On July 26, 2024, the California Department of Healthcare Services (“DHCS”) – which administers California’s Medicaid program – sent Notices of Medi-Cal Desk-Audit (“Audit”) to numerous California pharmacies. It appears that pharmacies that bill expensive specialty medications to Medi-Cal are subjects of these audits.

The Audit requests an overwhelming amount of information: from business ownership/ affiliations to detailed general ledgers for the last three years. It also requests dispensing data encompassing non-Medi-Cal patients. Any pushback from the pharmacies is met with the DHCS’s threats of immediate suspension for non-compliance. Many independent pharmacies are already struggling with financial resources and these audits add just another hurdle in pharmacy operations.

On the other hand, on June 27, 2024, the Justice Department announced its prosecution of a Southern California pharmacy that billed over 300 million in allegedly fraudulent Medi-Cal claims. In its press release, the Justice Department alleges that the pharmacy billed for medically unnecessary medications, which were often not provided to patients or “obtained through the payments of tens of millions of dollars in illegal kickbacks.” This prosecution explains a more aggressive stance that the DHCS is taking regarding the Audit and pharmacy compliance.

It is unclear whether there will be another wave of such audits but we recommend that pharmacies review compliance, policies and procedures, billing practices and other operational aspects in preparation for potential Medi-Cal audits.

I am very excited to announce that Mazina Law has partnered with The California Society of Health-System Pharmacists (CSHP) to offer exclusive benefits for the members of the CSHP. I have previously heard a lot of praise to the CSHP’s annual seminars and their educational webinars and finally we will be a part of it. The first joint event is a CE webinar on compliance with the Controlled Substances Act with the focus on DEA audits of hospital pharmacies.

When I teach DEA webinars, I am often asked questions regarding how DEA regulations or compliance with the state and federal regulations apply to hospital pharmacies because the dispensing process is so different. If you are one of the people who want to know the difference, we hope that you will join us on September 11, 2024 at 6pm.

Some of the topics that I will be covering include:

  • DEA’s tools for enforcing the Controlled Substances Act;
  • potential record-keeping issues in the hospital pharmacy setting;
  • the most cited DEA violations in hospital pharmacies;
  • effective practices in preparation for a DEA audit;
  • practical tips to avoid diversion in a hospital pharmacy context.

To register: https://www.cshp.org/page/CSHP_Webinar9-11-2024

Last week, many pharmacy and healthcare industry organizations sent announcements that FDA granted a two-year exemption to small dispenses for complying with the Drug Supply Chain Security Act (“DSCSA”). However, many pharmacies still have questions whether the exemption applies to them and how it affects them.

To remind, the DSCSA was enacted in 2013 with the goal of creating an interoperable electronic system to trace certain prescription drugs as they are distributed in the United States.

The DSCSA’s requires:

  • Product identification (such as a bar code)
  • Product tracing (trading partners, such as manufacturers, wholesalers, and pharmacies must trace the product from creation until dispensing)
  • Product verification (trading partners must establish a system and processes to be able to verify products)
  • Product investigation (trading partners must quarantine and promptly investigate a drug that has been identified as suspect (i.e. counterfeit, unapproved, or potentially dangerous))
  • Notification (trading partners must notify FDA if they suspect that the product is illegitimate).

DSCSA has six compliance deadlines. The last one was to commence on November 27, 2023 and pertained to enhanced product tracing. Starting with November 27, 2023, wholesalers were to provide 2Ts (transactional information and transactional statement) in an electronic format (EPCIS) with serial number of the product. Before that date, drug products had to list 3Ts (transactional information, transactional statement, and transaction history) from their wholesalers.

Prior to the implementation deadline, many stakeholders sent comments to FDA explaining that many pharmacies had no technical capabilities to access EPCIS. As a result, FDA postponed the implementation to November 27, 2024.

On June 12, 2024, FDA granted yet another extension but only for small dispensers. This time the extension is for two years until November 27, 2026.  FDA defined “small dispensers” as pharmacies with 25 or fewer full-time licensed employees (such as pharmacists or technicians).  Most independent pharmacies fit within this definition.If they don’t, they can request an extension by sending a waiver request to FDA no later than August 1, 2024 (as recommended by FDA).

If you are a small pharmacy with less than 25 full-time licensed employees, you can continue with your current practices of not including package-level product identifiers until November 27, 2026.

