3 Federal Regulatory Changes Affecting Pharmacy


In recent years, federal agencies have introduced significant regulatory proposals impacting different facets of the pharmaceutical industry.

In recent years, federal agencies have introduced significant regulatory proposals impacting different facets of the pharmaceutical industry, from drug manufacturing, to reimbursement, to disposal.

Here are 3 major proposals handed down from federal agencies that pharmacists should know:

1. CMS Final Rule on Outpatient Drug Reimbursement

The Centers for Medicare and Medicaid Services (CMS) final rule on reimbursement for outpatient drugs represents a dramatic shift in the way Medicaid programs are reimbursed. Like most regulations, this rule comes with pluses and minuses in terms of how it affects pharmacy.

On the plus side, the rule forces states to give more serious consideration to the actual cost of dispensing prescription medications. For those unfamiliar with the figures tabulated on the adjudication screen, prescription drug reimbursement can essentially be broken down into 2 components: the ingredient cost and the dispensing fee.

The CMS final rule makes a slight adjustment to the dispensing fee’s nomenclature, clarifying it’s a “professional dispensing fee,” which signals that the calculations of such fees must incorporate costs associated with a pharmacist’s time performing essential professional services. These services include functions like patient coverage determinations, drug utilization review, and counseling.

The rule requires state Medicaid programs to provide justification for the professional dispensing fees they submit in their required state plan amendments, which are due to CMS early next year. In most cases, this necessitates that states either conduct their own cost of dispensing study, or use another state or national study that could reasonably be applied to their state.

This measure is a significant step in the right direction for pharmacists bothered by the seemingly arbitrary dispensing fees that have been used historically. Although previously used dispensing fees were around $3 or less, figures tabulated from recent cost of dispensing studies have been in the $9 to $12 range.

Notably, this rule doesn’t herald a new windfall for pharmacies. In actuality, the rule is more of a shift away from percentage-driven margins on ingredient costs. Instead of using forms of estimated acquisition cost, like maximum allowable cost rates, the rule mandates the use of measurements examining “actual” acquisition cost. Such measurements include calculations based on CMS’s established Federal Upper Limits (derived from Average Manufacturer Prices), or national and state surveys of actual acquisition cost.

It’s reasonable to believe the National Average Drug Acquisition Cost (NADAC) will likely be the reimbursement standard of choice for many states that weren’t already operating their own actual acquisition cost surveys.

Generally speaking, these changes are somewhat favorable for pharmacies primarily dispensing low-cost generic medications. However, it’s quite a different story for higher-cost brand and specialty products.

The rule does gives states some flexibility in how they address specialty pharmaceuticals, and notably, closed-door and specialty pharmacies are excluded from NADAC calculations. Ultimately, state policymakers will have to find some way to balance potential cost savings on specialty products with the reality that significantly reducing the margin on these products to unreasonable reimbursement levels could result in serious patient access issues.

2. FDA Draft Compounding Guidance

Following the deadly fungal meningitis outbreak, the FDA tightened the reins on the types of practice conducted under the umbrella term “compounding.” Within the compounding quality statutory revisions of the Drug Quality and Security Act, the FDA established section 503(b) regulations, requiring compounders making products to be used in another health practice to register as outsourcing facilities and comply with good manufacturing practices.

The FDA’s guidance on its interpretation of which practices were considered under 503(a) compounding heralded criticism from the compounding pharmacist community, as it essentially prohibited the practice of compounding “for office use.” Recently the FDA received direction from Congress to issue guidance on this issue and its place in pharmacy practice.

In 2 new guidelines released earlier this year, the FDA doubled down on its insistence that compounding for office use necessitates registration as an outsourcing facility. The second guidance could potentially spell troubles for health-system distribution of compounded products between campuses. Up until the FDA’s Draft Guidance on Hospital and Health-System Compounding, the common interpretation was that facilities compounding products for use in facilities under common control of the same health system didn’t fall into the category of outsourcing facilities. Now, the guidance document narrows this exemption to pharmacies within a 1-mile radius of the health care facility and prohibits the issuance of any discharge prescriptions from the facility.

Additional guidance documents released in the last month answer questions regarding compounding of products that are essentially copies of commercially available products. For those who rely on compounders to make more affordable alternatives to expensive brand-name products, the guidelines are likely to ruffle some feathers.

Although guidance issued by the FDA isn’t the same as a formal legislative or rule-making process, it does indicate enforcement intentions. Therefore, it’s important for practitioners who would be affected by these measures to take advantage of the opportunity to submit comments to the FDA, or at the very least, coordinate with your state or national associations to make sure your voice is heard.

3. EPA Proposed Rule on Hazardous Waste Pharmaceuticals

Environmental concerns may not initially register high on your list of areas with practice-altering potential, but it would be a mistake to overlook such regulations entirely.

The Environmental Protection Agency (EPA) major rule revision pertaining to the handling of hazardous waste pharmaceuticals provided the pharmacy community with a major reminder that issues of environmental preservation and health care delivery aren’t separate. The proposed rule establishes a new Subpart P in 40 CFT Part 266 specifically for the handling of hazardous waste pharmaceuticals (HWPs).

The proposed rule has a variety of noteworthy provisions:

  • Clarifies that “health care facility” under these environmental regulations includes entities that “sell or dispense OTC or prescription pharmaceuticals,” thereby including all pharmacies
  • Defines “pharmaceutical” as “any chemical formulation formulated to effect the structure or function of the body or a human or animal,” a definition now including OTC products
  • Prohibits health care facilities from sewering any HWP
  • Establishes a new classification for HWPs sent to reverse distributors

The rule also stipulates documentation and training requirements related to the implementation and enforcement of the new regulations.

This isn’t the first time the EPA has proposed this kind of sweeping change. A similar rule was introduced in 2008, but it was withdrawn in 2013 due to “substantial negative public comments.” In this round of rulemaking, a large number of respondents provided comment on the rule, ranging from hospitals, to pharmacies, to wholesalers.

This only scratches the surface of each issue. It’s important for pharmacists and other health care stakeholders to stay engaged in the policymaking process so our voices are heard by those with the power to make drastic changes to the way we practice.

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