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Dermatology, ophthalmology, radiology, urology…the list goes on. Yet, in any physician practice management transaction, there are six key considerations that apply and, if not carefully managed, can derail a transaction. Download the 6 Things to Know Before Buying a Physician Practice to keep your physician practice management transactions on track.

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What To Remember About Refill Reminders


April 15, 2015

When structuring service programs such as refill reminders, benefits investigations, and prior authorization with manufacturers, specialty pharmacies (SPs) must consider how the services intersect with the Health Insurance Portability and Accountability Act (HIPAA) marketing rules. These regulations, most notably, the refill reminder exception to the marketing prohibition, were addressed by the US Department of Health and Human Services (HHS) through guidance in a September 2013 document, which sets limits on the compensation SPs can receive for making certain communications.1 

SPs and manufacturers are beginning to incorporate this Guidance while structuring service programs; however, no uniform approach has yet emerged. This is because SPs must consider the services offered, the program process flow, and various cost concerns to create a program that is workable and makes economic sense (Figure).

The following questions are critical to ask when structuring your service program:

  • Are the marketing rules implicated?
  • If so, do the services potentially fall within the refill reminder exception?
  • If so, is the SP better served by obtaining a patient authorization (and receiving the fair market value of the services) or limiting its compensation to the direct and indirect cost of the services?
  • How does the SP operationalize the program? 

The HIPAA Marketing Rules and Guidance 

In order to structure a compliant and successful program, it is essential to understand the HIPAA marketing rules and guidance. Under HIPAA, an SP cannot use or disclose protected health information (PHI) for marketing absent a marketing authorization unless the use or disclosure meets an exception.2

The refill reminder exception permits the use and disclosure of PHI for communications "about a drug or biologic that is currently being prescribed for the individual, only if any financial remuneration received by the [SP] in exchange for making the communication is reasonably related to the [SP's] cost of making the communication."

Thus, there are 2 elements to the exception:

1. Services that involve communications about a drug or biologic that is currently being prescribed for the individual. The Guidance provides that such communications include information regarding:

  • Adherence guidelines encouraging individuals to take prescribed medicines as directed
  • Aspects of a drug delivery system when an individual is prescribed a self-administered drug
  • Generic equivalents of a drug being prescribed
  • Prescriptions that have lapsed within the last 90 calendar days

Communications such as those related to benefits investigations, prior authorizations, and appeals that are often at the heart of service contracts are not expressly addressed.

2. Remuneration must be reasonably related to the cost of making the communication. Under the Guidance, "reasonably related" for SPs and other covered entities means the reasonable direct and indirect costs of the services. Historically, HHS directed that this compensation could only include the "cost of drafting, printing, and mailing the refill reminders" and that compensation "beyond the cost of making the communication to encourage the pharmacy’s continued willingness to send such communication" was unacceptable.4 However, in the Guidance, HHS backed off, noting that reasonable direct and indirect costs include "labor, materials, and supplies, as well as capital and overhead costs."

Applying the Guidance 

The takeaway is that without a marketing authorization, an SP can only receive the reasonable direct and indirect costs for refill reminder communications.

Step 1: Is a HIPAA Analysis Required? HIPAA does not apply if no PHI is used or disclosed (eg, data purchase agreements in which all data are de-identified in accordance with HIPAA). Further, a service is only considered marketing if the SP is being paid by the manufacturer for making the communication. Consequently, core SP services, provided to patients without compensation from a manufacturer, are not marketing.

Due to fraud and abuse concerns, SPs should already have a clear internal demarcation between core pharmacy services and those for which they receive compensation from manufacturers. Finally, if the SP obtains a marketing authorization from the patient, the communications are expressly authorized by the patient and do not have to meet a HIPAA exception.

Step 2: If No, Is the Communication a "Refill Reminder"? In many situations, this is not an easy question to answer. While HHS expressly recognizes the communications listed above as within the refill reminder exception, HHS has not provided guidance on whether other typical services that assist a patient with drug therapy adherence, such as prior authorizations and appeals, fall within the exception. Thus, the first step in applying the Guidance, for many services, will be a step in the dark.

Step 3: Whether to Get an Authorization. Once an SP decides that a service involves a refill reminder communication, it must choose whether to: (1) limit itself to the reasonable direct and indirect costs of the services, or (2) get an authorization and receive the fair market value. This calculus is tied to the operational issues associated with implementing the services, such as timing and cost of obtaining authorizations. For example, obtaining authorizations early in a process flow may prove difficult or impose additional costs (eg, supplementary communications, delay of services for which performance standards exist, etc).

Refill reminder programs may require the use of a different authorization form than the one typically used by the SP.5 Manufacturers often require the authorizations to acknowledge the manufacturer by name as paying for the service. Accordingly, even if an SP currently obtains authorizations from all its patients, its internal operational protocols may need to be revamped.

To determine the profitability of a program, SPs must perform a payment analysis that often requires calculating new operation methods. Manufacturers are coming to the table with fair market value payment terms and may be resistant to splitting fee calculations based upon the various services rendered (ie, fair market value for data services not involving PHI, reasonable direct and indirect costs for refill reminder services).

Given the decision tree resulting from the Guidance, it is no surprise that there is no standard market trend. While there still appears to be an ad hoc approach to implementing the Guidance, there is a well-informed dialogue coalescing around these issues. It is likely that in the coming months, as SPs and manufacturers begin to find their preferred individual tactics, trends will begin to arise from the current piecemeal approach across the industry.


1 US Department of Health and Human Services. The HIPAA Privacy Rule and Refill Reminders and Other Communications about a Drug or Biologic Currently Being Prescribed for the Individual. Published September 19, 2013.

2 45 CFR 164.508(a)(3).

3 45 CFR 164.501.

4 Modifications to the HIPAA privacy, security, enforcement, and breach notification rules under the Health Information Technology for Economic and Clinical Health Act and the Genetic Information Nondiscrimination Act; other modifications to the HIPAA rules. Fed Regist. 2013;78(17):5566, 5597.

5 45 CFR 164.508(a)(3)(ii).

Specialty Pharmacy Times previously published this article on April 15, 2015. The original publication may be accessed with a free login by visiting Specialty Pharmacy Times.

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