The regulation of pharmacies at the state level might not be what Justice Louis Brandeis had in mind as an example of a “laboratory of democracy,” but for pharmacists and consumers, state-level policy-making can have important real-world effects and encourage efforts on the federal stage. Over the past twelve months a number of regulatory trends have played out that define the current operating environment for pharmacies, many of which are anticipated to continue in 2019.
Drug Price Transparency
As healthcare costs rise rapidly for consumers relative to other categories of spending, pricing and transparency issues are at the forefront of public discussion. While federal legislators plan to introduce legislation addressing the high cost of prescription drugs, any legislation is likely to face a long and tough road to becoming law in the upcoming year. Meanwhile, states are taking matters into their own hands to protect patients against high drug costs. Over the past year several states — including Alaska, Arizona, Colorado, Delaware, Florida, Indiana, Kansas, Kentucky, Mississippi, New Hampshire, Utah, and West Virginia — adopted statutes that prohibit contractual gag clauses in commercial contracts between pharmacies and pharmacy benefit managers (“PBMs”) that bar pharmacies and pharmacists from informing patients of less costly alternative drugs. For example, on November 7, 2018, Alaska enacted HB240, which, among other things, requires a pharmacist or person acting at the direction of a pharmacist to notify patients if a known less costly alternative for a prescription drug, medical device, or supply is available. In Kansas, the Pharmacy Patient Fair Practices Act grants a pharmacy or pharmacist the right to provide a patient with information regarding the amount of the covered person’s cost share for a prescription drug and prohibits PBMs from restricting the ability of a pharmacy or pharmacist to discuss more affordable alternatives with a patient. As healthcare costs continue to rise and patients demand transparency, we expect additional states to adopt similar statutes in 2019.
Opioid Regulation; Prescription Drug Monitoring Programs
As the national concern over the opioid epidemic continues to grow, federal and state officials are increasingly focusing their attention on the prescription and distribution of controlled substances. As a result, pharmacies and pharmacists find themselves facing stricter requirements relating to controlled substances, including those with respect to prescription drug monitoring programs (“PDMPs”). For example, the Florida Board of Pharmacy introduced new disciplinary guidelines and penalty schedules that added violation and penalty provisions for failing to report information regarding dispensed controlled substances; failing to consult the PDMP prior to dispensing a controlled substance; and failing to maintain the confidentiality of information obtained from the PDMP. The new penalty guidelines impose more punitive penalties for knowing and negligent violations. Similarly, Maryland and Texas shortened the time periods for reporting controlled substance dispensing. Maryland now require dispensers to submit zero reports at least once every 24 hours, while Texas requires reporting take place no later than the next business day after the prescription is dispensed. Given the public and lawmakers’ growing concern over the opioid crisis, expect to see other state Boards of Pharmacy make similar changes over the next year.
Data Privacy and Security
This past year represented a sea-change in the posture of policy-makers toward data security concerns. Partly spurred by the landmark European Union General Data Protection Regulation, U.S. regulators and legislators are beginning to grapple with similar concerns. In California, the state’s new Consumer Privacy Act represents one of the first state-level attempts in the U.S. to articulate individual rights regarding the collection and use of personal data, including healthcare data. With pharmacies being an integral part of the healthcare delivery process, and often tied closely to drug manufacturer’s hub and patient enrollment processes, pharmacies must stay vigilant with not only the changing laws in this area, but also on the privacy and security side. The theme for 2018 was “bigger isn’t better.” On the federal level, we saw the biggest penalties assessed by the Office of Civil Rights for a HIPAA violation – $16 million to be exact – against Anthem. On the state level, New York Attorney General Eric Schneiderman announced a $575,000 settlement with EmblemHealth stemming from a mailing error that resulted in tens of thousands of Social Security numbers being disclosed. While pharmacies should stay on top of the day-to-day operational issues discussed elsewhere in this article, they should be aware that a lapse in its privacy and security policies could lead to significant, and costly, risk. We expect to see increased enforcement action on privacy and security matters in 2019 as hackers aim to go bigger and bolder.
