Author: Linda J. Clark & Brad Gallagher

A Silver Lining: COVID-19 Offers Independent Pharmacies a Chance to Shine

Independent pharmacies are on the front lines in the fight against COVID-19. NYS Governor Andrew Cuomo recognized their efforts in a recent press conference, stating, “The pharmacists have lines going out the door, and they’re showing up every day, day after day.” Independent pharmacies are integral in the fabric of our communities, with many treating generations of families, supporting local charities, and consistently going the extra mile to help us when we need it most.

Unfortunately, many independent pharmacies have been destroyed by the market power of largely unregulated pharmacy benefit managers (PBMs) who regulate the same provider networks they compete in, with predictable anti-competitive results that have decimated community pharmacy. The COVID-19 pandemic is an opportunity for independent pharmacies to remind consumers and regulators of how they excel and providesuperior products and services as well as their deep commitment to their communities.

The COVID-19 pandemic and its impact on our lives has led to the unprecedented implementation of emergency measures being taken by the federal and state governments to relax regulation onpharmacies and pharmacists and expand their role in responding to the pandemic. These emergency measures include the suspension of regulations and expansion of services, including: 

  1. Authorizing emergency refills
  2. Allowing pharmacists to refill prescriptions early based on professional judgment
  3. Remote pharmacy practice for pharmacists and technicians
  4. Mobile pharmacies and clinics
  5. Ability to serve patients via delivery (including mail), drive through, curb-side pickup, and automated pickup kiosks
  6. Waiving signature requirements for receiving drugs
  7. Waiving technician-to-pharmacist ratios
  8. Compounding hand sanitizer
  9. Dispensing chloroquine, hydroxychloroquine, and azithromycin
  10. Reusing personal protective equipment (PPE)
  11. Extending inventory reconciliation reporting
  12. Deferring license renewals and continuing education requirements

The expanded role of pharmacies during the pandemic provides an opportunity for independent pharmacies to shine and provide the full range of professional services that are often prohibited by either law, regulation, or by the PBM middlemen who increasingly constrict pharmacy services (such as delivery) to commoditize the profession of pharmacy to their own economic advantage.

While these are all welcome measures, the government should also ensure consumers are able to freely access the pharmacy of their choice and ensure that the pharmacy is reimbursed, at the very least, for the cost of acquiring the medication and a reasonable professional fee and relief from the retroactive clawbacks imposed by PBMs that have plagued them. This basic relief has not yet been addressed, even as the strain on pharmacy resources has increased.

We caution pharmacies to maintain good hygiene in their recordkeeping to ensure proper documentation and practices, as PBMs will undoubtedly increase their audits; fraud, waste, and abuse investigations; and accompanying recoupments for any noncompliance. We are also concerned with the havoc that may be caused by direct and indirect remuneration (DIR) and generic effective rate (GER) fees due to dispensing during this time by pharmacies. The urgency of the pandemic environment will someday subside, leaving in place the usual dynamics of retrospective auditing and judgments by auditors and payors.

Barclay Damon represents pharmacies across the United States. Its attorneys are actively monitoring the changing landscape and are experienced in handling issues arising out of pharmacy relationships with PBMs. We are here to assist and support younow during the rigors of the current health crisis and always.

If you have any questions regarding the content in this alert,please contact Linda Clark, Health Care Controversies Teamleader, at lclark@barclaydamon.com; Brad Gallagher, counsel, at bgallagher@barclaydamon.com; or another member of the firm’s Health Care Controversies Team.

We have a specific team of Barclay Damon attorneys who are actively working on assessing regulatory, legislative, and other governmental updates related to COVID-19 and who are prepared to assist clients. You can reach our COVID-19 Response Team at COVID-19ResponseTeam@barclaydamon.com.

SCOTUS to Hear PCMA Case Concerning PBM Reforms

For those of you who have followed the long saga of pharmacy benefit managers (PBM) excesses, and state efforts to reign them in, may be aware that the question of the permissible scope of State regulation of PBMs has been slowly winding its way to the United States Supreme Court. After a false start last year by the Trump Administration’s threat of federal regulation, PCMA, the PBM industry group, chose a showdown with Arkansas at the SCOTUS O.K. Corral over state reforms that impacted pharmacy reimbursement mechanisms. PCMA claims the Arkansas Law Act 900, was pre-empted by the Employee Retirement Income Security Act (“ERISA”) because it improperly impacted federal regulation of ERISA plans. In essence, Act 900 requires PBMs to discontinue their use of unfair business practices by reimbursing pharmacies for generic drugs at prices equal to, or higher than the pharmacy acquisition cost.

After the Eighth Circuit granted PCMA’s motion for summary judgment, and held that Act 900 was preempted by ERISA, the Eighth Circuit affirmed the federal district court’s ruling. Subsequently, the Attorney General for the State of Arkansas petitioned the U.S. Supreme Court for certiorari. The U.S. Supreme Court, using its “phone a friend” (i.e. “amicus”) option, called upon the Solicitor General to weigh in on whether the Court should hear the case. The result was a brief to the Court recommending that the Supreme Court hear the case because the issue presents one of legal significance where there is a split of authority. The Solicitor General further recommended that the Arkansas Law be upheld on various grounds.

Most recently, on January 10, 2020, the Supreme Court granted the Attorney General’s petition for review of the Eighth Circuit’s controversial holding, which, among other things, has broad implications for states’ ability to keep a cap on drug prices, while simultaneously disallowing PBMs to use ERISA pre-emption as a shield against unfavorable regulations.

All in all, this is a very good sign for state PBM reform efforts, but probably not a free pass for more aggressive reforms that would directly, or more explicitly regulate the plans themselves.

Author Information:

Linda is Barclay Damon’s health care controversies team leader. A nationally recognized litigator with over 20 years of experience, she serves as lead litigation counsel as well as national, regional, and local counsel in the prosecution and defense of claims brought in state and federal courts on behalf of large groups of business and institutional clients.

Author Contact Information:

Linda J. Clark, Esq. lclark@barclaydamon.com

Author Organization Information:

Barclay Damon attorneys team across offices and practices to provide customized, targeted solutions grounded in industry knowledge and a deep understanding of our clients’ businesses. With nearly 300 attorneys, Barclay Damon is a leading law firm that operates from a strategic platform of offices located in the Northeastern United States and Toronto.