The Importance of a Pharmacy Compliance Program

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As federal agencies and law enforcement investigate pharmacies around the country for health care fraud and kickback schemes, pharmacies should be proactive in understanding their regulatory environment and the importance of setting up strong pharmacy compliance programs.

Federal agencies such as the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) are increasing their investigative efforts to scrutinize pharmaceutical companies and their executives for health care fraud.

In July 2020, a pharmaceutical company and its former executives were charged with improper revenue recognition and misleading disclosures in SEC filings and earnings presentations and agreed to pay a $45 million penalty to settle these charges. Additionally, in January 2021, a co-owner of compounding pharmacies and pharmaceutical distributors was sentenced for conspiracy to commit health care fraud in a multi-million dollar scheme that defrauded TRICARE and other health care benefit programs. More recently, the DOJ in mid-March 2021 charged a pharmacist with a $4 million health care fraud and kickback scheme for his role in a conspiracy involving billing Medicare and Medicaid for prescription drugs that were not eligible for reimbursement.

Pharmacy compliance is not only a requirement for pharmaceutical entities and executives when engaging in their day-to-day activities, it also serves as crucial evidence of the company’s intent to follow the law if problems arise in the future—such as with adults or federal investigations.

There is no standardized pharmacy compliance program. Compliance policies achieve their full potential where they are hand-tailored to the specific needs of the pharmacy and its internal environment. An attorney experienced in complex pharmaceutical laws, compliance, and health care regulations can help pharmacies and executives set up a robust compliance program to limit liability exposure.

What Is A Pharmacy Compliance Program?

Having no plan or program in place is just as bad as maintaining a substandard pharmacy compliance program. For this reason, most pharmacies understand that implementing a compliance program is a top priority.

A pharmacy compliance program is a company-wide policy that is designed, implemented, executed, and monitored to maintain compliance with regulatory and legal requirements and eliminate the potential for internal problems that may lead to federal investigations.

The purpose of a compliance program is to demonstrate to regulators and auditors that the pharmacy and its executives have a reliable operation. It is oftentimes more important for upper management and executives to set a strong tone at the top and demonstrate to company personnel that full compliance is critical.

Regulatory Compliance Areas for Pharmacies and Executives

Understanding the legal and regulatory environment under which an entity and its executives operate is key to success and to limiting liability exposure. Pharmacies face an immense package of regulatory requirements and ongoing compliance obligations. Pharmaceutical compliance is complex and can differ depending on the type of pharmacy at issue. However, most pharmacies are generally subject to the following compliance areas:

  • Registering with the Drug Enforcement Administration (DEA) to ensure full compliance with initial rules and regulations;
  • Complying with DEA rules and regulations regarding the acceptance by pharmacies of electronic prescriptions;
  • Follow appropriate regulations regarding the ordering of prescription drugs;
  • Maintaining proper documentation for prescription drug ordering;
  • Ensuring that all labelling and marketing practices are consists with the Controlled Substances Act (CSA);
  • Keeping all drug inventories up-to-date and properly documented in the pharmacy's records in case of audit;
  • Maintain a strong compliance program to prevent undue risks of internal fraud and misconduct such as bribes, kickbacks, and drug fraud;
  • Ensuring that the pharmacy has provisions in place to regulate the transfer, packaging, and disposal of prescription drugs in a safe and consistent manner;
  • Mandating periodic training of pharmacy personnel; and
  • Complying with billing rules for federal program reimbursements.

Setting Up A Pharmacy Compliance Plan

Pharmacies must follow a host of obligations when billing Medicare, Medicaid, and TRICARE as well as state and federal government health care benefit programs. Some pharmacies may be subject to additional compliance requirements if they are treated as a specialty pharmacy or compound pharmacy, for instance.

Nevertheless, there are three important features that every pharmacy compliance plan should include—policy, training, and enforcement—as explained by Pharmacy Compliance attorneys.

Establishing policies and procedures in a thorough compilation such as in a code of ethics and code of conduct provides a clear outline of what is expected of company personnel. In addition, pharmacies find it both useful and imperative to provide regular personnel training that is updated for changes in the legal and regulatory environment.

An effective pharmacy compliance program also includes a healthy enforcement mechanism. Paper compliance programs are insufficient. The effectiveness of an entity’s compliance program is only as good as its enforcement. This can involve incentives for compliance with the program and sanctions for the failure to comply. Pharmacies should also ensure that their compliance program has a reliable whistleblower program that allows for the internal reporting of violations without fear of retaliation.

How An Attorney Can Help You With Compliance Issues

Choosing the best pharmacy compliance attorney can be a daunting task. While experience is typically the most important, other relevant factors include firm work ethic, commitment, transparency, communication policies, and results.

A strong pharmacy compliance plan should be hand-tailored to the specific needs of the company and offer flexibility. This will become important if your company needs to prepare for an audit or is under federal investigation. Compiled below are a few ways that a pharmacy compliance attorney can assist you in setting up a compliance plan:

  • Reviewing billing policies and records;
  • Evaluating prescription records and the pharmacy’s policy for accepting electronic prescriptions;
  • Examining inventory records to confirm consistency;
  • Making sure the company is prepared for an audit;
  • Checking that pharmacies properly fill out forms for prescription ordering;
  • Setting up a company-wide compliance plan and program; and
  • Implementing and monitoring the compliance program.

“Making sure that you have a robust and comprehensive pharmacy compliance program in place substantially reduces your liability exposure—civil and criminal. Its existence demonstrates to the government and auditors that you intended to maintain full compliance with the law. Without this "bad intent" element, a criminal prosecution cannot be sustained. It is important that pharmacies and executives across the country understand the critical role of a compliance program and retain an experienced attorney to provide pharmacy consulting services.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.

Federal agencies are stopping at nothing to hold pharmaceutical companies and their executives accountable for health care fraud. The failure to implement a strong compliance program or the failure to properly execute such a program are definite red flags to federal agencies and law enforcement.

Pharmacy compliance is a complicated area of the law that presents many challenges to pharmacies and executives when trying to implement and maintain strong compliance programs. Its adoption is imperative for the success of pharmaceutical operations. Retaining an attorney experienced in pharmacy compliance obligations will help guard you against federal liability.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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