Key Legal Concerns for Pharmacies Participating in Telehealth

A pharmacy’s adoption or creation of a telehealth model is a complex endeavor that requires evaluation of a variety of state and federal laws, most commonly including kickback and physician self-referral prohibitions, patient privacy protections, state prohibitions on the corporate practice of medicine and fee splitting, patient choice laws, and professional board regulations enumerating the requirements for engaging in the practice of medicine and pharmacy.

Of particular concern to any health care arrangement is the Federal Anti-Kickback Statute, which is a criminal law that prohibits providing “remuneration” to induce or generate patient referrals. Remuneration can include anything of value and is not always in the form of a direct payment; the provision of free products or services to a prescriber in exchange for patient referrals is just as likely to implicate the Anti-Kickback Statue as a cash payment to that provider. 

The Anti-Kickback Statute can be implicated in a variety of ways in telehealth arrangements due to the flow of money and services between the stakeholders – technology and/or marketing companies, physicians, and pharmacies. For example, if a telehealth technology company markets its platform to generate consumer traffic, and a licensee pays that company for access to its network, the fee may be considered renumeration from the licensee to the company for patient referrals resulting from its marketing activities. Alternatively, if a prescriber does not pay for that same technology company’s platform, the access to the platform may be considered the provision of a free service to that physician in exchange for referrals that prescriber makes to an affiliated pharmacy. Many states have enacted substantially similar prohibitions to this federal statute, reinforcing the importance of ensuring compliance in the payment structure between the parties to a telehealth arrangement.

Any payment between the entities involved in a telehealth relationship must also be evaluated from a fee splitting perspective. In many states, both physicians and pharmacies are prohibited from dividing their fees with individuals or entities that have not participated in the rendering of care. Fee splitting commonly occurs in telehealth arrangements when patients are not provided with an itemized invoice, which is typical of cash-based telehealth programs: a patient is presented with a single dollar amount that is purported to include the cost of:

• using the telehealth service,
• an encounter with a physician, and
• any resulting medically necessary prescription products.

In these circumstances, the telehealth technology company collects payment from the patient and divides the fee among itself, and the 2 licensees. However, the lack of clarity in the payment breakdown frequently enables the technology company to share in the professional fees earned by the physician or pharmacy. The impermissible division of fees is distinct from situations in which payment is made to a technology company for a discrete and specific service, such as use of its platform. Pharmacies must remain aware of fee splitting limitations and seek to confirm the propriety of business partners’ activities in any model that does not enable the pharmacy to collect its balance directly from a patient.

In addition to pharmacies that actively include telehealth in their business models, any pharmacy that receives prescription orders resulting from telehealth may have a duty to validate the encounter conducted by the virtual prescriber. In the absence of an appropriate telehealth encounter that establishes a bona fide provider-patient relationship, any resulting prescription order is likely to be seen as invalid. Therefore, the lack of a properly formed provider-patient relationship may have a direct impact on a pharmacy. Although a pharmacy cannot interfere with or control the physician-patient relationship, state laws typically set forth varying degrees of duty placed upon pharmacists to confirm the validity of a prescription prior to dispensing; the existence of a bona fide provider-patient relationship is a critical component of that validity.

Telehealth presents both unique opportunities and risks to pharmacies. Irrespective of how a pharmacy accesses a telehealth network (whether by contracting with an existing third-party model as a “participating” or “network” provider, or by establishing a proprietary platform or brand), the pharmacy must perform appropriate due diligence to ensure that its activities do not expose the business to civil and criminal risk, ramifications with payers, or board discipline. 

Arielle T. Miliambro, Esq. is a partner at Frier Levitt, LLC, a national boutique healthcare law firm established in 2000, and Jonian Rafti, Esq., CIPP/US, is an associate in the firm.