To policymakers and insurance executives, copayments for health care services are an important component of preventing fraud. The rationale is that by requiring the patient to pay a portion of the bill the patient will be more scrupulous about what services they receive; with the added benefit that it directly reduces costs on each claim. The effect can at times work a cruel result; a patient has insurance but can’t afford the copayment and therefore can’t afford needed care.

Pharmacies routinely confront this problem, and the approach by most has been to waive or reduce the copayments in those instances where it would be difficult for the patient to pay in order to ensure the patient receives needed medication. What appears to be an altruistic notion, believing the only one harmed is the pharmacy who does not receive a portion of their compensation, is actually the origins of a crime; particularly with respect to large copayments. This is increasingly true with respect to many compounded medications.

In 1994, the Office of the Inspector General for HHS first issued guidance in this area in the form of a Special Fraud Alert relating to Medicare items or services. The OIG found copayment waivers to be a crime in several ways. First the Alert provides that fraud occurs because the provider who waives a copayment is actually misstating to the payer the amount that the medication should cost and that by relying on the provider charges as a way to set pricing, the waiver of copayments throws off the calculation of a fair price for the medication.

Secondly, the waiver of a copayment is an unlawful kickback, when providers forgive financial obligations for reasons other than genuine financial hardship of the particular patient, they may be unlawfully inducing that patient to purchase items or services from them.

This concept, waiver of copayment as a crime has caught on in a big way in the pharmacy industry and PBMs now routinely ask pharmacies to provide proof of the collection of copayments. To avoid the prospect of overpayment liability or cancellation of a valued contract, and worse, potential criminal prosecution, a pharmacy must collect their copayments, or in cases of hardship, have in place a verifiable program to demonstrate hardship and bonafide attempts at collecting those copayments.

Click here to read an additional article Mr. Cassidy penned on Compounding Pharmacies for the Daily Business Review

Bernard M. Cassidy is an attorney specializing in health law, health law regulatory and white-collar criminal defense. Mr. Cassidy began his career as a Law Clerk to the Honorable Joel Pasano, a former Magistrate Judge now District Court Judge. Mr. Cassidy is a former Assistant Prosecutor in New Jersey and a former Assistant Attorney General and Assistant Statewide Prosecutor in the State of Florida. As an Assistant Attorney General, Mr. Cassidy defended the State of Florida in lawsuits and brought cases to protect consumers in both civil and criminal courts. Of note was Mr. Cassidy's experience in prosecuting violations in the health law field, which experience has proven invaluable in his representation of Doctors, pharmacists, pharmacies, clinics and associations of particular healthcare providers. Before striking out to form his own firm, Mr. Cassidy practiced in the healthcare and white-collar criminal defense sections of Broad and Cassel in Fort Lauderdale, Florida.