Violations of Usual & Customary Charges

What are violations of usual and customary charges?

Pharmacies are prohibited from charging Medicaid higher prices for prescription medications than the pharmacies’ “usual and customary charge to the general public.”

When billing federal-state Medicaid programs, or Medicare Part D, for prescription medicines, pharmacies may not charge any more than their “usual and customary charge to the general public.” While the federal and state governments establish various maximum reimbursement rates for prescription drugs billed to the Medicaid program, such as “federal upper limits” (FULs), “estimated acquisition costs,” and “maximum acquisitions costs” (MACs), these federal health care programs generally will not pay more than a pharmacy’s “usual and customary charge to the general public.” As a condition of participation in these programs, pharmacies must agree to disclose and bill their usual and customary rates.

Whistleblowers and the federal government have begun to focus their energies on enforcing this pharmacy billing rule using the government’s investigatory and audit resources and, when appropriate, the False Claims Act. Thus, in 2009, the Inspector General of the U.S. Department of Health & Human Services announced his intention to audit retail pharmacy chains’ compliance with the usual and customary (“U&C”) requirement when offering the public special, deep discount programs for generic medications.

VSG’s Qui Tam Attorneys Are Experienced in Handling Usual & Customary Pharmacy Fraud Cases

In 2010, in a qui tam whistleblower lawsuit case handled by Vogel, Slade & Goldstein, the long-term care pharmacy chain Omnicare paid more than $20 million to the states of Massachusetts and Michigan to settle allegations that it charged state Medicaid programs more than it charged private health plans.

The fifty states interpret the terms “usual and customary” and “general public” in various ways. For example, some state Medicaid programs define the term “usual and customary” variously to mean the “lowest,” “average,” or “most frequent” charge, while others leave the term undefined. And, depending on the state, the term “general public” is either left undefined or is expressly defined as all customers or a specified subset of customers — for instance, all customers except for third party insurers. Some (but not all) states provide guidance on the time period that a pharmacy must consider when determining its “usual and customary charge.”

To comply with the usual and customary charge rule, pharmacies must design software programs for billing Medicare and Medicaid that calculate their current “usual and customary charge to the general public” and use the appropriate state definition of the term when the payer is Medicaid. If they do not, they face liability for “knowing” false claims on government programs.