Recently, Sen. Wyden has introduced a bill, tilted “Creating Transparency to Have Drug Rebates Unlocked (C-THRU) Act.” The purpose of the bill is to require PBMs to share more information about the rebates they receive and how much of the rebates they actually pass to the plans.

The terms of the contracts between PBMs and manufacturers are variable and secret. If PBM has access to a greater amount of covered individuals, the more bargaining power it will have in negotiating steeper rebates, which is why some large PBMs may walk away with rebates twice as big as those of their smaller competitors.

As expected, PCMA – PBMs’ trade group – argues that the effect of the bill would be the opposite: it actually lead to increased drug prices. PCMA argues that drug companies would use PBMs’ information and collude with competitors.

Link to the full bill

As described by Business Insider, this legislation:

  • Requires greater transparency of rebates and discounts negotiated by the PBM as well as the proportion of these rebates and discounts passed on to the health plan.

  • Requires greater transparency of a common PBM practice known as “spread pricing” – which is the difference in payments made to pharmacies by PBMs compared to payments received by PBMs made by health plans.

  • Requires this information (aggregated by PBM) to be posted on CMS’s website, allowing consumers and employers to decide whether PBMs’ are delivering on their promise of bringing down the cost of prescription drugs.

  • Establishes, after two years of public reporting, a minimum percentage of rebates and discounts that must be passed on from a PBM to a health plan, which will lower premiums or other cost-sharing amounts paid by patients.

  • Requires cost-sharing for Part D enrollees to be based off the negotiated price of the drug as agreed to by the drug manufacturer and PBM (or an approximate negotiated price if the actual negotiated price is unknown at the time the drug is dispensed) so that Part D enrollees to fully benefit from discounts and rebates provided by drug manufactures. Cost-sharing for prescription drugs in Part D is often based off a higher price than the price negotiated by the PBM and the drug manufacturer. Specifically, cost-sharing (e.g. 20% co-insurance) is based off the price the pharmacy acquires the drug, meaning Part D enrollees pay cost-sharing based off a higher price than the price the Part D plan pays to purchase the drug.

    • Example: a drug maker sets a drugs price at $100. Under current law, Part D beneficiaries pay co-insurance based on the $100 price, not the lower price, say, $80, that a PBM negotiates with a drug maker. Seniors in Medicare ought to benefit from these negotiations.

Yesterday I attended the biggest pharmacy conference I’ve ever been to – APhA’s annual conference with around 6,000 attendees.  This year it happened to be in my home city, San Francisco, and I decided to take advantage and do a short presentation on the PBM updates during the Pharmacy Planning Services’ (PPSI) breakfast. In a nutshell, we discussed efforts to push for legislation to eliminate all retroactive DIR fees or any other price concessions; (2) a new California bill (prepared by CPhA) to require PBMs to be licensed as pharmacies! (Georgia is the only other state that requires PBMs to be licensed by the Board of Pharmacy); and (3) I discussed some recent suits filed by pharmacies against PBMs.

I also met a representative from American College of Apothecary (Donnie Calhoun) and we engaged in an interesting discussion about how we can better advocate for appropriate reimbursement amid the changes to the ACA proposed by president Trump. It is undisputed that pharmacies are playing more and more important role in coordinating healthcare, MTMs, and providing necessary healthcare services through extended scope of practice – it seems too much to handle for a pharmacist. Donnie’s point was that pharmacists must choose which route to take: dispensing medications or promoting wellness (MTMs) – but not combining the two. I totally see the point, this also could lead to developing a niche in the pharmaceutical market and increasing the return on investment. In addition, current PBM practices encourage more and more pharmacists to enter clinical work and provide more wellness programs, while letting chains and PBMs do all the dispensing. The time of change is here!

A little background on the case: In 2015, three compounding pharmacies brought a case against four largest PBMs—Express Scripts, CVS Health Corporation, OptumRx, Inc., and Prime Therapeutics, LLC—under the Employee Retirement Income Security Act (ERISA), alleging that PBMs systematically denied payment of compound drug claims without adhering to ERISA’s claims regulation. The judge denied pharmacies’ motion for a preliminary injunction and pharmacies appealed. The Court of Appeals (8th Circuit court) affirmed and held that the district court did not abuse its discretion in denying preliminary injunction.

