More and more states are mandating e-prescribing. Some states require e-prescribing only for CII controlled substances, some for all controlled substances, and some require e-scripts for all medications.

States with current e-Rx mandate laws are:

    • Connecticut (e-prescribing for controlled substances only, no penalties for non-compliance)
    • Maine (e-prescribing for controlled substances only, penalties provided)
    • Minnesota (all prescriptions, no penalties)
    • New York (all prescriptions, penalties)

State with future e-Rx mandate laws are:

    • Arkansas (e-prescribing for controlled substances only, provides for penalties, starts in 2021)
    • Arizona (CIIs only, no penalties, starts in 2020)
    • California (all prescriptions, starts January 1, 2022)
    • Iowa (all prescriptions, starts in 2020)
    • Kentucky (e-prescribing for controlled substances only, starts in 2021)
    • Massachusetts (e-prescribing for controlled substances only, starts in 2020)
    • New Jersey (EHR must be able to accept, process, and transmit prescriptions for CIIs, starts May 1, 2019)
    • North Carolina (applies to highly abused CIIs and CIIIs, starts January 1, 2020)
    • Oklahoma (e-prescribing for controlled substances only, starts in 2020)
    • Pennsylvania (e-prescribing for controlled substances only, starts October 24, 2019)
    • Rhode Island (e-prescribing for controlled substances only, starts in 2020)
    • Tennessee (CIIs only, starts in 2020)
    • Virginia (for opioids only, starts in 2020)
    • Wyoming (e-prescribing for controlled substances only, starts in 2021)

States with pending legislation on e-prescribing:

  • Colorado (CII-IV only)
  • Florida (all prescriptions)
  • Kansas (all controlled substances)
  • Michigan (all prescriptions)
  • Missouri (all prescriptions)
  • South Carolina (all controlled substances)
  • Texas (all controlled substances)
  • Washington (all prescriptions)
  • West Virginia (all prescriptions)

If you are not in one of the above states, it is likely that your state will be added to this list next. If not, e-prescribing is unavoidable anyway because Medicare will require all Part D scripts to be transmitted electronically starting in 2021.

The Drug Enforcement Administration (DEA) has allowed e-prescribing since 2010. But a practitioner must use a EPCS-certified software. In order to be EPCS-certified, the system must meet strict DEA requirements for credentialing, software certification and dual factor authentication (among others). Therefore, it is important to know your vendors, their certifications, and their audit records. Surescripts – for example – is one of the platforms facilitating e-prescribing. However, the company was investigated and charged with illegal monopolization of e-prescription markets. Read FTC’s announcement here.

While e-prescribing is supposed to resolve ambiguities in prescriptions, sometimes it creates them. For example, e-prescriptions have “Notes” section. Prescribers may add additional information that is relevant in this field. This field, however, is often a source of miscommunication. For example, “Notes” may state “dispense 60 tablets” but there is already a quantity field indicating 60 tablets. This creates some uncertainty regarding the prescriber’s intent and therefore a pharmacist must call to verify and resolve the uncertainty. In addition, pharmacy must train staff and offer tech support at all times. And when dealing with any healthcare technology, it must comply with HIPAA and all relevant regulations, such as security breach notification and similar state laws. If you work with e-scripts, what are your hurdles?


Is CBD a drug, a dietary supplement, or food (or all/none)? Can it be marketed under any of these labels?

Recently, the FDA clarified one aspect of this puzzle: CBD products should not be marketed as drugs unless they went through a rigorous regulatory scrutiny.

This month, the FDA – together with the FTC – issued warning letters to three CBD manufacturers making unsubstantiated medical claims about their products’ ability to treat various conditions. For example, some of the claims included such statements as:

  • “CBD successfully stopped cancer cells in multiple different cervical cancer varieties.”

  • “For Alzheimer’s patients, CBD is one treatment option that is slowing the progression of that disease.”

  • “Cannabidiol May be Effective for Treating Substance Use Disorders.”

  • CBD may be used to avoid or reduce withdrawal symptoms.”

Note that none of the manufacturers used concrete statements, such as “CBD cures/helps /relieves, etc.” They were simply stating that there is a possibility that CBD may relieve the symptoms or improve a condition or is a treatment option. Even in this form, such statements constitute health claims. The FDA must pre-approve all health claims, and requires that they be supported by evidence from scientific studies.

