Last week, DEA proposed two new rules regarding (1) reporting theft or significant loss of controlled substances and (2) registration fees.

1.     15-day requirement for reporting drug loss or theft.

This proposed rule would amend DEA regulations regarding Form-106, used by the registrants to report thefts or significant losses of controlled substances, to clarify that all such forms must be submitted electronically. In addition, the proposed rule would add new requirements for the form to be submitted accurately and within a 15-day time period. This proposed rule will not change the requirement that registrants notify the DEA Field Division Office in their area, in writing, of the theft or significant loss of any controlled substances within one business day of discovery of such loss or theft. The comment period is now open. If you would like to address this proposed rule, submit your comments by following these instructions.

    2.       Increased registration fee

A new registration fee will take effect for all new applications and all renewal applications submitted on or after October 1, 2020. Current registration fee for a pharmacist is $731, which will increase to $888 (for a three-year cycle).

In addition to raising fees, DEA also made a comment regarding its refund policy.  Currently, DEA’s policy is that it will not issue a refund of registration fees, including if the payment was made in error based on guidance provided by DEA personnel. The Notice of Proposed Rulemaking now includes provisions that “will give DEA’s Administrator discretionary authority to refund registration fees.” The circumstances warranting consideration of a refund include: “applicant error, such as duplicate payments, payment for incorrect business activities, or payments made by persons who are exempt under this section from application or renewal fees; DEA error; and death of a registrant within the first year of the three-year registration cycle.”

While this is not a new case, nevertheless it must be revisited to remind the importance of verifying all licensure, credentials, and records of pharmacy employees. This straightforward and easy step could potentially save pharmacies millions of dollars, as this case and many enforcement actions illustrate.

Earlier this year, Walgreens agreed to pay $7.5 million to resolve a lawsuit contending that the company allowed an unlicensed employee to handle over 745,000 prescriptions.

For over 15 years, Walgreens employed a pharmacist who handled more than 100,000 prescriptions for controlled substances such as oxycodone, fentanyl, morphine and codeine.

This “pharmacist,” who was never licensed, used the license of someone else with the same first name to obtain promotions, according to a consumer protection lawsuit filed by the Santa Clara County and Alameda County district attorney’s offices. (How was it possible for a non-pharmacist to fill and consult patients on prescription medications?)

The unlicensed practice was discovered by the Board of Pharmacy during a routine audit. The “pharmacist” has been criminally charged by the State Attorney General with criminal identity theft, false personation, and false pretenses.

Walgreens has agreed to pay a hefty monetary penalty for its failure to verify licensure. The final judgment requires Walgreens to ensure licensure compliance by implementing a verification program, posting proof of licensure, conducting annual audits, and submitting an annual compliance report.

In addition to criminal investigations, a pharmacy may face recoupments and other penalties if it fails to verify licensure of its employees and contractors. Pharmacy should also verify that all its employees, contractors, and agents are not listed on the OIG’s List of Excluded Individual/Entities (LEIE) or the DHCS’s exclusion database. For certain protections against negligent hiring, the Pharmacy shall also perform education and employment verification, a Social Security number validation, and an appropriate criminal records history check.

Need a policy for verifying licensure and exclusion databases? Click here to access RxPolicy to download a policy and procedure.

Many pharmacy owners wonder if contracting with Medicare directly (as a Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (“DMEPOS”) provider) adds value to a pharmacy business. The answer depends on whether the sale of the pharmacy is structured as an asset or a stock purchase.

Asset purchase

To become a DMEPOS provider under Medicare Part B, a pharmacy must obtain accreditation, post a surety bond, and obtain a Medicare contract by filing form CMS-855S. (The pharmacy does not need to obtain accreditation if it bills Medicare only for the items that are not subject to CMS Quality Standards, such as immunosuppressive drugs, oral anti-emetic drugs, etc.). If the Medicare Administrative Contractor (“MAC”) approves the pharmacy’s application, it assigns a Provider Transaction Access Number (PTAN) to the pharmacy and it can start billing Medicare directly.

