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GOVERNMENT INVESTIGATIONS SPECIALTY AND COMPOUNDING PHARMACIES STILL IN THE CROSSHAIRS

WHO IS PROTECTING THE PHARMACIES WHEN A PBM UNILATERALLY, REPEATEDLY, AND SYSTEMATICALLY REVISES THE NETWORK MANUAL?

IS YOUR PHARMACY HIPAA STRONG?


TABLE OF CONTENTS Issue 04 / May, 2016

04

PRESIDENTS MESSAGE

19

FEDERAL RESERVE THREATENS THE BIOTECH FRENZY

06

IS YOUR PHARMACY HIPAA STRONG?

20

BEATING MARGIN PRESSURES WITH INNOVATION IN COMMUNITY PHARMACY

24

THE CONNECTION BETWEEN BIG PHARMA AND THE FEDERAL RESERVE SYSTEM

27

PHARMACISTS, BEWARE OF HIDDEN FEES!

28

4 FACTORS OF CONSUMER BEHAVIOR

12

14

WHO IS PROTECTING THE PHARMACIES WHEN A PBM UNILATERALLY, REPEATEDLY, AND SYSTEMATICALLY REVISES THE NETWORK MANUAL? GOVERNMENT INVESTIGATIONS, SPECIALTY AND COMPOUNDING PHARMACIES STILL IN THE CROSSHAIRS

PHARMACY EDGE

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President’s message Joshua Pirestani DEAR FRIENDS, In this month’s Pharmacy Edge online magazine, we are pleased to provide focused content on the legal and regulatory landscape impacting the pharmacy industry. Navigating a complex regulatory environment is nothing new to pharmacy operations. Independent and community pharmacies, specialty and compounding pharmacies and others involved in the industry have long been accustomed to oversight by the FDA, state boards of pharmacy and others in the regulatory spectrum. In recent years the regulations imposed by government agencies have become more stringent and intensely focused on enforcement. Civil penalties and criminal indictments within the industry are at an all-time high and are still increasing. Audits and exclusions by pharmacy benefit managers (PBM) are also adding to the pressure and deeply impacting the revenue stream. Our feature article will drill down on government investigations involving specialty and compounding pharmacies. Enlightening information on investigation triggers, targets and what to do if your pharmacy is investigated by a government agency are topics not to be 4

PHARMACY EDGE

missed. Knowing how, what and when in the face of a government investigation could help mitigate a pharmacy’s civil penalty liability. Our second regulatory article addresses the challenging HIPAA data and privacy regulations that are investigated and enforced by the Office of Civil Rights. The importance of having a fully implemented compliance plan as well as a robust data breach protocol are important topics every pharmacy should take the time to understand. The third article will discuss how the PBM’s are unilaterally modifying and amending their contractual obligations and provider manuals to tighten the vice on pharmacies. Audits are being utilized as evidence in federal civil and criminal cases and to terminate pharmacies. Litigation against PBMs is increasing and every pharmacy needs to know its rights. This last article discusses some of these changes to PBM agreements and how to be cognizant of these changes as well as how to be prepared for your next audit. Joshua Pirestani President


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IS YOUR PHARMACY HIPAA STRONG? HEALTHCARE DATA BREACHES HAVE BECOME SO COMMON, THEY HARDLY MAKE A BLIP IN THE DAILY NEWS CYCLE. BY NICOLE H. WAID

W

e mostly think of data breaches as those impacting large healthcare systems such as hospitals or health insurers however, the majority of breaches occur in considerably smaller organizations. Physician offices, pharmacies, home health agencies and the like are equally at risk and bear the same requirements as a hospital to protect a patient’s health information. This highly complex subject matter spans the entire healthcare spectrum. For purposes of this article, we will narrow the scope to focus on pharmacies. Data breaches can be sophisticated acts by hackers seeking to gain access to patient social security numbers, date of birth and other personal information that can be used to steal a person’s identify or, they can be an inside job by an employee looking to sell the information for personal profit. In some cases, a breach is the result of an unintended event such as the theft of a laptop. Outdated technology, insecure network-enabled devices, complex data systems with multiple points of entry, and an overall lack of data security procedures and processes, as well as not having a properly implemented HIPAA compliance program, are making pharmacies particularly vulnerable to data breaches.

NICOLE H. WAID

Esq., Partner, FisherBroyles LLP nicole.waid@fisherbroyles.com 202-906-9572 6

PHARMACY EDGE

HIPAA BACKGROUND Through the federal civil rights laws and Health Insurance Portability and Accountability Act (HIPAA) Privacy and Security Rules, the U.S. Department of Health & Human Services (“HHS”) Office for Civil Rights (“OCR”) is the gatekeeper for protecting fundamental nondiscrimination and health information privacy rights of individuals. The agency does this through educational programs for


communities and health and social workers, as well as conducting robust investigations of violations of the HIPAA Privacy and Security Rules. Covered entities are defined as (1) health plans, (2) health care clearinghouses, and (3) health care providers who electronically transmit any health information in connection with transactions for which the Department of Health and Human Services has adopted such standards. Individuals, organizations, and agencies that meet the definition of a “covered entity” pursuant to HIPAA must comply with the Rules’ requirements to protect the privacy and security of health information and must provide individuals with certain rights with respect to their health information. Pharmacies are considered to be covered entities and, as such, are obligated to comply with the HIPAA Privacy and Security Rule regulations. Contractors, subcontractors, and other outside persons and companies who are not employees of the pharmacy, but who need access to protected health information (PHI) to provide services for the pharmacy, or who will potentially have the ability to gain access to PHI during the course of providing services, are referred to as “business associates.” Examples of business associates include: • Billing companies that process claims to private insurance and federal payor programs; • Companies that store or destroy pharmacy records; • Lawyers and accountants; • IT companies; and • Marketing companies. To properly protect PHI, the pharmacy should have a Business Associate Agreement (BAA) with all of its business associates. Business associates in turn, must follow the use and disclosure provisions of the BAA, as well as the HIPAA Privacy and Security Rules.

