We have been following Amazon in its attempts to enter the pharmaceutical market. See related blog posts:

Amazon-PillPack deal – a pharmacy shakeout?

Why Amazon shelved its plan to enter the pharmaceutical distribution chain. 

Is Amazon ready to enter pharmacy business? 

This month, Amazon made headlines when it announced its 6-month prescription plan starting at $6 (for maintenance medications). Customers can pay as low as $1 per month for some medications, including diabetic and blood pressure drugs, with free 2-day delivery. This is a real industry shaker.

Since its acquisition of PillPack, Amazon has been making gradual steps towards acquiring a larger chunk of pharmaceutical business by making medications more affordable and delivery faster. But what does this mean for independent community pharmacies who simply cannot compete with Amazon? As many pharmacies are realizing, it is difficult to make profits on maintenance medications. More and more pharmacies are turning into closed door, long term care, or specialty pharmacies (or selling files and closing its doors).

Many chain pharmacies are also affected by this move. For example, Walgreens announced that it will launch its own prescription savings program for its members.

About eight years ago, I represented Pharmacists Planning Services Inc (“PPSI”) (led by the late Fred Mayer) in front of the Board of Pharmacy regarding medication errors and working conditions of the pharmacists.

Fred was advocating for the reduction of errors due to difficult working conditions of the pharmacists employed by chain drug stores. We prepared and drafted a regulation  prohibiting chain stores of imposing stringent requirements on the minimum amount of prescriptions to be filled per day. Our survey showed that many pharmacists were deprived of bonuses or even demoted if they did not fill their weekly quota. We presented the case to the Board, which decided not to act on this issue at the time.

And now – almost ten years later – the Board is commencing its own investigation into these practices. It is conducting a workforce survey to determine if working conditions in pharmacies may contribute to medication errors. The survey is anonymous. If you feel like the working conditions in your pharmacy are likely to trigger errors (e.g. you are required to work at a high pace, you do not have enough ancillary staff, etc.), I strongly encourage you to fill out the Board’s survey (available on its website) or contact the Board to participate in this survey.

I would like to think that we have planted a seed with Fred and his legacy will live on.

Pharmacy terminations based on aberrant quantities and products are becoming more and more prevalent. It is difficult to appeal such terminations due to broad definitions of aberrant products/quantities and PBMs’ excessive discretion on what constitutes such products and volumes.

For example, PBM manuals usually state that Provider “must not dispense aberrant quantities of” certain products “and/or high volume of claims within a therapeutic category (e.g. topicals, dermatologicals), as measured by number of claims, quantity dispensed or dollars, inconsistent with the habits of local Prescribers or Plan Sponsors formularies.” This is a very broad definition and does not give much guidance to the providers. Plus, it gives PBMs an exclusive discretion to determine what aberrant quantities are.

Based on my experience, anything above 10% could be classified as aberrant. In most cases, however it’s 25% or more  of the provider’s claims or dollars.

Also watch your reversals, as PBMs usually count them towards calculating aberrant volumes. While there is nothing in the manuals clarifying this issue (besides a provision that aberrant volume may be calculated on a number of claims), this issue has not been clarified in a legal proceeding. Therefore, it is recommended that the amount you bill to PBMs (not necessarily dispense) does not exceed 25% of your total claims billed (including reversals).

If you operate a healthcare business, responding to government investigations and informal requests for information is an everyday reality. Your response to such investigations and requests can often decide the fate of your business (this is not an exaggeration, as the below examples show).

One common thread in many of my cases is the admissions that clients make in attempt to be cooperative. But in the context of government investigations this need to cooperate should disappear in favor of a more thoughtful approach. You must first decide what type of investigation this is, whether it is pursuant to a warrant or subpoena, and what your potential exposures are. As a healthcare provider, you must be prepared to provide certain information and records but you are not required to talk or discuss any aspects of your practice. And even if you do decide to talk to the agents – who are on the lookout for any misstatements or admissions – consult your attorney. This could be a crucial step in preventing an escalation of the situation.

