A Review of Federal Legislation Affecting Pharmacy Practice

Virgil Van Dusen, RPh, JD & Alan R. Spies, RPh, MBA, JD, PhD

Pharmacy Times, Volume 0,0

For full disclosure information, send an e-mail request to: arybovic@ascendmedia.com.

Behavioral Objectives

After completing this continuing education article, the pharmacist should be able to:

  • Identify significant federal legislation affecting pharmacypractice.
  • List specific mandates of federal law that require pharmacistactions and compliance.
  • Explain how each law provides patient benefits and positiveoutcomes.
  • Explain applicable provisions of federal pharmacy laws inorder to avoid violations.
  • Describe potential penalties for violations of selected federalpharmacy-related laws.

For almost 70 years, federal legislationhas been impacting the practiceof pharmacy. In almost everycase, the purpose of this legislation hasbeen to protect the health, safety, andwelfare of the patient from the potentialrisks of drug use or misuse.Most of this federal legislation hasbeen initiated in response to issues andconcerns at a certain point in time. Forexample, the Federal Food, Drug, andCosmetic (FDC) Act passed by Congresswas done as a safety concern because ofthe deaths of over 100 individuals whoconsumed a drug product containingantifreeze.1 Other acts that followed alsowere the result of significant issues withnational implications.

While defining pharmacy practice andregulating the profession has primarilybeen left to the individual states based onthe Tenth Amendment to the Constitution,the federal government regulatesdrug distribution through the InterstateCommerce Clause. This regulation of drugdistribution often results, either directlyor indirectly, in the regulation of the professionof pharmacy as well. The federalgovernment also has implemented legislationaffecting pharmacy practice basedon participation in such programs asMedicaid. The counseling provisions ofthe Omnibus Budget Reconciliation Act,while not directly requiring pharmacistactions, did require the individual stategovernments to establish expanded standardsof practice or risk losing federalfunding of their programs. In effect, abackdoor approach to regulating the professionwas utilized.

Over the years, much of the federal legislationthat has been passed by Congresshas proven itself useful by providingthe safety and security that our societyhas come to expect. Pharmacists haveembraced this legislation, albeit sometimesreluctantly, as most legislation hasimposed new requirements in such areasas record keeping, counseling, and packagingof pharmaceuticals.

Food, Drug, and Cosmetic Act of1938

The FDC Act served as a replacementto the Pure Food and Drug Act of 1906.2This earlier act prohibited interstate commercein misbranded and adulteratedfoods, drinks, and drugs and was mostconcerned with purity, not safety, issues.In addition, the 1906 act did not prohibitfalse therapeutic claims and, in somecases, even protected those claims.Furthermore, the 1906 law did little toinform patients as it did not require thelabel to list ingredients, include directionsfor use, or provide warnings regardingthe product.

Because of the shortcomings of the1906 Act, the FDA petitioned Congressfor a new act. Between 1933 and 1937, alegislative battle ensued to replace the1906 law.3 Ultimately, it was a therapeuticdisaster in 1937 that motivated Congressto act. A Tennessee company marketed asulfa drug in an untested solvent thatresulted in the death of over 100 people,many of whom were children. The publicoutcry not only reshaped the drug provisionsof the new law to prevent such anevent from happening again, but it propelledthe bill through Congress. This newlaw also brought cosmetics and medicaldevices under control and required thatdrugs be labeled with adequate directionsfor use. This new law also mandatedpremarket approval of all new drugs,such that a manufacturer would have toprove that a drug was safe before it couldbe sold. Today, because of this law, pharmacistshave the assurance that thepharmaceuticals they dispense are of thehighest quality and safety of any drugs inthe world.

Misbranding and Adulteration

The FDA is responsible for enforcingthe provisions of the FDC Act.4 This isdone by classifying offenses into 2 majorcategories: adulteration and misbranding.While many of the provisions of theFDC Act are directed toward manufacturers,pharmacists can violate this act ina number of ways.