HIPAA AUDITS This past March, OCR announced the next phase of audits of covered entities and business associates. OCR is identifying pools of covered entities and business associates that represent a wide range of health care providers that include pharmacies, physicians, hospitals, health plans, health care clearinghouses and business associates. The audits are anticipated to be conducted primarily by desk audit, an electronic process with no on-site visit by OCR. If your pharmacy is chosen for a desk audit, requested information must be submitted electronically within 10 business days of the request. OCR will provide draft findings and auditees will have 10 days to review and return written comments. Similarly, pharmacies chosen for onsite audits will also receive an email notification. OCR will schedule an entrance conference to provide more information about the process and onsite audits will be conducted over a 3-5 day period, depending upon the size of the operations. You will have 10 business days to review draft findings and provide written comments to the auditor. OCR will complete and provide a final audit report within 30 business days. ENFORCEMENT LANDSCAPE We believe OCR is focusing its efforts on business associates as evidenced by enforcement activity in 2016. Business associates have been covered by HIPAA only since 2013, therefore compliance with the HIPAA PrivaPHARMACY EDGE

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cy, Security and Breach Notification Rules may not be as robust or as fully vetted as required by OCR. Additionally, HHS is currently developing regulations related to business associate obligations and agreements under the HITECH Act of 2009, which is yet another indication of the government’s interest in enforcement actions regarding the lack of BAAs with business associates. By the numbers, pharmacies ranked fourth on OCR’s list of the most common types of covered entities that have been required to take corrective action for HIPAA violations. Physicians, hospitals and outpatient facilities ranked above. The compliance issues most investigated are impermissible uses and disclosures of PHI and lack of safeguards to protect PHI as evidenced by recent enforcement actions. On April 19, 2016, an orthopedic clinic in North Carolina agreed to pay $750,000 to settle charges that it potentially violated the HIPAA Privacy Rule by handing over PHI for approximately 17,300 patients to a potential business partner without first executing a business associate agreement. OCR investigated the clinic after receiving a breach report. On March 16, 2016, a Minnesota hospital agreed to pay $1,550,000 to settle charges that it potentially violated the HIPAA Privacy Rule by failing to enter into a BAA with a major contractor and failing to institute an organization-wide risk analysis to address the risks and vulnerabilities to its patient information. OCR initiated the investigation after the hospital reported the theft of an unencrypted, password-protected laptop from a business associate’s car. The electronic PHI on the laptop contained information regarding approximately 9,500 individuals however, OCR determined the lack of a BAA potentially exposed more than 289,000 individuals. Another common element in OCR investigations is the theft of devices which can include laptops, tablets, phones and USB or external drives. This past March, a biomedical research facility agreed to pay $3.9 million to settle charges it exposed the PHI of ap-

proximately 13,000 patients when a laptop was stolen from an employee’s car. OCR’s investigation discovered the facility had limited, incomplete and insufficient policies and protocols in place to protect PHI. While the recent publicly reported enforcement activity has not been against pharmacies, the examples of the alleged violations are issues that could happen in a single independent pharmacy, a chain drug store group, or larger pharmacy entities. It should be noted that all OCR settlements contain a corrective action plan which includes penalties for breaching the agreed upon plan. HIPAA COMPLIANCE PLANS There are key elements of the HIPAA Privacy and Security Rule that must be addressed and included in a compliance plan. Specifically plans must: • Ensure the confidentiality, integrity, and availability of all PHI the pharmacy may create, receive, maintain or transmit; • Identify and protect against reasonably anticipated threats to the security or integrity of the information; • Protect against reasonably anticipated, impermissible uses or disclosures; and • Ensure compliance by your workforce – both employees and business associates. Risk analysis and management of same are additional key elements. The pharmacy is required to perform on-going risk analysis as part of the security management process. A risk analysis should include, but is not limited to: • Evaluation of the likelihood and impact of potential risks to PHI; • Implementation of appropriate security measures to address the risks identified in the risk analysis; • Documentation of the chosen security measures and, where required, the rationale for adopting those measures; and • Maintenance of continuous, reasonable, and appropriate security protections. Required administrative safeguards include designating a security official or privacy officer who is responsible for the development and implementation of policies and procedures. The privacy officer will set role-based access to limit the access and use of PHI to the “minimum necessary” to perform job functions. Additionally, the