When the pharmacy owner sells the assets of the pharmacy, the PTAN and accreditation could not be assigned to the buyer. Therefore, the buyer will have to (1) obtain a new accreditation (if billing for the items subject to CMS Quality Standards, such as DME, diabetic shoes, parenteral and enteral items, etc.), (2) submit a new CMS-855S form to the MAC, (3) post a new surety bond (unless reassigned); and (4) obtain a new PTAN. These could take a substantial amount of time and cause potential gaps in Medicare billing. The buyer, however, could complete these steps before the closing of the deal or request that the new PTAN be retroactive to the date of the closing. Here is an example of the latter scenario: when the deal closes, the buyer continues serving Medicare beneficiaries but does not bill Medicare until it obtains a PTAN. On the day its application is approved and a PTAN is issued, the buyer then bills for all accumulated claims. The risk is obvious: Medicare might not approve some (or even all) of the claims. 42 CFR 424.57 establishes the criteria DMEPOS suppliers must meet in order to be eligible to receive payment for a Medicare-covered item. Therefore, if the buyer does not comply with any of the requirements, Medicare may deny reimbursements leaving the provider in a vulnerable financial position.

Stock purchase

By contrast, when the buyer purchases stock or 100% interest in the existing DMEPOS pharmacy business, it will continue using the same TIN, PTAN, accreditation, and all third-party payors’ (3PP) contracts. The buyer simply steps into the shows of the previous owners and continues to operate the business as is. The buyer, however, will need to notify all 3PP (including its MAC) of the change of ownership (CHOW). The caveat is that the new owner assumes all liabilities of the existing business. If the business was in operation for a number of years, it may have existing issues for which the buyer might end up paying a hefty price. For example, we have recently assisted a DMEPOS pharmacy which was acquired by our client through a stock purchase about 2 years ago. Subsequent to the purchase, the federal government became interested in the prior owners’ marketing practices. As a result of the investigation – which determined that improper kickbacks were paid to marketers – our client had to endure payment suspension and an administrative action because he purchased the stock of this business. That’s why you do not see many stock purchases of a healthcare business (mergers and asset purchases are much more common).

The buyer may attempt to protect his business from the liabilities stemming from the prior owner’s conduct by drafting a strong indemnification language in the stock purchase agreement. But it does not guarantee that the seller would comply with the indemnification request and cooperate, especially if a long time has passed since the CHOW.


If you are selling stock of your company – provided that you find a buyer willing to assume the liabilities – adding a Medicare part B contract to your arsenal would potentially increase the value of your business. If it is an asset purchase, however, a Medicare Part B contract is not likely to increase the value of your pharmacy (because the buyer will have to obtain its own contract with possible gaps in billing).

Please note that nothing in this post constitutes legal advice. Each business and pharmacy sale is different and you should consult an experienced transactional attorney, tax specialists, and other professionals prior to making any decisions regarding a business sale.


While many sources say that the DEA audits registrants every three year, in my experience as a pharmacy attorney it usually happens less frequently. But if you are a pharmacy owner or manager, it is likely that your business would be (or was) audited by the DEA at some point.

In the pharmacy context, the DEA conducts an audit for the following reasons:

  • It received a tip regarding potential violations of the Controlled Substances Act (“CSA”) (such tips may come from the Board of Pharmacy, wholesalers, prescribers, or even patients);
  • It flags the pharmacy as an outlier compared to similarly situated pharmacies; or
  • It randomly audits to ensure compliance with CSA.

Many of my clients often say: “I have nothing to hide, DEA can audit me at any time.” This statement comes from misunderstanding of how the DEA conducts its audits. While the DEA focuses on over-dispensing (pill-mills) and diversion, most of the audits result in monetary penalties due to simple and apparently innocent record-keeping errors. Almost every single DEA audit that I worked on resulted in record-keeping fines.

There are two types of monetary penalties in the DEA’s arsenal:

  • One is a hefty fine of $64,820 per violation, found in 21 U.S.C. Sec. 842(a) (all subsections other than 5, 10, 16). Most commonly cited violations under this section are failure to exercise corresponding responsibility, dispensing on invalid prescription blanks, purchasing controlled substances under invalid or missing power of attorney.
  • Another one is a smaller monetary penalty of $15,040 for violations of Sec. 842(a)(5) and (10) only. These are all record-keeping errors, such as failure to list patient addresses or failure to keep complete and accurate records. It is not uncommon that such record-keeping violations add up to millions of dollars.

