The Medicare Approved Drug Discount Card and Transitional Assistance program, a voluntary prescription drug discount program for eligible Medicare beneficiaries, began accepting enrollees in May 2004. Under the program, which was established as part of the MMA, individuals with an annual income in 2004 of no more than $12,569 if single or $16,862 if married, and individuals receiving state help in paying Medicare premiums or cost sharing, may qualify for a $600 credit in 2004 and 2005 on their discount card to pay for prescription drugs. Medicare has contracted with private companies to offer new drug discount cards until a Medicare prescription drug benefit starts in 2006.

On April 8, 2004, the OIG issued general guidance to drug card sponsors regarding the implication of the antikickback statute in arrangements involving payments to network pharmacies in connection with drug card sponsor-funded education and outreach programs. The OIG stated, "Payments that compensate pharmacies for submitting enrollment applications or for otherwise directing patients to a particular drug card may implicate the Federal criminal anti-kickback statute, section 1128B(b) of the Social Security Act." According to the guidance, the OIG supports bona fide efforts to educate beneficiaries about Medicare's discount drug program and to assist beneficiaries in making educated and informed choices about card options; however, the OIG is concerned that financial incentives offered by drug card sponsors may "convert the education process into a mechanism for steering beneficiaries to a particular drug card without regard to the beneficiaries' best interests." The OIG indicated that arrangements might fit within the personal services antikickback safe harbor at 42 C.F.R. § 1001.952(d) and properly structured arrangements using independent, neutral third parties, such as nonprofit charitable organizations, pose little risk under the antikickback statute.

The OIG subsequently issued an interim final rule establishing its authority to impose civil money penalties under the Medicare prescription drug discount program against endorsed sponsors who knowingly (i) engage in false or misleading marketing practices, (ii) overcharge program enrollees, or (iii) misuse transitional assistance funds. 69 Fed. Reg. 28,842 (May 19, 2004). The regulation allows CMS and the OIG to impose penalties of up to $10,000 per violation against any sponsor who engages in fraudulent marketing practices, misuses federal funds under the discount drug card program, or fails to comply with its endorsement agreement. In addition, the OIG has stated in a recent press release that it will "actively monitor drug prices under the discount card program to assure that Medicare beneficiaries are fully protected under the plan in which they have enrolled."