Advisory Opinion 07-09*

On August 28, 2007, the OIG posted Advisory Opinion 07-09, which addresses whether a membership warehouse chain’s arrangement with its members would be found to violate the civil money penalty for inducements to beneficiaries or the anti-kickback statute.

Under this arrangement, the membership warehouse chain’s premium members (who pay $100 for their annual membership) receive a reward of up to 5% on almost all of their purchases, including purchases from the warehouse’s pharmacy that sells prescription drugs that are reimbursed, in part, by Federal health care programs. Under the arrangement, the membership warehouse chain has placed a cap on the annual reward of $500 per year and calculates the reward based only on amounts paid by the premium member, not on amounts paid by any third-party payors.

Although the OIG concluded that the financial reward to the members would constitute is remuneration under the civil monetary penalty ("CMP") provision of the Social Security Act, the OIG also concluded that the arrangement was unlikely to influence whether premium members would select the warehouse chain as their pharmacy provider for items payable by Medicare and Medicaid as the annual reward is not tied directly to the purchase of prescription drugs. In addition, the OIG concluded that it would not impose penalties on the parties to the arrangement under the anti-kickback statute as the OIG did not find that the requisite intent to induce or reward referrals was present.

For a full copy of the OIG’s Advisory Opinion, click here.

* Shawn Gilman is a Summer Associate (not admitted to the practice of law) in the firm's Washington, DC office and contributed significantly to the preparation of this summary.