If you are following opioid litigation across the nation, you probably wouldn’t be surprised by another billion dollar settlement. But this latest case against Endo Health Solutions Inc. (Endo) is different. It is a criminal fine (not a settlement) with criminal forfeiture. The degree of culpability and burden of proof is very different from the previous settlements with opioid manufacturers and distributors.

On April 18, 2024, Endo pleaded guilty to one misdemeanor count of introducing misbranded drugs into interstate commerce. According to the U.S. Department of Justice press release, Endo admitted that from April 2012 through May 2013, certain Endo sales representatives marketed Opana ER to prescribers by touting the drug’s purported abuse deterrence, tamper resistance and/or crush resistance, despite a lack of clinical data supporting those claims. The company also admitted that it marketed the drug with a label that failed to include adequate directions for its claimed abuse deterrence use, in violation of the Federal Food, Drug and Cosmetic Act.

Endo withdrew Opana ER from the market in 2017 and filed for bankruptcy. The now-reorganized Endo has agreed to pay $1.086 billion in criminal fines and $450 million in criminal forfeiture. Going forward, Endo and its affiliates are prohibited from selling or marketing opioids.

A similar trajectory was followed in the case against Reckitt Benckiser Group PLC (Reckitt) that resulted in the largest criminal penalty relating to opioid distribution. Back in 2019, Reckitt agreed to pay $1.4 billion for its role in marketing of the opioid addiction treatment drug Suboxone.

In terms of settlements, the largest one in opioid litigation was against the three largest pharmaceutical distributors: McKesson, Cardan Health, and AmerisourceBergen and manufacturer Janssen Pharmaceuticals, Inc (including its parent Johnson & Johnson). In 2021, these companies settled collectively with states and local governments for $26 billion.

Some other large settlements with opioid manufacturers and distributors:

  • Teva: $3.34 billion
  • Allergan:  $2.02 billion
  • CVS: $4.90 billion
  • Walgreens: $5.52 billion;
  • Walmart: $2.74 billion.

These numbers are simply mind-blowing and make one wonder (again and again) how much money is involved in opioid and drug industry. Due to these large settlements, many pharmacy chains and distributors implemented drastic changes in how they distribute and dispense opioids, often resulting in patient hardship and drug shortages. The pendulum is swinging in a completely different direction now. The current trend set by these settlements and criminal fines is to err on the side of caution and minimize any government scrutiny

Earlier this year, California Senator Scott Wiener (D-San Francisco) introduced SB 966 that would require PBMs doing business in California to be licensed and regulated. The objective is to curb PBMs anticompetitive practices  contributing to rising drug costs. The press release calls the effort “the most comprehensive regulation of PBMs yet attempted by any state.”

In 2022, drug spending in California grew by 12%–much faster than the overall rate of inflation–while total health premiums rose by just 4%. Last year, more than half of Californians either skipped or postponed mental and physical healthcare due to cost, putting their safety and wellbeing at risk.” 

The three largest PBMs in California (and nationally) are CVS Caremark (operated by Aetna CVS Health), Express Scripts (Cigna), and OptumRx (UnitedHealth Group). Their market power allows them to generate significant profits with very little transparency. Some of the abusive practices that PBMs often engage are:

            – spread pricing;

            – steering patients to more profitable and higher-priced branded medications;

            – steering patients to PBM owned mail order and specialty pharmacies;

– engaging in other anticompetitive practices, such as aggressive pharmacy audits and unsubstantiated fraud investigations against independent pharmacies.

Most of the states – aware of such practices – have enacted some sort of PBM regulations. For example: about 15 states ban spread pricing and 25 states require PBMs to be licensed by state boards of pharmacy. For further information on national PBM legislation by state, see National Academy for State Health Policy’s report.

California, however, has less stringent requirements for PBMs operations. It requires PBMs to be registered (not licensed) with the Department of Managed Healthcare and has legal requirements on PBM audits of pharmacies. In addition, effective January 1, 2024, California now has a law prohibiting PBMs from discriminating against 340b entities (which I plan to cover in my next blog post).

Now –  if enacted – SB 966 would require PBMs to be licensed and to disclose basic information regarding their practices. Other pro-consumer requirements are:

            – anti patient-steering provisions;

            – no spread pricing;

            – passing all negotiated drug rebates to the payor or patients;

            – no exclusive deals with the manufacturers;

            – transparency in fee charged to the plans.

