A recent report released by California health officials revealed that drug prices are still on the rise – even despite California’s drug-price transparency laws aimed at curbing drug cost.

In 2017, California passed a drug-price transparency law that requires manufacturers to notify its customers at least 60 days in advance if they plan to increase a drug price by more than 16% in a two-year period. The law also requires manufacturers to provide a report describing reasons for drug price increases. Because of the law, several manufacturers announced plans to postpone or rescind previously planned price hikes.

However, the report showed that since the passage of the law, pharmaceutical companies raised the wholesale acquisition cost (WAC) of their drugs by a median of 25.8%.

Generic drugs saw the largest price increase of about 40%. By comparison, the annual inflation rate during the period was 2%.

Some drugs saw the sharpest increase. For example, Prozac’s price was increased from $9 to $69 (just in the first quarter of 2019, an increase of 667%). Guanfacine rose more than 200% in the first quarter of 2019 (its manufacturer cited costs and “market conditions” as reasons for the price hike).

Other states with similar drug-price transparency laws experience the same increases despite the efforts and oversight of the manufacturers. As a result, many states consider alternative measures to contain drug price hikes. For example, California has passed a law allowing it to manage and negotiate drug prices for Medi-Cal managed-care plans. Drug benefit will be carved out of the Medi-Cal managed care plans and be directly administered under the fee-for-service model.

Another example, Nevada fined several manufacturers for failing to comply with the state’s transparency law requiring detailed disclosure of financial and pricing information.

On the federal level, the Senate is currently considering several proposals to contain drug cost.  One approach is to negotiate Medicare drug prices for approximately 250 brand drugs directly with the manufacturers. Another approach in to set a maximum out-of-pocket cost for Medicare patients and penalize drug companies if prices rise faster than inflation.

 

 

 

As always, the American Society for Pharmacy Law (“ASPL”) gathered pharmacy attorneys and pharmacists for an excellent three-day conference focusing on pharmacy legal issues. Some of the highlights of the conference:

Regulatory updates: Despite various state and federal attempts to lower drug prices, they continue to grow mostly due to high deductible plans, cost-sharing, increased drug utilization, and expanded coverage. There are several bills pending attempting to lower drug costs. In addition, speakers discussed federal bills to promote generic and biosimilar competition, such as CREATES Act, bills promoting faster market entry, bills limiting “product hopping” and “patent thickets.”

DIR fees: PBMs’ retroactive claw-backs continue to grow despite many discussions on the federal level and state actions limiting retroactive claw-backs.

Drug importation: drugs are still prohibited from importation unless the importation fits within the “Personal use exception.”  Several states have enacted drug importation laws (Colorado, Florida, Maine, Vermont). It will take some time to determine the success of such bills.

340b reform: federal government is ready for a 340b reform due to a belief that 340b discounts create additional pressure on manufacturers to increase prices.

HIPAA: data breaches and HIPAA non-compliance continue to cause troubles for pharmacies despite numerous fines assessed by federal government against multiple pharmacies.

CBD updates: Products containing CBD are still not allowed to be sold in pharmacies. Speakers discussed Boards’ and FDA restrictions and possible enforcement actions. The speakers discussed the ubiquitous nature of CBD products and difficulties in enforcing federal and state laws regarding such products.

Online pharmacies: the number of online illegitimate pharmacies continue to increase. About 95% of online pharmacies are selling illegitimate, adulterated or/and misbranded products. The speakers discussed enforcement actions and ways to identify legitimate online pharmacies.

Employment issues: the speakers discussed good business practices to document and analyze employment termination focusing on three major considerations: severity, breadth, and specificity.

Thank you ASPL and the speakers for your dedication to the profession and for keeping us abreast of  the developments in pharmacy law.

Our hearts go to all affected by wildfires raging through California. Thousands are evacuated and in need of medical care and access to medications. While we acknowledge our first responders, we must also show appreciation to our pharmacists responding to the disaster. They are working tirelessly at the front lines helping vulnerable patients, providing medications, and working in shelters. I witnessed many brave pharmacists and technicians working without any compensation, helping day-and-night, delivering medications to their affected communities.

