. Lifeblood of the Successful Pharmacy Chain: Marketing, Joint Ventures and Arrangements with Referral Sources…While Remaining Within Legal Parameters Presented by Jeffrey S. Baird, Esq. © 2013 Brown & Fortunato, P.C.

Legal Guidelines

Federal Statutes Medicare/Medicaid Anti-kickback Statute Beneficiary Inducement Statute Anti-Solicitation Statute False Claims Act False, Fictitious or Fraudulent Claims Stark Statute

Safe Harbors Small investment interest Space rental Equipment rental Personal services and management contracts Employees

OIG Guidance Advisory Opinions Special Fraud Alerts and Special Advisory Bulletins Special Fraud Alert: Joint Venture Arrangements Special Fraud Alert: Routine Waiver of Copayments or Deductibles Under Medicare Part B OIG’s April 2003 Special Advisory Bulletin: Contractual Joint Ventures

OIG Guidance Special Fraud Alerts and Special Advisory Bulletins (continued) Special Fraud Alert: Rental of Space in Physician Offices by Persons or Entities to Which Physicians Refer Offering Gifts and Other Inducements to Beneficiaries Telemarketing by Durable Medical Equipment Suppliers

States All states have enacted statutes prohibiting kickbacks, fee splitting, patient brokering, or self-referrals. State statutes may vary greatly. Some statutes refer to definitions and standards found in the federal statutes while others are materially different.

States Some statutes are applicable only when certain parties are involved, such as physicians or hospitals. Almost all states have statutes that apply when the payor is a government health care program. In addition, about 24 states have statutes that apply regardless of the identity of the payor.

States The following discussion is for illustration purposes only, and should not be taken as legal advice. Texas has an anti-kickback statute that applies regardless of payor. Tex. Occ. Code § 102.001(a) provides in relevant part:

States A person commits an offense if the person knowingly offers to pay or agrees to accept, directly or indirectly, overtly or covertly any remuneration in cash or in kind to or from another for securing or soliciting a patient or patronage for or from a person licensed, certified, or registered by a state health care regulatory agency.  

States The above statute adopts the exceptions and safe harbors to the Medicare/Medicaid Anti-kickback Statute. Tex. Occ. Code § 102.003 provides: Section 102.001 permits any payment, business arrangement, or payment practice permitted by 42 U.S.C. Section 1320a-7b(b) or any regulation adopted under that law.

States In addition, Texas also has an anti-kickback statute that applies only to the Texas Medicaid program.

States For comparison, the state of New Jersey has only one anti-kickback statute, and the statute applies only to the state Medicaid program. N.J. Stat. Ann. § 30:4D-17 (1968) provides, in relevant part: (c) Any provider, or any person, firm, partnership, corporation or entity who solicits, offers, or receives any kickback, rebate or bribe in connection with:

States (1) The furnishing of items or services for which payment is or may be made in whole or in part under this act [Medicaid]; or (2) The furnishing of items or services whose cost is or may be reported in whole or in part in order to obtain benefits or payments under this act; or

States (3) The receipt of any benefit or payment under this act, is guilty of a high misdemeanor and, upon conviction thereof, shall be liable to a penalty of not more than $10,000.00 or to imprisonment for not more than 3 years or both.

Innovative Marketing

Innovative Marketing Use of employees Use of independent contractors Media advertising Approaching physicians and other referral sources

Innovative Marketing Mail-outs Promotional items to customers and potential customers Health fairs, luncheons and kiosks

Provision of Discounts to Cash Customers An HME company is prohibited from charging Medicare substantially in excess of the company’s usual charges, unless there is good cause. See 42 U.S.C. § 1320a-7(b)(6)(A); 42 CFR § 1001.701(a)(1).

Provision of Discounts to Cash Customers The current regulations do not give any guidance on what constitutes “substantially in excess” or “usual charges.” While there have been some efforts by the OIG to define “substantially in excess” and “usual charges,” no final rule has been issued.

Provision of Discounts to Cash Customers The most recently proposed rules contemplate the “usual charge” to be either the average or median of the supplier’s charges to payors other than Medicare (and some others). See generally 68 FR 53939 (Sept. 15, 2003). Under these proposed rules, an HME company’s usual charge should not be less than 83% of the Medicare fee schedule amount (i.e., up to a 17% discount from the Medicare fee schedule).

Provision of Discounts to Cash Customers There would be an exception for good cause, which would allow a company’s usual charges to be less than 83% of the Medicare fee schedule, if the company can prove unusual circumstances requiring additional time, effort or expense, or increased costs of serving Medicare and Medicaid beneficiaries.

Provision of Discounts to Cash Customers The proposed rules would include charges of affiliate companies into the calculation of a supplier’s usual charges. An affiliated company is any entity that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the HME company.

Provision of Discounts to Cash Customers The proposed rules explicitly exclude fees set by Medicare, State health care programs, and other Federal health care programs (except TriCare). By implication, charges not specifically excluded will be included. However, CMS declined to promulgate the proposed rules into a final rule. 72 FR 33430, 33432 (June 18, 2007).

Business Arrangements

Business Arrangements Joint Venture Physician Ownership in Pharmacy

Business Arrangements Joint Ownership of a New Pharmacy Operation by a Hospital/DME Supplier and an Existing Pharmacy

Contractual Arrangements Pharmacy Staffing Services Agreement Operational Services Cooperative Marketing Program Administrative Services Agreement Loan/Consignment Closet

Contractual Arrangements Preferred Provider Agreement Employee Liaison Medical Director Agreement Purchase of Internet Leads Subcontracting

Fraud & Abuse Issues Billing for non-existent prescriptions. Billing multiple payers for the same prescriptions, except as required for coordination of benefit transactions. Billing for brand when generics are dispensed.

Fraud & Abuse Issues Billing for non-covered prescriptions as covered items. Billing for prescriptions that are never picked up (i.e., not reversing claims). Billing based on “gang visits.”

Fraud & Abuse Issues Prescription splitting to receive additional dispensing fees. Prescription drug shorting. Bait and switch pricing.

Fraud & Abuse Issues Prescription forging or altering. Dispensing expired or adulterated prescription drugs. Prescription refill errors. Violation of “own use” contracts and diversion.

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