If you are thinking: how about the Farm Bill that was recently signed? Know that it has not changed the way how the FDA looks at health-claims on non-approved (by the FDA) products.

Agriculture Improvement Act of 2018 (the Farm Bill) established a new category of cannabis classified as “hemp” – defined as cannabis with extremely low (no more than 0.3%) concentrations of the THC. The Bill removed hemp from the Controlled Substances Act, which means that it is no longer a controlled substance under federal law.

Congress explicitly preserved the FDA’s current authority to regulate products containing cannabis or cannabis-derived compounds under the Federal Food, Drug, and Cosmetic Act (FD&C Act) and section 351 of the Public Health Service Act. The FDA – however – is struggling with hemp classification and marketing requirements. It will hold a public hearing on May 31 to discuss CBD health claims and whether they are justified and explore potential pathways for dietary supplements and/or conventional foods containing CBD to be lawfully marketed. If you are in the CBD business, this is your opportunity to be heard.

On multiple occasions, the FDA stressed that it now treats CBD products as any other FDA-regulated product. Therefore, the FDA requires a CBD product that’s marketed with a claim of therapeutic benefit to be approved by the FDA for its intended use before it may be introduced into interstate commerce.

The FDA also announced that it is unlawful to introduce food containing added CBD, or the psychoactive compound THC, into interstate commerce, or to market CBD or THC products as dietary supplements. This is because CBD and THC are active ingredients in FDA-approved drug products (e.g. Epidiolex) and were the subject of substantial clinical investigations before they were marketed as food. In such situations, with certain exceptions that are not applicable here, the only path that the FD&C Act allows for such substances to be added to foods or marketed as dietary supplements is if the FDA first issues a regulation, through notice-and-comment rulemaking, allowing such use.

There is no clear definition – however – of “unauthorized claims” that would put CBD companies at risk of enforcement actions. The FDA hopes the stakeholders submit additional scientific and researched evidence of the CBD’s potential at its May 31st hearing.  Meanwhile, if you are a producer or manufacturer – do not make any health-related claims on your products. The only claim which you can currently make is “claims of well-being” (e.g. statements that a product can “make you feel better”). Such claims do not require FDA’s pre-approval.

This week I want to offer you an illustrative video “Pharmacoeconimics” prepared by a pharmacy owner – Loren Pierce – describing how DIR fees are killing his business.

In the video, Loren explains and shows his financial reports illustrating that in:

  •  2017, the pharmacy paid a total of $212,000 (1.2% of sales) in DIR fees;

  •  2018, $642,000 (3.8%); and

  • January, 2019, PBMs withheld $76,000 in DIR fees, which constituted 5.1% of his total sales.

If you are a pharmacy owner, your DIR reports show similar numbers. DIR fees are rising without any justification and proper accounting.

PBMs explain that DIRs are mandated by federal requirements to lower medication cost and improve adherence. However, DIRs are not accomplishing these goals. Medication costs are still rising and PBMs report increased profits each year. Independent pharmacies – on the other hand – are going out of business or sell files to chains who can absorb the loss due to the volume. Many pharmacies are facing a dilemma: to accept these PBM contracts reimbursing below cost or turn away Medicare beneficiaries, who constitute a large chunk of business. The video could be accessed here.

Please join me for a live webinar, “Opioids and Other Controlled Substances: Minimizing the Risks in Prescribing, Dispensing and Administering” scheduled for Wednesday, April 17, 1:00pm-2:30pm EDT.

I will be speaking on new regulations and practices pertaining to TeleHealth and e-prescribing. My co-speakers include: Kerry B. Harvey, Member at Dickinson Wright; Lindsay P. Holmes, Attorney at BakerHostetler and Dennis A. Wichern, Managing Partner at Prescription Drug Consulting.

Currently, I have 10 complimentary passes for clients and colleagues. To take advantage of this offer, please email me directly ( and I will provide you a code to join. Hope you can tune in and take advantage of this great program.

Last Thursday, a federal judge dismissed a lawsuit brought by pharmacies alleging that Express Scripts, Inc. (ESI) used prescription data to forcibly switch patients from their retail pharmacies to ESI’s own mail-based pharmacies. The judge ruled that ESI used the patient data appropriately under the agreements with the pharmacies.

