Astronomical settlements involving complicated manufacturer-specialty pharmacy (SP) relationships usually dominate the headlines and our attention, but SPs should not let the new trend of enforcement on day-to-day operations fly under their radar.
Recently, regulators, whistleblowers, contracting partners, and payors are focusing on “nuts and bolts” issues like prior authorizations, copay coupons, and proper credentialing. While the topics seem mundane, these operational practices are low-hanging fruit for those who want to bring actions against the SP.
Attention to policies and practices, along with regular compliance audits, will bolster SP’s defenses against the increasing scope of regulator and payor scrutiny.
Uptick in HIPAA Enforcement
Perhaps the biggest uptick in regulatory enforcement is by the Office for Civil Rights (OCR) on HIPAA issues. OCR reports 6 enforcement actions during the first 4 months of 2016, the same number that occurred during all of 2015. The issues giving rise to the 2016 actions range from the sensational: sharing patient information with the news media; to the more mundane: failure to execute business associate agreements; to the classic: stolen laptop and patient records taken home by an employee.
In pursuing the actions, OCR consistently focuses on lack of policies, procedures, and safeguards that result in the breaches or violations. Of the 6 actions in 2016, 5 cases resulted in settlements and 1 resulted from an Administrative Law judge’s grant of summary judgment, a rarity in HIPAA enforcement. Settlements/fines ranged from $25,000 to $3.9 million.
Copay Cards and Federal Program Beneficiaries
Although it is commonly known that a SP must carve-out federal program beneficiaries from certain programs, such as copay cards, determining which patients are federal program beneficiaries is not always an easy task.
In fact, even the Office of Inspector General has acknowledged that it is difficult to determine federal program beneficiaries and that the difficulty results in “vulnerability” for pharmacies and other entities trying to prevent federal program beneficiaries from using copay cards.
Despite the recognized difficulty in identifying federal program beneficiaries, the prohibition remains. In January 2016, Nashville Pharmacy Service (NPS) paid $7.8 million to settle claims that it had improperly provided copay coupons to federal beneficiaries, among other things.1
To tighten up the process, SPs should consider requiring written or orally recorded attestations from patients stating they are not federal program beneficiaries. Relying only on third party vendor software to flag beneficiaries may fall short. If requiring attestations from all patients is not practical, consider obtaining attestations from all patients 60 or older.
Also, SPs vary on which programs should exclude federal program beneficiaries based their risk tolerance and the regulatory analysis related to the specific facts of the program. For this reason, SPs should pay careful attention and ensure federal program beneficiaries are carved out from programs as they intend to occur.
The types of licenses required by an SP are ever-moving targets. Regulatory changes and operations growth that outpace staffing and infrastructure combine to make keeping up with license renewals difficult. Since 2015, Georgia, Pennsylvania and Massachusetts have all instituted non-resident pharmacy license requirements.
Recently, many states have changed the licensure requirements for compounding pharmacies. Further complicating matters are state limits on in-state dispense.
For example, some states require a license to dispense to a person, even if they are only visiting in the state. Therefore, dispensing to a regular patient who is visiting a state in which the SP is not licensed may violate that state,s licensure requirements.
Failure to have adequate licensure can result in license probation or termination, which can have a chain reaction effect on other pharmacy licenses. Payor recoupment, payor network exclusion, and other woes may also result.
Payors excluding SPs for violating their mail-order thresholds as “retail pharmacies” have made the headlines 3 times in the last year. In October 2015, Express Scripts, Optum, and CVS terminated their provider agreements with Philidor, citing mail-order volume as a cause. Later, in November 2015, Express Scripts terminated Linden Care. In April 2016, Express Scripts announced plans to exclude PillPak at the end of the month.
SPs should pay careful attention to their payor credentialing and re-credentialing attestations. As business models shift, previous credentialing categories may no longer be appropriate. While payor focus on the issues is inconsistent, it is growing and should not be ignored as a potential reason for network exclusion. Also, accurate and truthful credentialing are important to ensure the SP is not engaging in false certifications.
Prior authorizations have also become an area of regulatory focus. In October 2014, CareMed Specialty Pharmacy settled allegations that its employees fraudulently impersonated physician office staff when submitting prior authorizations for $9.8 million. A year later, drug manufacturer Warner Chilcott pleaded guilty and paid $125 million to settle allegations that its employees impersonated physician staff during the prior authorization process. These prosecutions alleged fraud, violations of the false claims act, and HIPAA. Along with these high profile prosecutions, payors continue to focus audits and recoupments on prior authorization processes that are in violation of applicable provider manuals, which often vary from payor to payor.
SP staff should be trained on the importance of identifying as SP staff, not physician office staff, including blocking caller ID. Compliance with policies should be regularly audited and training should reflect lessons learned from such audits.
Part D plans, many state Medicaid programs, and commercial payors prohibit automatic refills. Some SPs only carve-out Part D patients, but the NPS settlement highlights the need to be broader in the prohibition.
It was alleged that NPS automatically refilled medications without the consent of the patient, resulting in unneeded medications, which led to the $7.8 million settlement mentioned above.
SPs should require patient consent and documentation of that consent for each refill dispense. For many payors, prior consent authorizing multiple refills is not acceptable.
Payor recoupment often focuses on the lack of proper proof of drug delivery. An SP that obtains patient signatures to confirm delivery has the best defense against such recoupment.
SPs may utilize a carrier that obtains and provides proof of patient signature, or may obtain patient signatures directly. If the SP relies on its carrier’s documentation, but does not maintain the documentation, that SP may experience material costs and use of labor in obtaining the appropriate proof from its carrier during the urgent pace of an audit.
Although the patient mail-in method requires more time and effort upfront, having the documentation will significantly reduce the odds of recoupment later.
Many states require a pharmacist to provide personal consultation to a patient receiving a new prescription drug, or upon the patient’s request. Failure to provide adequate consultation is another operational process recently targeted by regulators.
In August 2015, Walgreens paid $502,000 to settle allegations that its pharmacists failed to comply with the patient consultation rules. In addition, under the Controlled Substances Act, pharmacists have a duty to ensure that controlled substance prescriptions they fill are issued for legitimate medical purposes. The failure to do so has also been recently targeted. For example, CVS Pharmacy paid $8 million to settle such allegations in February 2016.
SPs should regularly audit their compliance with pharmacist oversight policies, create training and tighten policies based on the findings of such audits.
Sweating the Small Stuff
SPs that only direct compliance and legal efforts on complex business relationships and ignore day-to-day operational issues expose themselves on multiple fronts. SPs should not view any issues as small enough to fly under the radar.
Regulators, whistleblowers, and payors are casting their nets deep and wide. SPs may be soothed into complacency by the inconsistent enforcement.
However, if targeted, the SP is subject to defense costs, labor diversion from operations, diminished goodwill, and public scrutiny, as well as settlement costs or payor network exclusion.
The better course of action is to consistently self-audit operational process and continually refine training and policies, striving for optimal compliance.
Specialty Pharmacy Times previously published this article on April 27, 2016. The original publication may be accessed with a free login by visiting Specialty Pharmacy Times.
1 United States ex rel. McCullough v. Nashville Pharmacy Services, LLC, No. 12-cv-0823 (M.D. Tenn.).