1099 Employees and Marketing

What is All the Fuss About 1099 Employees and Marketing?

The thinking goes like this:
If you have a 1099 sales employee who gets a nominal base salary and also receives a commission or bonus on prescriptions generated from a specified number of doctors, there is a far greater likelihood that the sales person may be engaged in inappropriate behavior in order to generate a higher income. That might involve fiduciary incentives (direct payments/kickbacks, sports tickets, trips, anything that exceeds nominal financial value). For compounders who employ contracted sales people, it might also mean that they may make inappropriate or inaccurate claims about the compounded preparation, participate in communications which exceed their professional scope, or distribute marketing materials that would make the drug “misbranded” and therefore not eligible for coverage.
Many of the regulations and policies for sales and marketing employees and how their behavior can "cross the line" and generate significant legal trouble for a pharmacy appear in the Anti-KickBack Law (Stark) and the False Claims Act (FCA) language. Both laws are very broad. The Stark Law is more specific to health care and providers and what prohibitions exist which may result in payment by the federal government for Medicaid, Medicare and other health insurance programs funded with tax dollars. The FCA covers any transaction with the federal government including health care.
1099 employees are not prohibited by either law. It’s how they are compensated and a series of tests to assure that they are part of a regulatory provided "safe harbor" that an employer needs to establish. Included in that safe harbor provision are issues related to “fair market value” of their salaries vs. commissions or bonuses that are paid based upon generating specific business (e.g., more prescriptions, more dialysis machines, more lab tests) from providers who are subsequently billing CMS and the federal government for those services or products.
This is a particularly complicated issue but what every compounder who currently or is considering employing a contract sales person needs to know is that you, the employer, are directly accountable for the actions, statements and behavior of your sales person. To help you understand the complexities of these laws, IACP has scheduled an important and informative continuing education webinar on Thursday, September 27, 2012 at 1:00 pm. “Don’t Mess with Uncle Sam! How the Stark Law and the False Claims Act Impact Pharmacists” will be hosted by IACP Executive Vice President and CEO David G. Miller, RPh. Click here for more information.
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