For the complete text of SB 966, visit LegInfo.

Current status:

On April 15, 2024, the Bill passed but was referred to the Committee on Health.

On April 24, 2024, the Bill was amended and referred to the Committee on Appropriations.

Source: Digital Democracy CalMatters

The Bill is definitely making its way through the California legislature and has many supporters determined to codify it.

The California Pharmacists Association has expressed strong support for the bill and conducted a series of events to raise awareness among pharmacy owners and patients. It has a webpage that could be forwarded to the patients and other interested individuals to support the bill.

Join the Fight to Save Our Pharmacy

It has also provided information and flyers to educate pharmacy patients regarding PBM practices and how to voice their support for the Bill.  For more information and to request such materials, please contact CPhA.

While it is very possible that the Bill, as written, will be heavily amended due to some of the requirements; if it passes, California is likely to be the next state that takes PBM abusive practices seriously. Let’s make it happen.

By Bhavesh Desai, PharmD, J.D.

DIR fees have been a focus of debate since their implementation and for the past decade, they have been increasingly scrutinized in congress as well as at the state level. The companies (Pharmacy Benefit Manager – PBMs) responsible for reporting true and accurate drug prices to the CMS have used loopholes in legislation to their advantage. A select few PBMs control a vast majority of the prescription volume in our country and they operate with minimal oversight.  This coupled with vertical integration has allowed them to grow their sphere of influence and use DIR fees to clawback monies from pharmacies through retroactive fees. 

Many pharmacy and patient advocacy groups have spoken out against the obscure methods employed by PBMs to increase their profits. These groups have advocated for the fees to be applied at the time a patient picks up the medication at the pharmacy rather than subjecting pharmacies to these fees months later. CMS finally mandated that PBMs implement the DIR fees at the point of sale starting January 1, 2024. While this is a win for patients, pharmacies and CMS, recent reports indicate that PBMs have increased the fees against the pharmacies and have placed pharmacies in precarious position as they strive to care for the public. Now more than ever, advocacy groups need to highlight the detrimental effect these PBM policies are having on their ability to provide the services necessary to manage the health conditions of the population.

What are DIR fees?

DIR stands for Direct and Indirect Remuneration. DIR fees were implemented with the creation of the Part D program through the passage of the Medicare Modernization Act of 2003. Congress intended the DIR fees to encompass Medicare Part D sponsors and their Pharmacy Benefit Managers (PBMs) to include the true costs of drugs to determine the net amount paid by CMS and the Medicare beneficiaries. When a pharmacy processes a prescription for a Medicare beneficiary, the out-of-pocket cost paid by the beneficiary and the reimbursement amount shown in the claim detail is generally not the actual cost of the drug paid by the Pharmacy Benefits Managers (PBMs). The true cost of the drug is determined by factoring in manufacturer rebates, any subsidies, or any price concessions from any manufacturers, pharmacies, or any other person (42 C.F.R § 423.308).

How are DIR fees determined?

Due to lack of CMS guidance on how DIR fees are to be determined and lack of any other oversight, individual PBMs have implemented their own DIR fee designs, resulting in no standardized method of determining DIR fees. Each PBM has a different methodology in determining the DIR fees collected from the pharmacy. Instead of calling DIR fees, the PBMs generally call them “performance fee”. Some PBMs charge DIR fees to pharmacies based on a percentage of the drug ingredient cost, while others charge based on a percentage of average wholesale price, whereas some charge a flat fee per prescription. Other criteria utilized by PBMs include medication adherence rates, generic compliance ratios, generic effective rate, and medication therapy management implementation. These are the different “performance” matrix used by PBMs to determine DIR fees.

Why are DIR fees controversial and what is their impact on Pharmacies, Patients and CMS?

There are several issues related to DIR fees and their application to pharmacies. PBMs opaque and vague tactics to determine how DIR fees are calculated, and these “fees” are assessed months after the prescription has been dispensed to the patient. Because the fees are assessed against the pharmacies months after the prescription is dispensed, they are termed “clawback” fees.

Despite the retroactive nature of these fees, the Pharmaceutical Care Management Association (PCMA) notes that Pharmacy DIR is NOT a retrospective “fee” associated to pharmacies. They further note that Pharmacy DIR is NOT a clawback of payment to pharmacies.1 it is helpful to keep all perspectives in mind irrespective of how divergent the view is to what pharmacy groups have been advocating for years.

