I came across a very good illustration of a lost pharmacy business due to the DEA’s heightened scrutiny of buprenorphine scripts. A community pharmacy in West Virginia was raided by the DEA, which decided that the pharmacy was excessively dispensing buprenorphine (Subutex and Suboxone). Ultimately, the DEA revoked the pharmacy’s registration based on this “excessive” dispensing.

It has been clinically proven that medications containing buprenorphine effectively treat opioid use disorder by reducing chances of opioid relapse and the risk of overdose. Many medical providers specializing in opioid use disorders prescribe buprenorphine as the only feasible alternative. In fact, the federal government itself encourages clinicians to prescribe it. But – as the West Virginia case illustrates – the DEA takes a very tough approach on dispensing them. As a result, many patients cannot fill these prescriptions because pharmacies are afraid to stack on them.

During the hearing in this case, the DEA also argued (in addition to its main claim of excessive furnishing) that some of the scripts were suspicions and that the pharmacy did not clear the red flags, such as: prescriptions were filled for Subutex instead of Suboxone, some patients travelled long distances and paid cash.

In response, the pharmacy presented evidence that the patients travelled long distances because no other pharmacy was able to fill their scripts in their localities and that some insurances did not cover these medications (or patients were uninsured). It also explained that Subutex was cheaper to fill than Suboxone. To reduce the cost to the patients and/or the plan, pharmacy often substituted Suboxone with Subutex, which it was allowed to do under state law.

Two judges heard this case (one was a superior court judge and another DEA’s Administrative Law Judge). And both ruled in favor of the pharmacy.

While, this West Virginia pharmacy and its owner ultimately prevailed, the damage was irreparable. Unable to fill controlled substance scripts, the pharmacy lost most of its payor contracts and had to shut down.

The article explains this so-called “Prescribing Cliff” when there are more prescriptions for buprenorphine than could be filled because pharmacies set their own thresholds of how much of this product they can purchase not to trigger DEA’s or wholesalers’ attention to its dispensing practices.

Some industry experts argue that these DEA tactics actually exacerbate the opioid epidemic by scaring pharmacies away from dispensing buprenorphine when it is desperately needed to address the epidemic.

Because this case put the problem in the spotlight, hopefully the DEA reevaluates its tactics and coordinates its enforcement actions with other agencies which actually encourage prescribing and dispensing of buprenorphine. We surely need some sort of consensus.

PBMs often flag telehealth claims and scrutinize the legitimacy of such scripts. When we see chargebacks based on “Invalid patient/prescriber relationship,” we know that it’s time for some legwork. We typically research (1) where the prescriber and patient were located; (2) whether prescriber was authorized to prescribe the medication in question; and (3) whether the prescriber established valid relationship with the patient. It usually takes time and resources to reach out to the prescribers and obtain their statements and/or evaluation notes.

Probably the most effective way to prevent or minimize risks associated with dispensing based on telehealth scripts is to verify prescribers’ licensure and ensure that they are authorized to prescribe across state lines (if applicable). I recently came across a very useful resource prepared by the Federation of State Medical Boards outlining each state’s telehealth laws and waivers due to the pandemic. Click here for the survey.

Normally, a telehealth provider must be licensed in a state of the patient’s residence. Due to the pandemic, however, many states enacted waivers allowing out-of-state prescribing. Even the DEA – during the public health emergency – has enacted a new regulation providing that “DEA-registered practitioners may prescribe controlled substances to patients in states in which they are not registered with DEA via telemedicine” (provided that they are registered in another state).

Because enforcement actions on telehealth providers have been vigorous, I encourage you to consult the survey to understand whether your prescriptions comply with telehealth requirements.

A side note: in 2020, we’ve seen the largest crackdown on telehealth providers. The Department of Justice announced $4.5 billion in allegedly false and fraudulent claims submitted by more than 86 criminal defendants in 19 judicial districts all relating to telehealth schemes. These numbers alone should motivate you to research where your prescriptions are coming from and if they are coming by means of telehealth inquire whether such prescriptions comply with state laws applicable to telehealth prescribing.

I recently had an unusual DEA audit, after conclusion of which the DEA decided to penalize my client for not keeping CSOS records for 3 years. Why did I call this case unusual? For a number of reasons.

First of all, because this issue had never come up in any of my previous audits. Secondly, because federal law requires pharmacies to keep CSOS records only for 2 years (not 3!). See 21 CFR §1311.60. This is a reason why your wholesaler provides access through its online CSOS platform to only the last two years of purchases.

