HHS to Release Guidance on “Reasonable” Financial Remuneration by September 23, 2013; Enforcement to Be Delayed Until November 7, 2013

On September 5, 2013, Adheris, Inc. (“Adheris”), a Massachusetts company that provides, among other services, prescription refill reminders, filed a lawsuit in the U.S. District Court for the District of Columbia against Kathleen Sebelius, Secretary of Health & Human Services (“Secretary”), and the Department of Health & Human Services (“HHS”), challenging the constitutionality of the HITECH Final Rule’s restrictions on remunerated prescription refill reminders. Contemporaneous with its lawsuit, Adheris filed a Motion for Preliminary Injunction seeking to enjoin the Secretary’s enforcement of these restrictions, which was set to begin on September 23, 2013.

In a joint motion filed by the parties today seeking to suspend the court’s schedule on the Motion for Preliminary Injunction, the Secretary and HHS have informed the court that HHS expects to release guidance by September 23, 2013, on the HITECH Final Rule’s “reasonable in amount” restriction applicable to financially remunerated prescription refill reminders. The Secretary has also decided not to enforce the restrictions on financially remunerated prescription refill reminders until November 7, 2013, 45 days after the general HITECH compliance date of September 23, 2013.

Under the currently enforced Privacy Rule, covered entities must obtain an individual’s valid authorization prior to using and disclosing the individual’s protected health information for “marketing” purposes – which includes communications about a product or service that encourages the recipients of the communication to purchase or use the product or service. This requirement, however, included a significant exception for communications that also met the definition of “treatment” or “health care operations” communications, including prescription refill reminders, even where a third party subsidized the covered entity’s communication.

In a marked departure from the currently enforced Privacy Rule (and the July 2010 HITECH Proposed Rule), the Final Rule generally requires authorizations for all third-party subsidized health care operations and treatment communications, with a limited exception applicable to prescription refill reminders. With respect to prescription refill reminders, a covered entity may still receive some financial remuneration from third parties for making these communications, but this remuneration must be “reasonably related to the covered entity’s cost of making the communication.” In preamble language to the Final Rule, HHS made clear that permissible costs include only the costs of labor, supplies, and postage – where a covered entity generates a profit or receives payment for other costs in exchange for making a prescription refill reminder, the exception would not apply and the covered entity would need to obtain individual authorization.

Ultimately, what remains unknown is whether HHS will explicitly permit covered entities, and their business associates, to make a profit in connection with communicating prescription refill reminders, or if HHS will merely reaffirm its previously stated position in the preamble to the HITECH Final Rule.

For more information about the HITECH Final Rule and its implementation, please see our previous discussion of this topic.