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OIG Gives a Thumbs Down to Specialty Pharmacy Prescription Transfer Program

Health Law Alert Susan B. Trujillo, Katea M. Ravega

On August 15, 2014, the U.S. Department of Health and Human Services, Office of Inspector General (“OIG”) posted Advisory Opinion 14-06 (“Opinion”) advising against a specialty pharmacy’s proposal to pay local retail pharmacies a fee for support services provided in connection with patient referrals to the specialty pharmacy. The fee would be paid per prescription filled. OIG concluded that the proposed program involved more than a minimal risk of fraud and abuse because the availability of the fee per fill would influence the retail pharmacies’ referral decisions.

The Proposed Program

The advisory opinion requestor (“Requestor”) was a specialty pharmacy that dispenses medication to treat a variety of diseases including cancer, HIV/AIDS, multiple sclerosis, and hemophilia. In the specialty drug world, and as the Requestor described, patients are often prescribed medications that cannot be filled by a local retail pharmacy for various reasons. For example, the medication may have cold chain storage requirements that make it impractical for the retail pharmacy to stock, Food and Drug Administration REMS program requirements, or a limited distribution imposed by the manufacturer. In addition, the retail pharmacy may decide not to stock a specialty medication due to the price of the medication combined with potential low volume. In these types of situations, the Requestor stated that the retail pharmacy may not know which alternative pharmacies the patient could choose that would have the ability to fill the prescription. Under the Proposed Arrangement, Requestor would contract with retail pharmacies and pharmacy networks (“Local Pharmacy”) to help these patients obtain their prescribed specialty medications from Requestor.

Under these contracts, the Requestor proposed that the Local Pharmacy would be required to provide various support services, including:

  1. accepting new specialty drug prescriptions from patients or their prescribers;
  2. gathering patient and prescriber demographic information;
  3. recording patient-specific medication history and use, including drug names, strength, 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 specialty drug prescription to Requestor;
  7. transferring the specialty drug prescription information to Requestor; and
  8. providing ongoing assessments for subsequent refills, including transmitting information on any changes in the patients’ medication regimens to Requestor (the “Support Services”).

In exchange for providing the Support Services, Requestor would pay Local Pharmacy upon Requestor’s receipt of the initial prescription for the specialty drug and upon each subsequent refill throughout the course of the patient’s therapy. The Requestor certified that this payment would be fair market value.

OIG Analysis

OIG concluded that the Proposed Arrangement implicated the Anti-Kickback Statute because the Requestor would pay a fee for each prescription filled that had been referred by the Local Pharmacy and for which the Local Pharmacy provided the Support Services. OIG noted that the fee would be paid only if the Support Services resulted in a referral and a filled prescription at the Requestor pharmacy. As a result, OIG viewed the fee itself as “directly linked” to the amount of business generated for Requestor by the Local Pharmacy. Requestor did not propose to pay the Local Pharmacy, for example, for Support Services that were not associated with referrals to Requestor. The OIG concluded that the fees were not solely compensation for bona fide, commercially reasonable services, and instead that the fees created potentially problematic financial incentives to materially influence the Local Pharmacies’ referral decisions. Therefore OIG concluded that the Proposed rrangement posed more than a minimal risk of fraud and abuse under the Anti-Kickback Statute.

What Does it Mean for Specialty Pharmacies?

The Proposed Arrangement suggested a solution pharmacies could employ for marketing their services while addressing the very real challenges patients encounter while trying to obtain specialty drugs. However, these business realities must be addressed within the limitations of the Anti-Kickback Statute, and based on this opinion it is clear that from the OIG’s perspective, fee for referral or fee for transfer type of arrangements — even if the fees are fair market value for services provided — are likely to be disfavored.

Finally, it should be noted that OIG advisory opinions are only applicable to the party that requested the opinion. OIG issues the advisory opinions with disclaimers that the opinions cannot be legally relied upon by any other party. For more information about this or other OIG advisory opinions, the Anti-Kickback Statute, or specialty pharmacy issues, please contact: Susan Brichler Trujillo at (602) 229-5318 / susan.trujillo@quarles.com, Katea Ravega at (602) 230-5541 / katea.ravega@quarles.com, or your Quarles & Brady attorney.