The DEA took a stance that under California law, a pharmacy must keep acquisition records for 3 years. We argued that the DEA is a federal agency and therefore, it should enforce only the provisions of the Controlled Substances Act and not a state law or a regulation (this is a province of the State Board of Pharmacy). While we would have likely prevailed if we went to court against the DEA on this issue, the pharmacy decided to settle (which is understandable considering the uncertainty and costs associated with such an action).

It’s unclear whether the DEA has started a trend of requiring 3 years of CSOS records (when you can only provide them with the last 2 years through your CSOS platform). But you might want to start thinking about downloading your CSOS information and archiving it for 3 years.

While this was an unusual case, the DEA regularly audits CSOS information and records. Some issues that I often see in my DEA audit cases are:

– lack of a record of the quantity or each item received and the date received (See 21 CFR 1305.22(g));

– sharing CSOS certificates (See 21 CFR 1311.30);

– maintaining certificates of employees who are no longer with the pharmacy. (See 21 CFR 1311.30).

Although CSOS record-keeping might not be at the top of your risk assessment, it could potentially cause significant monetary penalties if a pharmacy does not properly maintain CSOS records or fails to properly order controlled substances due to the issues with its CSOS certificates. We recommend reviewing the above federal regulations to ensure compliance and downloading your CSOS history from your wholesaler’s CSOS platform so you are able to produce this information to your Board or the DEA.

Based on popular demand, we now offer “USP 800 – Hazardous Drugs” policy through our compliance platform RxPolicy.

Starting this year, most PBMs require this policy for recredentialing. In addition, it is a required policy for compounding, retail, LTC, and clinical pharmacies, and any other entities that handle hazardous drugs. There is a mistaken assumption that if a pharmacy does not compound, it does not need to worry about complying with USP 800. Note that you must comply with USP 800 if you receive, store, compound, handle in any way, dispense, or administer hazardous drugs (“HDs”). HDs are defined in NIOSH List of Antineoplastic and Other Hazardous Drugs. HDs include any drugs with the following characteristics:

– carcinogenicity or other development toxicity

– genotoxicity

– organ toxicity at low doses

– reproductive toxicity.

Accordingly, HDs include drugs that are used for chemotherapy, antiviral drugs, hormones, and many others that are dispensed by a typical retail pharmacy. So the chance that you do not have to comply with USP 800 is very slim.

Your USP 800 must be customized to address:

– HDs that the pharmacy handles

– applicable facility and engineering controls


– safe segregation and disposal of HD

– exposures (such as spills)

– responsibilities of personnel handling HDs

– personnel training

– proper labeling

– cleaning steps.

You can download a template from RxPolicy or feel free to contact us if you have any questions regarding this policy.



I am always eager to learn new ways to help pharmacies stay on top of their compliance and prevent chargebacks and contractual terminations. That’s why I am excited to introduce you to PharmPilot.

It has four primary functions:

Audit Pilot (my favorite): “proactive analysis of your pharmacy’s data to detect shortages and other problem areas well before they turn into audit findings.”

AuditSignal: “AI-assisted anomaly detection to identify red flags and benchmark your pharmacy’s performance against others.”

Buy/Sell & Valuation Support: “Providing prospective buyers and sellers with a full picture prior to pharmacy transactions.”

DataVault: “Securely retrieving, converting and storing your pharmacy’s data to be used on demand for analytics and transactions.”


PharmPilot’s website also has a few useful publications relating to PBM audits and some interesting statistics:

– a typical retail pharmacy is audited on average 8 times per year;

– an average post-audit chargeback is $56,780;

– 2 out of 3 pharmacies are terminated by PBMs when invoice shortages detected.

Over my ten years of representing pharmacies in PBM audits, I have seen many contractual terminations and significant chargebacks based on inventory shortages and a pharmacy being an outlier. Very often, my clients are telling me that there is no chance that they will face a chargeback because everything was dispensed according to law and only based on the existing inventory. They are often surprised when a PBM comes back with a significant recoupment because the product was not purchased within the time-frame or the pharmacy ordered a different NDC. The pharmacy needs strong data to set aside such findings. Some pharmacies, however, do not even know how to perform an internal audit. That’s why I think this new product has potential and I wanted to share this information with you in case your pharmacy is seeking new ways to stay proactive in its audit preparations.