Another concern related to the DIR fees is when these fees are assessed against the pharmacy, the PBMs generally do not include claim level details and hence the pharmacies are unable to reconcile claims with any degree of certainty. This lack of transparency interferes with the pharmacy’s ability to make operational decisions. Given the lack of details provided by PBMs, the pharmacies are unable to predict the fees they are to likely incur, and many times results in negative reimbursements for drugs previously dispensed. What compounds these issues further is the fact that PBMs are not required to define or explain how the fees are levied against the pharmacies or to CMS.

The intent behind CMS implementing the DIR fees was simply to account for the true cost of drug paid to the Part D sponsor. Unfortunately, the PBMs have used DIR fees as a means to enrich themselves. While there is lack of most current available data, DIR fees have increased by double digits year over year.2 As of 2018, DIR fees have increased to over six percent of the overall Medicare drug sales. 3

While the PBMs benefited from the manufacturer rebates and other fees that they collected, those savings were never passed down to the Medicare beneficiaries. This resulted in the beneficiaries sharing a higher out-of-pocket burden as a result of the retroactive DIR fee structure in place up until January 1, 2024. It wasn’t just the Medicare beneficiaries who were subjected to higher cost, CMS also was saddled with higher costs. There are three coverage phases in a Medicare recipient’s drug design. The initial coverage phase where the beneficiary generally pays a deductible and a co-pay for the drugs they received.  During the coverage gap phase, the beneficiary generally pays a significantly higher out-of-pocket cost. In the catastrophic phase, Medicare pays 80% of drug costs while the PBMs cover 15% of the cost. With DIR fees being applied on a retroactive basis, the Medicare beneficiaries enter the catastrophic phase earlier and thus require Medicare to subsidize the higher drug costs.

Given the negative impact on Medicare beneficiaries, Medicare and the pharmacies, CMS along with many patient and pharmacy groups for years have advocated a change in how DIR fees were calculated and collected. On April 29, 2022, the Centers for Medicare & Medicaid Services (CMS) issued the highly-anticipated Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs Final Rule (“Final Rule”).  This rule went into effect on January 1, 2024.5

What is the new CMS final rule and how will it impact pharmacies?

The final rule will prohibit Medicare Part D plan sponsors and their PBMs from retroactively assessing DIR fees for prescriptions adjudicated under the Part D benefit. By removing the retroactive nature of fee assessment, this rule eliminates the “clawback” and improves the predictability of pharmacy cash flow. This rule neither eliminates the DIR fees nor does it remove the loopholes which the PBMs use to their advantage.

The pharmacies will be subject to a double whammy for the first six months of 2024. While the elimination of retroactive fees is a welcome change, there are many PBMs who have not assessed DIR fees from June 2023 through December 2023. These will now be collected through June 2024 along with point-of-sale DIR fees for claims adjudicated beginning January 1, 2024. As previously noted, these fees represent a substantial cost to the viability of a pharmacy’s survival. With nearly 12 months of fees being assessed within a six-month period, pharmacies will notice a significant negative impact on their cashflow and operations. CMS is aware of the cash flow concerns faced by pharmacies and have issued a letter expressing concerns “about the sustainability of these businesses, especially small and independent pharmacies, and their potential closures that may leave pharmacy services out of reach for many people, especially those in rural and underserved areas.”4 

The final CMS rule also does not address the numerous unilateral below-cost reimbursements dictated by the PBMs, it does not prevent PBMs from steering patients to their own pharmacies and, pharmacies remain blind to the “negotiated price” calculations employed by the PBMs.

Conclusion

Pharmacies operate on slim margins. Every below-cost reimbursed prescription can have a detrimental impact on the sustainability of a pharmacy. While the point-of-sale DIR fees have been implemented as of January 1, 2024, and the pharmacies are able to see the total reimbursement they are to receive for a particular Part D drug, their woes are far from over. The PBM reimbursements have plummeted to a new low.  The PBMs continue to use obscure methodology to determine DIR fees and many of the pharmacists I spoke with are more concerned now than ever before. They see numerous negative reimbursements daily, especially on branded medications. When a pharmacy receives a reimbursement that is several hundred dollars below cost for a single prescription, the pharmacy struggles to survive. But when you have scores of prescriptions a day that are reimbursed below a pharmacy’s cost, the pharmacy is likely to shudder its doors.