Adulteration of a drug takes place if itsstrength, quality, or purity differs fromthose stated on the label.5 Again, whilethe FDC Act is most concerned withmanufacturers of pharmaceuticals, pharmacistswho compound products can bedeemed by the FDA as having created a"new drug," thus giving the agency theauthority to regulate the product. In1997, a new law, the Food and DrugAdministration Modernization Act(FDAMA), was enacted that reduced theFDA's authority to deem drugs compoundedin pharmacies as new drugs.The FDAMA, however, has been ruledunconstitutional, resulting in the actbeing invalidated.6 While the FDA mayexert little direct influence on pharmaciesregarding adulteration, such influencemay change depending on publichealth and safety as affected by pharmacycompounding.

Pharmacist dispensing of prescriptionmedication is also regulated by the FDCAct, and subsequent legislation, knownas the Durham-Humphrey Amendment,was enacted in 1951.7 Prescriptionmedication from this time forwardcould only be legally dispensed basedupon authorization from a prescribergranted prescriptive authority by astate. Today, any pharmacist who wouldprovide a prescription medication withoutsuch authorization could bedeemed in violation of the FDC Act andsubject to misbranding penalties.

The FDC Act also provides for a numberof penalties involving violations regardingdrug products that could havean impact on pharmacists and pharmacies.8 One such violation deals withcounterfeit drugs. The pharmacist orpharmacy that holds for sale or dispensingany counterfeit drug is in violation ofthe FDC Act.9 In addition, any pharmacistor pharmacy that even receives anadulterated or misbranded drug is inviolation of the FDC Act. The provisionscontained within the penalty section ofthe FDC Act impose on the pharmacistan obligation to take steps to ensurethat the products received by the pharmacyare of such quality as to preventsuch a violation. Pharmacists should beconfident that the manufacturersand/or wholesalers used by the pharmacyhave the highest standards inorder to protect the pharmacy fromthese types of violations.

Controlled Substance Act of 1970

The Comprehensive Drug AbusePrevention and Control Act of 1970,commonly known as the ControlledSubstance Act (CSA), is the legal foundationof the government's fight againstthe abuse of drugs and other substances.10 While other federal legislationhas an impact on pharmacy, the CSAexerts more of a direct impact, as thelaw requires registration, specific recordkeeping, and rules regarding the dispensingof controlled substances.Penalties for the violation of the CSA aresignificantly more severe than violationof the FDC Act.

Under the act, controlled substancesare placed in one of 5 categories.Schedule I drugs cannot be handled bypharmacies. These pharmaceuticalshave a great potential for abuse and currentlyhave no recognized medical use.11Any pharmacy found to possess aSchedule I drug is in violation of the CSA,even if the drug was formerly a ScheduleII drug. In the early 1980s, the drugmethaqualone (Quaalude) was rescheduledby the government from a ScheduleII to a Schedule I drug. This reclassificationrequired all pharmacies to properlydispose of the drug or face a penalty forviolation of the CSA.

Schedule II drugs, which have a highpotential for abuse but do have a currently accepted medical use, have severalspecific provisions relevant topharmacists.12 One of the primary provisionsis the requirement that prescriptionsdispensed for Schedule IImedications must be written and thensigned by the individual practitioner.Exceptions to this rule do exist.

One exception deals with emergencyprescriptions. In such an emergency,the pharmacist is permitted todispense a Schedule II medicationbased on an oral authorization andcompliance with several other guidelines(Table 1).13

Record Keeping

Every pharmacy must maintain completeand accurate records on a currentbasis for each controlled substance purchased,received, distributed, dispensed,or otherwise disposed of.14 These recordsmust be maintained for 2 years. It isalso required that records and inventoriesof Schedule II and Schedule III, IV, andV drugs must be maintained separatelyfrom all other records or be in a form thatis readily retrievable from other records.The "readily retrievable" requirementmeans that records kept by automaticdata processing systems or other electronicmeans must be capable of beingseparated out from all other records in areasonable time. In addition, some notation,such as an asterisk, red line, or othervisually identifiable mark must distinguishcontrolled substances from otheritems.15


Federal requirements are such that apharmacy is required to take an inventoryof controlled substances every 2 years.16This inventory must be done on any datethat is within 2 years of the previousinventory date. The inventory record mustbe maintained at the registered location ina readily retrievable manner for at least 2years for copying and inspection by theDrug Enforcement Administration (DEA).An inventory record of all Schedule II controlledsubstances must be kept separatefrom those of other controlled substances.Submission of a copy of anyinventory record to the DEA is notrequired unless requested.