privacy officer will set a standard process for maintaining documentation of business associate agreements. All employees and business associates who work with PHI should be trained on policies and procedures to safeguard PHI. The compliance plan should include appropriate sanctions to be applied against employees and business associates for violation of same. Physical safeguards include limiting access to the facility and the proper use and access to electronic media. The compliance plan must cover the transfer, removal, disposal, and re-use of electronic media to ensure appropriate protection of PHI. For example, the plan should include policies and procedures to govern the receipt and removal of laptops that contain electronic PHI into and out of the pharmacy’s facilities. All devices should have encryption and be password protected. BREACH PROTOCOL The pharmacy is required to have a data breach protocol as part of its overall HIPAA compliance plan. A breach is, generally, an impermissible use or disclosure under the Privacy Rule that compromises the security or privacy of PHI. Should the pharmacy experience a breach, even though it may have a written data breach protocol, it is highly recommend that legal counsel be immediately consulted for guidance through the breach process. Following a breach of unsecured PHI, the pharmacy must provide notification of the breach to affected individuals, the Secretary of HHS, and, in certain circumstances, to the media. Business associates must notify the pharmacy if a breach occurs at or by the business associate. With respect to a breach by a business associate, while the pharmacy is ultimately responsible for ensuring individuals are notified, the notification process may delegated to the business associate.

Notice to affected individuals must be provided in written form by first-class mail or by email if the individual has agreed to receive such notices electronically. If the contact information is out of date for more than 10 individuals, a substitute notice must be provided by posting on the home page of the pharmacy’s website for at least 90 days or by posting in major print or broadcast media. A toll free number, active for 90 days, must be provided for out of area notifications. The pharmacy has the burden of demonstrating that all required notifications have been provided or that a use or disclosure of unsecured protected health information did not constitute a breach. Therefore, the pharmacy should maintain documentation to demonstrate that notifications were made or documentation to demonstrate that notification was not required. Administratively, the pharmacy is required to have in place, written policies and procedures regarding breach notification, breach training programs for employees on the policies and procedures, and the ability to apply appropriate sanctions against employees and business associates who do not comply. CONCLUSION As seen by the recent enforcement examples, a breach of PHI can be extremely costly. OCR investigations take into consideration the existence of an effective HIPAA compliance program when making penalty determinations. If the pharmacy maintains a robust and effective program and provides full cooperation during the investigation, it will face a lessor penalty. The pharmacy’s best practice for preventing a breach is to develop and implement a strong and robust HIPAA compliance program that continues to monitor and analyze the daily risks every pharmacy and healthcare facility faces when protecting patient health information.

The number of individuals affected dictates the notification process to the Secretary. If less than 500 individuals are affected, the notice to the Secretary may done on an annual basis. If more than 500 individuals are affected, the notice to the Secretary must be made within 60 days following a breach. Notification to the Secretary for both scenarios can be made by filling out and electronically submitting a breach report form. 9


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WHO IS PROTECTING THE PHARMACIES

WHEN A PBM UNILATERALLY, REPEATEDLY, AND SYSTEMATICALLY REVISES THE NETWORK MANUAL? BRIAN E. DICKERSON

N

etwork Provider Manuals are one of the key components defining the relationship between Pharmacy Benefits Managers (PBM’s) and Network Provider Pharmacies (NPP). However, the length and duration of PBM Provider Manuals is discretionary and almost always incorporated by reference into the Agreement between the PBM and NPP. Thus, the PBM has created a mechanism by which it can make a unilateral change, which often goes unnoticed until a NPP is audited or terminated.

12

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While one-sided changes to the Provider Manual can and do occur without comment, input, or approval, the modifications are responsive to litigation trends, defenses presented by other pharmacies, and nearly always increase control of the PBM over the relationship with the NPP. This trend continues to suppress pharmacies and empower the PBM’s. Review of recent changes shows that the changes frequently seen include: • Changes to incorporate federal and state regulations; • Increased accountability surrounding; • Higher transaction fees; • Modifications to grievance procedures; • Additional restrictions on compounding; • More restrictions surrounding co-payments and/or coupon usage; • Governing law and venue mandates; • Indemnity provisions; • Cost shifting provisions; and • Increasing the scope of PBM’s investigative requests to allow it full insertion into the pharmaceutical business.

Incomplete records and knowledge of the agreement with the PBM can prove fatal for any pharmacy upon an initial audit. No matter how benign, an audit should never be taken lightly. Based upon the agreement with the PBM and the ever changing Provider Manuals, responding to the satisfaction of the PBM to any audit can be like standing on quicksand. Even more frightening, an unsuspecting pharmacy can create civil, and even criminal liability, for itself and its pharmacists through audit responses and actions. A complete understanding of your rights and responsibilities under the Provider Manual and your agreement with the PBM is pivotal to maintaining a long and prosperous relationship with the PBM servicing the health, safety, and welfare of the American public. More than familiarity with these expansive documents are needed when your pharmacy is audited. Make sure that you know your contracts and any changes to them.