Pharmacies brought claims against ESI for (1) attempted monopolization, (2) unfair competition, (3) breach of contract, (4) breach of implied covenant of good faith and fair dealing, (5) interference with prospective economic advantage, (6) violation of the uniform trade secrets act, and (7) fraud. The core of all the claims was ESI’s conduct of collecting and using prescription data to boost its mail-order operations.

The judge, however, held that the conduct was not prohibited and in fact was expressly allowed under the terms of the agreement with the pharmacies.

ESI’s agreement with the pharmacies (including pharmacy manual, collectively “Agreement”) states that ESI is the owner of all information it obtains through the administration and processing of any and all pharmacy claims submitted by pharmacies. The agreement also identifies ESI’s “mail service dispensing” and provides that pharmacies shall cooperate in coordinating pharmacy benefits.

  1. Breach of contract claim

Pharmacies asserted numerous HIPAA violations when ESI used the patient data to switch those patients to mail order. The complaint alleged that patients did not authorize a switch to mail order, but only learned that their prescriptions were switched to mail order when they attempted to refill the prescriptions at local pharmacies. Pharmacies argued that ESI has breached the Agreement, which provides that the parties shall comply with all applicable laws.

The judge dismissed this claim holding that no private cause of action exists under HIPAA, even under a contract claim.

   2. Breach of implied covenant of good faith and fair dealing

Pharmacies alleged that ESI breached its duty of good faith and fair dealing owed by using the patient information supplied pursuant to contracts’ requirements in order to take customers away and move them into ESI’s mail order pharmacy.

The court dismissed the claim holding that the agreement with the pharmacies permitted ESI to fill mail order prescriptions through its own mail order pharmacy.

  3. Attempted Monopolization

Pharmacies alleged that ESI’s conduct eliminated competition by barring pharmacies from competing for refills and prohibiting patients from purchasing their refills from local pharmacies. Pharmacies claimed that ESI ensured that only its mail order could refill patients’ prescriptions by switching patients to mandatory mail order. Pharmacies pointed to the fact that ESI has quintupled its mail order revenues and quadrupled the number of prescriptions they fill via mail order in just 4 years.

The Court dismissed the claim holding that pharmacies failed to plead enough facts to establish this claim. It also found “nothing inherently anticompetitive in [pharmacies] purported inability to compete with ESI for refills.”

  4. Fraud

Pharmacies argued that ESI’s omission of the information that ESI intended to switch patients to its mail-order service constituted fraud by omission. The court dismissed holding that pharmacies failed to properly allege fraud.

  5. Tortious Interference

The Court held that pharmacies did “not allege any unauthorized actions by Defendants that caused Plaintiffs harm. Rather, as outlined, Defendants’ actions were sanctioned by the parties’ agreements, particularly the Provider Manual’s provisions giving ESI ownership over the customer information.”

   6. Unfair Competition and Uniform Trade Secrets Act

Pharmacies alleged that customer information is a protectable trade secret. And ESI used pharmacies confidential information “to compete unfairly with Plaintiffs.” The court dismissed holding that customer lists and customer information do not constitute protectable trade secrets. Moreover, as the court previously held, ESI was the owner of and had the right to use this information in the manner alleged.

It is unclear whether the pharmacies plan to appeal the decision. Considering a long string of negative cases holding for PBMs in similar contractual disputes, it seems unlikely.

Several PBMs now require their in-network pharmacies assisting prescribers with Prior Authorizations (PAs) to have written policies and agreements with the prescribers on how PAs are prepared and submitted.

Preparing PAs is a time-consuming and tedious process. Often, prescribers are not willing to invest their staff’s time and resources into preparing and submitting them. To streamline the PA process and to ensure the continuity of care, many pharmacies offer PA assistance. Pharmacies, however, are also financially interested in PAs being timely submitted to PBMs and their reimbursement directly depends on which medication is dispensed. PAs are usually necessary for more expensive medications or medications that are not on PBMs’ formulary lists. Therefore, several PBMs have conducted – and are still conducting – audits targeting PAs and medical necessity of medications prescribed.

During these audits, PBMs discovered cases of (1) improper monetary compensations for signing or preparing PAs; (2) pharmacies that sign PAs on behalf of prescribers; (3) prescribers that sign PAs for patients they have never seen. As a result, some pharmacies have lost their contracts with PBMs and facing monetary recoupments and even criminal investigations. Many PBMs require an agreement between the pharmacy and the prescriber describing the PA procedure.