The latest updates on California fires. 

As communities are evacuated, pharmacy personnel may have questions regarding pharmacy relocation, transportation and storage of medications offsite, security of dangerous drugs and devices, etc.

Pharmacists working with other healthcare providers in shelters or at emergency clinics may have questions regarding mobile pharmacies, compliance with California law on emergency pharmacy services, refill too soon issues, and potential legal exposures.

We want to help you make right decisions and stand by you as much as you stand with the affected communities. We offer free legal services if your pharmacy was impacted by the fires or if you are a pharmacist providing emergency services to all affected by the fire. Contact us now.  We are keeping everyone affected in our thoughts.

 

 

 

Only a few exceptions exist to the rule that a pharmacist must dispense pursuant to a valid prescription. Such exceptions are: furnishing emergency contraceptives, hormonal contraceptives, and naloxone hydrochloride. Beginning next year, pharmacists in California also will be able to dispense HIV prevention drugs without prescriptions.

Senate Bill 159 authorizes pharmacists to furnish a 30-day supply and up to a 60-day supply of drugs used for pre-exposure  or post-exposure prophylazis (PrEP) without requiring a prescription from the patient, as long as the following conditions are met:

  • The patient is HIV negative;
  • The patient does not report any signs or symptoms of acute HIV infection;
  • The patient does not report taking any contraindicated medications;
  • The pharmacist provides counseling to the patient on the ongoing use of preexposure prophylaxis;
  • The pharmacist does not furnish more than a 60-day supply of preexposure prophylaxis to a single patient more than once every two years, unless directed otherwise by a prescriber.

In addition, pharmacists dispensing PrEP without prescriptions must complete a training program approved by the Board of Pharmacy.

This bill also expands the Medi-Cal schedule of benefits to include PrEP as covered pharmacist services.

Another interesting highlight of the bill: the plans and insurers would be prohibited from subjecting antiretroviral drugs, including PrEP to prior authorization or step therapy (with some exceptions) and PBMs could not deny coverage for PrEP. The bill also prohibits plans and insurers from covering PrEP that has been furnished by a pharmacist in excess of specified amounts.

 

 

 

 

During recent audits, several PBMs required pharmacies to have policies and procedures addressing CMS form 10147. Most pharmacies do not have written policies regarding CMS-10147 because it is not required by state or federal regulations or PBM manuals. Nevertheless, drafting a policy addressing when and how CMS-10147 is distributed is a good idea (especially considering that this policy is usually succinct and easy to draft).

So what is CMS form 10147 and what pharmacies have to do with it?

Federal law requires that each Medicare Part D plan sponsor distributes CMS form 10147 (“Notice”) to its members who receive a prescription fill rejection from the plan. This notice is intended to educate Part D members of their rights when a prescription cannot be filled under the Medicare Part D benefit at point of sale.

If a pharmacy receives the plan’s rejection code 569 , the pharmacy must provide the Notice – which is entitled “Medicare Prescription Drug Coverage and Your Rights” – to the beneficiary whose prescription could not be filled.  The notice instructs members to contact their Part D plan to obtain a coverage determination or ask for a formulary or tier exception if the beneficiary disagrees with the information provided by the pharmacist.

This requirement applies to all pharmacies (including retail, LTC, specialty, and mail order pharmacies). For example, a mail order pharmacy must provide the Notice to the member via the member’s preferred method of communication (fax, electronic, or first class mail) as expeditiously as the member’s health condition requires, but no later than 72 hours from the receipt of the original transaction response indicating the claim is not covered by Part D.

Home infusion pharmacy, for example, may deliver the notice in person with delivery of home infusion drugs or through a nurse, as long as the next scheduled visit is within 72 hours of the rejection code.