ANTHONY J. CALAMUNCI anthony.calamunci@fisherbroyles.com fisherbroyles.com

PHARMACY EDGE

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GOVERNMENT INVESTIGATIONS

SPECIALTY AND COMPOUNDING PHARMACIES STILL IN THE CROSSHAIRS BRIAN E. DICKERSON

L

ately it seems that the specialty and compounding pharmacy industry has been under seize by federal agencies investigating alleged false claims violations. Criminal and civil investigations by the Health & Human Services Office of the Inspector General (HHS-OIG) and the Department of Justice (DOJ) are not breaking news as they have been part of the enforcement landscape for several years. The current trend is for other agencies such as the Department of Defense (DoD) and the Department of Labor (DOL) to take the lead in initiating investigations of pharmacies in 2015 and 2016. Statistics on the number of prescriptions for compounded drugs and the cost to federal payor programs have garnered the DoD and DOL’s attention. TRICARE, the military’s health program reported that outpatient pharmacy costs in fiscal 2010 totaled $6.6 billion with only $23 million spent on compounded drugs. Fiscal year 2014, TRICARE outpatient costs increased to $7.7 billion but compounded drugs soared to $515 million. The first nine months of TRICARE outpatient pharmacy costs for 2015 tripled to $1.7 billion, prompting

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LAST YEAR THE GOVERNMENT INTERVENED IN 638 WHISTLEBLOWER LAWSUITS AND RECOVERED $3.5 BILLION FOR FALSE CLAIMS ACT VIOLATIONS, OF WHICH MORE THAN $2.8 BILLION RELATED TO QUI TAM ACTIONS.

a complete overhaul of the approval process for compounded drugs. As all in the industry are aware, Express Scripts, the pharmacy benefit manager (PBM) for TRICARE implemented a new protocol to screen all ingredients in compound drug claims as of May 1, 2015.

compound drug costs, with another $71 million forecasted through the end of the year. These unprecedented increases were due to the higher costs of compound drugs, the rising number of compound drug prescriptions, and fraud according to HHS-OIG.

At the DOL, the surge in workers’ compensation claims for compound drugs by United States Postal Service employees is one example of the impetus for the DOL’s increased enforcement and investigation of claims volume throughout the system. In March 2016, HHS-OIG lambasted the DOL for what they termed as “lax handling of compounded prescriptions” for the United States Postal Service’s workers’ compensation claims. Compound drug costs escalated to over $98.7 million for fiscal 2015, a $68.6 million increase over fiscal 2014. During the same period, the Postal Service’s administrative expenses for compound drugs increased to $5.1 million, a $3.6 million increase. The costs for compounds have continued to escalate. For the first 6 months of fiscal 2016 (July 2015 through December 2015), the Postal Service has incurred $85.7 million in

INVESTIGATION TRIGGERS One of the top triggers for an investigation is a pharmacy’s volume of billing to federal healthcare payors which include Medicare, Medicaid, TRICARE and Department of Labor. The government looks for patterns such as high volume of prescriptions written by a physician, family prescriptions, multiple refills and the use of telemedicine. Sales representative and marketing company actions are another significant trigger. At the present time, the top of the list for triggering a government investigation is a whistleblower lawsuit. The number of whistleblower filings and lawsuits commenced pursuant to the qui tam provisions of the False Claims Act has steadily risen each year. Last year the government intervened in 638 whistleblower lawsuits and recovered $3.5 billion for False Claims Act violations, of which more than $2.8 billion related to qui tam actions. PHARMACY EDGE

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In our experience, sales representatives and marketing groups are the weakest link in a pharmacy’s compliance with the False Claims Act, Anti-Kickback Statute and Safe Harbor regulations. At the core of the government’s investigations is the issue as to how marketers are compensated and whether or not they are a bona fide employee. Sales representatives are protected by the employment safe harbor if they are a bona fide employee and there is a personal services and management contract that adheres to all seven factors outlined by HHS. If the sales representatives are independent contractors paid by 1099’s, then there is a presumption by HHS and DOJ that the Anti-Kickback Statute is being violated. Another new area of concern is the use of telemedicine physicians. There must be a bona fide physician-patient relationship. We have seen time and time again, the government challenge this issue in investigations. The government has routinely found evidence of marketers paying for telemed consultations, paying kickbacks to physicians for those telemed visits and other questionable practices. “Bona fide physician–patient relationship” means a relationship in which the physician has ongoing responsibility for the assessment, care, and treatment of a patient’s medical condition. Guidelines require physicians to practice within the scope of their state practice act, in the states where they are licensed. Telemed visits for the sole purpose of prescribing a compound drug does not constitute a physician-patient relationship and, the use of telemedicine across state lines where the physician is not licensed is yet another red flag for the government. Neither the pharmacy nor the sales representative can compensate the physician for a telemed visit. To be viable, the patient must compensate the physician for the telemed consult. 16

PHARMACY EDGE

INVESTIGATION TARGETS The government’s focus is broad and in addition to pharmacies, includes PBMs, outside marketing groups, physicians, drug manufacturers, wholesalers and third-party vendors who facilitate billings to federal healthcare payor programs. Our Pharmacy Law team is aware of ongoing investigations against pharmacies in thirteen states: Alabama, Arizona, California, Florida, Georgia, Illinois, Louisiana, Mississippi, Nevada, New Jersey, New York, Ohio, Tennessee, Texas, Utah and Wisconsin. Certain areas of the country have seen aggressive enforcement activity by the DOJ, specifically the Middle District and Southern District of Florida. The Middle District of Florida has focused on TRICARE investigations, partnering with the DoD. Jointly they announced the investigation of more than 20 pharmacies in the Jacksonville area in 2015 and in the last quarter of 2015, settled investigations totaling more than $31.6 mil-