CMS in their final rule “requires Part D plans to apply all price concession they receive from network pharmacies to the negotiated price at the point of sale, such that the beneficiary can also share in the savings.” 5 This negotiated price is the lowest possible payment to a pharmacy and with the uncertainty of any additional “performance” payment to be received by a pharmacy, the pharmacies remain in a precarious position. The PBMs continue to dictate unilateral terms given the lack of significant regulatory oversight. Many states have begun to scrutinize PBM practices and bring them under their purview, but the challenges faced by pharmacies are imminent. While there is hope of more PBM reform in the future, the pharmacies will need to find ways to survive in the interim. Pharmacies will need to seek out additional sources of revenue and not rely solely on cost of goods reimbursement.

References:

  1. https://www.pcmanet.org/dir-2/
  2. https://www.cms.gov/newsroom/fact-sheets/medicare-part-d-direct-and-indirect-remuneration-dir#:~:text=Examples%20of%20such%20compensation%20include,payments%20to%20Part%20D%20plans.
  3. Inmar white paper
  4.  https://www.cms.gov/newsroom/fact-sheets/cms-letter-plans-and-pharmacy-benefit-managers
  5. https://www.cms.gov/newsroom/fact-sheets/cy-2023-medicare-advantage-and-part-d-final-rule-cms-4192-f

Even if your state has legalized cannabis products, it does not mean that your pharmacy can start selling them. This axiom has been tested and proven again and this time in Georgia.

Georgia took an interesting approach regarding expanding medical marijuana access. As far as I know, it is the only state that specifically allows its pharmacies to be registered as dispensers of  low-THC cannabis oil (containing under 5% THC). Its Board of Pharmacy has approved about 23 pharmacies to carry and dispense such products in attempt to expand access to medical marijuana (primary to rural patients). At some point, it became necessary to involve pharmacies because Georgia allows only a very limited amount of dispensaries (only seven as of the date of this writing) and they are concentrated in urban areas. As a result and to provide rural patients with access to medical marijuana, the state has approved special registration for pharmacies as dispensers of medical marijuana.

Shortly after this implementation, however, DEA sent the following letter to the pharmacies across the state warning that if they dispense THC products they will be in violation of the Controlled Substances Act:

Pharmacies should avoid distributing cannabis products precisely due to federal restrictions. The only exception would be distributing FDA approved CBD products (such as Epidiolex). Likewise, prescribers do not stock or prescribe cannabis. Instead, they issue recommendations regarding medical conditions that may justify consuming cannabis products.

Now Georgia is at a loss. It is facing a dilemma: the need to provide access to medical marijuana and avoid non-compliance for its pharmacies.  Frankly, it has only one way to proceed. It needs to wait until the DEA reschedules marijuana or until any other federal green light to dispense marijuana from federally licensed facilities. Of course, Georgia can file a legal action against DEA but marijuana remains a Schedule I substance and DEA is enforcing the Controlled Substances Act (I feel like it would be a very tough uphill battle).

A legal counsel for Georgia Access to Medical Cannabis Commission (“Commission”) explained in an interview that a congressionally approved budget rider prevents federal agencies from interfering with state approved medical marijuana programs. And it appears that DEA is interfering with Georgia’s state program to expand access to medical marijuana.

But as far as I remember, the rider is expiring shortly and pharmacies are registered by the DEA who exercises broad discretion on whether to renew/issue registration to dispense controlled substance. (Besides, dispensaries remain available to dispense marijuana in Georgia). So an argument could be made that DEA is not interfering with the state program but it warns its registrants against non-compliance with federal law.

So the only feasible approach is to push for rescheduling of marijuana. To remind, the Department of Health and Human Services (HHS) has recommended to reschedule marijuana into Schedule III. (See a related blog post). DEA has not responded to the HHS’s recommendation in any way yet. But many analysts predict (based on various precedents) that DEA will follow the HHS’s recommendation. Several governors also wrote letters to the Biden administration recommending rescheduling by the end of this year and highlighting the benefits of removing cannabis from Schedule I.

Question arises: if marijuana is rescheduled, will pharmacies be able to dispense products containing cannabinoids? It still seems unlikely because the FDA will need to approve pharmaceutical preparations containing cannabis and this could take a long time.

