Research · 11 min read
Who Profits From the Prescription, and What Limits That
One company can take the consultation fee, the membership, the margin on the medication and the revenue from every month you stay. The laws written to police that kind of arrangement are narrower than most people assume, and the narrowness is the story.
Key takeaways
- The federal provision on illegal remunerations reaches only items or services for which payment may be made under a Federal health care program, a term the section defines for itself.
- One state makes any rebate, commission, discount or other consideration unlawful where it is compensation or inducement for referring patients, irrespective of any membership, proprietary interest or coownership.
- That same state expressly permits referral to a pharmacy the licensee co-owns, provided the return on investment tracks capital or proportional ownership and not the number or value of patients referred.
- A second state allows a financial interest where the practitioner discloses it in writing, supplies a list of effective alternative facilities and assures the patient of no different treatment.
- Payment for advertising is treated as something other than a referral only where the advertiser does not itself recommend, endorse or otherwise select — which puts any ranked board on the selecting side.
- This is state law and it is not uniform; two states were read here and nothing is claimed about the other forty-eight or about any company.
Answer first: count the places money enters
A weight-loss telehealth purchase usually has three or four separate revenue events hidden inside one charge.
There is the clinical encounter. There is any membership or platform fee. There is the medication itself, bought at one price and supplied at another. And there is next month, which costs the seller almost nothing to earn.
In a traditional arrangement those sit with different businesses. A clinic bills for the visit and a pharmacy sells the drug, and neither one's income depends on the other's decision.
In this market they frequently sit inside one group of related companies. That is not hidden and it is not unusual, but it changes what a recommendation is.
The useful question is never whether a company makes money. It is whether the person deciding what you need is inside the business that gets paid for supplying it.
The federal rule everyone reaches for, and the words that keep it away
There is a well-known federal criminal provision on illegal remunerations, and it is the first thing most people think of here.
It reaches anyone who knowingly and willfully solicits or receives any remuneration, including any kickback, bribe or rebate, directly or indirectly, overtly or covertly, in cash or in kind. A parallel paragraph reaches the person who offers or pays.
The prohibited purposes are broad on their face. In return for referring an individual for the furnishing or arranging for the furnishing of an item or service. Or in return for purchasing, leasing, ordering, or arranging for or recommending any good, facility, service or item.
Then comes the clause that decides everything, and it sits at the end of each of those purposes. The item or service must be one for which payment may be made in whole or in part under a Federal health care program.
The section defines that term itself. It means a plan or program providing health benefits, directly or through insurance or otherwise. That plan must be funded directly, in whole or in part, by the United States Government, other than the named federal employee health benefits program. Any State health care program is included as well.
A cash-pay purchase is not that. Where nobody is billing a government program, the provision's own scope clause has not been engaged, and this market is overwhelmingly cash-pay.
That is a statement about reach, not about virtue. The provision also expressly carves out an ordinary salary: an amount paid by an employer to an employee with a bona fide employment relationship, for employment in the provision of covered items or services.
What a state can do that the federal provision does not
State law is where the answer actually lives, and the drafting is much wider. One state's article on unearned rebates, refunds and discounts is a clear example.
It makes unlawful the offer, delivery, receipt or acceptance, by a person licensed under that division, of any rebate, refund, commission, preference, patronage dividend, discount or other consideration.
The trigger is the purpose. The consideration is unlawful where it is compensation or inducement for referring patients, clients or customers to any person.
There is no government-payer condition anywhere in that sentence. It runs on a licensee and a referral, whoever is paying.
And it closes one obvious escape in the same clause. The prohibition applies irrespective of any membership, proprietary interest or coownership in or with the person the patients are referred to.
The state's penalty for that conduct is a public offense, with a first conviction punishable by jail or a fine and a heavier exposure on a second.
Owning the pharmacy is not the thing the rule prohibits
This is where most readers expect the law to say something it does not say, so it is worth quoting closely.
A separate subsection of the same section addresses ownership directly. It is not unlawful for a licensee to refer a person to a laboratory, pharmacy, clinic or health care facility solely because the licensee has a proprietary interest or coownership in it.