What PBMs are looking for: there should be a legitimate medical need for PAs. Needless to say, no money should be exchanged between the prescriber’s office and the pharmacy for preparing PAs. PAs should be prepared for the benefit of mutual patient only. Often PBMs scrutinize PAs on whether other alternatives were available and how PAs were prepared. Therefore, the pharmacy should have a clear policy on how to prepare and submit PAs.

The PAs policy and procedure (and the agreement with the prescriber) should specify that the pharmacy is acting as the prescriber’s agent in preparing and submitting the PAs (creating “limited agency”). At no time, a pharmacy should sign a PA. It can prepare and prepopulate the form but never sign it, even if authorized by the prescriber.

The policy should also describe emergency situations when a PA may not be practical to obtain and when a pharmacy may dispense first and obtain the PA at a later date.

Improperly performed PAs may also implicate kickbacks. In 2010, the Office of Inspector General (OIG) issued an opinion focusing on PAs. The opinion described that preparing PAs free of charge for prescribers may violate the anti-kickback statute:

“When a party in a position to benefit from referrals provides free administrative services to an existing or potential referral source, there is a risk that at least one purpose of providing the services is to influence referrals,”

The OIG concluded that as long as no payments (or any other rewards) are made to physicians, no assurances to physicians or patients are made that the PA would be approved, and the service is provided for the benefit of the mutual patients only – the provider [pharmacy] has a legitimate business interest in offering uniform pre-authorization services.

While pharmacies may continue witnessing enhanced PA reviews by PBMs, proper policies and agreements with the prescribers may help avoid terminations, recoupments, and possibly government investigations.

I am pleased to announce that I will be speaking in an upcoming Strafford live webinar, “Opioids and Other Controlled Substances: Minimizing the Risks in Prescribing, Dispensing and Administering” scheduled for Wednesday, April 17, 1:00pm-2:30pm EDT.

Because of your affiliation with my firm, you are eligible to attend this program at half off. As long as you use the links in this email, the offer will be reflected automatically in your cart.

Our panel will guide healthcare counsel on the legal challenges and liability risks facing practitioners and pharmacists related to prescribing and dispensing controlled substances. The panel will discuss the enforcement environment and steps to minimize legal risks.

After our presentations, we will engage in a live question and answer session with participants so we can answer your questions about these important issues directly.

I hope you’ll join us.

For more information or to register >

Or call 1-800-926-7926
Ask for Opioids and Other Controlled Substances on 4/17/2019
Mention code: ZDFCA

The FDA has issued its first warning letter under the Drug Supply Chain Security Act (DSCSA) to McKesson Corp. for tampering with opioid medications.

The FDA said the distributor didn’t address several instances of reported drug tampering for medications including opioids and treatments for HIV, seizures, bipolar disorder and high blood pressure.

The warning letter to McKesson outlines violations observed during inspections of McKesson’s San Francisco corporate headquarters and an Oregon distribution center. The violations include failing to:

– sufficiently respond to notifications that there was illegitimate product in their supply chain;

– quarantine and investigate suspect products; and

– maintain records of investigations of suspect product and disposition of illegitimate product as the law requires.

The warning letter explains that in one instance, McKesson was notified by a pharmacy customer that multiple of their pharmacy locations received bottles that were supposed to contain potent opioid pills. However, once opened, the pharmacies discovered that bottles at three pharmacy locations did not contain the correct medications, and the opioid pills were missing, having been replaced with other non-opioid medications.

The pharmacy customer notified McKesson about the discovery of illegitimate products. While McKesson’s internal investigation noted that it was likely the opioid medication was replaced while in their possession or control, McKesson did not sufficiently respond to the notification that they may have distributed illegitimate products. McKesson could not demonstrate that they took efforts to identify or quarantine additional illegitimate products that may have still been in their distribution facilities. Additionally, McKesson did not notify other pharmacy customers who may have received products with the same lot number or National Drug Code to make them aware of potential illegitimate product in the supply chain. Additional examples are given in the warning letter of similar failures by McKesson to: respond to illegitimate product notifications; quarantine and investigate suspect and illegitimate products; and maintain records as required by DSCSA.