Let me give you an example. A few years ago, my client received a visit from the FBI. The agents were particularly interested in the billing practices under a prior ownership.  The pharmacy owner considered his pharmacy to be in the top-notch compliance and therefore allowed the agents to come in and interview his staff. Not surprisingly, the owner received an invitation from the Department of Justice to informally discuss the case. Again – thinking that he had nothing to fear – he went to the interview without his lawyer. As a result of this interview, the client is now indicted for Medicaid fraud even though the wrongdoing stemmed from the acts of the prior pharmacy owner. During the interview, however, he made certain admissions that led the investigators to conclude that the client had knowledge of and abetted the wrongdoing.

Here is another example. A pharmacy was audited by the DEA and the agents confronted the PIC with a few prescriptions written by a doctor implicated in an illegal diversion scheme. To appear cooperative, the PIC stated that he could have exercised more diligence when filling these scripts. Armed with this statement, the DEA is now trying to settle the case with the pharmacy for a six-number figure because the PIC failed to exercise his corresponding responsibility. While we have argued that the statement was made under pressure and the pharmacy ran CURES reports on the patients (there was no patient or pharmacy shopping) and discussed diagnoses with the prescribers, the DEA has this admission from the PIC and is confident that it will be able to prove its case if we go to trial.

Another very common example that makes me cringe is when I read pharmacists’ letters to the Board addressing alleged violations. Most of these letters contain some sort of admission that could potentially cause serious trouble. And again these statements are made solely with the intent to cooperate and express remorse for the past conduct. I often see statements full of apologetic words and admissions but when I start digging deeper I discover that there was no wrongdoing or there was some minor record-keeping oversight not justifying the admissions or remorse.  Before you send such statements, run them by your legal counsel specializing in dealing with this particular agency to which you are writing to.

The bottom line is, you do not have to talk to the investigators and appear to be cooperative. While you do have to comply with warrants and the Board of Pharmacy inspections, you do not need to talk to any of the agents or inspectors without consulting your legal counsel. A very common assumption that just mentioning a lawyer would make investigators think that a wrongdoing is taking place is erroneous. In fact, as Michael Steinberg says in his blog post “The Dangers of Talking to the FBI:”  if you first obtain legal advice before answering questions, you are not perceived as uncooperative but “you are perceived to be aware of your rights.”

 

 

In March 2020, the California State Board of Pharmacy issued a “Remote Processing” waiver, which is still in effect today (with some modifications). For the purpose of the waiver – as the Board explained – “remote processing” means the entering of an order or prescription into a computer from outside of the pharmacy or hospital for a licensed pharmacy. Remote processing may also include order entry, other data entry, performing prospective drug utilization review, interpreting clinical data, insurance processing, performing therapeutic interventions, providing drug information services, and authorizing release of medication for administration. This means that these services could not have been performed remotely absent a waiver. But some pharmacies in California – especially LTC pharmacies – contract or outsource these functions and they did so prior to the waiver. In fact, as I hear from my clients, this is a common practice across the state.

And this is why many confused pharmacists (who outsource these functions) and technicians (who often enter data remotely) contacted me after the waiver, asking why the Board waived an allowed activity. This was not an easy question to answer as the regulations do not expressly prohibit remote data processing.

Moreover, California Code of Regulations § 1793.3 provides that non-licensed pharmacy personnel may “type a prescription label or otherwise enter prescription information into a computer record system… At the direction of the registered pharmacist, a non-licensed person may also request and receive refill authorization.” And data processing is not within the tasks limited only to pharmacists as per California Code of Regulations § 1793.1.

But when I started to dig deeper,  I found two administrative actions that explained the Board’s position on the remote processing.