lion. The Southern District of Florida is well known for prosecuting Medicare fraud and to date, has charged nearly 900 individuals for their involvement in more than $2.5 billion in fraudulent Medicare billings. In our practice we have seen a significant increase in the number of Civil Investigative Demands being issued to pharmacies in the Southern District and more specifically, their marketing/sales representatives. The Department of Justice has set up a special task force of at least 30 Assistant U.S. Attorneys, based in Washington, D.C., who are specifically assigned to reviewing DoD and DOL billing and claims by pharmacies and the actions of the industry. All of this tells us the government is keenly focused on the sales component of the pharmacy industry as a means to combat false claims and kickback violations. Last September, Deputy Attorney General Sally Yates drafted a memo


tives and physicians at their place of work, homes and even out dining. If you or your pharmacy receive any of the above notices, you should immediately seek legal counsel. Even those who deem themselves a witness and not a participant, should seek legal counsel. Investigations are unpredictable and the risk of civil penalties and/or criminal indictment are very real and can be very costly. COMPLIANCE PROGRAMS ARE ESSENTIAL. Just last month HHS-OIG published new criteria regarding when a person or entity will be barred from participating in federal health care programs. This new rule makes it transparently clear that the government expects providers to have a compliance program and doing so only puts the company and individuals in a neutral position when assessing future risk. directing the DOJ to aggressively pursue individuals, not just corporations. Pharmacy owners and executives should take notice. You may have the risk being prosecuted for the actions of others inside your operations and the actions of third-parties. HOW WILL YOU KNOW YOU ARE UNDER INVESTIGATION? The government may notify you via a False Claims Notice wherein you are informed for example, that an audit of billing records indicated a high incidence of waiving co-pays or you

shipped medications to states where you are not licensed. You could receive a Civil Investigative Demand wherein the government notifies you of allegations of violations of the False Claims act and demands you produce volumes of documents. Criminal target letters are another tool used by the government. An individual will receive a letter notifying them they are a target of a grand jury investigation involving possible violations of federal law. The letter urges the receiver to engage counsel and to have counsel contact the U.S. Attorney. Recently the DoD and HHS have approached sales representa-

Compliance programs are expected to be robust and regularly tested to ensure adherence with all federal guidelines. Audits of marketing activities including review of compensation, reimbursements, and marketing materials as well as field force monitoring with ride-alongs are vital to mitigating a pharmacy’s risk for a government investigation. Implementing and maintaining an effective compliance program will increase a pharmacy’s chances of addressing problems before they occur and protect its business operations.

BRIAN E. DICKERSON, ESQ. brian.dickerson@fisherbroyles.com fisherbroyles.com

PHARMACY EDGE

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FEDERAL RESERVE THREATENS THE BIOTECH FRENZY Biotech and pharmaceutical companies were engaged in mergers and acquisitions at a high level in 2014. According to data from Jefferies, 45 transactions from that year alone totaled $141 billion which is the highest on record.

T

he arrival of 2015 also saw an increase in biotech and pharma M&As – 16 transactions were announced before the midyear. Analysts at Jefferies note that one of the main factors for the increase in consolidations is low borrowing costs.

chases – just to name a few. A lot of companies have also upped their use of debt as a financing vehicle. As such, it isn’t a surprise that around 85% of the transactions have been announced in the last six years or so have been made using cash. This means that only a few M&As were completed using equity as the source of funds.

Since 2008, the Federal Reserve has kept interest rates close to 0%. As a result, borrowing costs have been reduced which then makes it a lot more cost-effective for companies to access debt in order to make deals.

The rate hike announced by the Federal Reserve could change the face of M&A activity. Given that stocks in the broader stock market were sold off following the announcement of a rate increase, the same could be said for biotech stocks even if the market isn’t really stable. With higher borrowing costs, it would be harder to see large deals made like those in recent years.

However, the rate hike announcement made by Janet Yellen, the Chair of the Board of Governors of the Federal Reserve System, might make it a little difficult for companies that want to consolidate. According to Jefferies, any increase in rates could slow down the pace of M&As, especially when it comes to larger transactions. This scenario is possible since leverage ratios will continue to rise and transactions will be limited by the higher anticipated interest expense payments. Also, the unstable global macro and geopolitical environment will affect equity valuations which need to be stable. Although currency considerations may have a positive outcome when it comes to the acquisition of foreign assets, the opposite of this will most likely reduce the purchasing power of US companies that want to consolidate. Companies in the healthcare industry have been using their proceeds to increase earnings growth through acquisitions and share repur-

Biotech companies are a hot commodity, especially to pharmaceutical companies. These companies know they can develop a product in the lab but run into trouble when time comes to commercialize the product. The commercialization of a product is an area where Big Pharma has had tons of experience. So a merge between the two is seen by some as a positive since more research is being done and when a solution becomes available, Big Pharma will be there to help with getting it to the market. Although M&As are not always seen as good for business, it could be beneficial when it comes to the healthcare industry. After all, we are still trying to find a cure for many diseases and more hands that help increases the chances of finally creating a cure. A rate hike might change all of this. PHARMACY EDGE

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BEATING MARGIN PRESSURES WITH INNOVATION IN COMMUNITY PHARMACY BY JIMMY NEIL

C

hallenges to the independent pharmacy community are fast and furious and 2016 appears to be no different than past years in terms of change and opportunity. “Think outside the box” is the quick message, but a deeper dive into the trends and options available to independent pharmacies drive an understanding of what can lead to change and growth.