If, for example, the prescriptions are missing patients’ addresses and you have 10,000 of such prescriptions, the monetary penalty may reach $150,400,000 (which is reduced depending on the pharmacy’s ability to pay). Therefore, I cannot stress enough how important record-keeping and compliance with the CSA to the letter are.

Here are some of the issues that often come up during DEA audits and which usually result in large monetary penalties:

  • Improperly performed inventories. It’s common for the pharmacy inventory to omit necessary requirements (such as a date/time or finished form of the substance) or some controlled substances on inventory forms;
  • Records of receipt and dispensing. CSOS receiving records must document the quantity received and the date of receipt. Dispensing records must state number of units dispensed, name and address of the person to whom it was dispensed, the date of dispensing, the name or initials of the individual who dispensed or administered the substance. Very often, pharmacy records omit patients’ addresses or/and the DEA number of the prescriber (or list incorrect number).
  • Power of attorney. All ordering personnel must properly execute a power of attorney with the registrant. Often, the power of attorney is not dated, not coming from the registrant or missing altogether.
  • Employee screening. Per federal regulations, pharmacy shall not employ anyone who has access to controls, if such person has been convicted of a felony relating to controlled substances or whose application with the DEA had been denied, revoked, or surrendered for cause. Pharmacy should run state, county, and federal background checks on all the employees with access to controls.
  • Corresponding Responsibility. Pharmacists usually run into this problem when they do not run PDMP reports on new and existing patients or they are filling scripts coming from problematic prescribers who are already on the DEA’s or Medical Board’s radar.

Always keep in mind that every record-keeping violation could potentially turn into a monetary penalty. Therefore, training staff on proper record-keeping and following every regulation of Title 21 Code of Federal Regulations (starting with § 1300, which is available on the DEA’s website) is a part of a solution to comply with federal regulations and to avoid administrative actions and monetary penalties.




Facts: Jan Tyler was regularly filling his scripts for several controlled substances at a local Walgreens pharmacy. Due to heat exposure at work, Jan succumbed to an increased level of fentanyl. During the proceedings, his estate established that the cause of death was acute Oxycodone, Fentanyl, and Alprazolam intoxication. Therefore, the question became: had  Walgreens violated the standard of care to be expected of a reasonably competent pharmacist under the circumstances. Please note, Jan’s estate presented evidence that the pharmacist knew that Jan worked in a high heat environment.


What do you think? Should Walgreens be held accountable for filling legitimate scripts but knowing that the patient may be at risk due to his specific work circumstances?

Holding: If you have decided in favor of the pharmacy, you are not alone. Ohio Court of Appeals held that that there was no evidence tying Jan’s cause of death to any failure by Walgreens. The court held that the pharmacist did not know specific details of Jan’s work, properly and timely filled Jan’s script, and therefore, the pharmacist did not breach his duty of care.

I actually have mixed feelings about this case. On one hand, it is not a duty of the pharmacist to inquire into the nature of patients’ jobs or life circumstances. The pharmacist’s duty is solely limited to review of the fill history and patient’s profile. But on the other hand, if a pharmacist knows of my specific circumstances and that they could interfere with the medication, shouldn’t he warn me or contact my prescriber?

Recently I attended a webinar “Managing COVID-19: Key Labor & Employment Issues” presented by LexisNexis. The speakers were two attorneys from Locke Lord LLP specializing in employment law. They covered and touched upon some important considerations that you need to keep in mind when running a business in these strange times.

Many pharmacies are attempting to go back to “normal” and often ask me about COVID-related issues in the workplace. Because I do not practice employment law, I usually refer them to the OSHA’s Guidance on Preparing Workplaces for COVID-19, which recommends the steps employers can take to reduce workers’ risk of exposure to SARS-CoV-2.

Another guidance I usually send to my clients is CDC’s “Guidance for Pharmacists and Pharmacy Technicians in Community Pharmacies during the COVID-19 Response.” In a nutshell, this guidance recommends pharmacy staff to wear face-masks, require customers to wear face coverings, provide hand sanitizer containing at least 60% alcohol on counters for use by patients, install barrier protection at the patient contact area, clean surfaces often, discontinue the use of magazines/brochures (same recommendations apply to any other business).