As of today, however, DEA’s warning is clear: if pharmacies dispense cannabis products, they risk having issues with their DEA registration.

Since the new United States Pharmacopeia (USP) guidelines went into effect on November 1, 2023, I have been receiving many inquiries regarding their impact on compounders. Because the changes are fairly recent, compounders want to know how and when they must be fully compliant, what enforcement vehicles are in the government arsenals, and what types of resources they must have to comply with the new requirements. This post answers some of these questions by summarizing major changes and discussing some of the pitfalls on the way to compliance. On the other hand, this post does not go into any of the technicalities of the USP requirements, nor does it detail the requirements of each new rule. For the full text of USP chapters, please visit the USP’s website , which contains many resources and training materials.  And if you have a specific question regarding your or your client’s practice, you can reach USP directly at CompoundingSL@USP.org.

Does USP guidelines apply to your or your client’s practice?

If you do not compound on a regular basis or do not run into the USP chapters often, you might be wondering if the new USP requirements apply to your practice. The USP chapters mostly apply to hospitals and compounding pharmacies. But they also apply to healthcare facilities where compounding takes place, such as hospitals, 503A and 503B compounders, vet compounding, and pharmacy schools. The USP provides a comprehensive framework for compounding sterile, non-sterile, and hazardous drugs, including training, cleaning and maintenance of work areas in such compounding facilities. Most state board of pharmacies ensure that their compounding regulations match the USP guidelines.

Summary of the 2023 USP Changes:

The latest update went into effect on November 1, 2023 and still causes many questions, such as when compliance is due. Full compliance was due back on November 1, 2023. The USP clarified that it would no longer give any extensions for full compliance.

BUD assignments: Most of this year changes pertain to the beyond-use date (BUD) assignment. For example:

  • the USP has clarified how BUD is computed for water containing products. Due to water’s susceptibility to microbial contamination and hydrolytic degradation, the revised chapter clarifies what actually constitutes a “water-containing” product and how BUD should be assigned to such products.
  • It also provided instructions on BUD assignability when compounders add flavors to commercially manufactured nonsterile products.
  • The USP made changes to BUD assignment to compounding products under Category 2 and 3 (which are medium and high risk products in terms of susceptibility to microbial contamination). To facilitate patient access, the BUD for aseptically prepared Category 2 preparations is extended if only sterile ingredients at room temperature were used. In addition, for Category 3 sterile compounding, the USP provided more stringent standards for personnel training, garbing, and environmental monitoring frequency.
  • BUD is extended up to a maximum of 180 days when sterility and stability tests have been performed.

Personnel training: The USP increased requirements for compounding staff training, such as additional training, testing, documentation, and practical evaluations on the job. The supervising pharmacist now must also be trained to demonstrate competency in aseptic manipulation, core compounding skills, and garbing every year. Compounding staff now must undergo regular competency evaluations on the job to ensure they are capable of performing sterile compounding procedures safely.

Garbing: garbing requirements now apply to anyone involved in compounding. No exposed skin is allowed in the buffer room. Garbs must be sterile, low-lint, re-sterilized each time after washing. Gloved fingertip and thumb sampling must be taken to assess microbial contamination and garbing competency evaluations. It must contain zero colony-forming units on the gloved fingertips. The USP set specific timeframes when such tests must be performed (depending on the products being compounded).

Aseptic manipulations and environmental monitoring: to reduce microbial contamination, the USP now requires that compounding staff obtains a work surface sample with a maximum of 3 colony-forming units (CFUs) before compounding and then repeat every 6 months. For Category 3 compounding, compounders must test hood surface weekly at the end of each batch and perform monthly air sampling.

Cleaning: for non-sterile compounding, cleaning and sanitization must be performed at the beginning and end of every compounding activity/shift. For sterile compounding, on the other hand, only daily surface cleaning is required.

USP 800 changes (compounding hazardous drugs): unlike, Chapters 795 and 797, Chapter 800  protects not only the consumers but compounders, environment, staff, and the patients. While an image of very dangerous drugs comes to mind when we talk about hazardous drugs, these drugs could be simple hormonal creams. What dictates whether a drug is hazardous or not is determined by the National Institutes for Occupational Safety and Health (NIOSH), which is a branch of the CDC. They create and publish a list of hazardous drugs. The USP provides standards on how these drugs should be handled. Some of the changes pertain to training, cleaning, receiving, labeling, packaging, transport and disposal of hazardous drugs, as well as spill control and decontamination.

