The importance of choosing the right wholesaler cannot be underestimated. With so much emphasis on compliance, a pharmacy cannot succeed if it partners with a wholesaler that does not understand pharmacy business and the requirements placed on pharmacies by PBMs, Boards, and federal agencies. Pharmacy’s profitability largely depends on its wholesalers. Therefore, an effective and strategic relationship between the pharmacy and its wholesaler is crucial.

Increased competition and thin margins pressure independent pharmacies to seek “good deals” from smaller, and often “shady” wholesalers. Many pharmacies have learned their lessons by being terminated from PBMs’ networks or by being subjected to large recoupments stemming from unsuccessful drug reconciliation reports performed by PBMs. The major part in these audits is played by your wholesaler, which need to respond promptly with adequate information.

While pharmacies must verify that the wholesaler is properly licensed, now they need to inquire into the wholesaler’s VAWD accreditation. This is a new requirement that OptumRx – with about 30% of the market share – decided to impose on the pharmacies within its network.

In 2016, OptumRx announced that its network pharmacies must purchase products only from VAWD-Accredited wholesalers. It also granted an extension for the wholesalers to pursue the accreditation. Last month, Optum announced the revocation of the extension and made a public comment that it will subject the pharmacies to recoupments if the products are bought from non-VAWD wholesalers.  This development affects smaller pharmacies working with smaller non-VAWD wholesalers.

To avoid PBMs’ recoupments and termination, follow some basic guidelines:

  • Purchase from VAWD-accredited wholesalers

  • Know your wholesaler

Searching for discounts and buying from small, relatively unknown wholesalers might cost more in the long run. For example, see a recent criminal case where a wholesaler falsified pedigrees and pharmacies failed to spot red flags. Our office represented pharmacies who were not able to account for drugs because a wholesaler disappeared, did not provide adequate 3Ts records, or provided misbranded drugs. This becomes especially relevant in PBM audits where a strong partnership with the wholesaler means a successful drug reconciliation audit.

  • Make sure your wholesaler is compliant with the Drug Supply Chain Security Act by reviewing all purchasing records

  • Verify all applicable licensing and disciplinary records

  • Review all invoices, acquisition records, pedigrees prior to accepting a delivery

  • If you see any red flags, address them with the wholesaler and document the conversation

Note that when a distributor approaches you with a too-good-to-be-true deal, think twice, research the distributor and the source of the drug.

  • Know the source of the product (domestic v. foreign)

It’s not always easy to spot a drug from a foreign source. For example, in 2005 three businesses and 11 individuals were charged in connection with a $42 million dollar conspiracy that involved the distribution of counterfeit Lipitor manufactured in Costa Rica and smuggled into the U.S. Misbranded Lipitor was virtually indistinguishable and the invoices showed a U.S. distributor and manufacturer.

Our firm was also involved in defending a physician in an Avastin case, where a clinic was purchasing a drug from a distributor located in the U.S. (properly licensed) but who was selling counterfeit Avastin obtained from a foreign source. It was almost impossible to determine where Avastin was coming from. The physician was indicted by the U.S. Department of Justice despite the fact that his job and responsibilities did not include purchasing medications.

See a related blog post.