One recent challenge is the impact of changes in Direct and Indirect Remuneration (DIR) fees. For the full story, review the NCPA hearings with CMS on how these fees are calculated and what that means for a pharmacy’s bottom line. One thing is certain, DIR fees will continue to affect gross margins for community pharmacies as well as big box and chain stores. It is important to ensure a store’s contracted Pharmacy Services Administrative Organization (PSAO) is helping to identify DIR fee changes and is adept at negotiating with third-party payors. Consolidation within the industry continues to move at a breakneck pace: for starters, CVS with Target and Omnicare, Walgreens with Rite Aid, just over the past few years alone. The financial strength of the mega chains offer the big box formats ample room to grow, build on real estate with parking, and provide drive-through windows and the like in convenient, high traffic areas. Competition will remain fierce among pharmacists as more and more newly minted professionals enter the job market each year. The output from professional college programs simply outstrips market demand. This trend can also affect community pharmacy as pharmacists displaced by the influx of new recruits can drive seasoned professionals to seek startups where they live-a trend also indicated by the higher number of startup funding requests at lending institutions. The pressure to keep independents independent is also prevalent from both a prescriber and patient perspective. Health plans, distributors and manufacturers also have an interest in maintaining a high-performing independent pharmacy pool. INNOVATE FOR GROWTH While changes to reimbursements and narrow networks have posed threats to margins over the past three years, it is not all gloom and doom 20

PHARMACY EDGE


for the independents. Innovation is the key driving force for 2016. Several initiatives, often coupled with widely available technology solutions, have paved the way to drive new income for the future. Independents can combat bottom line pressures with services that make sense for their community. Each of these initiatives also play a role in the availability of funding for startups and acquisitions as well as in the selling prices for existing businesses. Medication synchronization or “med sync� is one sure way to help the bottom line, increase interactions with patients and develop relationships with prescribers. Med sync coordinates the refill orders for patients requiring three or more medications per month on the same day. A program can be developed with either a low-tech or high-tech solution that offers advanced reporting and measurement of success. Coordinating scripts also increases patient adherence and facilitates harmonization with prescribers. A Medication Therapy Management (MTM) program and patient adherence packaging solution is often added to the med sync program. These scheduled one-on-one consultations provide an opportunity to drive patient adherence and build customer relationships. Adherence not only keeps patients healthier, but also increases script counts. A study by the NCPA found that 21 percent of patients enrolled in a med sync program are less likely to discontinue treatment and 2.5 times more likely to be adherent to medications. Patient-centered care is the wave of the future. Personalized service cultivates loyalty and trust for longterm relationships with customers. Convenience is a factor, too. Consider technology for refills or reminders. An online presence is essential allowing current customers to access services in the format they prefer, or in many cases educating a caretaker for a customer. Innovate. Deliver better care than your competitors. This will help compensate some of the challenges of falling reimbursements. In fact, pay for performance measures, such as those

determined by the Centers for Medicare & Medicaid Services Five Star Quality Rating System, are directly affected by adherence measures. Plans that receive the highest ratings pass along bonuses to individual pharmacies. Many independent pharmacies have gained traction by offering compounding services onsite or at a complementary, ancillary facility. With new technologies available, more pharmacists can expand highly personalized service levels by creating solutions for unique patient needs. Compounding medications provides a tailored approach to wellness. It enables complimentary disease state management, drives customer loyalty and delivers solid margins. It also enhances working relationships with prescribers, adherence measures and patient interaction for success in expanding business. Consider becoming an expert in a disease state with specialty medications. This growth area offers advantages for prescribers and patients seeking attentive care for those requiring specific regimes for diseases such as HIV, Hepatitis C, Rheumatoid Arthritis, Organ Transplants and Multiple Sclerosis. These treatments run $600 or more. In addition, specialty favors community pharmacies offering an in-person, high-touch approach. It begins with the referrals from the physicians, and is dependent upon managing the communication continuum (doctor, patient, pharmacist, manufacturer). Research evolving technology solutions that are bridging these gaps. A NEW WORLD OF MARKETING Independent pharmacy will continue to be challenged by the financial resources that chain and PBM’s use for targeting your customers. Predatory marketing is luring unwitting patients to specific branded pharmacies. From targeted messages in prescription plan member materials to online, telemarketing and direct mail campaigns, tactics are being employed that are cost-prohibitive for most community pharmacies. A proactive approach is essential. Evaluating regional demographics and hard data from network administrators to product distributors provides valuable insights for developing a strategic plan. Build a tactical plan by assessing the competitive landscape, researching local marketing opportunities, meeting with local providers, and developing staff training programs to meet higher service level expectations. Independents should rely on affordable resources PHARMACY EDGE

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such as web-based and traditional print advertising as well as marketing programs offered by PSAOs, distributors and local media outlets. Programs may include public health events, health screenings at community or extended-care facilities, schools, churches and large employers. Use these tactics to showcase differentiation in community pharmacy from mega chains. Focus on personalized services, accessibility, delivery, direct interaction with a pharmacist, prescriber relationships, franchise affiliations and any other innovative services offered. PLANNING AND EXECUTION Innovation is developing new approaches to deliver medicine to your customers

that drives adherence. Implementing programs and processes that are patient-centered, promote adherence, and increase intervention and communication while driving incremental increases to your margins. Tactics and technological solutions that help pharmacists integrate with prescribers, distributors and healthcare plans increase opportunity to grow margins and meet business goals. There are great resources available to independent pharmacies to drive innovation. Use the Google. All of the drug distributors have great solutions and are focused on helping you drive adherence. If you are frustrated and don’t know where to begin, call me and I’ll help get you started.

