Close X

Attorney Spotlight

How does Eli Richardson's past work with the federal government inform his client interactions? Find out more>

Search

Close X

Experience

Search our Experience

Experience Spotlight

In June 2016, AmSurg Corp. and Envision Healthcare Holdings, Inc. (Envision) announced they have signed a definitive merger agreement pursuant to which the companies will combine in an all-stock transaction. Upon completion of the merger, which is expected to be tax-free to the shareholders of both organizations, the combined company will be named Envision Healthcare Corporation and co-headquartered in Nashville, Tennessee and Greenwood Village, Colorado. The company's common stock is expected to trade on the New York Stock Exchange under the ticker symbol: EVHC. Bass, Berry & Sims served as lead counsel on the transaction, led by Jim Jenkins. Read more.

AmSurg logo


Close X

Thought Leadership

Enter your search terms in the relevant box(es) below to search for specific Thought Leadership.
To see a recent listing of Thought Leadership, click the blue Search button below.

Thought Leadership Spotlight

Inside the FCA blogInside the FCA blog features ongoing updates related to the False Claims Act (FCA), including insight on the latest legal decisions, regulatory developments and FCA settlements. The blog provides timely updates for corporate boards, directors, compliance managers, general counsel and other parties interested in the organizational impact and legal developments stemming from issues potentially giving rise to FCA liability.

Read More >

Specialty Pharmacies Face Emerging Fraud Risk in 'Usual and Customary' Pricing

Specialty Pharmacy Times

Publications

August 22, 2016

Executives of specialty pharmacy companies could be forgiven if they view "usual and customary (U&C) pricing" as a misnomer on par with jumbo shrimp. 

Instead of being an easy-to-define, industry-wide standard, U&C pricing is subject to the definition of the term in individual contracts and, in the case of many Medicaid plans, state statutes. 

As a result, the calculation of U&C for the same specialty pharmaceutical product from the same company can vary widely among commercial and Medicare Part D plans, and state Medicaid programs, for example. Those discrepancies are at the root of an emerging fraud risk for specialty pharmacy companies. 

In a handful of cases that have become public, thus far, whistleblowers are alleging that specialty pharmacies improperly reported U&C prices, and as a result, received greater reimbursement than they were entitled to. A look at a recent federal court ruling suggests some precautions specialty pharmacies should consider to mitigate this evolving risk. 

On January 12, 2015, a federal district court in Illinois ruled on a whistleblower lawsuit brought by a pharmacist formerly employed by Kmart Corporation. The whistleblower alleged that Kmart violated the False Claims Act (FCA) by misrepresenting its U&C pricing for various generic prescription drugs, which caused Medicare and other state and federal prescription drug benefit programs to overpay for those drugs. 

Similar allegations of manipulation of U&C pricing have been raised in other recent whistleblower actions under the FCA. As part of a discount program, Kmart set low prices for cash customers who signed up for one of Kmart's discount programs, and charged higher prices for the same generic drugs paid for by third-party insurers, including Medicare Part D and state Medicaid programs, and some non-program cash customers. 

The district court ultimately held that the U&C price standard is the cash price to the general public, which is the amount charged to customers for the prescription, unless state law, relevant contract, or payor sheet provide additional guidance. The district court concluded that members of Kmart's generic discount programs were members of the "general public" for purposes of U&C pricing, at least under the Minnesota, Nevada, and Alabama Medicaid programs. 

The district court's ruling indicates that misrepresentations on pricing to pharmacy benefit managers or Part D plan sponsors, even if not submitted directly to the government, may be sufficient for an FCA violation. The district court found misrepresentation of U&C pricing to be material, even though CMS would have paid the plan sponsor the same amount of money whether Kmart submitted false U&C pricing or not, expanding the scope of FCA liability under Part D. 

In May, a federal appeals court upheld this federal district court ruling.

Practical implications 
Given recent fraud cases related to U&C pricing manipulation, and in light of the varying definitions of U&C pricing across federal and state health care programs, as well as private payor contracts, pharmacies should institute a U&C pricing policy that includes tracking pricing to all patients and pricing requirements across all payor contracts, if possible. 

Creating an overarching policy may be difficult, however, because of the variances in state and payor definitions of U&C, such as differing volume percentage requirements for purchases. Pharmacies should be aware of the price reporting requirements of each payor or program. 

Some payors may require billing at the lower of the fee schedule or U&C price, while others may simply require annual reporting. To ensure accurate reporting of U&C pricing, pharmacies should track pricing through the claims adjudication process to avoid potential FCA liability. 

Ideally, tracking mechanisms should incorporate different payor and program requirements, including reflecting each payor's definition of U&C and fee schedule, and be able to generate annual reports. 

Tracking payor requirements by fee schedule and varying definitions of U&C would allow pharmacies to tailor their pricing to specific payors, and avoid potential fraud liability for failure to accurately report U&C pricing. 

Specialty Pharmacy Times previously published this article on August 16, 2016. The original publication may be accessed with a free login by visiting Specialty Pharmacy Times.


In Case You Missed It:

Related Professionals

Related Services

Notice

Visiting, or interacting with, this website does not constitute an attorney-client relationship. Although we are always interested in hearing from visitors to our website, we cannot accept representation on a new matter from either existing clients or new clients until we know that we do not have a conflict of interest that would prevent us from doing so. Therefore, please do not send us any information about any new matter that may involve a potential legal representation until we have confirmed that a conflict of interest does not exist and we have expressly agreed in writing to the representation. Until there is such an agreement, we will not be deemed to have given you any advice, any information you send may not be deemed privileged and confidential, and we may be able to represent adverse parties.