Ownership alone is expressly not the offense. What the subsection then attaches is a condition on how the owner is paid.
The licensee's return on investment for that interest must be based upon the amount of capital investment or proportional ownership. That ownership interest must not be based on the number or value of any patients referred.
Read the two halves together. You may own the pharmacy you send people to. You may not be paid more for sending more people.
The subsection then keeps a floor under the whole arrangement. Any referral excepted under the section is unlawful if the prosecutor proves there was no valid medical need for the referral.
There is a matching carve-out for ordinary service payments. Consideration for services other than the referral of patients is treated separately, including where it is based on a percentage of gross revenue. Such an arrangement is not unlawful where it is commensurate with the value of the services furnished, or with the fair rental value of premises or equipment.
A second state, and a disclosure route with its own edges
One state's statute is one state's statute, so a second was read. Its rebating section is drafted from the other end.
It makes it unlawful for any person, firm, corporation or association, whether cooperative, for profit or nonprofit, to pay, offer to pay or allow, directly or indirectly. The recipients it names are people licensed there in medicine and surgery, drugless treatment in any form, dentistry or pharmacy. It is equally unlawful for that licensee to request, receive or allow.
The forbidden thing is a rebate, refund, commission, unearned discount or profit by means of a credit or other valuable consideration, in connection with the referral of patients.
The list of transactions it attaches to is unusually explicit, and it names this market's product. Clinical laboratory supplies or services of any kind, drugs, medication, or medical supplies, or any other goods, services or supplies prescribed for medical diagnosis, care or treatment.
That state then supplies something the first does not: a disclosure route out. Ownership of a financial interest is not prohibited where the referring practitioner affirmatively discloses the interest to the patient in writing.
The route has two more conditions in the same subsection. The practitioner must give the patient a list of effective alternative facilities, tell the patient there is an option to use one of them, and assure the patient of no different treatment for choosing one.
Read the scope of that route before borrowing it. The subsection is written for ownership in a firm furnishing clinical laboratory or other services prescribed for diagnosis, while the prohibition in the first subsection plainly reaches drugs and medication. The two do not have identical footprints, and nothing here claims the disclosure route covers a dispensing pharmacy.
A violation of that section is a misdemeanor there.
Where advertising stops and selection begins
The first state's section carries one more subsection, and it is the one this site has to read about itself.
It provides that payment or receipt of consideration for advertising, where a licensee offers or sells services through a third-party advertiser, does not constitute a referral of patients. That protection has a condition attached in the same sentence.
The condition is that the third-party advertiser does not itself recommend, endorse or otherwise select a licensee.
A scored comparison board is on the selecting side of that line by design. It ranks, and ranking is selection.
So the honest reading is that a site like this one cannot describe itself as a neutral pipe. What it can do is publish the arrangement and the method, which is what the disclosure and methodology pages here exist to do.
The subsection carries further conditions worth knowing as a shopper, whoever is advertising. The advertiser's fee must be commensurate with the service provided. A purchaser who is found unsuitable, or who declines and asks, receives a refund of the full purchase price under the advertising agreement.
The licensee must disclose in the advertisement that a consultation is required and that an ineligible purchaser gets a refund. The advertiser must make available advertisements for all licensees then advertising through it in the applicable region. And an advertisement offering a discount price must also disclose the regular, nondiscounted price.
The questions that turn this into a fact about one company
None of the above tells you what any particular program does. These do, and every one has a written answer.
Which entity dispenses, by its full legal name, and is it owned by or under common ownership with the company charging your card?
Does anyone in the clinical decision hold a financial interest in the pharmacy, and is that disclosed to you anywhere in writing?
Is the clinician an employee, a contractor or a shareholder, and does anything in their pay move with what gets prescribed or with how long you stay?
May you take the prescription to a pharmacy of your own choosing, and what changes in price if you do?
What is the fee for, separately from the medication, and does it keep being charged in a month when nothing is dispensed?
A program that answers all five in writing has not proved it is good. It has made itself checkable, which is a different and more useful thing.
