money iStock_000009034924_LargePharmaceutical manufacturer discount card usage by government program beneficiaries has been an active area for government action in recent years.  In a September 2014 Special Advisory Bulletin, the U.S. Department of Health and Human Services, Office of Inspector General (OIG) stated, “[t]hese coupons constitute remuneration offered to consumers to induce the purchase of specific items.” The availability of a coupon, according to the OIG, could cause “physicians and beneficiaries to choose an expensive brand-name drug when a less expensive and equally effective generic or other alternative is available,” thus resulting in additional program costs.

Recently, Nashville Pharmacy Services (NPS) and its majority owner entered into a settlement agreement with federal authorities to resolve allegations that NPS pharmacies overbilled the Medicare and TennCare programs in connection with its acceptance of manufacturer discount cards to reduce co-payments and deductibles for Medicare and Medicaid patients. The NPS settlement is based upon the company’s future profitability and will range from $1.25 million to $7.8 million. The settlement also covered the following conduct:

  • Routine waivers of co-payments for Medicare and Medicaid patients without an individualized assessment of the beneficiaries’ inability to pay
  • Dispensing medications after the patient’s death
  • Dispensing without a valid prescription
  • Automatically refilling prescriptions without a request from the beneficiary, in violation of a TennCare managed care organization’s contractual requirements

As many pharmacy providers have discovered, routine co-payment waivers, direct and through the use of coupons or discount card programs, can result in significant penalties under the Anti-Kickback Law and, in some cases, the False Claims Act.  Pharmacies should observe the typical warning statement on coupons and discount cards to the effect that the coupon or discount card may not be used by beneficiaries of federal healthcare programs.