Executive Summary
On October 10, 2012, the Department of Health and Human Services Office of Inspector General (“OIG”) posted OIG Advisory Opinion 12-14 (the “AO”). The OIG reviewed a proposed arrangement involving a retail supermarket rewards program that included rewards for a customer’s out-of-pocket amounts spent on prescriptions covered by federally funded health care programs purchased at in-store pharmacies. The OIG concluded: (1) while the rewards program would implicate the prohibition on beneficiary inducements, it would not constitute grounds for the imposition of civil monetary penalties (“CMPs”); and (2) while the rewards program potentially could be characterized as prohibited remuneration in violation of the Anti-Kickback Statute (“AKS”) if the necessary intent to influence referrals of federal health care program business were present, the OIG would not impose sanctions under the facts and circumstances presented by the party requesting the AO (the “Requestor”). The AO can be found here.
Proposed Arrangement
The Requestor owns and operates retail supermarkets, many of which have in-store pharmacies, that offer all customers a free preferred customer card (“Store Card”). Any customer who has a Store Card (“Customer”) is entitled to benefits such as special pricing and coupons, as well as the benefit at issue, the opportunity to earn discounts on gasoline purchases at a particular gas station chain (“Gas Station”). Subject to certain exclusions, for every $10 that a customer spends in the Requestor’s stores, the Customer is entitled to a one cent per gallon discount on a single purchase of gasoline, up to a maximum of 20 gallons, at the Gas Station. Historically, the rewards program excluded copayments and deductibles for prescriptions covered by federal health care programs. Under the proposed arrangement, these same copayments and deductibles would be eligible to accrue the same gasoline discounts as the Customer earns on other in-store items. The Customer would not receive an extra bonus or other reward for transferring prescriptions, nor would dollars spent on prescription drug copayments and deductibles generate different or higher rewards than those spent on other non-pharmacy items. The Requestor may run “double point” promotions enabling all Customers to earn double points on all in-store purchases, including these deductible and copayment amounts. Medicare, Medicaid and private insurer portions of prescription drug costs would continue to be excluded from the rewards program.
OIG’s Analysis
The OIG stated the proposed arrangement implicated both the prohibition on beneficiary inducements and the AKS. However, the OIG would not impose CMPs or administrative sanctions because the proposed arrangement would satisfy the terms of the retailer rewards remuneration exception and would pose a low risk of fraud and abuse under the AKS.
The OIG concluded that, given the cumulative nature of the rewards program, it is likely that many beneficiaries could exceed the CMP Statute’s $10 per item, $50 in the aggregate annual limit on free items and services, thereby potentially implicating the prohibition on beneficiary inducements. However, the Affordable Care Act (“ACA”) added a new exception specific to retailer rewards that, if met, would remove the reward from the definition of remuneration under the CMP Statute (“Retailer Rewards Exception”). Retailer rewards do not constitute remuneration if: (1) the rewards consist of coupons, rebates or other rewards from a retailer; (2) the rewards are offered or transferred on equal terms available to the general public, regardless of health insurance status; and (3) 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 Medicaid programs.
The OIG found that the gasoline rewards in the proposed arrangement would meet the three criteria of the Retailer Rewards Exception. First, the Requestor operates supermarkets with pharmacies that sell items directly to the public. Customers receive gas rewards for certain in-store purchases. Thus, the gas rewards are coupons, rebates or other rewards from a retailer. Second, the reward program is offered on equal terms to all customers, allowing any customer to obtain a card online or in stores. Third, the gas rewards are not tied to the provision of other items or services reimbursable by the Medicare or Medicaid program. To participate in the gas rewards program, prescription drug purchases would not be required, and such purchases would be treated the same as all other in-store purchases. Finally, the gas rewards may be redeemed only toward the purchase of gasoline, which is not reimbursable by Medicare or Medicaid. Having met all three criteria, the proposed arrangement did not provide grounds for the imposition of CMPs under the prohibition on beneficiary inducements.
Turning to the AKS, the OIG stated that there is no parallel exception from the definition of remuneration under the AKS. However, the OIG stated it would not impose sanctions because the proposed arrangement would pose a minimal risk of fraud and abuse. First, the proposed arrangement would be unlikely to steer beneficiaries because the Requestor’s stores are general supermarkets, selling a broad range of groceries and non-prescription items, and Customers would not be required to purchase prescriptions to earn rewards, nor would there be a special incentive for transferring prescriptions to the Requestor’s pharmacies. Second, the proposed arrangement would be unlikely to result in overutilization or increased costs to federal health care programs because any cost-sharing amounts included toward the rewards would result from already-prescribed prescription drugs. Furthermore, the OIG was comforted by the fact that the proposed arrangement would not involve a waiver or reduction of cost-sharing amounts and only amounts paid out-of-pocket would count toward the rewards.
Conclusion/Practical Takeaways
This AO is instructive insofar as it gives the public insight as to how the OIG has interpreted the Retailer Rewards Exception, one of the CMP Statute’s beneficiary inducement exceptions promulgated under Section 6402(d)(2)(B) of the ACA entitled “Clarification of Treatment of Certain Charitable and Other Innocuous Programs.”
As always, the OIG clarified that its favorable opinion can be relied on only by the Requestor; therefore, other retailers wishing to provide similar programs should proceed carefully and with regard to the requirements of the Retailer Rewards Exception.
While it is not clear whether the Retailer Rewards Exception will have much impact on other kinds of providers, such as hospitals and physicians, below are the other exceptions added to the CMP Statute’s beneficiary inducement exceptions that were added by the ACA, some of which may be helpful to such providers:
- Certain remuneration that promotes access to care and poses a low risk of harm to patients and federal health care programs, as designated by the Secretary of HHS;
- Certain unadvertised, unsolicited transfers of items or services to beneficiaries in financial need and reasonably connected to the medical care of the beneficiaries; and
- Certain waivers by prescription drug plan sponsors of Part D plans or Medicare Advantage (“MA”) organizations offering MA prescription drug plans, of any copayments, for the first fill of a covered Part D generic drug.
Providers that are interested in offering certain limited free items and services to Medicare and Medicaid beneficiaries may wish to consult counsel regarding these exceptions introduced by the ACA.
If you have any questions or would like additional information about this topic, please contact:
- Susan D. Bizzell at 317.977.1453 or sbizzell@wp.hallrender.com;
- Nicholas A. Gonzales at 414.721.0486 or ngonzales@wp.hallrender.com;
- Stephane P. Fabus at 414.721.0904 or sfabus@wp.hallrender.com;
- Adele Merenstein at 317.752.4427 or amerenst@wp.hallrender.com; or
- Your regular Hall Render attorney.