I have previously covered a case of HM Compounding Services LLC, which sued Express Scripts for contractual termination. To remind, Express Scripts terminated the pharmacy for misrepresenting during a re-credentialing process that it never waived or discounted member copayments. In return, HM sued Express Scripts asserting various statutory and common law claims. See my blog post covering the case.

Now – after four years of litigation – the pharmacy not only lost the case but also agreed to pay $20 million to Express Scripts. How did this happen… that the pharmacy asking for $120 million in breach of contract claims had to pay $20 in counter-claims to the PBM?

Looking at the case pleadings and records, I can see several tough roadblocks that the pharmacy had to overcome and which eventually tripped it along the way.

Roadblock No.1: Waiving co-pays. During the litigation, Express Scripts presented ample evidence that the pharmacy was in fact not collecting some of the required co-pays. Waiving copays is a violation of state and federal anti-kickback laws and PBM contracts.

Roadblock No.2: Misrepresenting information on its application. Because Express Scripts was able to prove that the pharmacy was waiving copays, it was easy to show that the pharmacy misrepresented this fact on its re-credentialing application. This constituted a breach of contract warranting immediate termination.

Roadblock No.3: Aggressive litigation by Express Scripts. It’s not easy to litigate a PBM case. Litigation records show that every time a pharmacy sues a PBM, the case is aggressively litigated by the PBM, causing financial difficulties to the pharmacy, which is often forced to settle early or dismiss the case all together. In this action, however, Express Scripts went a step further by bringing multiple counter-claims, motions for sanctions, motions for dismissing the case and summary judgment.

Roadblock No.4: Early unfavorable rulings. The judge in this case refused to consider the antitrust claim brought by the pharmacy and decided to focus on the breach of contract claims first. Eventually he sided with Express Scripts and the pharmacy never got to argue its anti-trust claims. The judge ruled on the summary judgment motion holding for Express Scripts: “no reasonable jury could find HM substantially complied with its contractual obligation to collect copayments.” Because the judge dismissed pharmacy’s breach of contract claims, the trial would have focused only on Express Script’s counter-claims. Therefore, the pharmacy was forced into an unfavorable settlement.

Roadblock No.5: Pharmacy’s attorneys tried to back away from the case. Two weeks before the trial, the law firm representing the pharmacy filed a motion to withdraw from the case citing “irreconcilable differences” with the client. The motion was denied because it would have left the pharmacy unrepresented at the trial. But you must agree that having an attorney who wants to get out is not a good thing in the middle of litigation.

Roadblock No.6: Sanctions and procedural misconduct. The pharmacy failed to meet many filing deadlines and misrepresented facts during the discovery stage. The judge ordered monetary and evidentiary sanction for “gross misconduct.” This misconduct led the judge to exclude most of the pharmacy’s evidence from the case.

As a result of these roadblocks, a consent judgement was filed under which the pharmacy is to pay $20 million to Express Scripts with 9% annual rate. The consent judgement constitutes the final judgment and may not be appealed.

The case reinforces the notion that litigation with PBMs is extremely risky, costly, and often unfair. This case, however, teaches many lessons. Some of them are: scrutinize the facts prior to suing anyone, choose a right litigation team, meet all the deadlines and cooperate with the court and other parties. Despite this unfavorable precedent, a successful case could nevertheless be brought against a PBM – it all depends on how prepared you are and your ability to tolerate the risk.

Anthem has announced a launch of its own PBM – IngenioRx. The decision came shortly after Cigna’s acquisition of Express Scripts, which provided pharmacy services to Anthem’s members since 2009. Due to the merger, Anthem decided to terminate the contract with Express Scripts. It anticipates that operating its own PBM will result in annual savings of more than $4 billion.

Anthem had already operated its own PBM company, which it sold to Express Scripts in 2009. But with a trend of in-house PBMs, Anthem decided to reconsider the move. For example, United Health operates its own PBM, and Aetna and Cigna also process pharmacy claims internally. Reportedly, these moves result in multi-billion dollar savings to the plans and patients. And controlling health care cost is a new mantra in the healthcare arena. Also, controlling, maintaining, and collecting health data is an invaluable tool, which major payors do not want to share with outside companies. They claim that in-house health data can help manage care and improve health outcomes.

CVS Health will help Anthem administer the program by processing claims through its own PBM for the initial five years.