When taking the inventory of ScheduleII controlled substances, an actual physicalcount must be made.17 For the inventoryof Schedule III, IV, and V controlledsubstances, an estimate count may bemade. If the commercial container holdsmore than 1000 dosage units and hasbeen opened, however, an actual physicalcount must be made.

State law may strengthen this requirementwith annual actual physical countsof all controlled substances. It also mayrequire such an inventory be submittedbefore reregistration by the board ofpharmacy.

Computerization of PrescriptionInformation

A pharmacy is permitted to use a dataprocessing system for the storage andretrieval of prescription order refill informationfor Schedule III and IV controlledsubstances.18 The computer system mustprovide on-line retrieval of original prescriptioninformation, which will includethe original prescription number anddate of issuance; the full name andaddress of the patient; the prescriber'sname, address, and DEA registrationnumber; the name, strength, dosageform, and quantity of the controlled substanceprescribed; and the total numberof refills authorized by the prescriber.

In addition, the computer system mustbe able to provide on-line retrieval of thecurrent refill history for the Schedule IIIand IV drug.19 Refill information historyrequirements include the name of thedrug, the date of refill(s), the quantity dispensed,the dispensing pharmacist'sidentification code or name/initials foreach refill, and the total number of refillsdispensed to date for each prescription.These records must be maintained for aperiod of 2 years from the date of dispensing.

Refill Provisions

Schedule III and IV controlled substancesmay be refilled if authorized onthe prescription.20 The prescription maybe refilled up to 5 times within 6 monthsafter the date of issue. These restrictionsdo not apply to a Schedule V prescriptiondrug. Schedule II drugs may not be refilled.

Partial Fill of Prescriptions

Pharmacists often question the DEArule regarding the partial refilling ofSchedule III, IV, or V prescriptions.21 Confusionlies in whether or not a partial fillor refill is considered one fill or refill, or ifthe prescription can be dispensed anynumber of times until the total quantityprescribed is met or 6 months haspassed. According to the DEA's interpretation,as long as the total quantity dispensedmeets with the total quantityprescribed with the refills, and they aredispensed within the 6-month period,the number of refills is irrelevant.

The Code of Federal Regulations statesthat the partial filling of a prescription fora controlled substance listed in ScheduleIII, IV, or V is permissible, provided that:

1. Each partial filling is recorded in thesame manner as a refilling.

2. The total quantity dispensed in allpartial fillings does not exceed thetotal quantity prescribed.

3. No dispensing occurs after 6months of the date on which theprescription was issued.

For a Schedule II drug, the pharmacistmay partially dispense a prescription ifhe or she is unable to supply the fullquantity in a written or emergency oralprescription, provided the pharmacistnotes the quantity supplied on the frontof the prescription.22 The remaining portionmust be supplied within 72 hours ofthe first partial dispensing. Otherwise,the pharmacist is obligated to notify theprescribing physician of the shortage.