One was against PharMerica for outsourcing its data processing to Infinx (a company based in Mumbai) to process/type prescriptions from a remote location. The Accusation against PharMerica explained that PharmMerica and Infinx had entered into a business agreement, which detailed privacy, security, HIPAA standards, and business terms, such as a provision that Infinx was to arrange “data entry support performing routine pharmacy billing tasks, included but not limited to new order processing and refill order processing.” The Accusation further elaborated that employees of Infinx had the same login and access to the network as PharMerica’s employees. In other words, Infinx had access to protected patient and prescription information but was not licensed in California as a pharmacy. And none of its employees were licensed pharmacists or technicians. According to the Board’s records, the only supervision employees of Infinx received by licensed pharmacists was remotely through the computer system. The sole cause for discipline against PharMerica was for “unlicensed activity” by allowing an “unlicensed entity, to process prescription refill orders, including accessing the Pharmacy’s computer software by individuals not located in a pharmacy licensed by the board to process the refills.”

The second case was against Infinx in a form of a cease-and-desist demand. Infinx disagreed with the Board’s conclusion that it engaged in an unlicensed activity and requested a hearing. The final decision upheld the Board’s demand by explaining that the arrangement violated:

  • Bus. & Prof. Code § 4037, which required that common electronic files be used by two licensed pharmacies for dispensing information. Infinix was not a licensed pharmacy but had access to PharMerica’s common electronic file to update information relevant to the dispensing of the dangerous drugs.
  • Title 16, Cal. Code of Regulations § 1793.3, which provided that a pharmacy “may employ a non-licensed person to type a prescription label or otherwise enter prescription information into a computer records system.” The employees of Infinx were not employees of the pharmacy and were not supervised by California pharmacists.
  • Bus. & Prof. Code § 4071.1, which prohibited prescriptions or orders to be electronically entered outside of the pharmacy unless the prescription or order was entered by a prescriber or a pharmacist.

As these two cases illustrate, outsourcing data processing must be reconsidered taking into consideration the above three legal points.

While we currently have a waiver on file, it is set to expire on May 31, 2021. I suspect that it will be renewed again. If the Board, however, does not renew the waiver, many pharmacies will have to modify their practice of employing outside companies to perform remote data entry.

To remind, the current waiver expands the provisions of Bus. & Prof. Code § 4071.1 to allow for remote processing by pharmacy technicians and pharmacy interns to include “prescription or order entry, other data entry, and insurance processing of prescriptions and medication orders for which supervision by a pharmacist is provided using remote supervision via technology that, at a minimum, ensures a pharmacist is (1) readily available to answer questions of a pharmacy intern or pharmacy technician; and (2) verify the work performed by the pharmacy intern or pharmacy technician.” The waiver also requires that:

  • “A pharmacy utilizing remote processing shall ensure that all pharmacy interns and pharmacy technicians providing such services have been trained on the pharmacy’s policies and procedures relating to medication order or prescription processing and remote supervision via technology that, at a minimum, ensures a pharmacist is (1) readily available to answer questions of a pharmacy intern or pharmacy technician; and (2) verify the work performed by the pharmacy intern or pharmacy technician.
  • A pharmacy shall ensure that any pharmacy intern or pharmacy technician performing remote processing shall have secure electronic access to the pharmacy’s patient information system and to other electronic systems to which an on-site pharmacy intern or pharmacy technician has access when the pharmacy is open.
  • Each remote entry record must comply with all record keeping requirements for pharmacies.
  • A pharmacy utilizing remote processing is responsible for maintaining records of all medication orders and prescriptions entered into the pharmacy’s information system.”

Our firm is currently considering a possibility of petitioning the Board to codify the waiver and allow remote data entry with certain technical and contractual safeguards. For example, Arizona and Washington allow remote data entry if  proper contracts and technical safeguards are in place. If your pharmacy would like to join the efforts to change California law and allow remote data processing in the absence of waiver, please contact our firm.

