OIG finds proposed per-fill fee arrangements suspect

Ned MilenkovichThe Office of the Inspector General (OIG) for the United States Department of Health and Human Services (HHS) recently issued an opinion rejecting a proposed per-fill arrangement between a specialty pharmacy and local retail pharmacies. Although Advisory Opinion No. 14-06 is limited to the situation presented to the OIG, it provides insight as to how the OIG may treat similar per-fill contractual agreements. Pharmacies should review their current per-fill arrangements to determine whether they contain a pattern of facts similar to the those described in the opinion and below.

The specialty-pharmacy requestor that is the subject of the opinion has both a nationwide distribution channel and several freestanding pharmacies. The specialty pharmacy dispenses drugs for cancer, HIV/AIDS, multiple sclerosis, and hemophilia that are reimbursable by federal healthcare programs and are not available at all retail pharmacies.

Kickback? Or fee for services rendered?

Under the arrangement presented to the OIG, the specialty pharmacy would have compensated retail pharmacies for “support services” provided on a per-fill basis. In other words, the specialty pharmacy would have paid the retail pharmacies upon receiving (1) the initial prescription for the specialty drug and (2) each subsequent refill request.

Under the arrangement, the retail pharmacies would have provided support services, including collection of patient information, patient counseling, and acceptance and transfer the prescription to the specialty pharmacy.

The retail pharmacy would have been required to inform the patient with the specialty-drug prescription that pharmacies other than the specialty pharmacy could fill the patient’s prescription. However, the specialty pharmacy would not have paid the retail pharmacy for any support services provided if the specialty pharmacy did not receive a patient’s specialty-drug prescription.

Violations of the anti-kickback statute can occur when remuneration - anything of value - is “paid purposefully to induce or reward referrals” of prescriptions payable by a federal healthcare program. Penalties for violating the anti-kickback statute include fines of up to $25,000, imprisonment for up to five years, or both, as well as automatic exclusions from Medicare, Medicaid, and other federal healthcare programs.

Can’t pay to generate business

The OIG concluded that the proposed arrangement was a potential violation of the federal anti-kickback statute because the per-fill fee would reward referrals for specialty prescription drugs payable by a federal healthcare program.

In the opinion, the OIG explained that a significant risk existed that the per-fill fees paid by the specialty pharmacy would compensate the local retail pharmacies for generating business, as opposed to payment for legitimate, “commercially reasonable services.” 

The OIG found that per-fill fees are “inherently subject to abuse” because of their direct tie to the number of patient prescriptions referred to the specialty pharmacy. As the proposed arrangement would create financial incentives that could influence a retail pharmacy’s referral decisions, the OIG determined it posed more than a minimal risk of fraud and abuse under the anti-kickback statute.

In addition, the OIG cautioned, courts have held the anti-kickback statute covers arrangements where a portion of the payment is to induce referrals.

According to the opinion, the specialty pharmacy asserted that, if not for the proposed arrangement, local retail pharmacies would not know where to direct patients seeking to fill a prescription for a specialty drug.

The OIG expressed doubt at this statement and advised that the specialty pharmacy could describe its services to the local retail pharmacies without providing remuneration for specialty-drug prescription referrals received.