Electronic Transmission ofPrescriptions

Electronic transmission of prescriptioninformation has always raised concernabout legitimacy and security of patientinformation. Current DEA regulationspermit faxed prescriptions for ScheduleIII, IV, and V, and for Schedule II drugs inlimited situations.23 The following areexamples of faxed Schedule II prescriptionsthat may serve as the original:

  • Patients undergoing home infusion/intravenous pain therapy
  • Patients in long-term care facilities
  • Patients in hospice care as certifiedby Medicare under Title XVIII

The current regulations do not providefor data transmission by means ofmodem and e-mail. That is about tochange, though. Public meetings wereconducted on July 11 and 12, 2006, bythe DEA and Department of Health andHuman Services in order to allow interestedindividuals, such as pharmacists,software/hardware vendors, and thirdparties, to provide input regarding theelectronic transmission of controlledsubstance prescriptions. These meetingswere viewed as an incrementalapproach to adopting final "foundationstandards" consistent with the MedicarePrescription Drug, Improvement, andModernization Act of 2003, which has asits objectives patient safety, efficiency,quality, and cost savings.24

Transferring of PrescriptionInformation

The DEA allows the transfer of originalprescription information for Schedule III,IV, and V controlled substances for thepurpose of refill dispensing between pharmacieson a one-time basis.25 Pharmacieswhich electronically share a real-time, onlinedatabase may transfer up to the maximumnumber of refills permitted by thelaw and authorized by the prescriber. Ineither type of transfer, specific informationmust be recorded by both the transferringand the receiving pharmacist.

Poison Prevention Packaging Actof 1970

Before the Poison Prevention PackagingAct (PPPA) was enacted in 1970,poisonings by common household substances,including medicines, had longbeen considered by pediatricians to bethe leading cause of injuries among childrenunder 5 years of age. After thePPPA and the implementation of standardsto prevent poisonings, theConsumer Product Safety Commission(CPSC) reported that child-resistantpackaging reduced the oral prescriptionmedicine-related death rate by up to 1.4deaths per million children under age 5years. This represented a reduction inthe rate of fatalities of up to 45% fromlevels that would have been projectedin the absence of child-resistant packaging requirements, and equated toabout 24 fewer child deaths annually.26

The purpose of the PPPA was to give tothe CPSC authority to require "specialpackaging" of household products anddrugs to protect children from seriousinjury or illness. Manufacturers arerequired to perform tests to ensure thatchildren under 5 years of age would findthe packaging significantly difficult toopen.27 In these tests, pairs of childrenaged 42 to 51 months are selected andgiven 5 minutes in which to open thepackages. If the children cannot open thepackage, they are then given a visualdemonstration and another 5 minutes inwhich to open the package. The packageis considered to be child-resistant if notmore than 20% of the 200 children testedcan open the package. Adults are alsotested with the same packages.Adults arelikewise given a 5-minute period to openand properly close the package. If 90% ofthe 100 adults tested can open and closethe child-resistant package, it passes.

The PPPA affects pharmacy practiceand manufacturing of OTC and prescriptionmedications in many ways. Failure tocomply with packaging requirements orany of the applicable regulations is considereda misbranding violation underthe FDC Act. A pharmacist could be prosecutedand imprisoned for not more than1 year or sentenced to pay a fine of notmore than $1000, or both.

All legend drugs and controlled dangeroussubstances must be packaged ina child-resistant container, with limitedexceptions (Table 2).28 Pharmacistsshould be familiar with their responsibilitiesunder the PPPA (Table 3). OTC productsalso require child-resistant packaging,with one exception. Manufacturersmay market one size of an OTC productfor the elderly or handicapped in noncompliantcontainers, provided that thepackage states, "This Package forHouseholds Without Young Children."29

Prescription Drug Marketing Actof 1987

The Prescription Drug Marketing Act(PDMA), which was incorporated into theFDC Act, was enacted to address certainprescription drug-marketing practicesthat have contributed to the diversion oflarge quantities of such drugs into a secondarygray market.30 These marketingpractices—including the distribution offree samples and the sale of deeply discounteddrugs to hospitals and healthcare entities—have helped fuel a multimilliondollar drug diversion market thatprovides a portal through which mislabeled,subpotent, adulterated, expired,and counterfeit drugs are able to enter thenation's drug distribution system.