JIMMY NEIL is the General Manager of Pharmacy Lending at Live Oak Bank based in Wilmington, NC. Reach him at jimmy.neil@liveoakbank.com or 910.212.4951.


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Watchdog


THE CONNECTION BETWEEN BIG PHARMA AND THE FEDERAL RESERVE SYSTEM

A few weeks into 2015, Senator Elizabeth Warren waged war on Big Pharma. The senior Massachusetts senator proposed that the pharmaceutical industry pay more for federal research. Senator Warren said that big-name drug companies have become “wealthy beyond imagination” through the development of drugs which depended on research funded by the government, as well as committing fraud.

A

t an event sponsored by the healthcare advocacy group Families USA, Warren had this to say: “Over the last 10 years, some of our wealthiest drug companies – those that capitalize on government research to generate billions of dollars in revenues through the sale of blockbuster drugs – have found another way to boost profits.” She added: “They’ve been caught defrauding Medicare and Medicaid, withholding critical safety information about their drugs, marketing their drugs for uses that aren’t approved, and giving doctors kickbacks for writing prescriptions for their drugs.” In February 2016, Robert Califf was confirmed as the next commissioner of the Food and Drug Administration. Califf has received money from more than 20 drug companies, including Johnson & Johnson, Merck and GSK. Not only that, Califf has also served on the board of directors of Portola Pharmaceuticals. Although he won the position on an 89-4 vote, Califf’s confirmation as commissioner has been strongly opposed by Senator Bernie Sanders. According to Sanders,

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PHARMACY EDGE

Califf’s personal history with Big Pharma will prevent him from regulating the industry and putting the interests of patients first. Food and health isn’t the only industry where Big Pharma has several cheerleaders. It turns out, they have a big influence on the financial industry as well. As such, everything else gets affected – most particularly when it comes to health. HEALTH AND THE FINANCIAL SYSTEM Civil litigation attorney Ellen Brown has authored more than ten books on health and the politics behind it. In her book Web of Debt: The Shocking Truth About Our Money System, Brown centers on the financial system itself. In Forbidden Medicine, she finds out that the suppression of natural health treatment can be traced back to the corrupt financial system. When she was writing her books, Brown was asked to be part of the legal team of alternative cancer therapist Jimmy Keller who was thrown in jail for stating that he had a high-rate of cure for cancer. According to Brown, Keller showed in his movie World With-

out Cancer the connection between the cancer industry and the banking industry. Rockefeller, Morgan and Carnegie were the biggest names in business at the turn of the 20th century. All three entrepreneurs were in support of drugs and they also funded medical schools. Homeopathic schools, the leading health treatment in the 19th century, were shut down because of such actions by the business magnates. According to Brown, money is created by banks, not the government as many is led to believe. Banks do so by making loans. While banks to create principal, they don’t do so for interest. As such, they always get more returns than what they invested. This is how banks “...manager to corner politics, buy up the media, and basically monopolize the field,” Brown says. BIG PHARMA AND BANKS: THE CONNECTION The link between Big Pharma and the banking system has become increasingly clear. Although the connection may seem clear now, its roots trace back to the 19th century. Case in point: John D. Rockefeller. He was an oil mag-


nate who also owned a bank (so did J.P. Morgan). Drugs are oil based and were in competition with natural herbal remedies and homeopathic remedies; they prevailed over alternative solutions because they funded the American Medical Association (AMA). And if a drug got advertised in the AMA journal that essentially means it got a seal of approval. THE FEDERAL RESERVE’S ROLE The Federal Reserve is the central banking system of the United States of America. According to US Congress, the three key objectives of the Fed is to maximize employment, stabilize prices and moderate long-term interest rates. Those duties have since expanded and as of 2009, the Fed now supervises and regulates banks, maintains stability of the financial system and provides financial services to depository institutions, the US government and foreign official institutions. Essentially, the Fed is the bankers’ bank as they serve as a lender of last resort. They can create money without having the back the money from somewhere. THE QUESTION IS: HOW DOES ALL THIS TIE UP TO BIG PHARMA? As mentioned earlier, some of the biggest names in business are involved in both the financial, as well as health and medical industry. What happens is that fortunes are trying to be made rather than really helping people out. For Brown, the medical profession is manipulated and influenced to increase profits for the pharmaceutical industry. For instance, alternative treatments are deemed as quackery because there is no scientific proof they work. Even worse, some media companies that report on such issues area actually owned by banks. WHAT CAN PEOPLE DO? We may brag about being healthy and getting enough exercise and all that, but there will come a time when we would need healthcare. Knowing that there is some manipulation going on by Big Pharma and the money system, how can one ensure they are in control of their own health? One suggestion is to do research – a lot of it. Rather than immediately trust doctors on what medication to take, let’s all take time to read up on what was recommended to see its pros and cons. Only by weighing the good with the bad can we know for sure what is right for us. The good thing about doing research nowadays is that the internet is there: you can do a search on Google, ask questions in forums and discuss with others on social media. Who knows? There is a clear link between the pharmaceutical industry and the financial system. Drug companies will continue to make profits out of drugs while the health of the public will continuously be on decline. This is why there’s a movement for the creation of more state-owned banks because they can easily be monitored and can cater to the own economic model of the state. It has been proven in North Dakota, why can’t it work elsewhere? PHARMACY EDGE

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The Pharmacy Choice online network is collectively the most popular destination on the internet for pharmacy professionals.