This month, the American Medical Association, American Pharmacist Association, and American Society of Health-System Pharmacists issued a joint release urging prescribers and pharmacists to stop ordering, prescribing, and dispensing ivermectin to prevent or treat Covid-19 outside of clinical trials. The reason for issuing this plea is a 24-fold increase in prescribing and dispensing of ivermectin since before the pandemic. According to the release, calls to poison control centers due to ivermectin ingestion have increased five-fold from their pre-pandemic baseline. The associations reminded the public that (1) ivermectin is not approved by the FDA for human use to prevent or treat Covid-19 and (2) Clinical trials and observational studies to evaluate the use of ivermectin to prevent and treat COVID-19 in humans have yielded insufficient evidence to recommend its use.

What is even more important for retail pharmacies is that many payors consider dispensing ivermectin to treat or prevent covid-19 as clinically inappropriate. Any such dispensing is likely to result in recoupments. To ensure appropriate use, virtually all payors require prior authorization for dispensing products containing ivermectin.

While some pharmacies (such as CVS) refuse to fill ivermectin prescriptions for non-FDA approved uses, others fill these scripts for cash patients.

Keep in mind that if your pharmacy does dispense ivermectin and bills third party payors for it, the prescription must have a diagnosis code showing that the product is used as approved.

But if your pharmacy dispenses ivermectin for the off-label use (to treat/prevent covid) to cash patients, you still have a duty to ensure that the prescription is written for a legitimate medical use. The biggest issue with these prescriptions is that they are often prescribed by “online doctors” for large doses.  It is the pharmacist’s responsibility to verify that the prescription is coming from a legitimate source and does not present danger to the patient’s health. For example, currently, ivermectin is approved as a one-time treatment with a follow-up dose several months afterwards. However, some ivermectin prescriptions are for daily intake for a period of a few months.  Such extended use may cause serious side effects ranging from nausea to coma and death. Ivermectin can also negatively interact with other medications. So a full review of the patient’s drug regimen is recommended.

Just for your entertainment, here is how some of prescriptions for ivermectin look like (notice the chicken soup and hot lemonade).


In addition to checking the dosage and reviewing patient’s current medication intake, the pharmacist should educate and inform the patient (in writing) of the potential side effects and risks associated with taking ivermectin.

This informed consent should also contain a release of the pharmacy and acknowledgement that the patient understands the risks involved and wishes to proceed with the treatment at their own risk.

While such releases may minimize pharmacy’s exposure to liabilities, they will not shield the pharmacy from any government investigations. For example, some state boards indicate that dispensing ivermectin may constitute unprofessional conduct. Recently, the California Department of Consumer Affairs, the Medical Board of Board of California, and the California State Board of Pharmacy issued a joint statement reminding health care professionals that inappropriately prescribing or dispensing medications constitutes unprofessional conduct in California. The statement specifically addressed improper prescribing and dispensing of medications related to treatment of Covid-19.

Most boards, however, do not prohibit ivermectin dispensing as long as the pharmacists use their professional judgment in dispensing valid prescription while meeting all applicable federal and state laws and regulations.

In addition, the FDA issued several warning letters to companies selling ivermectin to treat/prevent Covid. The most recent warning was issued to RxMedKart for selling “Ziverdo Kit” containing Acetate 50 mg, Doxycycline 100 mg & Ivermectin 12 mg  as a treatment/prevention of Covid. The FDA’s warning explained that this company was selling misbranded and unapproved drugs and requested to cease any further activity.

While it is important to accommodate patients and drugs are permitted to be used off-label, remember that you have a right to refuse to fill any prescription if doing so is contrary to your professional judgment. It is better to err on the side of caution and refuse the fill if in your professional judgment there is a question as to the safety for the patient.



Compounded medications have been under government radar for quite some time. So a recent inditement and prosecution of two pharmacists and a marketer implicated in allegedly fraudulent scheme involving compounded medications comes as no surprise.  The individuals allegedly defrauded TRICARE and private insurances by:

  • price-testing and adjusting prescription formulas to ensure the highest reimbursement;
  • using marketers to procure prescriptions for high-margin compounded medications and paying commissions to these marketers;
  • waiving or reducing copays to “falsely make it appear as if [the] pharmacy… had been collecting copayments;”
  • paying kickbacks to prescribers;
  • manipulating and deceiving insurance audits to maintain the ability to submit claims for reimbursement for medically unnecessary high-adjudication compound medications.

According to the indictment, the conduct resulted in more than $180 million in fraudulent billing. One of the pharmacists plead guilty and is currently facing five years in prison and restitution.