Some pharmacy-specific provisions are:

  • Encourage prescribers to submit prescriptions via telephone or electronically and avoid handling paper prescriptions;
  • Limit patient contact: place medication on a counter instead of handing it directly to the patient, provide phone consultations, avoid handling insurance cards (instead, have the patient take a picture of the card for processing or read aloud the information that is needed), and limit physical contact as much as possible.
  • Consider offering home delivery, curbside pick-up, and drive-through services.

I would also add: do not accept returns or patient bottles for refills, encourage patients to call in refills to avoid extended waiting at the pharmacy, advise patients to have enough medication to limit exposure by coming to the pharmacy, and remove all customer seating.

Virtually all Boards (and many PBMs) have waived certain in-person requirements, such as physical signatures, and other procedures involving direct patient communication, in addition to allowing remote order entry (enabling your employees to work from home).

The webinar, however, focused on some less familiar recommendations, such as shift rotations, tenancy issues (how to work with the landlord to implement social distance in common-use areas, staggered entry time for the tenants, and cleaning common areas), testing of the employees and reporting (and record-keeping) requirements in case an employee tests positive.

Another common problematic area is hours and salary reduction. According to the speakers, under the Fair Labor Standards Act, salaried employees are entitled to full salary for weeks in which any work is performed. However, many employers are now switching their employees to a reduced compensation (e.g. 20% reduction in hours would result in a 20% reduction in salary). This could be problematic with salaried employees. Therefore, it might be necessary to convert salaried employees’ status to hourly work, paying for actual hours worked. If you are planning to implement such changes, consult your employment counsel.

While we are going into the next phase of the quarantine, continue following OSHA and CDC guidance, and if you are planning to implement new employment policies, do not forget to consult an employment attorney, who can help you navigate through these uncertain times.

A group of independent pharmacies filed a lawsuit against OptumRx alleging various unfair/illegal business practices, such as reimbursements below cost,  price manipulations, discriminatory treatment. Mark Cuker of the Jacobson Law Group filed the case in Pennsylvania and Illinois on behalf of independent pharmacies, and he is looking into filing a similar action in California.

This is not the first case filed by Mark, in which he represents the interest of independent pharmacies. In 2015, he filed a similar action against Catamaran for breach of contract and bad faith in setting prices for prescription drugs. Most of the pharmacies, however, had an arbitration clause in their contracts with Catamaran. Only one pharmacy had no arbitration clause and continued with the litigation.

Later in the proceedings, the Court found that the factual allegations were enough to establish a plausible claim that the MAC pricing appeals were not reasonable and were conducted “arbitrarily, capriciously, or in a manner inconsistent with the reasonable expectations of the parties.”

Subsequent to the court’s decision, the pharmacy added two additional claims against OptumRx: (1) setting reimbursement prices below acquisition costs; (2) failure to set a single reimbursement for similar drugs. The case is currently in its discovery stage.

The present 2020-case against Optum also alleges below-cost reimbursements, which are arbitrary and unilaterally set by Optum unrelated to the actual wholesale price. The lawsuit also alleges unfair business practices relating to (1) billing plans for brands but reimbursing pharmacies for generic; (2) paying independent pharmacies less than what it pays large chains or its own mail order pharmacy. We will continue covering the case as it advances through litigation.

Mark also plans to bring a similar action in California, which is a favorable forum due to our strong precedent on “Unfair Competition and Unfair Business Practices” litigation, as well as California’s MAC law. If you are interested in participating in such an action in California, please contact Mark Cuker at (215) 531-8522.


Recently, I’ve been inundated with offers to purchase N95 masks and PPE, as well as with offers to order COVID test-kits. Most of these offers come through my firm’s website and I suspect it is because my website has “pharmacy” written all over it. After reading the APhA’s article on new scams targeting pharmacies, I realized that a reason why I receive these offers is because I work with pharmacies. Apparently, pharmacies are dealing with more scams during the COVID-outbreak due to  their unique position to distribute needed medications, offer treatment, and advise on prevention. Therefore, many scammers or substandard companies (e.g. unlicensed wholesalers) target pharmacies hoping that their offers could not be resisted due to the desperate situation many communities experience.