 

I receive many questions regarding the transition to Medi-Cal Rx (a new California Medicaid program for processing pharmacy claims). The Department of Healthcare Services has just announced its Medi-Cal Rx training program for pharmacies and prescribers. If you bill Medi-Cal, I strongly suggest that you take advantage of this resource.

The training consists of three sessions and will cover important Medi-Cal Rx changes for pharmacy providers and prescribers. Topics that will be covered in these sessions include the following:

  • Session 1: Medi-Cal Rx Implementation and Changes Affecting Providers (includes background information and changes affecting pharmacy providers and prescribers);
  • Session 2: Point-of-Sale (POS) Technical and Operational Readiness;
  • Session 3: Claim Submission & Finance Information (includes changes affecting pharmacy providers and prescribers in terms of web claim submissions along with an overview of the Finance Portal).

To register and for more information, please visit the DHCS website.

 

This year, the California State Board of Pharmacy (“Board”) adopted a new regulation applicable to pharmacies where pharmacists perform non-professional activities because they work alone. The regulation – Title 16, California Code of Regulations, Section 1714 – establishes criteria a pharmacy must meet to identify and ensure that a person is assigned to assist the pharmacist when the pharmacist is otherwise working alone, as required by Business and Professions Code Section 4113.5.

Prior to the enactment of Section 4113.5, pharmacists were often working alone for extended periods of time. This resulted in the pharmacist having to perform non-pharmacist related functions, including staffing the cash register and assisting customers with non-pharmacy purchases. According to the Board, performing these duties takes time away from the pharmacist’s professional responsibilities and could impact public health as the pharmacist has insufficient time to safely exercise their professional judgement while reviewing and filling prescriptions. Additionally, it impacts the pharmacist’s ability to provide appropriate patient centered care.

Therefore, Section 4113.5 was enacted to prohibit a community pharmacy from “requiring a pharmacist to engage in the practice of pharmacy while the pharmacy is open to the public unless another employee of the pharmacy or the establishment is always made available to assist the pharmacist.” The section also specifies that the prohibition shall not apply to pharmacies that meet specific criteria, including, but not limited to, a hospital pharmacy (as defined by Section 4029 or 4056), a hospital outpatient pharmacy, “a pharmacy owned by a person or persons who, collectively, control the majority of the beneficial interest in no more than four pharmacies in California,” or a government owned pharmacy.

Section 1714.3, in turn, was enacted to identify the criteria that the pharmacy must meet to comply with Sec. 4113.5.

Sec. 1714.3 now requires the following:

  • the pharmacy must identify one or more persons who will be available to assist the pharmacist;
  • the backup person must be able to perform the duties of non-licensed pharmacy personnel
  • the pharmacy should run background checks for each backup person (this designated person should be qualified to have access to controlled substances)
  • the designated person must respond and be able to assist the pharmacist within five minutes (!) after the pharmacist’s request.
  • the pharmacy must have policies and procedures addressing how a designated person is identified, trained, and contacted.

If your pharmacy has a pharmacist working alone (and you are not exempt as provided by Section 4113.5), you must comply with both sections (Sec. 1414.3 and Sec. 1714.3) If you need assistance with drafting policies and procedures as required by these regulations, feel free to contact RxPolicy. 

 

 

I often say that pharmacies that bring legal actions against PBMs do not have a good precedent to rely on. Things might be changing soon with a recent California case holding that Optum’s provider agreement is unconscionable and thus unenforceable (specifically, its arbitration clause).

The court noted that the search for the true meaning of “the arbitration clause – requiring the combined intellect of three appellate justices to parse – further highlights the procedural unconscionability. The complexity of the prolix rendered the substance opaque and, consequently, unenforceable.” (Prescription Care Pharmacy, LLC Vs. OptumRx PBM Of Illinois, Inc. (Superior Court of California, County of Orange) Minute Order, 2/22/2021).

