Keeping accurate records for controlled substances often presents a challenge.  The Controlled Substances Act requires every pharmacy to maintain complete and accurate records on a current basis for each controlled substance received, sold, delivered, or otherwise disposed of.

This closed system is supposed to reduce the potential for diversion of controlled substances (“CS”).

But in reality, it is often difficult to implement effective inventory management. For example, the Department of Justice press releases are full of settlements with pharmacies that failed to keep accurate inventories and records concerning the distribution of CS.

In my practice, I often see pharmacy owners struggling to reconcile CS discrepancies discovered. Often, the manual count shows different amounts than what the software shows. And some pharmacists still use good old logbooks, which are extremely tedious and time-consuming to keep. This is a reason I want to introduce a new product designed to simplify and improve CS inventory management: C2 Keep. The team – consisting of a pharmacist and tech developers – claims that the product helps make pharmacist’s life easier by eliminating the logbook and digitally tracking CS. In addition the software also:

–  has a built-in calculator and the ability to scan barcodes (to improve the accuracy of the transactional data);

– integrates with the pharmacy software and streamlines filling process;

– prevents diversion by disabling data deletion/modification;

– assists during DEA, Board of Pharmacy, or PBM audits by quickly presenting the data you need (including biennial report);

– supports reporting diversion.


Check out the product and read more at:




Is your pharmacy located in California and selling over-the-counter Covid-19 at-home test kits? If so, you must be careful on how much you charge for these Kits.

On January 8, 2022, Governor Newsom signed Executive Order prohibiting excessive charging for the Kits in order to allow access to these products for as many people as possible.

The order explains that:

“…the heightened transmissibility of the Omicron variant has increased the need for widely available, affordable COVID-19 At-Home Test Kits that can be administered by members of the public at their convenience. it is vital that residents of California have access to COVID-19 At- Home Test Kits in order to protect public health and safety, and enable the continued operation of California schools, businesses, and other institutions in as safe a manner as possible.

“COVID-19 At-Home Test Kit” is defined as a test that

(i) is authorized for use by the FDA,

(ii) detects the presence of the SARS-CoV-2 virus, and

(iii) is intended for non-prescription home use by an individual.

If your pharmacy was selling the Kits on December 1, 2021, the Order prohibits the pharmacy (until March 31, 2022) to sell the Kits at a price that is more than 10 percent greater than the highest price charged by the pharmacy on December 1, 2021.

If the pharmacy did not sell the Kits on December 1, 2021, then it is prohibited from selling the Kits at “unconscionably excessive price,” which is defined as more than 50 percent greater than the amount paid for the Kit. This restriction is also in effect until March 31, 2022.

Even before this Executive Order, California had (and still has) a provision prohibiting price gouging in the times of distress. Penal Code Sections 396 prohibits entities from taking unfair advantage of consumers by greatly increasing prices during a declared emergency. It provides that:

“…for a period of 30 days following that proclamation or declaration, it is unlawful for a person, contractor, business, or other entity to sell or offer to sell any consumer food items or goods, goods or services used for emergency cleanup, emergency supplies, medical supplies, home heating oil, building materials, housing, transportation, freight, and storage services, or gasoline or other motor fuels for a price of more than 10 percent greater than the price charged by that person for those goods or services immediately prior to the proclamation or declaration of emergency, or prior to a date set in the proclamation or declaration.

However, a greater price increase is not unlawful if that person can prove that the increase in price was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services, during the state of emergency or local emergency, and the price is no more than 10 percent greater than the total of the cost to the seller plus the markup customarily applied by that seller for that good or service in the usual course of business immediately prior to the onset of the state of emergency or local emergency. If the person, contractor, business, or other entity did not charge a price for the goods or services immediately prior to the proclamation or declaration of emergency, it may not charge a price that is more than 50 percent greater than the cost thereof to the vendor as “cost” is defined in Section 17026 of the Business and Professions Code.” [Emphasis added].