What does it all mean to your or your client’s practice?

Hospitals and compounding pharmacies now must update or develop policies addressing the USP changes. Some of the changes are extensive, such as the above mentioned BUD reevaluation, cleaning, staff training and garbing. This means that smaller compounders may be struggling to find additional resources to comply. Compounding providers must reevaluate facilities, equipment, processes , and staffing capacity, which could potentially cost compounders – according to the USP’s representatives – millions of dollars. Here is a link to the USP’s team analysis of the changes, published by Pharmacy Times.

For example, let’s take training: your facility now needs to evaluate whether there is enough staff to perform training, evaluations, and observations on the job. Plus, you will need additional compounding supplies for training for practice, tests, and evaluations.  Failure of any portion of the evaluation requires repeating the entire competency hands-on training.

Or air sampling: because this is required for Category 3 compounding involving more complex processes, most providers now need to hire a third party company or invest in expensive instruments to monitor air quality.

I anticipate that FDA’s oversight will increase and we will see more compliance audits from the FDA and state boards. Thus, hiring consultants and performing mock inspections could be a helpful preventative measure. In response, many online resources sprouted offering assistance with the USP compliance by providing policies, competency evaluation templates, and other guidance.

If state boards increase their number of inspections to ensure compliance with the new requirements, many smaller independent compounders could be exposed to enforcement actions. For example, following the New England Compounding Center’s meningitis outbreak, the California State Board of Pharmacy  increased its scrutiny and toughened its compounding regulations (as most state boards did). This effectively eliminated the majority of sterile compounders in the state. Will the number of sterile and non-sterile compounders further decrease with the new USP requirements? Time will show.

Due to the new Medicare Part D requirements effective the next year, direct and indirect remunerations (DIR) fees – that are so favored by PBMs – must be included and deducted from reimbursements at point-of-sale. In other words, starting with 2024 (still unclear when exactly), there will be no more retroactive DIR fees. Currently PBMs recoup DIR fees at a much later date after the actual claim adjudication.

In 2024, PBMs will be implementing something known as “Double DIR Cliff” when PBMs will be deducting DIR fees retroactively but at the same time at the point-of-sale. Many experts anticipate that this would leave pharmacies with negative cash flow.

For example, in January 2024, PBMs will be collecting DIR fees for May-August of 2023 and in March 2024, PBMs will still be collecting  fees for the claims submitted for the last quarter of 2023. But at the same time, PBMs will be collecting DIR fees at point-of-sale. This double DIR issue has been a great concern for my independent pharmacy clients.

Terry Cater (RPh, MBA) – who has helped many of my clients with improving cash flow, compliance, and pharmacy every-day operations – is asked the questions of “What to do with the upcoming DIR changes” on a daily basis. Below are some of his tips to the independent pharmacies on how to minimize their financial exposure. With Terry’s permission, I would like to share them with my audience.

Tips on facing DIR Double Cliff from Terry Cater, RPh, MBA:

Here is my take on dealing w/ the DIR “Hangover” or “Cliff” or DIR Armageddon,” which will likely occur towards end of first quarter 2024.

This is a cash flow issue.

Build liquidity – Hoard cash.

Start Tax planning NOW !!!

Meet with your banker and set up a line of credit.

This is HUGE:  Inventory management.

Take a look at technology like Datarithm or CIM (Cardinal customers).

You can free up a lot of cash by managing what you have on the shelves.

Make sure your financial documents are up to date, ESPECIALLY your P&L.

Do you know what DIR fees are as percentage of revenue?

Do you use a reconciliation program for A/R?

This will show you DIR & service fees & claims adjustments.

It’s Med Part D open enrollment. Review various plans in your

locale and work with patients to assist them in finding the best

plan that they can use at their pharmacy (that would be you).

Diversify revenue sources ie OTC, immunizations, DME, etc

To reduce DIR fees on an ongoing basis:

Understand how DIR fees are part of Star ratings.

Easiest (but NOT easy!) path is to drive adherence.

Suggest offer Med Sync or Auto Refill program.

Consider offering Compliance Packaging to seniors.

Call me if you need to discuss.

Terry Cater, R.Ph., M.B.A.
Pharmacy Executive

If you would like to discuss this complex issue with Terry, you can contact him through his website.