OIG Scrutinizes Specialty Pharmacy Arrangement in Unfavorable Advisory Opinion

OIG recently issued Advisory Opinion 14-06, determining that a proposed arrangement for patient referrals to a specialty pharmacy had the potential to generate prohibited remuneration under the Anti-Kickback Statute. The proposed arrangement involved a specialty pharmacy paying a support services fee to local retail pharmacies when the local pharmacies referred patients to the specialty pharmacy. As such, OIG concluded that it could potentially impose administrative sanctions against the parties involved in the Advisory Opinion request.

Relevant Facts

Background. The requestor of the Advisory Opinion (“Requestor”) is a specialty pharmacy that dispenses specialty pharmaceuticals (“Specialty Drugs”) prescribed for certain chronic or life-threatening diseases that may be unavailable at local retail pharmacies. Generally, Specialty Drugs are drugs that are structurally complex, require special handling or delivery mechanisms and are priced significantly higher than traditional pharmaceuticals. Local retail pharmacies may be prohibited and/or restricted from dispensing Specialty Drugs due to handling restrictions and requirements, inventory management or manufacturer distribution limitations. The specialty pharmacy industry is growing at a rapid rate, and many health plans now contract with specialty pharmacies to supply enrollees with Specialty Drugs and coordinate treatment.

The Proposed Arrangement. Requestor desires to enter into contracts with local retail pharmacies to assist patients in obtaining Specialty Drugs from Requestor when the local retail pharmacy is unable to fill a Specialty Drug prescription (“Proposed Arrangement”). Under the Proposed Arrangement, the local pharmacy would provide various support services to patients. Such support services would include recording patient medication history, counseling patients and informing patients of access to Specialty Drugs and the services provided by Requestor and other specialty pharmacies. If a patient elected to transfer his or her Specialty Drug prescription to Requestor, the local pharmacy would obtain the patient’s consent and transfer the prescription to Requestor. In return, Requestor would compensate the local pharmacy for the fair market value of the support services provided to patients upon Requestor’s receipt of an initial Specialty Drug prescription and upon each subsequent refill (“Per-Fill Fees”).

OIG Analysis

The Anti-Kickback Statute makes it a criminal offense to knowingly and willfully offer or receive remuneration in an effort to induce or reward referrals of items or services reimbursable by federal health care programs. If just one purpose of the remuneration is to induce further referrals or obtain money in exchange for referrals, the Anti-Kickback Statute has been violated.

Under the Proposed Arrangement, Requestor would pay local retail pharmacies a Per-Fill Fee for support services each time the services resulted in a patient referral to Requestor for Specialty Drugs. OIG concluded that the Per-Fill Fees are inherently subject to abuse because the amount of Per-Fill Fees that the local pharmacy would receive would be directly tied to the number of patients with Specialty Drug prescriptions referred by the local pharmacy to Requestor. According to OIG, the Per-Fill Fees would not be compensation solely for bona fide, commercially reasonable services. Rather, the Per-Fill Fees could be viewed as compensation to the local retail pharmacies in exchange for generating business. OIG also determined that because the local retail pharmacies would receive compensation under the Proposed Arrangement only when support services resulted in referrals of patients to Requestor, there was significant risk that the Per-Fill Fees could influence the local pharmacies’ referral decisions. OIG noted that Requestor could have informed the local retail pharmacies of its services without offering remuneration in exchange for referrals of Specialty Drug patients.

Practical Takeaways

Retail pharmacies should be aware of the risks associated with specialty pharmacy arrangements. Additionally, all health care entities should use caution when entering into per-fill or per-click compensation structures. When arrangements provide compensation on a per-fill or per-click basis, OIG may interpret the compensation to be for business generation. Entities considering these types of arrangements should conduct a thorough evaluation of the arrangement and consider the following:

The structure of the formula used to determine compensation paid to the referring entity is critical, particularly when considering per-fill or per-click compensation structures;
Compensation paid to referring entities must be in exchange for bona fide, commercially reasonable services; and
The arrangement should be structured so as to avoid a potential misinterpretation that the arrangement is being pursued for the purpose of inducing referrals of federal health care program beneficiaries.

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