What this does not decide
It does not decide that any arrangement is unlawful. Two states were read, and neither reading is applied to any company here.
It does not decide that integration is bad. A single company holding the visit, the pharmacy and the shipping can be faster, cheaper and better coordinated than three that do not talk to each other.
It does not decide what the rule is where you live. These are state statutes, they are drafted very differently from one another, and forty-eight other answers exist.
It does not decide anything clinical. A financial interest is not a diagnosis and does not make a prescription wrong.
And it decides nothing about your own position in a dispute. That needs someone advising you directly, with your facts in front of them.
Sources
- 42 U.S.C. 1320a-7b, Criminal penalties for acts involving Federal health care programs (subsections (b) and (f))Subsection (b)(1) and (b)(2), reaching whoever knowingly and willfully solicits or receives, and whoever knowingly and willfully offers or pays, any remuneration including any kickback, bribe or rebate, directly or indirectly, overtly or covertly, in cash or in kind, in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service, or in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing or ordering any good, facility, service or item — in each case qualified by the words for which payment may be made in whole or in part under a Federal health care program. Subsection (b)(3)(B), excepting any amount paid by an employer to an employee who has a bona fide employment relationship with that employer, for employment in the provision of covered items or services. Subsection (f), defining Federal health care program as any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government other than the health insurance program under chapter 89 of title 5, or any State health care program as defined in the named section. That definition is the basis for the scope statement in this article and for nothing else; no conclusion about the propriety of any arrangement is drawn from it.
- California Business and Professions Code section 650, Unearned Rebates, Refunds and Discounts (Division 2, Chapter 1, Article 6)Subdivision (a), making unlawful the offer, delivery, receipt or acceptance by any person licensed under that division or the named initiative act of any rebate, refund, commission, preference, patronage dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for referring patients, clients, or customers to any person, irrespective of any membership, proprietary interest, or coownership in or with any person to whom those patients, clients or customers are referred. Subdivision (b), providing that payment or receipt of consideration for services other than the referral of patients, based on a percentage of gross revenue or similar contractual arrangement, is not unlawful where the consideration is commensurate with the value of the services furnished or with the fair rental value of any premises or equipment leased or provided. Subdivision (d), providing that it is not unlawful for a licensee to refer a person to any laboratory, pharmacy, clinic or health care facility solely because the licensee has a proprietary interest or coownership in it, provided that the licensee's return on investment for that interest is based upon the amount of the capital investment or proportional ownership, which ownership interest is not based on the number or value of any patients referred, and providing that any referral excepted under the section is unlawful if the prosecutor proves there was no valid medical need for the referral. Subdivision (g), providing that payment or receipt of consideration for advertising, where a licensee offers or sells services through a third-party advertiser, does not constitute a referral of patients when the third-party advertiser does not itself recommend, endorse or otherwise select a licensee, that the fee paid must be commensurate with the service provided, that a purchaser found unsuitable after consultation or electing not to receive the service and requesting a refund receives a refund of the full purchase price as determined by the advertising service agreement, that the licensee must disclose in the advertisement that a consultation is required and that an ineligible purchaser will receive a refund, that the third-party advertiser must make available advertisements for the services of all licensees then advertising through it in the applicable geographic region, and that an advertisement offering a discount price must also disclose the regular, nondiscounted price. The section's penalty provision, making the conduct a public offense punishable on a first conviction by imprisonment in a county jail or a fine or both, with heavier exposure on a second or subsequent conviction.
