Nashville Pharmacy Services, LLC’s (NPS) recent settlement of allegations involving the use of copay coupons, copay waivers and automatic refills, among other things, highlights regulators’ focus on specialty pharmacy (SP) day-to-day operations. NPS, an HIV and AIDS specialty pharmacy, and its majority owner, agreed to pay up to $7.8 million to settle the claims against it.1 Although high-profile cases involving service arrangements with pharmaceutical manufacturers often steal the spotlight, the NPS settlement is a reminder that routine pharmacy operations can also be a significant source of liability. This alert outlines the issues targeted in the NPS Complaint and offers compliance points to consider related to each.

Copay Waivers: The Complaint alleged that NPS routinely waived patient copays as an inducement to patients to utilize its services in violation of the Anti-Kickback Statute (AKS). It further alleged that sometimes NPS told patients their copayment would be posted to their account balance later; instead of posting the copayment, however, NPS would simply write it off.

Failure to collect patient copays can be a violation of the AKS, the Civil Monetary Penalties (CMP) law and state law. Under the CMP, copay waivers are only permissible as part of a good faith financial assistance policy or if there has been a good faith attempt to the collect the copay with no result.2 The AKS permits waivers of Part D copays under similar circumstances.3

  • Consider implementing a written financial assistance policy with objective eligibility criteria, and only waive copays for qualifying patients.
  • Consider implementing a copay write-off policy that requires bona fide collection efforts before patient obligations are written off and requires that service to the patient be discontinued if patient obligations are continually not paid.
  • Consider periodic internal audits of your financial assistance and copay write-off practices.

Copay Coupon Use: The Complaint alleged that NPS applied manufacturer copay coupons to reduce patients’ out-of-pocket costs. The AKS prohibits the use of copay coupons to reduce federal program beneficiaries’ out-of-pocket costs4; some commercial payors also disallow the practice.

  • SPs should institute policies and protocols to ensure copay coupons are not used by federal program beneficiaries, such as controls for identifying patients’ age, a check for potential federal program beneficiaries, or confirming the patient’s insurance’s bank identification number (BIN) is not associated with a federal program.

Automatic Refills: Also, it was alleged that NPS automatically refilled medications without the consent of the patient, in violation of TennCare’s contractual requirements and the Centers for Medicare & Medicaid Services (CMS) policy.5 Automatic refills run afoul of CMS’ mandate that all Medicare Part D sponsors require participating pharmacies to obtain patient consent to deliver a prescription prior to each delivery. Commercial payors may also prohibit automatic refills.6

  • Protocols should be implemented that require patient consent and documentation of the consent for each refill dispense. Prior consent authorizing multiple refills is not acceptable.

Prescription Tampering: It was further alleged that NPS “re-wrote” the length of prescriptions, automatically extending them to the maximum. When technicians received a 29 or 30-day prescription, it was claimed that the technicians extended the prescription to 31 days by forging the authorizing signature of the physician. In one instance, a technician renewed a patient’s prescription for an entire year without the physician’s knowledge or permission.7

  • SPs should establish operational checks that will make prescription tampering more difficult, and conduct regular compliance audits to ensure prescriptions are being dispensed as written by the prescriber.

SPs are confronted daily with operational issues such as those targeted in the NPS Complaint. SPs without robust compliance policies or those that do not regularly audit their compliance may find their regular pharmacy practices slipping into non-compliance. As the NPS settlement highlights, these regulatory violations arising from routine pharmacy operations can carry a heavy cost. Consider starting 2016 by critically reviewing your operational practices and current policies, targeting areas for focus and improvement.

1 United States ex. rel. McCullough v. Nashville Pharmacy Services, LLC, No. 12-cv-0823 (M.D. Tenn.). On January 5, 2016, NPS and its majority owner agreed to pay up to $7.8 million to settle allegations that they overbilled Medicare and TennCare for pharmacy services. See id. at docket # 54-1. The qui tam action alleged violations of the False Claims Act, the Anti-Kickback Statute and the Tennessee Medicaid False Claims Act. The allegations were initially raised in a qui tam lawsuit by the relator, a former order entry technician. See id. at docket # 1. To settle these claims, NPS and its owner agreed to pay $500,000 and make additional contingency payments during the next five years. See id. at docket # 54-1. In a unique settlement term, the total payments will depend on NPS’s revenue for each year during that period, with the possibility that NPS could pay up to $7.8 million. See id. at docket # 54-1. NPS also agreed to pay the relator $115,000 for expenses, attorney’s fees and costs, and to settle her whistleblower retaliation claim. See id. at docket # 54-1.

2 42 U.S.C. § 1320a-7a(i)(6)(A). “The term “remuneration” does not include the waiver of coinsurance and deductible amounts by a person, if . . . the person waives the coinsurance and deductible amounts after determining in good faith that the individual is in financial need; or fails to collect coinsurance or deductible amounts after making reasonable collection efforts.”

3 42 U.S. C. § 1320a–7b(b)(3)(G). The Anti-Kickback Statute is not implicated by “the waiver or reduction by pharmacies . . . of any cost sharing imposed under Part D of subchapter XVIII, if . . . .” the pharmacy “waives the coinsurance and deductible amounts after determining in good faith that the individual is in financial need; or fails to collect coinsurance or deductible amounts after making reasonable collection efforts.”

4 Specialty Pharmacy Copay Coupon Controversy.

5 Tenn. Comp. R. & Regs § 1140-03.03(b) (“a medical or prescription order shall not be refilled unless so authorized by the prescriber.”); 2014 Call Letter, pp. 144-145,

6 “Such confirmation is unnecessary when the beneficiary personally initiates the refill or new prescription request. This policy does not affect retail refill reminder programs that require the patient to pick-up the prescription and does not apply to long-term care pharmacy dispensing and deliveries.” 2014 Call Letter at 145.

7 42 U.S.C. § 1320c-5(a). “It shall be the obligation of any health care practitioner and any other person . . . who provides health care services for which payment may be made (in whole or in part) under this chapter, to assure, to the extent of his authority that services or items ordered or provided by such practitioner or person to beneficiaries and recipients under this chapter will be provided economically and only when, and to the extent, medically necessary.” (emphasis added).