So essentially, the Executive Order mirrors this already existing section by specifying that the Kits constitute emergency medical supplies. Note that a violation of Section 396 is a misdemeanor punishable by imprisonment in a county jail for a period not exceeding one year, by a fine of not more than ten thousand dollars ($10,000), or by both for each violation. This means that if you sell hundreds of Kits at an excessive mark-up, you could potentially face many years in prison and millions of dollars in fines. Something to keep in mind. ..


If you work in a pharmacy in California, I am sure you are aware of the new e-prescribing requirement that took effect on January 1, 2022. Because I’ve been receiving many calls from pharmacists regarding this new law, I decided to create this post and clarify a few points.

In a nutshell, the new law requires California prescribers to transmit electronic prescriptions (in lieu of paper/faxed/oral scripts) and pharmacies to have the capability to receive these transmissions.

Some exemptions apply. Namely, a prescriber can still issue a paper prescription or fax/call it to the pharmacy if:

  • the prescription is for a terminally ill patient;
  • the prescriber experiences a temporary technological or electrical failure;
  • the prescription to be dispensed by a pharmacy located outside California;
  • the prescription is issued in a hospital emergency department or urgent care clinic under certain scenarios (see the bill for more information);
  • the prescription is issued by a veterinarian;
  • the prescription is for eyeglasses or contact lenses;
  • the prescribing health care practitioner and the dispenser are the same entity;
  • the prescription is issued under circumstances whereby the prescriber reasonably determines that it would be impractical for the patient to obtain the medication by an electronic data transmission prescription in a timely manner, and the delay would adversely impact the patient’s medical condition;
  • the prescription includes elements not covered by the latest version of the NSPSP SCRIPT standard;
  • a prescription is for an inmate, individual on parole, or youth under the jurisdiction of the Department of Corrections and Rehabilitation.

As you can see, there are many exemptions and some of them are very broad. The good news is that the pharmacy does not need to verify that a written, oral, or faxed prescription satisfies the specified exemptions. The compliance in this respect is on the prescriber. The pharmacy, however, should immediately notify the prescriber if the electronic data transmission prescription fails, is incomplete, or is otherwise not appropriately received.

The bottom line: your pharmacy should have the ability to accept e-scripts. If you still receive “traditional” handwritten/faxed/phoned-in prescriptions, you can continue filling them as long as such prescriptions are compliant in all other aspects.





Back in 2020, I wrote a blog post on potential PBM audit issues and disciplinary actions based on purchasing diabetic test strips from unauthorized wholesalers. The problem is still prevalent. In fact, during these past few months, we have seen several manufacturers sending cease-and -desist letters to pharmacies demanding money for lost sales and threatening to report unauthorized sales to PBMs and Board of Pharmacies.

To remind, an “authorized distributor” means a supplier expressly authorized by the manufacturer to distribute test strips. I had cases when distributors had erroneously represented to pharmacies that they were “authorized,” but in fact they were simply licensed to conduct drug distribution business in the state and were VAWD-accredited (which is completely different from being authorized by the manufacturer to distribute test strips). Instead of asking your wholesalers and relying on their representation (which might be false), you should verify manufacturers’ lists of their authorized distributors for nonprescription diabetic test strips. Some states also publish such lists (eg. here is a list published by the California State Board of Pharmacy).

Several of my clients were recently contacted by various law firms representing test strips manufacturers explaining that their records show that the pharmacy dispensed X amount of their products but the pharmacy had purchased less from their authorized distributors. Therefore, the manufacturer concluded that the rest of the products were purchased on a grey market and the manufacturer had sustained certain damages in lost profits. The manufacturer demanded lost profits. Otherwise, it threatened to report pharmacies to PBMs and Board of Pharmacy. As discussed in my blog post on this subject, PBMs may terminate pharmacies purchasing from unauthorized distributors and Boards may commence an administrative action.

So why despite these grave consequences, pharmacies still continue purchasing products from unauthorized wholesalers? As one of my clients explained, purchasing from authorized dealers result in reimbursement below cost. But on the other hand, saving money in this manner may jeopardize your pharmacy business: there could be significant PBM chargebacks, terminations, and even administrative actions. If you dispense for less than your cost, maybe it is a reason to reconsider dispensing the product altogether.


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.