Let’s dissect the case to understand the alleged scheme.

Two pharmacists owned a pharmacy in Missouri. When they learned of potential profits that could be made by submitting claims for compounded medications, they aggressively expanded their compounding business by acquiring several other pharmacies in various states and contracting with other pharmacies to dispense and bill for compounded medications. Profits were split between these affiliated pharmacies and businesses owned by the pharmacists (red flag # 1: kickbacks).

Simultaneously, the pharmacists formed six business entities to receive and distribute the profits generated by compounding business (red flag # 2: potential money laundering).

The pharmacists also formed two telemarketing companies to cold-call patients to solicit their business for compounded medications. According to the indictment, these telemarketing companies were paid about 50% of what pharmacies received in reimbursements for the claims secured by these cold-calls (red flag # 3: kickbacks). Allegedly, the telemarketing companies used an array of fraudulent tactics to generate prescriptions including pretending to be representatives of the patients and referring prescriptions to the affiliated pharmacies without the patients’ knowledge or approval.

To assist patients with copays, the pharmacists also formed a business entity (Affordable Medication Solution LLC aka “AMS”) (red flag # 4: the “non-profit” was under the common ownership with the dispensing pharmacies). Because copayments for compounded medications are often hundreds and even thousands of dollars, many beneficiaries balked at receiving these high-adjudication meds. AMS was created to make it appear that the pharmacies collected copayments through AMS (which supplied the coupons) when in reality they had not.

But that’s not the end in a myriad of business entities formed by these two “entrepreneurial” pharmacists. They formed another entity to allegedly pay kickbacks to the prescribers. To avoid  restrictions imposed by the anti-kickback statutes, the pharmacists formed an “investment” company and paid dividends to the affiliated prescribers. (red flag # 5: the “investment” company was under the common ownership with the pharmacies and rewarded the prescribers for sending and/or authorizing high-dollar prescriptions).

To receive the highest reimbursement possible, the pharmacies submitted “dummy” claims to PBMs to ascertain the potential reimbursements and ultimately to find formulas for high-dollar medications. (red flag # 6: most PBM manuals prohibit or curb claim-testing). According to the indictment, the pharmacies adjusted the formulas by including some ingredients solely to increase the reimbursement amounts despite these ingredients having no medical efficacy. Moreover, the pharmacies created preprinted “check-the-box” prescription pads containing these previously determined high-adjudication compound medications and provided these pads to marketers who would then distribute the pads to prescribers. Marketers received  commission payments (red flag # 7: marketers were acting as independent contractors). During the investigations, some prescribers denied that they wrote or authorized prescriptions generated by these marketers (red flag # 8: potentially fraudulent prescriptions created by marketers to receive commissions).

During PBM audits, the pharmacies allegedly used white-out to conceal or alter information on requested documents. When Caremark discovered these practices and terminated one of the pharmacies, the prescriptions were sent to the affiliated pharmacies.

After reading the indictment, it appears that the pharmacists were creating various business entities attempting to conceal potential issues and to compensate marketers and prescribers, as well as assist patients with copayments for these expensive compounded medications. While independent pharmacies are struggling to stay afloat amidst a very strong competition and diversifying business and specializing might be a good idea, it does not excuse blunt violations (such as paying commissions to prescribers and marketers). The case is a good reminder for pharmacies to keep it simple and to consult with the legal team when diversifying and marketing services.

In my last post, I covered a recent settlement of $2.75 mil where an LTC pharmacy – AlixaRx – was allegedly improperly filling “emergency” scripts for LTC patients. A part of this settlement also included an allegation that AlixaRx billed Medicare Part D for claims that had already been reimbursed through claims paid to long-term care facilities under Medicare Part A. Today, I want to elaborate on this issue and touch on the proper billing practices when a pharmacy works with hospice or skilled nursing facilities.

A rule of thumb: federal law requires hospices to provide drugs related to the palliation and management of the terminal illness. Medicare Part A pays for these drugs. Therefore, for medications covered under Part A (hospice benefit), the pharmacy negotiates a fee with the hospice. For medications unrelated to the treatment of the terminal illness, the pharmacy bills Part D. Likewise, Part A applies to skilled nursing claims for certain condition and under certain circumstances. Pharmaceutical care provided to qualifying patients should be billed through Part A.

Sounds pretty straightforward? As AlixaRx case illustrates, it is not all that simple.