Why this case is still relevant:

The case didn’t end with the 8th Cir. ruling. The pharmacies renewed its efforts and filed a second amended complaint alleging that PBMs jointly boycott compounding pharmacies and eliminate them from the market by ending insurance coverage for compounded prescription medications in violation of the Sherman Act and state antitrust laws in Texas (a different theory). The pharmacies also assert that PBMs’ conduct constitutes unfair competition under Texas and Missouri law and tortious interference with business relations under Texas common law.

PBMs filed a motion to dismiss. The court held for pharmacies and determined that they have sufficiently plead that defendants engaged in an antitrust conspiracy to boycott pharmacies and that defendants tortiously interfered with plaintiffs’ business relationships. Thus, pharmacies’ claims of antitrust violations and tortious interference are going forward. Stay tuned.

Prime Aid Pharmacy Corp. v. Express Scripts, Inc., No. 4:16-CV-1237 (CEJ), E.D. Mo., 2017 U.S. Dist. LEXIS 6692, 2017.

During the last two years, we’ve seen a sweep of MAC transparency laws across the nation. The intent of these laws is to provide pharmacies with a look into how PBMs determine generic drug reimbursement. When entering into a PBM contract, many independent pharmacies do not receive a clear definition of Maximum Allowable Cost (MAC) prices and how they are determined. To remedy this, many states have enacted MAC laws containing some basic requirements that PBM must:

  • Identify the pricing sources used to determine MAC prices in their pharmacy network contract.

  • Provide a reasonable appeal process for pharmacies to contest a MAC price with a resolution within 7-10 business days (PBM must provide a specific reason for denying appeal).

  • Update MAC lists, and make MAC updates available to contracted pharmacies on a timely basis, at least every 7-14 calendar days.

Iowa enacted its own PBM transparency law when 75 independent pharmacies closed in 2013 due to unregulated PBM business practices. The law provided for state authority to audit PBMs and to require PBMs to submit information on their methodology for calculating MACs, and requiring inclusion in contracts with network pharmacies information about which sources were used in calculating MAC prices, and provisions which allow pharmacies to comment on, contest, or appeal the MAC rates. The Pharmaceutical Care Management Association (PCMA), a PBM trade group, challenged these law as being preempted by ERISA. The trial court disagreed but was overturned by the 8th Circuit court on appeal. PCMA v. Gerhart et al., No. 15-3292, 8th Cir., 2017. This precedent serves as non-binding authority for other states to follow and we are likely to see more challenges to state PBM transparency laws across the nation.

 

Last week, I wrote about Walgreen’s settlement with state and federal governments for unlawfully soliciting Medicare and Medicaid beneficiaries to enroll in its Prescription Savings Club.

However, OIG has finalized a final rule extending safe harbors related to coupons, rebates, and other rewards from a retailer if:

  • The reward is offered on equal terms available to the general public and

  • The reward is not tied to the provision of other items or services reimbursed in whole or in part by federal funds.

(OIG has clarified that pharmacies are retailers unlike physicians or hospitals).

The above appears to allow Medicare patients to participate in loyalty programs by Walgreen or any other retail pharmacy, then why Walgreens is facing this huge settlement?

First, the retailer rewards exception creates a pathway for pharmacies to include Medicare and Medicaid patients in their reward programs without violating “the beneficiary inducement” aspect of the Civil Monetary Penalties. But such enrollment must be strictly structured following OIG’s final rule, which could be found here: 

https://www.federalregister.gov/documents/2016/12/07/2016-28297/medicare-and-state-health-care-programs-fraud-and-abuse-revisions-to-the-safe-harbors-under-the

The rule defines:

  • the coupons as discounts on merchandise or services, such as a percentage discount on an item or a “buy one, get one free;”

  • rebate is a return on part of a payment. But, a retailer could not rebate an amount that exceeds what the customer spent at the store.

  • other rewards are free items or services, such as store merchandise, gasoline, frequent flyer miles, etc. OIG explains that health care items or services can be “other rewards” but the reward cannot be in the form of a copayment waiver.