The Pharmacy Choice online network consists of three primary web portals PharmacyChoice.com, RxSchool.com and RxCareerCenter.com. Each of these portals serves a specific purpose while leveraging the marketing power of the others. Combined, these portals are the most visited websites in the pharmacy industry.

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RxSchool AMN Healthcare Education Services

RxSchool offers the best Live Internet education available through the popular RxSchool Live seminar room. Our leading internet delivery solution provides pharmacy professionals with a convenient way to get quality live education that qualifies for live CE credit.

The Pharmacy Choice web portal provides pharmacists, pharmacy technicians, students and others in the pharmacy industry with the most comprehensive suite of web-based tools and information available, including drug information, industry news, career opportunities and educational programs.

Rx Career Center is home to the largest job board for pharmacy professionals. Job candidates can search career opportunities using a secure and confidential system. Employers have the ability to upload their open jobs and search résumés.

www.rxschool.com

www.pharmacychoice.com

www.rxcareercenter.com

For more information please contact Trevor Oxley ¨ (877)223- 6121 â trevor.oxley@pharmacychoice.com


PHARMACISTS,

BEWARE OF HIDDEN FEES!

T

he four Partners at United Rx Solutions have been in the pharmaceutical return industry for a long time...95 years combined! During that time, we’ve seen a lot, and we’ve learned a lot. One thing that has always concerned us is hearing about return companies who quote a very low service fee, then add on extra (hidden) fees.

By taking a few minutes to study an invoice from your return company, you may discover that you are paying much more than you thought you were. When meeting with prospective customers and going over an invoice from their current company, we feel obligated to inform them of the extra fees they are paying. It’s a real eye-opener when they realize they are actually paying 15-20%, and many times even more! We have compiled a list of extra fees that we urge you to look for when checking an invoice. Taking a few minutes to look at that invoice could save your pharmacy thousands of dollars per year. 1. If you don’t receive invoices from your return company, that means they are “batching” your products. “Batching” means your expired medications are mixed with the expired medications from hundreds of other pharmacies and sent back to the manufacturers for credit. The return company will take their fee out before issuing the checks/ credits to you. Without an actual invoice for you to look at, it’s easier for the return company to charge extra fees.

2. Probably the most common extra fee is for disposal of non-returnable products. The disposal fee is based on the weight of the non-returnable items. 3. Many more will charge a fee for handling controlled items. Sometimes they charge per line item, some=mes they charge per bttle. Some will even charge you for the 222 forms! 4. Many return companies will claim to provide free shipping for your products to be sent to their warehouse. They will place pre-paid shipping labels on the boxes, but then charge you on the back end. Some will even charge you for shipping costs from their warehouse to the various manufacturers. 5. Make sure that the service fee is based on the value of only the returnable products, not all of the products. Some return companies base their service fee on the value of the returnable AND non-returnable products. 6. If you don’t send in any expired products for a year, you may be charged an “inactivity fee” when you DO send in expired products the next time. 7. Beware of any “administrative fees”.....or “reconciliation fees”. These are just more Creative ways of squeezing you for more money. At United Rx Solutions, our fees are all-inclusive. We won’t charge you extra for disposal, shipping, or controls... and we certainly don’t have any “administrative fees” or “reconciliation fees”. These are just some of the many reasons why we are a different kind of return company. Visit us at www.unitedrxsolutions.com or give us a call at 844-741-9718 to learn about more ways we can save you a lot of money!

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4 FACTORS OF CONSUMER BEHAVIOR

A

person’s culture is defined by their basic set of values, perceptions and wants learned from their family or other important institutions. Specifically, in the US, we have recently seen a culture shift toward greater concern about health resulting in surges in the health-and-fitness, exercise equipment and clothing, organic foods and diets sectors. It might be worthwhile for your pharmacy to add a vegan or organic supplements section. Subculture consists of a group of people with shared value systems based on life experiences and situations. For example, Hispanic Americans, African Americans and Asian Americans. In addition to racial groups, subcultures can include religions and geographic regions. Statistically, Hispanic Americans favor brands that show special interest in them, African Americans are motivated by quality

and selection and Asian Americans are fiercely brand loyal. Take a look at your community to see what subcultures are represented near you. Social classes are divisions in a society whose members share similar values, interests, and behaviors. Social class is not determined by a single factor, but is measured as a combination of occupation, income, education, wealth and other variables. Each social class shows distinct product and brand preferences. It might be necessary to re-evaluate your store’s offerings and change some things to reflect the local social classes preference(s). Knowing more about your current and potential customers’ behavior can help you tailor a targeted, more impactful message that can cause action to it sooner than a general one.

NICOLLE MCCLURE VICE PRESIDENT 2929 Westown Pkwy., Suite 100, West Des Moines, IA 50266 515.440.1270 main | Web: www.grxmarketing.com

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Pharmacy Edge  

Issue 4, May 2016

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