The most simple and straightforward ofthe acts which severely impacts pharmacyand is prohibited by the PDMA is theact or offer of knowingly selling, purchasing,or trading a prescription drug sample.This offense is punishable by a fine of upto $250,000 and up to 10 years' imprisonment.What many pharmacists do notrealize is that there is a "finder's fee" of upto $125,000 for individuals who provideinformation leading to the conviction of aviolator of this portion of the PDMA.31

Another important portion of thisextensive law that affects pharmacistsprohibits the resale of any prescriptiondrug that was previously purchased by ahospital or other "health care entity."32This provision was intended to eliminatea major source of drugs in the diversionmarket—namely, drugs that were originallypurchased by hospitals or healthcare entities at substantially discountedprices, as allowed by the NonprofitInstitutions Act of 1938, and then resoldto the retail class of trade. Congressbelieved that the resale of such drugsconstituted an unfair form of competition.Unfortunately, due to the host ofexemptions found in the PDMA and thecomplexity and potential loopholes, prosecutionof institutional diversion caseshas been rare.

Omnibus Budget ReconciliationAct of 1990

While most federal laws provide thepharmacist with guidance on handlingpharmaceuticals, the Omnibus BudgetReconciliation Act of 1990 (OBRA-90)placed expectations on the pharmacistin how to interact with the patient.33While the primary goal of OBRA-90 wasto save the federal government moneyby improving therapeutic outcomes, themethod to achieve these savings wasimplemented by imposing on the pharmacistcounseling obligations, prospectivedrug utilization review (ProDUR)requirements, and record-keeping mandates.

The OBRA-90 ProDUR languagerequires state Medicaid provider pharmaciststo review Medicaid recipients' entire drug profile before filling their prescription(s). The ProDur is intended todetect potential drug therapy problems.34Computer programs can be used toassist the pharmacist in identifyingpotential problems. It is up to the pharmacists' professional judgment, however,as to what action to take, which couldinclude contacting the prescriber.As partof the ProDUR, the following are areas fordrug therapy problems that the pharmacistmust screen:

  • Therapeutic duplication
  • Drug-disease contraindications
  • Drug-drug interactions
  • Incorrect drug dosage
  • Incorrect duration of treatment
  • Drug-allergy interactions
  • Clinical abuse/misuse of medication

OBRA-90 also required states to establishstandards governing patient counseling.In particular, pharmacists must offerto discuss the unique drug therapy regimenof each Medicaid recipient when fillingprescriptions for them. Such discussionsmust include matters that are significantin the professional judgment ofthe pharmacist. The information that apharmacist may discuss with a patient isfound in Table 4.

Under OBRA-90, Medicaid pharmacyproviders also must make reasonableefforts to obtain, record, and maintaincertain information on Medicaid patients.35 This information, including pharmacistcomments relevant to patienttherapy, would be considered reasonableif an impartial observer could review thedocumentation and understand whathas occurred in the past, including whatthe pharmacist told the patient, informationdiscovered about the patient, andwhat the pharmacist thought of thepatient's drug therapy. Information thatwould be included in documented informationmay be found in Table 5.

While OBRA-90 was geared to ensurethat Medicaid patients receive specificpharmaceutical care, the overall result ofthe legislation provided that the sametype of care be rendered to all patients,not just Medicaid patients. The individualstates did not establish 2 standards ofpharmaceutical care—one for Medicaidpatients and another for non-Medicaidpatients. The end result is that all patientsare under the same professional care umbrellarequiring ProDUR, counseling, anddocumentation.

Health Insurance Portability andAccountability Act of 1996

The Health Insurance Portability andAccountability Act of 1996 (HIPAA) is themost significant piece of federal legislationto affect pharmacy practice sinceOBRA-90.

The Privacy Rule component of HIPAAtook effect on April 14, 2003, and was thefirst comprehensive federal regulationdesigned to safeguard the privacy of protectedhealth information (PHI).36 Pharmaciesthat maintain patient informationin electronic format or conduct financialand administrative transactions electronically,such as billing and fund transfers,must comply with HIPAA.

Privacy Provisions

While HIPAA places stringent requirementson pharmacies to adopt policiesand procedures relating to the protectionof patient PHI, the law also gives importantrights to patients. These rightsinclude the right to access their information,the right to seek details of the disclosureof information, and the right toview the pharmacy's policies and proceduresregarding confidential information.