A reward program can also be targeted to patients with disease but the reward cannot be tied to other items or services reimbursed by a federal health care program. For example, if a patient accumulates rewards based only on purchases of federally reimbursable items, the reward is tied to the provision of reimbursable items. Similarly, if the reward is a copayment waiver or a reduction, the reward would also be tied to the purchase of a reimbursable item. The bottom line is, a coupon cannot be limited to a reduction in price of a reimbursable item or service.

If a retailer offered a free or discounted item or service covered by Medicare or Medicaid but did not seek reimbursement for that item or service, the reward is likely to be protected. For example, a pharmacy could not have as a “reward” a free box of test strips that a patient could obtain only when filling an insulin prescription. But if a pharmacy offered a rewards program that if a patient spent a certain amount of money in the sore, the patient could obtain a free blood pressure monitor – that reward will be protected if the provider does not bill for that monitor.

Keep in mind, that coupons to transfer prescriptions would not be protected under this exception. But the Final Rule allows pharmacies to waive copayments for the first fill of a covered Part D “generic drug,” as defined in Part D regulations. But this exception will not be available until January 1, 2018.

So it appears that Walgreens’ savings program was tied to the provision of reimbursed services by Medicare and therefore a violation of the kickback and CMP laws and therefore contradicted the OIG’s guidance.

Last month, the DOJ and other state governments entered into a settlement with Walgreens. The company was accused of unlawfully soliciting Medicare and Medicaid recipients to enroll in its “Prescription Savings Club,” which gave discounts on thousands of brand and generic drugs as well as a 10% rebate on all Walgreens branded products including household products, grocery, OTCs, etc. The arrangement was alleged to implicate federal and state anti-kickback laws.  Walgreens agreed to pay the states and federal government $50 million.

Walgreen’s case teaches us three important lessons:

  1. Absolutely no discounts or rebates on drugs for Medicare, Medicaid, Tricare patients (and other federally funded programs).

  2. Your staff must understand how to properly implement savings programs. For example, Walgreens knew that it should not allow government health insurance beneficiaries into its Prescription Savings Club and it had published materials saying that such patients are ineligible. Nevertheless, Walgreens employees marketed the program to these beneficiaries and enrolled such without proper verification.  Proper policies and procedures, plus training – is a must when it comes to discounts, savings, and rebates.

  3. Do not incentivize your employees to enroll patients into discount programs. Walgreens paid its employees $1-5 for enrolling each patient into the Prescription Savings Club. If your employees have incentives based on patients’ volume, they are likely to skip the verification process.

We haven’t seen much anti-kickback enforcement with pharmacies and its discount programs. The Walgreens case is likely to change that. The DOJ swore to continue aggressively investigate allegations of fraud and abuse. Beware!

 

As a practical matter, pharmacists in California already provide written warnings on medications dispensed. Now California law expressly requires pharmacists to include written labels on prescription drug containers indicating that the drug may impair the ability to operate a vehicle or a vessel and that it poses a significant risk if consumed with alcohol. Failure to provide such warnings may result in citation and fine.

The regulation also identifies specific classes of drugs that may impair a person’s ability to drive a vehicle and that pose a substantial risk when taken in combination with alcohol. Pharmacists must also include warnings if based on their professional judgement a drug may need it. Thus it is safe to include the warning on all prescription drugs dispensed.

Link to the amended regulation: www.pharmacy.ca.gov/laws_regs/1744_oa.pdf 

Keep in mind that warnings such as this: “If you drink alcohol, discuss the safe use of alcohol while taking this medication with your healthcare professional” – do not comply with the new regulation (and I’ve seen quite a few of them). While this warning: “Do not drink alcoholic beverages while taking this medicine” will suffice.

 

Here is a list of 2017 regulations that affect your pharmacy practice this year.

Gender toilet facilities, AB 1732: Commencing Mar. 1, 2017 all single-use bathrooms (designated for no more than one occupant at a time or for family or assisted use) must be identified as all-gender by signage that complies with Title 24 of California Code of Regulations.

Certified Access Specialist Program, AB 2093: All rental agreements executed on or after Jan. 1, 2017 must state whether the premises have been inspected by a Certified Access Specialist.