The court emphasized the substantive unconscionability because the contract provided that Optum could allege fraud, but “provide no specific evidence until 40 days after the claim for arbitration and can require [pharmacy] to present its own response at the same time, without even knowing the evidence involved.” Id.

The case was brought by a compounding pharmacy – Prescription Care Pharmacy LLC (PCP) – which dispensed compounded medication to Optum’s members relying on prior authorizations. Optum, however, alleged that the pharmacy submitted claims at pricing that was well above the lowest “average wholesale price,” which was what defendant would have paid its network pharmacies. As a result, Optum terminated the pharmacy in 2016. Pharmacy filed a legal action against Optum, who in turn filed a motion to compel arbitration.

To make the story short (there is some important procedural history here, such as a remand to the superior court to determine whether the provider manual was unconscionable): the court explained that “procedural unconscionability focuses on “oppression” or “surprise” and unequal bargaining power.” Id. The court agreed with the pharmacy that the parties had unequal bargaining power, with Optum’s yearly revenue far exceeding PCP’s revenue. PCP also presented evidence that Optum’s members comprised a majority of PCP’s business (roughly 80%).  Due to this economic pressure, the court found a degree of procedural unconscionability.

On the substantive unconscionability, the court focused on the one-sidedness of the arbitration provision and that it did not allow any discovery. Optum was the party with the majority of the relevant documents, precluding PCP from its fair pursuit of the claims. The pharmacy also argued that a three-arbitrator panel and their undisputed high rates would have made arbitration excessively costly. The court agreed with the PCP’s arguments and denied the motion to arbitrate.

In my opinion, this is the most favorable arbitration ruling for pharmacies. There were too many cases enforcing arbitration provisions in pharmacy contracts. Arguments that these clauses are unconscionable are usually futile.  Too many pharmacies spent years fighting motions to arbitrate, not even getting to substantive arguments, exhausting their legal pockets, and eventually abandoning their claims.

Prescription Care Pharmacy, LLC Vs. OptumRx PBM Of Illinois, Inc. is litigated by Dorros Law.

 

 

I am excited to announce a new webinar that I will be presenting with Marina Plotkin, Harrison Beach. The American Society for Pharmacy Law is hosting the webinar on March 10 at 12pm (Central) (10am PST). The presentation will focus on pharmacy operation during the times of natural and man-made disasters, local/state/national emergencies, and other catastrophic situations. We will present information on:

(1) state and federal waivers of certain regulatory compliance, such as prior authorization requirements, prescription refill limits, cost sharing obligations, ratios, etc.;

(2) potential issues with PBM audits based on emergency medication dispensing;

(3) opportunities for pharmacies to better serve patients (hand-sanitizer compounding, pharmacists prescribing authorities, community involvement, etc.);

(4) anti-fraud enforcement during coronavirus;

(5) immunity under the law for the diagnosis, prevention or treatment of COVID-19,  including pharmacist-administered vaccines.

The attendees will receive a copy of a template of “Disaster and Contingency Plan” policy and procedure.

More information and registration.

The announced Medi-Cal Rx implementation date, which was initially set for April 1, 2021, is postponed. (See a related Blog Post).

Magellan Haelth, Inc – a PBM that will administer the program – is in the process of being acquired by Centene Corporation. Centene operates managed care plans and pharmacies that participate in the Medi-Cal program. As a result, the Department of Health Care Services (DHCS) is analyzing potential conflicts with Centene managing Medi-Cal Rx on behalf of the DHCS.

The DHCS has announced that this transition was unexpected and “requires additional time for exploration of acceptable conflict avoidance protocols to ensure that there will be acceptable firewalls between the corporate entities to protect the pharmacy claims data of all Medi-Cal beneficiaries, and to protect other proprietary information.” See DHCS’s announcement.

The DHCS is expected to provide additional information on the new implementation date in May.  We will continue covering the progress towards this important transition.