Hospice claims: The CMS has determined that the following categories of drugs are generally payable under Medicare Part A when prescribed to patients that have elected hospice: laxatives, antiemetics, antianxiety agents, and analgesics (nonnarcotic, opioid, and anti-inflammatory). However, if the hospice or non-hospice prescriber determines that a drug within one of these four categories is unrelated to the terminal illness, the drug would be eligible for coverage under Medicare Part D. In this case, a prior authorization (submitted by hospice) is required.

Skilled Nursing Facility coverage: it applies to newly admitted or re-admitted patients who are coming for a hospital stay of at least three days. Part A pays up to 100 days of coverage for prescription drugs.

While pharmacies are ultimately responsible for ensuring that claims eligible for coverage under Part A or Part B are not adjudicated under Part D, the responsibility for proper claim classification should be on the hospice/facility provider. Therefore, your contract with the facility should expressly states that the facility shall designate claims as not covered by part A and indemnify the pharmacy in case of a retroactive audit and chargeback identifying discrepant claims. And – what I see as often missing – there should be a provision allowing you to renegotiate your fee if Part A fees have increased. For example, this year Medicare increased hospice payment rates by 2.4% but I don’t think many pharmacies increased their rates under hospice contracts.

If a pharmacy erroneously bills Part D for a drug where coverage is available under Part A or Part B, PBMs will recoup any money incorrectly paid through the pharmacy audit process. The PBM may refer the case to the government for further investigation (if the discrepant amount is substantial).

In the case of AlixaRx, the complaint alleged that it submitted Part A claims to Part D, which warranted investigations by the OIG and FBI.  The complaint explains that Medicare Part A “SNF coverage applies to newly admitted or re-admitted beneficiaries who are coming for a hospital stay of at least three days… and provides 100 days of coverage for prescription drugs…” But AlixaRx allegedly assigned such claims a Part D status.

To recap and to give you some food for thought: (1) ensure that hospice and LTC claims are properly billed; (2) your contracts with the facilities should shift the billing responsibility to the facility and properly protect you; (3) and such contracts should be timely updated and revised (and rates renegotiated).

A national LTC pharmacy – AlixaRx – agreed to pay federal government $2.75 mil to resolve allegations that it improperly dispensed controlled substances at long-term care (LTC) facilities. AlixaRx dispensed prescriptions drugs to LTC patients primary through its on-site automatic dispensing units (ADU). According to the complaint, the pharmacy violated the federal Controlled Substances Act (CSA) in its dispensing pursuant to purported “emergency prescriptions.”  Federal investigators alleged that the pharmacy routinely abused the emergency prescription provisions of the CSA by requesting and obtaining verbal “emergency” refills from prescribers, in the absence of any true emergency.

To remind, the CSA requires a written prescription by a physician for dispensing Schedule II drugs and refills are not permitted by law.  Pharmacists may dispense controlled substances without a written prescription only in true emergencies and, even then, only for the quantity of drugs necessary to treat the patient during the emergency period.  Emergency prescriptions must promptly be reduced to writing and signed by an authorizing physician within seven days of issuance.  See 21 CFR § 1306.11.

The complaint against the pharmacy alleges that the purported emergency was created by the pharmacy’s ADU machines, which did not alert nurses when the medication was about to end. When LTC staff realized that there were no more fills, they called the hub pharmacist responsible for the remote operation of the ADU and asked for a “refill.” The pharmacist, in turn, called the LTC’s Medical Director and obtained a verbal authorization to program the ADU to dispense additional controlled substances for the patient as “emergency” fills. Allegedly, the pharmacy did not receive follow up written prescriptions to document the new fills for most of its “emergency” dispensing. Later – when the investigation was ongoing – the pharmacy attempted to obtain backdated written prescriptions for these fills.

As a result of this practice, the pharmacy faced several federal investigations conducted by the U.S. Attorney’s Office, the DEA, the OIG, and the FBI and agreed to settle the case for $2.75 million.

This case is a good reminder that even if a pharmacy is pressured to dispense immediately, it must follow all regulatory requirements (in this case, obtain the prescriber’s written authorization within 7 days of the fill). Many LTC pharmacies face the same issues.

The California law mirrors federal requirements and allows emergency dispensing only when failure to dispense a controlled substance may result in loss of life or intense suffering (and of course, this must be documented). These requirements do not apply to terminally ill patients (See Health & Safety Code § 11159.2).



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: admin@pharmhealthlaw.com and we will be happy to help.