- Revised Code of Washington 19.68.010, Rebating prohibited — Disclosure — List of alternative facilitiesSubsection (1), making it unlawful for any person, firm, corporation or association, whether organized as a cooperative or for profit or nonprofit, to pay or offer to pay or allow, directly or indirectly, to any person licensed by that state to engage in the practice of medicine and surgery, drugless treatment in any form, dentistry, or pharmacy, and equally unlawful for such person to request, receive or allow, directly or indirectly, a rebate, refund, commission, unearned discount or profit by means of a credit or other valuable consideration in connection with the referral of patients to any person, firm, corporation or association, or in connection with the furnishings of medical, surgical or dental care, diagnosis, treatment or service, on the sale, rental, furnishing or supplying of clinical laboratory supplies or services of any kind, drugs, medication, or medical supplies, or any other goods, services or supplies prescribed for medical diagnosis, care or treatment. Subsection (2), providing that ownership of a financial interest in any firm, corporation or association which furnishes any kind of clinical laboratory or other services prescribed for medical, surgical, or dental diagnosis is not prohibited under the section where the referring practitioner affirmatively discloses to the patient in writing the fact of that financial interest, and provides the patient with a list of effective alternative facilities, informs the patient of the option to use one of them, and assures the patient of no different treatment for choosing one. Subsection (3), providing that any person violating the section is guilty of a misdemeanor. The article states the difference in footprint between subsection (1), whose transaction list names drugs and medication, and subsection (2), whose disclosure route is written around services prescribed for diagnosis, and claims nothing beyond that difference.
Frequently asked questions
Is it legal for a telehealth company to own the pharmacy that fills my prescription?
That is state law, and the two states read here both address it without banning it. One provides that it is not unlawful for a licensee to refer a person to a laboratory, pharmacy, clinic or health care facility solely because the licensee has a proprietary interest or coownership in it. The condition is on the money. The return on that interest must be based on the amount of capital invested or proportional ownership. It must not be based on the number or value of patients referred. The other state allows ownership where the referring practitioner discloses the interest in writing and offers a list of alternatives. No claim is made here about any other state or any particular company.
Does the federal anti-kickback law protect me as a cash-pay patient?
Read its scope clause rather than its reputation. The provision reaches remuneration paid or received in return for referring an individual, or for purchasing, ordering or recommending a good or service. Each of those purposes ends with the same limit. The item or service must be one for which payment may be made in whole or in part under a Federal health care program. The section defines that term as a plan or program providing health benefits funded directly or in part by the United States Government, other than the named federal employee program, plus State health care programs. A purchase paid entirely by card is outside that description. This is a statement about the provision's reach and not about whether anything is proper.
Is a monthly membership fee a way of paying for a referral?
Not on its face, and one of the statutes read here draws the distinction directly. It addresses payment or receipt of consideration for services other than the referral of patients, based on a percentage of gross revenue or a similar contractual arrangement. Such consideration is not unlawful where it is commensurate with the value of the services furnished, or with the fair rental value of premises or equipment. So a fee tied to real services is treated differently from a payment tied to sending people. What that means for a fee you are actually being charged is a question about that specific arrangement, and this article does not answer it for anyone.
Why does it matter who employs the prescriber?
Because it decides whose interests sit behind a recommendation, and because it changes who answers for what. The federal provision discussed here expressly carves out an amount paid by an employer to an employee with a bona fide employment relationship, for employment in the provision of covered items or services. So ordinary salaried employment is treated as a different thing from a payment for a referral. What is worth asking is narrower and more practical: whether any part of the clinician's compensation moves with what is prescribed, or with how long a customer stays enrolled.
Does a comparison site count as a referral?
One of the statutes read here draws a line and puts the condition in the same sentence. Payment for advertising, where a licensee offers or sells services through a third-party advertiser, does not constitute a referral of patients when the advertiser does not itself recommend, endorse or otherwise select a licensee. A scored board is on the selecting side of that line, because ranking is selection. That is why the arrangement and the scoring method on a site like this one belong on the page rather than in a footer, and why this site publishes both. Nothing here is a claim that any site complies with anything.
What should I actually ask before enrolling?
Five things, all answerable in writing. The full legal name of the entity that dispenses, and whether it is under common ownership with the company charging your card. Whether anyone involved in the clinical decision holds a financial interest in that pharmacy. Whether the clinician is an employee, a contractor or an owner, and whether any part of their pay moves with what is prescribed. Whether you may use a pharmacy of your own choosing, and what changes in price if you do. And what the recurring fee buys in a month when nothing ships. Keep the replies; a written answer survives a site redesign.