An LTC pharmacy must fax or deliver the notice to the member, his/her representative, prescriber, or staff at the LTC facility as soon as possible but no later than 72 hours from the receipt of the rejection code.

The only pharmacy that is exempt from the requirement to provide the Notice is Indian Health dispensing facilities.

Most PBMs require the Notice to be in at least 12-point font, physically distributed to beneficiaries (and not simply posted on a wall) and to have an OMB control number.  Deviation from the content of the Notice is not allowed.

If you anticipate any upcoming PBM visits, it is recommended that you have a policy describing how and when you distribute the Notice. The Notice itself can be obtained here.

 

 

 

 

 CVS has been dominating the news lately: CVS-Aetna merger, CVS’s free drug deliveries, its efforts to curb opioid epidemic, etc. This post is about a recent litigation commenced by CVS against its ex-executive John Lavin to prevent him from working for a competitor, Pill Pack. After Amazon purchased PillPack last year, CVS’s shares dropped and ever since CVS has been concerned about PillPack’s expansion. Further discussion.

During Lavin’s employment with CVS, he signed a non-compete agreement. After 27 years with CVS, Lavin decided to work in the same position for PillPack. Understandably, CVS panicked and filed a legal action seeking a preliminary injunction for violating the non-compete. Lavin’s lawyers argued that the non-compete was so broad that it effectively prevented Lavin from working anywhere in the pharmaceutical industry and therefore it was unenforceable.

The U.S. District Judge concluded that the non-compete was reasonable and issued an injunction against Lavin. The judge reasoned that because Lavin can use certain trade secrets and internal information to harm CVS’s market, the non-compete in this situation was appropriate. Because Lavin was an executive of the PBM branch – Caremark – the judge ruled that the confidential information obtained and learned while at CVS “poses a significant likelihood of harm.” The position at PillPack was substantially similar as it also involved negotiations between PBM and pharmacies, internal pricing and negotiations, and other proprietary information. And therefore, Lavin could use his knowledge to harm CVS’s share of the market. Lavin filed an appeal.

The healthcare industry is closely watching the case and not for the non-compete application but for any clues on PillPack’s future plans. For example, during a deposition in this case, the PillPack’s chief executive did not deny that PillPack is looking into a PBM model to add to its services.

Are non-compete agreements enforceable?

Non-compete agreements are usually provisions in employment contracts prohibiting employees from working directly or indirectly for any competitor for a certain period of time after terminating the employment .

Contractual relationships are typically governed by state law. But most states disfavor non-compete employment contracts and most courts enforce them only when reasonable or “when the restriction does not extend beyond what is apparently necessary for the protection of those in whose favor they are made.” (As the judge in Lavin’s case said in his opinion).

California, for example, is one of the states that rarely enforces non-compete agreements even if they appear reasonable and narrowly drafted. For a discussion on California’s history and enforceability of non-compete agreements, see Dowell v. Biosense Webster, Inc.case,(2009) 179 Cal. App. 4th 564, 574–75.

Moreover, California Bus. & Prof. Code Section 16600 states:

“Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

There are only three statutory exceptions to this prohibition on non-compete agreements:

  1. One who sells the goodwill of a business, or all of one’s ownership interest in a business entity or substantially all of its operating assets and goodwill, to a buyer who will carry on the business may agree with the buyer not to carry on a similar business within a specified geographic area, if the business will be carried on by the buyer (Cal. Bus. & Prof. Code § 16601) (i.e. a sale of a pharmacy);
  2. Upon dissolution of a partnership or dissociation of a partner, such partner may agree not to carry on a similar business within a specified geographic area, if the business will be carried on by remaining partners or anyone deriving title to the business or its goodwill (Cal. Bus. & Prof. Code § 16602);
  3. And a member of a limited liability company may agree not to carry on a similar business within a specified geographic area, so long as other members or anyone deriving title to the business or its goodwill carries on a like business (Cal. Bus. & Prof. Code § 16602.5).