Below is the summary of the APhA’s article regarding scams targeting pharmacies.  The article explains red flags and prevention techniques. First of all, potential scammers may reach your pharmacy offering to sell:

  1. Fake or substandard N95 masks
  2. COVID-19 vaccine
  3. COVID test-kits
  4. Drugs preventing or treating COVID infections

Note: I would like to add offers to assist with small business loans.

The APhA reminds of the following red flags to spot a scam:

  1. An offer that is too good to be true;
  2. Offering products that are in short supply;
  3. Offers from unknown sources;
  4. Requesting personal or confidential information.

To verify whether you received a legitimate offer, verify if a product offered for sale is FDA approved ( you can check FDA’s approval for drugs here).

To avoid pharmacy scams, discuss the red flags with your staff and explain reporting requirements (to FDA, FTC, and FCC).

Remember, you can spot most of scams by paying close attention to the way the offer is made (professionalism, price, method of communication, sense of urgency, etc.). Always verify the source and keep in mind state and federal laws/regulations that come into play (such as HIPAA, wholesale licensed distribution, etc.).

Recently I was reviewing client’s compliance on sending advertisements via fax.  Because the pharmacy industry is still extensively utilizing fax machines (and e-faxes), I decided to remind how to properly send promotional materials through fax.

First of all, a recent case prompted my compliance review. Last year, a doctor filed a legal action against a pharmacy who advertised its services and products by fax. Dr. Katz brought a class action against Benzer pharmacy for violating the Telephone Consumer Protection Act (“TCPA”).

The TCPA forbids sending unsolicited advertisement for goods or services via facsimile without the recipients’ prior express invitation and to recipients with whom the sender does not have an established business relationship. The TCPA requires that even if you send fax advertisements to those with whom you have an established business relationship, the fax must include an opt-out notice. In order to comply with the TCPA’s Opt-Out Notice requirements, each fax advertisement must include all of the following:

  • Clear and conspicuous language on the first page stating that recipients may opt out from receiving any further fax communication;
  • A toll free phone number (or any other no-cost method) that the recipient may use to submit an opt-out request.

The TCPA provides for statutory damages in the amount of $500 – $1,500 per violation.

In the Benzer Pharmacy case, the pharmacy was fax-blasting advertisements of its services to many prescribers with whom it had no prior contact or established business relationship (red flag No. 1). In addition, its faxes had no opt-out language (red flag No. 2).  As a result, the pharmacy is now in the middle of a very expensive litigation (to remind, this is a class action with many complex legal issues).

To avoid similar problems, review how and to whom you send faxes, and whether any of your faxes could be classified as “advertisement.” Does your fax (if it is an advertisement) contain an opt-out notice on the first page of the fax? If so, does the notice list a toll-free number to opt out. Do you send faxes only to the established business contacts?

California bonus: If you are located in California, even more stringent rules apply (no surprises here). California law requires an express permission to fax advertisement even if you are faxing to your established business contacts.


Pharmacists – being the most accessible healthcare providers – can prove to be invaluable during the current pandemic.  With the passage of the Public Readiness and Emergency Preparedness Act (PREPA), pharmacists now can order and provide COVID-testing. Many pharmacies have already started providing testing through their drive-up stations and home visits to quarantined patients.

Why is this a crucial time for pharmacists?

Because pharmacists are not recognized by the federal government as health care providers, they could not be reimbursed by Medicare or Medicaid for providing medical services. Without the PREPA, pharmacists would not have been able to offer COVID-testing. With the passage of PREPA, the federal government specifically acknowledged the role pharmacists play in public-health emergencies. See “Guidance for Licensed Pharmacists, COVID-19 Testing, and Immunity under the PREP Act.” Please note that it is still unclear how pharmacies should bill for testing.

Another constructive move was the inclusion of pharmacists in Helping Emergency Responders Overcome Emergency Situations (HEROES) Act of 2020. Initially it did not include pharmacists, which changed after various pharmacists advocacy groups stepped in.

These developments and acknowledgement of pharmacists as healthcare providers on the federal level may change the playing field in terms of pharmacy reimbursement (where pharmacies may be reimbursed for direct patients care services) and potentially could lead to a provider status.

Thank you to all the pharmacists and other healthcare providers that are on the frontlines of the pandemic!