Specialty Pharmacy Kickbacks: When the Next Patient Is the Payment

Specialty pharmacy kickbacks can take the form of patient referrals, rebates or other benefits used to buy a pharmacy’s influence over prescriptions paid by Medicare or Medicaid. The payment can be the next patient sent through the door. A manufacturer controls the referrals, measures how long patients keep ordering its drug, and sends more business to the pharmacy with the strongest refill score. If you work with those allocation reports, patient calls or manufacturer contracts, you may see the commercial bargain behind what the patient hears as clinical advice.

What Is a Pharmaceutical Kickback?

A pharmaceutical kickback is something of value offered or received to improperly influence referrals, purchasing or recommendations involving federal health care program business. The Anti-Kickback Statute reaches indirect benefits as well as cash. In a specialty-pharmacy arrangement, that value can be a stream of patients or a rebate tied to the pharmacy’s success in promoting a manufacturer’s drug.

Claims for drugs resulting from kickbacks are false claims under the False Claims Act. A manufacturer can cause those claims even when the pharmacy submits them.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Our whistleblower experts help pharmacy, hub and manufacturer insiders turn what they saw into a case.

How Do Pharmaceutical Kickbacks Work?

In a closed specialty-pharmacy network, a manufacturer can reward a pharmacy’s sales performance by sending it more patients. The Exjade case shows how control over referrals gave a drug company influence over the pharmacy’s conversations with patients.

Novartis launched Exjade in 2005 through a closed distribution network of three specialty pharmacies: BioScrip, Accredo and US Bioservices. Exjade treats iron overload resulting from blood transfusions. The company supplying the drug also controlled the allocation of patients within that network.

The government alleged that Novartis used referrals and rebates to reward recommendations of Exjade and Myfortic. A whistleblower started the case, and the government joined it. Novartis agreed to a $370 million civil False Claims Act settlement in November 2015. The allegations reached both continuing an existing drug and switching to another one.

The commercially valuable decision was which pharmacy received the patient. A purchasing record could show the drug changing hands while the referral report showed why one pharmacy kept receiving more business.

The pharmacy had something valuable to offer in return: its voice with the patient. A nurse calling from the pharmacy could discuss treatment and encourage a refill. The manufacturer could reward the pharmacy for what happened after that call.

The government’s complaint alleged that Novartis threatened to cut off undesignated referrals to BioScrip, or remove it from the network, unless it met requirements that included higher refill levels. It also alleged that Novartis increased BioScrip’s per-shipment Exjade rebate from $13 to $20 in January 2008. The alleged bargain combined a threat to incoming business with a larger payment for each shipment.

When Specialty Pharmacy Refill Rates Determine Referral Allocation

Specialty pharmacy refill rates determine referral allocation when a manufacturer uses continued ordering to decide which pharmacy receives the next patients. Accredo admitted agreeing to precisely that arrangement in the Exjade network.

Novartis began issuing monthly Exjade Scorecards in June 2007. The adherence score measured how long patients continued ordering refills. In October 2008, Accredo agreed to an allocation plan giving the highest-scoring pharmacy 60% of undesignated patient referrals and each of the other pharmacies 20%.

The measure rewarded continued purchasing even when a patient had a reason to stop. Accredo admitted knowing that Novartis did not exclude patients who stopped ordering because of side effects or because their physicians directed them to stop therapy.

The score called it adherence. What it counted was how long the orders continued. A pharmacy could lose ground in the competition for referrals because a patient’s doctor had said the drug should stop.

Accredo agreed to a $60 million civil settlement described in the Justice Department’s May 2015 announcement. Its admissions make the operational question unusually clear: what did the scorecard reward, and what did it count against the pharmacy?

The Nurse’s Call Followed the Referral Incentive

The referral incentive reached the content of patient calls. According to the government’s account, Novartis pressed the pharmacies to hire or assign nurses to encourage Exjade refills while understating serious risks. The pharmacy supplied a trusted clinical voice to a manufacturer seeking more sales.

In its amended complaint, the government described a newly hired practical nurse at BioScrip:

The allegation puts the training and the commercial instruction side by side. The nurse allegedly knew what she was supposed to persuade the patient to do before she knew the drug’s risks.

Accredo’s admissions give another view of the same problem. In January 2010, the Food and Drug Administration required a boxed warning about kidney impairment, liver impairment and gastrointestinal bleeding, including fatal cases. Accredo updated its call protocols the following month, but they still directed nurses to discuss common reactions such as diarrhea and rash without the more severe reactions in the warning. Patients needed advice about serious risks. The pharmacy’s financial incentive favored another refill.

The end of the incentive is equally revealing. In March 2012, Novartis told Accredo it would stop giving additional referrals to the pharmacy with the highest score. In April, Accredo stopped assigning nurses to call Exjade patients about their therapy. The extra referrals ended, and so did the nurse calls.

US Bioservices admitted training nurses to encourage continued treatment to improve its adherence score.

Service Fees and the Business They Bought

A data fee or consulting payment can be part of a bargain to move prescriptions. The useful question is what the recipient was being paid to change: its work, its purchasing, its recommendations or its share of a manufacturer’s product.

