On September 7, 2017, the HHS Office of Inspector General (OIG) issued an Advisory Opinion to the owner of a retail pharmacy chain (Pharmacy) that would allow Federal health care program beneficiaries to participate in a paid membership program (Program).  The Program would include discounts and rebates on certain prescriptions and, where offered, on selected clinic services.

The Program was being offered previously to customers who satisfied certain eligibility criteria and paid an annual fee to join, but Federal program beneficiaries had not been permitted to enroll. In seeking the Advisory Opinion, the Pharmacy sought to modify the Program to extend it to Federal program beneficiaries as well.

The Program would provide three categories of benefits:

  1. Members would receive coupons providing discounts on Pharmacy retail prices for specific items paid for entirely out-of-pocket by Members, where no insurer would be billed (e.g., discounts on certain drugs, pet prescriptions, nebulizers and supplies, blood glucose testing meters and supplies, and immunizations);
  2. Members could receive a 10 percent discount on any clinic services that the Member pays for entirely out of pocket (including physicals, immunizations, and health screenings and testing, such as lipid panel testing); and
  3. Members could earn a 10 percent credit toward future eligible retail purchases when they purchase certain Pharmacy-branded products and in-store photo finishing (not including credit towards cost-sharing amounts, and products such as prescriptions, immunizations, clinic services, alcohol, tobacco and other excluded products).

In addition, Members would be eligible for guaranteed savings in the form of store credit for the difference between the membership fee and the total savings over the course of a year (if savings are less than the fee). Enrollment would be either online or in person, and the only requirements would be payment of the membership fee, that the Member be over 18 years, and that certain personal demographic information be provided (including name, date of birth, address, phone number).

No pharmacy or clinic would bill or submit a claim to any Federal health care program or other insurer for discounted items.  Further, Members would not earn any additional credit, bonus or other reward for filling new or transferred prescriptions at a pharmacy or receiving clinic services.

The OIG concluded that, for purposes of the Beneficiary Inducement CMP, the Program would satisfy the exception to the definition of “remuneration” related to retailer rewards.  Although the OIG pointed out that the Pharmacy did not have a mechanism to prevent Members from claiming reimbursement from their insurance companies for items and services purchased at a discount, it reasoned that the Members were not likely to submit such claims in most circumstances.  However, the OIG noted that if a Member could only earn, redeem, preferentially accumulate, or use credits based on the purchase of federally reimbursable items and services, they would have reached a different conclusion.

The OIG also concluded that the Program would pose a low risk of fraud and abuse under the antikickback statute (AKS).  The OIG reasoned that the Program would simply allow Federal program beneficiaries to access the discounts and rebates, and that:

  • the Program did not specifically steer beneficiaries to pharmacies or clinics to purchase federally reimbursable items or services, particularly since the stores offered a broad range of inventory, including groceries and other items;
  • the Program would not require Members to purchase any health care-related items or services from pharmacies or clinics to receive rewards;
  • there would be no direct incentive to transfer or fill prescriptions at a pharmacy; and
  • the Program was not likely to result in overutilization or otherwise increase costs to Federal health care programs.

As with any Advisory Opinion, the OIG’s opinion was limited only to the Pharmacy and Program that were the subject of the opinion.