Section 16600 expresses California’s strong “public policy of protecting the right of its citizens to pursue any lawful employment and enterprise of their choice.” See Dowell v. Biosense Webster, Inc.

Unlike in other states, employers operating in California are not advised to add a non-compete clause in their agreements (unless the three above exceptions apply) because an employer’s use of an illegal noncompete agreement may violates the California Unfair Competition Law. (For further discussion on how an illegal non-compete can violate Unfair Competition Laws, see Application Group, Inc. v. Hunter Group, Inc. (1998) 61 Cal.App.4th 881, 906–908).

So if the Lavin’s case was decided by a California court or if California law was applied, the result would likely have been different.

 

   The CVS-Aetna merger has been one of the longest mergers in healthcare history. On September 4, 2019, the federal judge issued his final ruling approving the proposed settlement of the federal challenge to the merger. The judicial review took eleven months with multiple applications of the “public-interest” test as provided by the Tunney Act.

The ruling finalizes a merger of the nation’s largest pharmaceutical chain with the nation’s third largest health insurance. Both are the largest providers in Medicare Part D arena. To avoid conflict of interests, the settlement requires CVS to divest Aetna Medicare Part D to WellCare.

The judge concluded – after the first-ever live hearing under the Tunney Act – that the two companies will continue to compete despite the merger and the harm to the public was unlikely. (The judge was also focusing on potential harm to HIV and AIDS patients – no such was found). The Judge explained:

“The court’s function is not to determine whether the resulting array of rights and liabilities is one that will best serve society, but only to confirm that the resulting settlement is within the reaches of the public interest.”  

As a result, welcome another  800-pound healthcare conglomerate.

       The California State Board of Pharmacy has published an inspection checklist to guide pharmacies on what to inspect during an inspection.

The brochure elaborates on the process to be followed by the inspector. For example, the inspector must provide the pharmacy with:

  • a business card;
  • a receipt for any records taken from the premises;
  • a copy of the inspection report (TIP: This is a the most important document during the inspection. Review it with your counsel to determine on how to address the inspector’s concerns (if any) to avoid an administrative action);
  • information about pharmacy laws and regulations (TIP: This is your chance to ask any burning questions. But be prepared that you may not receive answers to all the questions that you may have).

During the inspection, the pharmacy should provide access to:

  • All stock of dangerous drugs and devices;
  • All records of manufacture, sale, acquisition, receipt, shipment and disposition.

TIP: The inspector is allowed to take samples of products (e.g. compounds).

To streamline  the inspection, you should have the following records readily available (TIP: have an inspection folder):

  • Past inspection reports.
  • Pharmacy self-assessments.
  • Copies of staff licenses.
  • Master list of pharmacist and technician initials.
  • DEA 222 forms.
  • Power of attorney to execute DEA 222 forms.
  • DEA biennial inventory.
  • Drug take-back records.
  • Wholesaler invoices.
  • Records of drug returns.
  • Records of destruction.
  • Off-site records waiver.
  • Pedigrees for drugs purchased.
  • Inventory reconciliation reports.
  • Controlled substances refill reports.
  • Policies:
    • Quality assurance reports.
    • QA for medication errors.
    • Theft and impaired licensees.
    • Pharmacy technician job description.
    • Pharmacist absence for meals.
    • After hours deliveries.
    • Interpretive services.
    • Repackaging previously dispensed drugs.
    • Automated Drug Delivery Systems.
    • Common electronic files to prevent unauthorized release of patient
  • Protocols:
    • Refusing to dispense on ethical, moral, religious grounds.
    • Emergency contraception.
    • Nicotine replacement.
    • Advanced practice pharmacist.
    • Procedures performed pursuant to BPC section 4052.2.