The institutional-pharmacy case against Omnicare supplies a close parallel. The government alleged that Amgen paid Omnicare to run therapeutic-interchange programs designed to move Medicaid patients from a competing drug to Aranesp. The alleged benefits included data fees, consulting services and performance rebates tied to market-share or volume thresholds. Omnicare settled those allegations in February 2014.

The alleged bargain was for the pharmacy to use its position to move patients to the manufacturer’s drug.

Veloxis agreed in August 2026 to a $34.45 million civil settlement resolving allegations of kickback arrangements intended to induce Envarsus prescriptions and purchases.

When a Pharmacy Is Paid to Switch Patients

A pharmacy can receive an incentive to recommend changing drugs, as well as an incentive to keep patients on one. The Myfortic allegations concerned rebates offered for recommendations that doctors switch patients from competing products to Novartis’s anti-rejection drug for kidney transplant recipients.

The government alleged that Novartis offered these rebates to five specialty pharmacies. In one example, a pharmacy owner agreed to send doctors a letter recommending that patients move to Myfortic. The alleged bargain bought the pharmacy’s recommendation to the prescriber. That recommendation could appear to come from a pharmacy making its own assessment of treatment.

A performance rebate can also reach the prescriber through pharmacy ownership. In the Galena Biopharma case, the government alleged that approximately $92,000 went to a physician-owned pharmacy under a performance-based rebate agreement to induce its owners to prescribe Abstral. Galena agreed to a civil settlement of more than $7.55 million in September 2017.

A rebate paid to a physician-owned pharmacy can benefit the very doctors whose prescribing the manufacturer wants to influence.

The economics of performance rebates were described in Examining the value of pharmacy benefit management companies, a 2004 commentary in the American Journal of Health-System Pharmacy. Discussing pharmacy benefit managers, the paper explains how performance rebates increase as a product gains market share, and identifies the conflict between maximizing a manufacturer’s rebate and selecting the best formulary value for the payer.

The recipient’s return can grow when more business moves to the favored product. The Myfortic and Galena allegations show why the recipient and the intended drug choice matter.

The Hub and Copay Data Loop

A specialty pharmacy can also connect a manufacturer’s donations to the patients whose prescriptions those donations finance. Benefits investigation, foundation applications and funding confirmations can give the manufacturer a view of whether its money is supporting its own drug.

Advanced Care Scripts provided benefits investigation services for Teva. In its August 2020 settlement, the pharmacy agreed to pay $3.5 million to resolve allegations that it helped Teva cover Medicare copays for Copaxone through foundations. The pharmacy also acknowledged facts about how information moved between those organizations.

When the foundations ran out of money, Advanced Care Scripts regularly told Teva how many Medicare Part D patients had Copaxone prescriptions, met the foundations’ criteria and were waiting for assistance. At least one employee understood that Teva would use that waiting-patient count to help decide its next donation. Teva sometimes gave the pharmacy advance notice of its payments to the foundations.

When a fund reopened, the pharmacy promptly sent a batch file consisting almost entirely of Copaxone patients’ applications. It often then received confirmation that most or all had been approved. It also relayed foundation data to Teva so the manufacturer could compare its donations with foundation spending on Copaxone patients.

A hub employee working with those files could see both the donation and where the assistance went.

Pfizer’s 2018 copay settlement described a similar return of information through a specialty pharmacy. The government alleged that Pfizer used the pharmacy to transition patients to a foundation, then received confirmation through that pharmacy that the foundation had funded their copays.

The industry incentive extends beyond getting an application approved. The Department of Health and Human Services’ Inspector General explained in its 2014 copayment-coupon bulletin that cost sharing can influence purchasing choices and price competition. Relieving patients of the copay can remove a price constraint on the manufacturer. In these foundation arrangements, the pharmacy’s data helped connect that financial benefit to particular patients and a particular product.

When the Specialty Pharmacy Pays the Kickback

A specialty pharmacy can also pay kickbacks to win business. In the BioTek reMEDys case, the government alleged that the pharmacy waived patient copayments and paid physician referral kickbacks. Here, the alleged payment moved outward from the pharmacy to influence the business coming in.

What Are Red Flags for Pharmacists?

Refill targets tied to new referrals, counseling that leaves out serious risks, rebates tied to switching and foundation data returned to a manufacturer are patterns a pharmacy employee can recognize. The important connection is between the pharmacy’s financial incentive and the recommendation or transaction it was supposed to influence.

Different employees see different parts. An allocation report shows where the next patients went. The refill scorecard shows what earned that allocation. Nurses and pharmacists know what they were told to emphasize and what happened when patients reported side effects or a physician stopped treatment.

People working with purchasing and manufacturer agreements can see the benefit offered for using a particular drug. Hub staff may know why a list of waiting patients went to the manufacturer and why applications went to a foundation as soon as its funding reopened. Billing staff see the prescriptions submitted to federal healthcare programs such as Medicare or Medicaid.

Those connections give an insider’s account its value. We work with you to understand the commercial decision behind the patient-facing service and connect it to the government claims.

When You Know Why the Patient Was Sent

If you know how a manufacturer used referrals, rebates or patient-support data to influence your pharmacy, speak with our whistleblower experts about the arrangement. We help you build your strongest specialty pharmacy kickback case and bring in pharmaceutical fraud whistleblower lawyers who understand pharmacy incentives and government prescription claims. We stay beside you from that first conversation through the case.