Automatic refills is a landmine. Some states prohibit them outright. Medicare requires patient consent before each delivery. Most PBMs also place some conditions on auto-refills, such as obtaining authorization from the patient for each refill (to prevent fraud, waste and abuse and to ensure that patients receive only medications that they have requested). PBM manuals usually require pharmacies to complete a drug regimen review on all prescriptions filled as a result of the auto-fill program. Some PBM manuals even spell out proper procedures for auto-refill programs, such as:

  • Auto-refill programs should be voluntary, on opt-in basis only;
  • Patient consent is for refills only and shall not apply to any new prescriptions (new consent must be obtained);
  • The pharmacy must provide patients with information on how to disenroll from its auto-fill program and must promptly respond to all disenrollment requests;
  • The pharmacy must confirm at least annually that the patient still wishes to participate in the auto-refill program;
  • The pharmacy must promptly discontinue automatic fill program upon notification that the patient entered a skilled nursing facility or elected hospice coverage.

Recently, California joined the states that place similar restrictions on auto-fill programs. This month, the California State Board of Pharmacy approved a new regulation that requires  pharmacies who offer auto-refills to comply with the following:

  • to have written policies and procedures addressing the auto-refill program;
  • to provide its patients with the information on how the program operates: instructions about how to withdraw a prescription medication from refill through the program or to disenroll entirely from the program. The patient or patient’s agent shall enroll by written, online, or electronic informed consent to participate in the program for each new prescription wherein there is a change in the prescription medication, strength, dosage form, or directions for use;
  • to obtain annual renewal of each prescription from the patient or patient’s agent no later than 12 months after the prescription was enrolled in the program;
  • to keeps a copy of the written or electronic informed consent to enroll on file for one year from date of dispensing;
  • to complete a drug regimen review for each prescription refilled through the program at the time of refill;
  • to provide a written or electronic notification to the patient or patient’s agent confirming that the prescription medication is being refilled through the program;
  • to allow the patient to withdraw a prescription medication from automatic refill or to disenroll entirely from the program. The pharmacy shall document and maintain such withdrawal or disenrollment for one year from the date of withdrawal or disenrollment and shall provide confirmation to the patient or patient’s agent.
  • to provide a full refund to the patient, patient’s agent, or payer for any prescription medication refilled through the program if the pharmacy was notified that the patient did not want the refill, regardless of the reason, or the pharmacy had been notified of withdrawal or disenrollment from the program prior to dispensing the prescription medication.

This new regulation, which becomes effective in 2022, mirrors PBMs’ requirements. Most pharmacies do not need to add anything to their compliance plan. If your pharmacy, however, does require assistance with drafting policies and procedures as required by this new regulation, please contact our firm directly: and we will be happy to help.

I am very excited to announce a release of Gavel & Pestle podcast where I speak on PBM audits, trends, and litigation. With Brooke Kulusich we discuss the most common compliance mistakes that pharmacies make, the implications of Rutledge v. PCMA decision, and how independent pharmacies can think outside-the-box in their approach to PBMs.

Please note that the podcast was recorded in January and a few things have changed since (e.g. Indy Health no longer operates (unfortunately!) due to some unexpected losses).

Thank you to the host Brooke Kulusich for this interview and thought-provoking questions.

Click here to listen to the podcast.

This year we saw some positive litigation outcomes for independent pharmacies. Let’s talk about two recent victories in PBM litigation. (Both cases were brought by Mark Cuker who represents several groups of pharmacies across the nation).

One of the cases was brought in California against Optum alleging misrepresentation, fraud, and breach of contract. Optum filed a motion to compel arbitration. California Superior court in Alameda denied the motion on procedural and substantive unconscionability. The court ruled that Optum had not demonstrated the existence of an enforceable arbitration agreement. The court reasoned that Optum had provider agreements with PSAOs and pharmacies were not provided with copies of the provider agreements, did not sign them and have not even seen them. Therefore, the pharmacies were not party to the provider agreements. In additional to this procedural unconscionability, the court found substantive unconscionability because arbitration provisions unreasonably limited discovery, precluded the presentation of live testimony, imposed costs greater than the cost of a court proceeding.

Optum argued that even if the provider agreement was unconscionable, pharmacies operated under Optum’s Pharmacy Provider Manual, which also had an arbitration provision. The court also dismissed this argument on procedural and substantive unconscionability grounds. The court explained that the manuals are a take-it-or-leave with Optum reserving the right to unilaterally change the terms without notice. The arbitration provision in the manual is also substantially unconscionable because it allows Optum to exercise “self-help” but requires the pharmacies to use the arbitration process. For example, the manual allows Optum to withhold the funds as deemed necessary. It also places unreasonable constrains on discovery in violation of the state law (precludes presentations of live testimony and does not allow cross-examination). In addition the arbitration clause in the manual requires that the arbitration is presided by a panel of three arbitrators, each with at least a 10-year experience in healthcare law. The court noted in its decision that the cost (to pay for such arbitrators) is likely to run into hundreds of thousands of dollars, effectively precluding smaller providers from bringing arbitration in the first place.

Mark Cuker, who is of counsel at Jacobs Law Group says that this victory “…opens the door for independent pharmacies to hold Optum publicly accountable in court for its violations of California’s MAC law, breach of contract, steering patients to mail order and underpaying on certain brand drug prescriptions.”

Recently he also defeated a similar motion to arbitrate in a federal court in Pennsylvania against OptumRx. The federal court ruled – as California state court did – that Optum’s arbitration provisions are unconscionable. Mark could be contacted at


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.