Washington Physicians and the Sale of Good, Supplies, and Over-the-Counter Supplements for Profit

The Advocate | Washington Law

By Richard H. Adler

September 30, 2019

In Washington State, the ability of physicians to sell goods, supplies, and over-the-counter supplements for profit is based on the green light provided by the Washington State Supreme Court’s unanimous ruling in the 2006 case of Wright v. Jeckle.

This case arose from a lawsuit against Milan Jeckle, M.D., who operated a Spokane Valley medical clinic and was sued for injuries caused by his prescribing and selling diet drugs such as “fen-phen.”

The personal injury claims brought against Dr. Jeckle were based upon the anti-rebating statute, RCW 19.86.010. Examining the history of Chapter 19.86 RCW, the Court noted that it was enacted in 1949, a time when the Federal Trade Commission and many states were showing great interest in passing “anti-kickback” legislation. The push for such legislation occurred in response to a number of high-profile scandals, including the American Optical kickback scheme. In American Optical, the Justice Department brought a class action lawsuit against 22 named physicians, representing 2,000 doctors, for conspiring to influence patients to fill their prescriptions at American Optical. American Optical would, in turn, inflate the charges and then give a kickback to the referring doctor. Against this background, the Washington State legislature adopted RCW 19.86.010 and its companion statutes. The actual text of RCW 19.86.010 provides:

It shall be unlawful for any person … to pay, or offer to pay or allow, directly or indirectly, to any person licensed by the state of Washington … in the practice of medicine and surgery, drugless treatment in any form, dentistry, or pharmacy and it shall be unlawful for such person to request, receive, or allow…a rebate, refund, commission, unearned discount or profit by means of a credit or other valuable consideration in connection with the referral of patients … or in connection with the furnishings of medical, surgical, or dental care, diagnoses, treatment or service, on the sale, rental, furnishing or suppling of clinical laboratory supplies or services of any kind, drugs, medication, or medical supplies, or any other goods, services or supplies prescribed for medical diagnoses, care or treatment.

Though the Court indicated that the statute was “not a model of clarity,” it did interpret the statute to mean:

The first clause prohibits paying anything of value in return for a referral. The second clause prohibits receiving anything of value in return for referring patients. RCW 19.86.010. But the statute does not prevent a patient from paying a healthcare provider for services rendered or prescriptions received. Nor does it prevent a healthcare provider from making a profit on furnishing goods or care to patients.

Essentially, the Court ruled that RCW 19.86.010 prohibits taking an “unearned … profit” from a third party, such as when a licensed healthcare professional is paid an unearned profit by another person, i.e., a kickback.

The Court was also clear on what remains prohibited under the statute, namely “paying anything of value in return for a referral … [and] receiving anything of value in return for referring patients.”

In essence, the Supreme Court determined that the statute does not prohibit furnishing goods, supplies, or over-the-counter supplements at a profit. Nevertheless, providers in Washington still need to be very careful that they are not receiving a profit for referring patients to another provider or such goods and supplies.

When your patient is involved in a motor vehicle collision, the treatment, goods, and supplies you provide or prescribe are covered under the patient’s Personal Injury Protection (PIP) insurance as long as your documentation validates that they are reasonable and necessary. If PIP coverage is exhausted or not available, then only those items covered in the patient’s healthcare insurance policy will be covered. If there is no PIP coverage or if health insurance coverage excludes the treatment, goods, and/or supplies, then the at-fault insurer will be responsible for the patient’s expenses. However, the at-fault insurer pays only at the time your patient signs a release of claim to settle the entire case.

If your patient needs treatment, goods, or supplies, prescribe them. If your patient needs legal counsel, we hope they will consider us.