On December 17, 2019, OIG published Advisory Opinion 19-06 approving a supermarket’s expansion of a loyalty program to allow customers to earn rewards points on out-of-pocket costs paid in connection with the purchase of pharmacy items or immunizations. OIG determined that while the proposal would implicate the Federal anti-kickback statute (AKS) and the prohibition on beneficiary inducements under the civil monetary penalties law (CMP Law), the arrangement would satisfy the CMP Law’s exception for retailer rewards and would pose minimal risk under the AKS.
The requester of the opinion operates supermarkets with in-store pharmacies and offers a loyalty program under which customers earn one point per dollar spent on purchases. Under the current program, customers could not earn points based on out-of-pocket costs for pharmacy items or immunizations (Pharmacy Products). Points may be redeemed for dollars off future purchases, except for Pharmacy Products. The supermarket proposed to expand the program by allowing customers to earn points on out-of-pocket costs for Pharmacy Products, including products covered by Federal health care programs. However, a customer could not earn more than $75 worth of points per year through the purchase of Pharmacy Products. Apart from the foregoing, the program would continue unchanged, and its other existing limitations would continue to apply. Notably, the program would be available on equal terms to all customers, and points would be subject to an expiration policy and could not be applied toward Pharmacy Products.
OIG first acknowledged the proposal would implicate the CMP Law because points earned on Pharmacy Products could induce a beneficiary to select the supermarket to supply federally reimbursable items or services. However, OIG determined the proposal would meet the CMP Law’s exception for retailer rewards programs, which applies where: (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. OIG had little difficulty determining the points are retailer rewards, the program would be offered on equal terms to all customers regardless of health insurance status, and the points would not be tied to federally reimbursable items or services. In reaching the final point, OIG observed that points could not be redeemed for Pharmacy Products, customers could earn points without purchasing Pharmacy Products, and the purchase of Pharmacy Products would not be incentivized through an increased point value.
Next, OIG explained the proposal would implicate the AKS because the points could induce a beneficiary to purchase federally reimbursable items or services from the supermarket. Although the AKS lacks an applicable safe harbor, OIG concluded the program would raise minimal risk because it would be unlikely to steer beneficiaries toward the supermarket or to result in overutilization or increase costs to Federal health care programs. In reaching this conclusion, OIG again observed that customers could earn points without purchasing Pharmacy Products and that there would not be a specific incentive for transferring prescriptions to the supermarket. OIG also observed the program would not involve the waiver or reduction of cost-sharing amounts and that any out-of-pocket costs that would generate points would result from previously prescribed or recommended Pharmacy Products.
A copy of the advisory opinion can be found here.