Additional documentations and issues that the inspector will review:

  • DEA registration.
  • Drug expiration dates.
  • Drug take-back receptacles.
  • Hot/cold running water (separate from restroom).
  • Confidential waste disposal.
  • Interpretive services poster.
  • Notice to consumers poster.
  • Restroom location.
  • Patient consultation.
  • Posted pharmacy license and renewal.
  • Out-of-state licenses.
  • Prescription labeling.
  • Prescription records.
  • Quarantine area for expired and recalled drugs.
  • Refrigerator/freezer temperature.
  • Security features.
  • Staffing ratio.
  • Transmission of CURES data.
  • Wearing identification or name tag printed in at least 18-point type.
  • Possession of keys to the pharmacy

TIP: Keep the Board’s guidance at the Pharmacy to serve as a checklist of all documents that have to be readily available for an inspection. Update and review your inspection folder periodically.

Sometimes the inspector may ask information that is not on this checklist. For example, I represented pharmacies in inspections where they were required to produce tax returns, articles of incorporations, billing records, etc. Such requests should be discussed with your legal counsel to analyze the validity and the Board’s authority for such requests.

    According to the most recent federal decision on the topic, state regulations of outsourcing facilities are not preempted by federal law. And therefore, facilities should comply with both.

The state-preemption challenge was brought by a federally-registered outsourcing facility against California on a ground that it denied its application under certain pharmacy-related regulations. Namely, a California regulation prohibits outsourcing facilities from operating under the same address as a registered pharmacy. This facility was attempting to do just that.

In the complaint, the outsourcing facility argued that California pharmacy rules do not extend to federally registered outsourcing facilities because Congress did not intend state laws to apply. The facility also argued that California rules pertaining to outsourcing facilities conflict with the federal law and impermissibly interfere with interstate commerce.

California Federal District court judge disagreed holding that section 503B does not contain express preemption of state regulations of outsourcing facilities. It also found that (1) regulations pertaining to outsourcing facilities were not meant to be solely dominated by federal law; (2) state and federal law do not contradict each other; and (3) state laws do not materially impact interstate commerce. In addition, the court decided that the facility failed to exhaust administrative remedies as required by California law (meaning that the facility should have gone through an administrative process prior to bringing this action).

For more information see: Fusion IV Pharm., Inc. v. Becerra, No. CV 18-2561 PA (FFMX), 2018 WL 6137606, at *1 (C.D. Cal. July 16, 2018)

 

  For a period of time, federal and state agencies made concerted efforts to control the cost of prescription drug spending, agreeing to use a reimbursement methodology that best reflects actual drug costs. Many states, however, used different methodologies to calculate drug cost. According to the U.S. Health and Human Services (HHS), such fluctuations in methodologies actually inflate drug costs. As a result, HHS enacted rules that changed the basis of payment for Medicaid-covered drugs from an “estimated acquisition cost” (EAC) to an “actual acquisition cost” (AAC).  The states were given some discretion which benchmark to use to determine AAC. One of such benchmarks is National Average Drug Acquisition Cost (NADAC). The California Department of Healthcare Services (DHCS) conducted a study and determined that NADAC adequately reflects actual drug cost acquisition in the state. It promptly notified CMS of the intent to switch to NADAC in reimbursing the pharmacies and obtained CMS approval.

The DHCS, however, did not immediately implement the changes approved by CMS. Instead, it continued to pay pharmacies through the Medi-Cal claims processing system consistent with the rate methodology used prior to the use of AAC. This lead to overpayments to pharmacies. Currently, the DHCS is recouping the overpayments resulted from the state’s delay in switching to NADAC.

As a result, California pharmacies are facing large monetary recoupments (particularly for specialty medications). Many NADAC prices do not even cover acquisition cost.

And in May 2019, California pharmacies filed a law suit against DHCS and HHS alleging irreparable harm to pharmacies and “a looming public health crisis.” Pharmacies complain that  large numbers of Medi-Cal patients will be denied access to critical life-saving specialty drugs. A motion for preliminary injunction is currently scheduled to be heard on August 30th, 2019.

For more information, visit California Pharmacists Association webpage (where you can also support the action financially).