Question:

Hi Jennifer,

A pharmacy reached out to me and is offering to pay for personnel to handle most of my prior authorization work for prescriptions. I’m tempted since it would significantly reduce my administrative burden, but it sounds too good to be true.  

What are your thoughts and should I move forward with this arrangement?

Best,
Dr. B
 
 
Answer:

You are 100% correct with your gut-check that this doesn't pass the "smell test".   In most case, "free services" constitute "remuneration" and a "kick-back", but, as with most answers, there are nuances.  So, I've asked Sarah Masheyev, Esq.  to lay out the longer answer.    

Jen, here is what we need to share - 

While it may seem like a practical solution, having a pharmacy pay for personnel to perform prior authorization work that is your responsibility raises significant red flags under the Anti-Kickback Statute (AKS) and New York law.

The Office of Inspector General (OIG) has consistently stated that providing free or discounted services to a referral source constitutes “remuneration” if it relieves that provider of a cost or burden they would otherwise be responsible for. Prior authorization work is a core operational responsibility and outsourcing that burden at no cost can be seen as a financial benefit that may influence prescribing decisions.

The OIG has reinforced this principle in multiple advisory opinions. In Advisory Opinion 25-04, it found that a company’s payment for compliance-related services on behalf of its customers created risk because it relieved them of a financial burden and could influence their purchasing decisions. Similarly, in Advisory Opinion 15-04, the OIG concluded that a laboratory’s provision of free administrative services to physician practices could improperly influence referral patterns, even in the absence of direct payments.

This same reasoning applies here: If a pharmacy is covering the cost of personnel to handle prior authorizations, regulators are likely to view that as remuneration intended to induce or influence where prescriptions are sent. Because prior authorizations are so closely tied to the prescribing process, shifting that responsibility to a pharmacy creates heightened concern around steering and anti-competitive behavior.

Further, the New York Department of Health has expressly prohibited third party authorization requests in this context, reiterating that pharmacists may not enter into agreements with prescribers to obtain prior authorization on the prescriber's behalf. See here. Pharmacies and physicians who engage in these arrangements may be subject to criminal, civil, or administrative actions. See here.

In short, if a pharmacy is offering to “make your life easier” by absorbing your prior auth workload, reconsider.   If it seems to good to be true, it likely is.   Make sure to vet before signing!!