The U.S. Department of Health & Human Services, Office of Inspector General (OIG) recently refused to bless a specialty pharmacy’s request to pay a per-prescription fee to retail pharmacies for “support services” to be provided in connection with prescriptions transferred to the specialty pharmacy (OIG Advisory Opinion 14-06). The OIG found that the per prescription fee could influence the retail pharmacy’s decision to transfer prescriptions, that the proposed arrangement implicated the Anti-Kickback Statute (“AKS”) and posed more than a minimal risk of fraud and abuse.

Generally, a specialty pharmacy is a mail order pharmacy that carries only expensive, often injectable, medications (usually over $1,000 per month) used to treat specific conditions such as HIV/AIDS and Hemophilia. Often, manufacturers of these specialty drugs limit their distribution to only certain specialty pharmacies and payors often limit patient access to only certain specialty pharmacies. The cost of the drugs and the limited need by retail pharmacies for the medications makes it cost prohibitive for most retail pharmacies to carry most specialty medications in stock. Thus, a retail pharmacy presented with a prescription for a specialty drug will often need to transfer the prescription or refer the patient to a specialty pharmacy.

In this case, the specialty pharmacy asked OIG to allow it to enter into agreements with various local pharmacies and pharmacy networks such that the specialty pharmacy would provide specialty drugs to their patients in exchange for a per-prescription fee amount. The retail pharmacy would be required to provide various “support services” including: (1) accepting new prescriptions from patients or their prescribers; (2) gathering patient and prescriber demographic information; (3) recording patient-specific medication history and use, including drug names, strengths, and directions; (4) counseling patients on appropriate use of their medications; (5) informing the patients about specialty drug access and services generally provided by specialty pharmacies; (6) obtaining patient consent to forward the prescription to the specialty pharmacy; (7) transferring the prescription information; and (8) providing ongoing assessments for subsequent refills, including transmitting information on any changes in the patient’s medication regimens (the “support services”).

The OIG concluded that the AKS was implicated because the specialty pharmacy would pay a per-prescription fee for support services each time the retail pharmacy transferred (referred) a specialty drug prescription. In most pharmacy-to-pharmacy prescription transfers, there is no accompanying payment. The OIG noted that the specialty pharmacy paid the retail pharmacy for support services only when a specialty prescription was transferred. Thus, the OIG found that the per-prescription fee is “directly linked” to specialty pharmacy prescriptions generated by the retail pharmacy, and could therefore materially influence the retail pharmacy’s referral decisions.

The requester argued and the OIG recognized that the retail pharmacy’s support services may benefit care coordination. However, the AKS applies if “one purpose” of the remuneration is to generate referrals (the one purpose test). Though the specialty pharmacy argued that it was paying fair market value for the services, the OIG found that there was a significant risk that the per-prescription payments were compensation to the retail pharmacy for generating referrals, rather than solely compensation for bona fide commercially reasonable services.

Most states allow pharmacies that are either commonly owned or have a contractual arrangement to engage in central fill arrangements, whereby an originating pharmacy receives the prescription, the prescription is shared with a dispensing pharmacy which dispenses the medication either directly to the patient or back to the originating pharmacy (similar to the arrangement above). Generally in a central fill arrangement, there is a sharing of pharmacy duties and responsibilities and some sort of sharing of the reimbursement for the medication.  Since many state pharmacy boards allow central fill arrangements, these were usually not viewed as an improper payment for referral arrangements. The above opinion casts doubt on these arrangements where there is a split of the reimbursement and when the drugs are reimbursed by a federal health care program (the AKS only applies when payment is made under a federal health care program). At a minimum, pharmacies engaging in such arrangements should make sure that the arrangements are commercially reasonable and justified such that they would not be viewed as a mere referral arrangement. And, while excluding or “carving out” federal programs does not always remove the federal AKS risk, in this instance excluding federally reimbursed prescriptions may help insulate the arrangements.

Absent from the OIG’s discussion was that many state prescription transfer laws and regulations only apply to refills and not to the transfer of the original prescription.

The opinion may be viewed here.

Key Takeaways:

  • Per-prescription payment for prescription transfers likely implicates the Federal Anti-kickback Statute (“AKS”).
  • Central fill arrangements should be carefully crafted to attempt to avoid characterization of reimbursement as a kickback.
  • Consider excluding prescriptions reimbursed by federal programs from central fill arrangements between separate entities (this would not be an issue for pharmacies under common ownership).
  • In states that have state anti-kickback laws, consider obtaining a state declaratory statement or similar ruling to address the payment arrangements, if your state allows this process.