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Office of Inspector General (OIG) Issues Unfavorable Advisory Opinion to Specialty Pharmacy For Support Service Payments

On August 15, 2014, the OIG issued an unfavorable Advisory Opinion to a specialty pharmacy in connection with the pharmacy’s proposal to pay local retail pharmacies for support services that they provide in connection with patient referrals to the specialty pharmacy.  The specialty pharmacy dispensed specialty pharmaceuticals that are often unavailable to retail pharmacies.  Under the proposed contractual arrangement, the specialty pharmacy would pay local pharmacies for support services, including accepting new patients and recording their demographic information; recording patient-specific medication history and use and providing ongoing medication assessment; counseling patients on appropriate use of their medications and informing them about the specialty pharmacy’s services; obtaining patient consent to transfer the prescription to the specialty pharmacy; and transmitting the prescription to the specialty pharmacy.  The retail pharmacy was paid a “per-fill fee” at the time that the initial prescription was transmitted and upon each subsequent refill.

In evaluating the arrangement which was the subject of Advisory Opinion 14-06, the OIG concluded that the per-fill fees were “inherently subject to abuse” because they were paid only when the support services provided by the retail pharmacy resulted in a referral to the specialty pharmacy.  The OIG concluded that there was significant risk that the per-fill fees would represent compensation for the local pharmacies generating business (including federal health care program business), rather than compensation for bona fide, commercially reasonable services.  The unfavorable Advisory Opinion graphically illustrates the inherent risks in entering into arrangements where payments to the service provider are only made when a referral is generated.

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About this Author

Frank R. Ciesla, Giordano Law Firm Health Care Litigation Health Care Fraud and Abuse Tax Health & Hospital Law
Of Counsel

Mr. Ciesla is Chair Emeritus of the firm's Health Care Law Practice Area. His practice is primarily devoted to Health Care and Government Contracts Law. He counsels clients on legal developments facing healthcare providers in the modern health care environment. Firm clients include hospitals, nursing homes, physicians and physician groups, individual practice associations, home health agencies, ambulance carriers and industry-wide associations.

Mr. Ciesla advises such clients on business structures, mergers and consolidations, joint ventures, reorganization of health care providers...

Beth Christian, Giordano Law firm, Health Care Attorney,Health Care Fraud and Abuse, Cannabis Law, Non-Profit Law

Ms. Christian's practice is devoted to Health Care Law and legal issues facing Health Care facilities licensed professionals and non-profit organizations. She has over twenty years of experience counseling clients on legal issues facing the modern health care and non-profit communities.

Ari G. Burd, Shareholder, Giordano Law Firm, Labor & Employment, Cannabis Law, Health Care

Ari devotes his time to assisting and defending employers with regard to traditional employment issues. He frequently counsels employers for compliance with New Jersey laws and has extensive transactional and litigation experience.

Ari has litigated employment matters throughout the state, having made appearances in almost every Superior Court in New Jersey, as well as before both Federal District Courts in New Jersey and the Federal and State Courts in New York.  These actions have involved a diverse range of claims such as wrongful discharge, discrimination, harassment,...