Pharmacist Services, AB 1114: requires Medi-Cal to cover certain pharmacist services including furnishing travel medication, naloxone, and self-administered hormonal contraception, initiating and administering immunizations, and providing tobacco cessation counseling and furnishing nicotine replacement therapy. DHCS must pay pharmacists at 85% of the Medi-Cal physician fee schedule.

Prescription drugs, AB 1069, Collection and distribution program: authorizes a pharmacy which exists solely to operate an existing county-operated prescription drug collection and distribution program to repackage donated medicine in anticipation of dispensing the medicine to its patient population. The bill requires the pharmacy to have repackaging policies and procedures for identifying and recalling medications, and requires the repackaged medication to be labeled with the earliest expiration date.

CURES, AB 482: requires authorized prescribers to consult CURES prior to prescribing Schedules II-IV for the first time to a patient and at least once every four months in case of a continuing treatment. A prescriber does not need to consult CURES for an inpatient or hospice patient.

Pharmacy Law changes, SB 1193: extends the operation of the Board of Pharmacy and makes a number of changes to the Board’s oversight of licensees. For more, please go to: https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201520160SB1193

Home-generated pharmaceutical waste, SB 1229: provides limited protection from civil and criminal liability for entities engaged in drug take-back collection.

Confidential Communication, AB 1671: makes it a crime to intentionally disclose or distribute the contents of a confidential communication with a health care provider after illegally obtaining it.

Personal Information, privacy, breach, AB 2828: requires a notice to a person whose encrypted personal information was acquired by an unauthorized person if the encryption key was also acquired.

You are probably wondering: HIPAA again? Yes, again and every year! Every January I re-train my clients on the HIPAA requirements, revise policies and procedures, and make sure we have no unnecessary exposures. The HHS recommends that you train your workforce yearly because human memory fades, you might have hired new people, revised your policies, or just need to tighten your compliance.

Penalties for lack of training could be huge: up to $1.5 mil per violation of HIPAA provisions. Let’s say a reportable breach has occurred and the OCR investigates your practice. The very first thing they will ask is your training documentation, and if you have none to produce or produce some de facto policies and procedures, which no one remembers seeing, the OCR will deem the breach a “willful neglect.” And the OCR imposes mandatory penalties for willful neglect going up to $50,000 per violation. We are likely talking about millions of dollars: if you lost a laptop containing records of 500 patients, this will constitute 500 violations! Did I get your attention?

So, let’s talk about what should be in your training:

If you are a covered entity, the training should cover all three parts of HIPAA: Privacy, Security, and Breach Notification.

If you are a business associate, HIPAA requires training only on the Security Rule. But because Business Associates enter into contracts with covered entities, I also make sure that during a seminar I cover Privacy Rule and how to identify and properly report a breach.

The HHS has prepared Security Risk Assessments tools (you should be re-assessing every year): https://www.healthit.gov/providers-professionals/security-risk-assessment-tool

And of course, make sure you document all your training, who attended it, what they learned – and you surely will significantly reduce one of your multiple legal exposures.

Privacy laws surround almost every transaction, especially in the context of healthcare.

So what is privacy law?

It can be divided by industry. For example,

  • Communication Privacy Law (TCPA, CAN-SPAM, Do Not Call List)

  • Financial Privacy Laws (FCRA)

  • Health Privacy Laws (HIPAA)

  • Online Privacy Laws (COPPA, CalOPPA)

How do we practice good privacy?

       – by follow FTC Fair Information Privacy Principles and HIPAA guidelines (I hope you have those in place).

5 core principles to avoid liability:

  • Notice/awareness

  • Choice/consent

  • Access/participation

  • Integrity/security

  • Enforcement/redress

Issue spotting for privacy violations

Always consider the following:

  • How does your business collect, store, and share info?

  • Where is data stored, where is it going? (cross-border transfers, vendor to sub processor.)

  • How is information stored, shared, collected? What are the business purpose for each? (data minimization, reasonable business purpose.)

  • Who has access to the info? Less intrusive ways?

A healthcare practice comes across every aspect of privacy regulations: it collects PHI and financial information, it communicates with patients by electronic and telephonic means, and it collects and stores sensitive information online. It is important to have a knowledgable compliance officer responsible for keeping track of all the legal changes.