Licensure & Operational Matters
The past year saw states implement new rules aimed at addressing a broad swathe of pharmacy licensure and operational matters, from virtual entity regulation to increased patient procedures.
Virtual and Other Intermediary Entities. As the pharmacy industry continues to shift toward virtual and online delivery models, there has been a rise in the presence of virtual entities, i.e., entities that own but never take physical possession of their inventory, and other intermediary entities. In response to this growing sector, states are increasingly addressing the licensure and regulatory requirements for these entities. States such as Mississippi and Arizona are taking steps to define “virtual wholesalers” and “virtual manufacturers.” Florida introduced the requirement for “third-party logistics providers” to obtain permits. The permit applies to those that contract with prescription drug wholesale distributors and prescription drug manufacturers to provide warehousing, distribution, or other logistics services but do not assume the title of a prescription drug or the responsibility of directing the sale or disposition of the drug. As pharmaceutical manufacturers and other players within the supply chain continue to outsource operations, state regulators may continue to set forth requirements specifically aimed at those who serve as intermediaries between the drug manufacturers and the patient.
Compounding Practices. Following the New England Compounding Center meningitis outbreak of 2012, federal and state regulators have taken measures to steadily increase the regulation of compounding pharmacies. While the Food and Drug Administration continues to revise its draft Memorandum of Understanding demarcating federal and state oversight of interstate distributions of compounded drugs, states have been consistently requiring that sterile compounding pharmacies adhere to the requirements of the current United States Pharmacopeia General Chapter 797 (“USP 797”). Over the course of 2018, several states proposed or finalized regulations requiring compounding pharmacies adhere to the USP 797 standards, including Illinois, Oregon, Wisconsin, and Wyoming. States that have not adopted USP 797 have often revisited and strengthened their own standards. Compounded drugs continue to be a hot-button issue for regulators and 2019 may see additional states require adherence to USP 797.
Patient Access to Prescription Drugs. State legislators and Boards of Pharmacy have enacted several laws and regulations aimed at expanding patient access to prescription drugs. These efforts address a broad range of circumstances, including ensuring that patients can obtain prescription drugs medication without having to repeatedly return to the prescribing physician for refill authorization. For example, Illinois passed SB3170, which created a presumption that prescriptions to refill drugs are valid for up to 15 months from the date of issue, unless specified otherwise in the prescription. The presumption does not apply to prescriptions for controlled substances. Oklahoma took a more circumscribed approach by authorizing prescribers to dispense up to a 90-day supply of a maintenance medication to patients when a sufficient quantity has been authorized by the prescriber on the original prescription, including refills. Another example can be seen in the strong movement across states to authorize pharmacists to dispense naloxone without a physician’s prescription. Increased patient access often leads to increases in patient adherence and patient outcomes, and with healthcare expected to be a pressing issue in the coming year, other states may adopt laws similar to SB3170.
Notification Requirements. Multiple states, including Kansas and Oklahoma, strengthened and clarified their requirements for pharmacies and pharmacists-in-charge to notify the state of certain events, including disciplinary actions in other jurisdictions; actual or suspected diversion of controlled substances; pharmacy closures; and operational events. Pharmacies and pharmacists-in-charge, especially those licensed in numerous states, may want to take note of these new reporting requirements.
The past year saw the continuation of several trends that began in 2017. To some extent, the coming year is expected to be similar in this regard as price transparency, controlled substances, and compounding are likely to remain topics of public conversation. As the healthcare industry shifts toward online and virtual care delivery models, 2019 may bring increased state regulatory attention on all sectors of virtual distribution chains, as well as patient privacy and data security. Other trends to watch out for include the expansion of pharmacists’ scope of practice; regulation of pharmacy technicians; and more stringent pharmacy inspection requirements.