OIG Gives Green Light to Pharmacy Discount Program Under CMP and AKS

In its recent Advisory Opinion No. 17-05, OIG stated that the Proposed Arrangement (“Arrangement”) would not violate the anti-kickback statute (“AKS”) nor would it prompt administrative sanctions under the Civil Monetary Penalties (“CMP”) provision of the Social Security Act, prohibiting inducements to beneficiaries.

The Proposed Arrangement discussed in the Opinion centers around a retail pharmacy chain offering a voluntary membership program to Federal healthcare program beneficiaries that includes discounts on certain prescriptions and clinic services.

OIG further noted that Program Members receiving discounts would also be eligible to earn rewards in the form of credits when certain merchandise in-store photo-finishing services were purchased. On its face, the Arrangement would appear to invoke prohibitions of the CMP and AKS, since the discounted items and services and earned credits could induce a beneficiary to select the retail pharmacy chain as his or her supplier for federally reimbursable items or services.

However, the Opinion goes on to explain that the Arrangement satisfies the requirements of the exception to the definition of remuneration related to retailer rewards for the purposes of the Beneficiary Inducement CMP and poses a low risk of fraud and abuse under the AKS. First, OIG address the retailer reward exception to Beneficiary Inducements CMP. The rule provides that retailer rewards are excepted if: (i) the rewards consist of coupons, rebates, or other rewards from a retailer; (ii) the rewards are offered or transferred on equal terms available to the general public, regardless of health insurance status; and (iii) the offer or transfer of the rewards is not tied to the provision of other items or services reimbursed in whole or in part by the Medicare or State health care program.

OIG explained that the Arrangement met all criteria for the following reasons: (i) the pharmacy chain is a retailer that offers coupon rewards and guaranteed credit and savings and in the form of rebates; (ii) Federal health care program beneficiaries would be allowed to enroll putting membership on equal terms with the balance of the retail pharmacy’s customers; and while discounts and credits would be member-only, any member of the general public regardless of health insurance status or plan could pay the fee and reap the membership benefit; and (iii) the offer or transfer of the rewards would not be tied to the provision of other items or services reimbursed in whole or in part by the Medicare program or a State health care program.

Next, OIG addressed the Arrangement under the AKS. It concluded that it would meet an exception to the definition of “remuneration” under the Beneficiary Inducements CMP and while no analogous exception exists under the AKS, the Arrangement would pose a low risk of fraud and abuse and OIG would refrain from subjecting the retail pharmacy chain to administrative sanctions. Specifically, OIG highlighted the fact that the Arrangement does not include any features to specifically steer beneficiaries to the pharmacies or Clinics to purchase federally reimbursable items or services since the pharmacy offers a variety of inventory. Members would not need to purchase any healthcare related items to achieve the benefit of the discounts and coupons, and finally, the pharmacy will not offer Members any direct incentive to receive services at its place of business. The Arrangement is also unlikely to result in overutilization or increase Federal health care programs’ costs since the Member would obtain the prescription regardless, and the only claims being submitted to a Federal health care program fall outside of the Benefit program.

OIG Opinion No. 17-05’s nod of approval of the proposed Arrangement will undoubtedly pave the way for other retail pharmacy chains to create and execute Membership Programs. It will allow them to not only stay competitive with their peers in terms of customer enrollment and retention, but also calm any concern of running afoul of the federal prohibitions on beneficiary inducement potentially subjecting them to catastrophic consequences.


For more information on this topic, please contact Adrienne Dresevic, Esq. (248) 996 – 8510 or by email at adresevic@thehlp.com.

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