HIPAA imposes 5 key provisions uponpharmacists. The first provision is therequirement that each pharmacy takereasonable steps to limit the use of, disclosureof, and the requests for PHI. PHIis defined as individually identifiablehealth information transmitted or maintainedin any form and via any medium.To be in compliance, a pharmacy mustimplement reasonable policies and proceduresthat limit how PHI is used, disclosed,and requested for certain purposes.The pharmacy also is obligated topost its entire notice of privacy practicesat the facility in a clear and prominentlocation and on its Web site (if oneexists).

The second component of HIPAArequires that individuals be informed ofthe privacy practices of the pharmacyand that the pharmacy develop and distributea notice with a clear explanationof these rights and practices. This noticemust be given to every individual nolater than the date of the first serviceprovided, which usually means the firstprescription dispensed to the patient.The pharmacist also is obligated tomake a good-faith effort to obtain thepatient's written acknowledgment ofthe receipt of the notice. Under the thirdcomponent, pharmacies are required,as well, to select a compliance officerwho will manage and ensure compliancewith HIPAA.

As part of the fourth component ofHIPAA, all employees working in thepharmacy environment in which PHI ismaintained must receive training on theregulations within a reasonable timeafter being hired. This training necessarilyincludes pharmacists, technicians,and any other individuals who assist inthe pharmacy.

Finally, in some situations, it is necessaryfor the pharmacy to allow disclosureof PHI to a person or organizationthat is known under HIPAA as a "businessassociate." Typically, businessassociates perform a function thatrequires disclosure of PHI such as billingservices, claims processing, utilizationreview, or data analysis. Under HIPAA, apharmacy is allowed to disclose PHI to abusiness associate if the pharmacyobtains satisfactory assurances, usuallyin the form of a contract, that the businessassociate will use the informationonly for the purposes for which it wasengaged by the pharmacy.

Security Provisions

The HIPAA security provisions wentinto effect April 20, 2005, almost 2 yearsafter the privacy provisions. These securitystandards were designed to protectthe confidentiality of PHI that is threatenedby the possibility of unauthorizedaccess and interception during electronictransmission. Like the privacyprovisions, any pharmacy that transmitsany health information in electronicform is required to comply with thesecurity rules.

In particular, the security standardsdefine administrative, physical, andtechnical safeguards that the pharmacistmust consider in order to protectthe confidentiality, integrity, and availabilityof PHI.

A unique aspect of the security provisionsis that they include both "requiredand addressable" implementation specifications.Required implementation specificationsare those that must be met,whereas, in addressable specifications,the pharmacy must determine whetherthe suggested safeguards are reasonableand appropriate, given the size and capabilityof the organization as well as therisk.

While cost may be a factor that a coveredentity may consider in determiningwhether to implement a particular specification,nonetheless a clear requirementexists that adequate security measuresbe implemented. Cost considerations arenot meant to exempt covered entitiesfrom this responsibility.


Federal legislation has had a majorimpact on the practice of pharmacy foralmost 70 years. These laws have providedaccountability for drugs, safety forpatients, and security for patient information.The effect future legislation mayhave on the world of pharmacy is yet tobe seen, but we may rest assured thatthe pervasively regulated fields of drugsand pharmacy will continue to be areasthat garner the attention of federallegislators.

Virgil Van Dusen, RPh, JD, Professor of Pharmacy Administration, Southwestern Oklahoma State University,Weatherford, Okla; Alan R. Spies, RPh, MBA, JD, PhD, Assistant Professor of Pharmacy Administration, Samford University, Birmingham, Ala

For a list of references, send a stamped,self-addressed envelope to: ReferencesDepartment, Attn. A. Rybovic, PharmacyTimes, Ascend Media Healthcare, 103 CollegeRoad East, Princeton, NJ 08540; or send ane-mail request to: arybovic@ascendmedia.com.


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