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Can Pharmacies Waive Patient’s Copays and Deductibles as they Please?

by Juan Santos, Esq.

The short answer is NO. The main reason is the Federal Anti-Kickback Statute (“AKS”), which prohibits any person from “knowingly and willfully” paying, offering, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in exchange for or to induce the referral of any item or service covered by a federal health care program.

This prohibition comes, in part, from the underlying theories that financial conflicts of interest can affect sound medical judgment and/or lead to over-utilization of medical services. The consequences for violating the AKS are extremely severe because it criminalizes the payment of any funds or benefits designed to encourage a party to a provider for services to be paid for by a federal health care program.

If pharmacies routinely waive co-pays and deductibles, or advertise “no out-of-pocket costs,” they may be violating the AKS, False Claims Act (“FCA”) and the Civil Monetary Penalties law (“CMP”), for contributing to the over-utilization of items and/or products paid for by the federal government.

The AKS is a criminal statute that include fines of up to $25,000 per violation and a prison term of up to five years per violation. The Office of the Inspector General may also ban providers from participating in federal healthcare programs under their exclusion authorities, and it can impose additional civil monetary penalties of up to $50,000 per violation plus an assessment of up to three times the amount of the payment.

Many pharmacies believe that by avoiding patients with public insurance such as Medicare, Medicaid or Tricare they can routinely waive copays and deductibles because they are not violating the AKS. Although it is true that if the federal government is not paying for the items and/or products there is no violation of the AKS, many states such as Florida (through the enactment of the “Florida Patient Brokering Act”) have enacted similar laws to deal with the overutilization of medical services at the state level.

When Can Pharmacies Waive Patient Copays and Deductibles?

In December 2016, the OIG promulgated the Cost Sharing Safe Harbor through its proposed rule and comment process. This new safe harbor protects cost-sharing waivers by pharmacies (e.g., waiver of patient copays). To fall within the safe harbor, pharmacies are required to satisfy the following criteria:

  • The wavier and/or reduction must not be advertised or part of a solicitation;
  • The pharmacy must not routinely waive cost-sharing; and
  • Before waiving a cost-sharing obligation, the pharmacy must determine in good faith that either the beneficiary has a financial need or the pharmacy has failed to collect cost-sharing amounts after making a reasonable effort to do so.

Only the first criterion is required if a Medicare Part D and/or Medicaid enrollee is eligible for a Part D low-income subsidy, and this safe harbor is wholly inapplicable to waivers by physicians for co-payments of Medicare Part B drugs. If you have questions or concerns regarding any aspect of the AKS please call Juan C. Santos at Chapman Law Group.

Juan C. Santos is an associate of CLG. Prior to joining the firm, Juan obtained a Master’s in Healthcare Law from Loyola University of Chicago. Juan practices in the areas of business organization, physician agreements, personal service agreements, non-competition agreements, non-disclosure agreements, mergers, acquisitions, and joint ventures, corporate and business counseling, professional licensing, Medicare/Medicaid issues, Anti-Kickback/Stark issues, DEA issues, medical management and virtually all issues facing the modern healthcare professional.