statute because Specialty Pharmacy would pay the local pharmacies a fee for Support Services each time the services result in a referral to Specialty Pharmacy to dispense a Specialty Drug. It further determined that the Proposed Arrangement poses more than a minimal risk of fraud and abuse. The reason articulated by the OIG for this finding centered on the Per-Fill Fees, which the Specialty Pharmacy would pay based on the referral from the local pharmacy, because they would be directly linked to business generated by the local pharmacies. The OIG went on to opine that, although there may be a commercially reasonable purpose for the provision of Support Services, the services would not be provided by the local pharmacy in situations where the local pharmacy had not made the referral. 

Although Advisory Opinions only apply to the parties requesting the Advisory Opinion, the guidance provided by the OIG provides a reasonable barometer of the tolerance that the Federal Government has for certain types of arrangements. This Advisory Opinion demonstrates the government’s distain for payments tied directly to “per-prescription” compensation arrangements. Moreover, the OIG acknowledges that the Support Services may be commercially reasonable but was skeptical that the Proposed Arrangement was nothing more that a scheme to kickback money to referring pharmacies. Frier Levitt has been cautioning clients for quite some time on the risk of “per-script” or “per-referral” relationships, such as payment to independent marketing entities. Therefore, this Advisory Opinion provides valuable insight for specialty, compounding, and full-service pharmacies, as well as any other healthcare provider that submits claims to Federal healthcare programs.

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