A recently issued federal court opinion confirmed that certain pre-COVID era prescribing restrictions are back in place. In July 2023, a nonprofit advocacy group, Community Oncology Alliance, filed suit against the U.S. Department of Health and Human Services (HHS) regarding provisions of the Stark Law. Stark prohibits physicians from referring Medicare and Medicaid patients to entities in which the physicians have an ownership or financial interest unless an exception applies. The suit related to Stark’s “in-office ancillary services” (IOAS) exception, which permits a physician to dispense prescription drugs to patients in his office even when he has a financial interest in the pharmacy business.
A waiver issued during the COVID-19 public health emergency (PHE) allowed physicians to mail drugs to individuals’ homes without violating Stark even though the IOAS exception would not be applicable. When the PHE formally ended in May 2023, the waiver expired, the need to meet the IOAS exception was restored, and mailings of drugs to patients’ homes could again violate Stark. After the end of the PHE, the Centers for Medicare & Medicaid Services (CMS) released a “Frequently Asked Questions” document confirming that the IOAS exception would not be met if prescription drugs were mailed to a federal program patient.
In Community Oncology Alliance, Inc. v. Becerra et al., the Alliance filed suit against HHS so that its member oncology practices could continue to mail prescription medications to their Medicare and Medicaid patients. The Alliance alleged that CMS’s FAQ document changed physicians’ obligations without the requisite “notice and comment” period for federal rulemaking, and that prior to the pandemic-era waiver, HHS’s regulations permitted physicians to mail prescription drugs directly to patients. Therefore, the Alliance claimed, the FAQ document impermissibly changed physicians’ permitted scope of services.
The court disagreed with Alliance’s interpretation of where pharmacy services are deemed to be “furnished” under the Stark Law, finding that drugs are not “dispensed to a patient” in the physician’s office when they are mailed to the patient’s home. The court therefore dismissed the case. Since the Stark Law is a “strict liability” statute, physicians who have ownership or financial interests in pharmacies should consult with their counsel to ensure that their procedures are compliant.
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