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How Copayment Waivers can Give Rise to a Whistleblower Claim

Posted  June 8, 2018
By Anne Hayes Hartman

Kickbacks in healthcare

What’s not to like about a doctor waiving a patient’s copayment, or a pharmaceutical company offering a prescription drug assistance program? Turns out there are plenty of reasons to be concerned about such activities. And, as a recently announced $24 million settlement with Pfizer illustrates, unlawful patient cost waivers can result in big liability for defendants.

Patient cost-sharing is a core principle of all health insurance programs, and is required by federal healthcare programs including Medicare. Payment for even a small portion of healthcare costs makes patients aware of those costs. Cost-awareness makes patients better healthcare consumers and incentivizes them to select medical services and drugs because they are medically necessary, rather than simply because they are free. Routine coinsurance and copayment waivers and other patient discounts undermine cost-sharing principles and increase healthcare costs. While patients avoid their small share of the cost, insurers and the government are left to pick up the rest.

Providers Barred from Routine Copayment Waivers

Recognizing this problem, federal guidelines have long barred providers from routine coinsurance and copayment waivers for Medicare beneficiaries and participants in other federal healthcare programs. Under these federal guidelines:

  • A provider cannot advertise fee waivers with language such as “Medicare accepted as payment in full,” or “no out-of-pocket costs,” and cannot indirectly promote such fee waivers or solicit business with an implied promise to waive copays.
  • Waivers are allowed, if they are based on an individualized financial hardship decision, or after reasonable collection efforts have been exhausted. Providers are advised to have written policies and procedures for the granting of fee waivers, and to ensure that those procedures are followed.

A provider or supplier that routinely waives Medicare cost sharing is misstating the actual charge for services to the government. For example, if a supplier claims that its charge for a piece of equipment is $100, but the supplier always waives the 20% copayment, the actual charge is $80. Medicare should be paying 80 percent of $80 (or $64), rather than 80 percent of $100 (or $80).

Providers and suppliers who waive copayments may also violate the Anti-Kickback Statute. Unless the patient is experiencing a genuine financial hardship, a fee waiver can be a way to unlawfully induce the patient to purchase items or services.

Limits on Drug Cost Assistance Programs

Research has shown that pharmaceutical patient assistance programs may lead to higher drug prices, including by steering patients away from generic drugs and other less-costly alternatives, and federal regulations impose limits on such programs. Drug makers are not allowed to directly cover prescription copayments for Medicare or Medicaid beneficiaries, although they can donate to bona fide independent charities.

False Claims Act Cases Based on Unlawful Copayment Waivers

If providers violate federal regulations covering coinsurance and copayment waivers, or if a drug company runs a patient assistance program that does not meet federal requirements, they face liability under the False Claims Act and other laws. Whistleblowers who report such activity under the False Claims Act may be eligible to receive a share of any government recovery as a reward for bringing the conduct to light.

Numerous False Claims Act cases alleging unlawful waivers and similar schemes have resulted in successful settlements:

  • Last month, Pfizer agreed to pay $24 million and enter a corporate integrity agreement to resolve False Claims Act claims that it unlawfully induced Medicare patients to use three of its drugs by illegitimately covering patients copays. Pfizer allegedly used a third-party specialty pharmacy to direct patients to a foundation that would cover the copays. Pfizer then made “donations” to the foundation to account for the copays.
  • In December 2017, United Therapeutics paid $210 million to settle a False Claims Act case based on its use of a non-profit foundation to pay the copays of thousands of Medicare patients taking United Therapeutics’ pulmonary arterial hypertension drugs.
  • In December 2017, DaVita Rx agreed to pay $63.7 million to settle a False Claims Act case brought by a whistleblower that alleged, in part, that DaVita paid financial inducements to federal healthcare program beneficiaries in violation of the Anti-Kickback Statute. Specifically, DaVita Rx allegedly accepted manufacturer copayment discount cards in lieu of collecting copayments from Medicare beneficiaries, routinely wrote off unpaid beneficiary debt, and extended discounts to beneficiaries who paid for their medications by credit card.
  • In January 2017, Walgreens agreed to pay $50 million to settle a whistleblower case alleging it violated the False Claims Act and the Anti-Kickback Statute by enrolling hundreds of thousands of government healthcare program beneficiaries in its “Prescription Savings Club” program by inducing them with discounts and other monetary incentives.
  • In 2016, a Florida cardiologist and his practice, the Institute for Cardiovascular Excellence, settled two whistleblower lawsuits that alleged the provider performed medically unnecessary services and paid kickbacks to patients by waiving Medicare copayments irrespective of patients’ ability to pay.

These cases each involve substantial fraudulent schemes resulting in increased costs to federal healthcare programs. Enforcing rules against unlawful patient compensation ensures that patients who are truly in need have access to necessary care and medicines.

If you have information about unlawful fee waivers for federal healthcare program beneficiaries, or information about potentially unlawful patient assistance programs, the whistleblower attorneys at Constantine Cannon can help. We know what it takes to bring a case like this. Please contact us to discuss your situation.

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Tagged in: Anti-Kickback and Stark, Healthcare Fraud, Pharma Fraud,