Prescription Electronic Signatures – Regulatory Requirements and Technology Solutions

Right now electronic signatures might seem like a distant memory for pharmacists, from a time, back in the pre-COVID-19 era, when things were “normal.”  For so long, the relatively simple practice of capturing a patient’s signature to validate a pickup was just a routine, expected part of the point-of-sale process.

That all changed though, in late March, when the Centers for Medicare & Medicaid Services (CMS), followed by pharmacy benefit managers (PBMs) issued guidance urging all states, including boards of pharmacies and Medicaid agencies, to temporarily waive proof-of-receipt and signature delivery requirements.  As the CMS noted in its guidance, “requiring a patient signature for receipt of medication could undermine current public health efforts to combat the spread of coronavirus.”

Since then, home deliveries, curbside pickups and contactless transactions have become the preferred methods of prescription transactions, with most signature pads safely tucked away for another day.

When that day will come seems far away, as the pandemic shows no sign of abating and pharmacies focus their efforts on finding increasingly creative ways to prioritize patient and staff safety.

But when pharmacies return to the day when prescription pickups require signatures, pharmacists will be reminded that electronic signatures require compliance with multiple legislative and regulatory requirements, and that when it comes to the law, not all signatures are the same.

As confusing as this may seem, pharmacy managers can be assured that technology providers have kept pace with signature requirements, and that certain systems, including PrimeRx™ from Micro Merchant Systems, offer solutions that are easy to use, ensure seamless storage, facilitate regulatory compliance, and can be portable, for use with handheld devices.

First though, a quick overview of the legislative requirements affecting electronic signatures.

E-Signatures – Legislative History

E-prescribing for non-controlled substances became legal in all 50 states in 2007.  But the 2008 development of what today is known as the “Surescripts  Network Alliance,” a national network that ensures seamless and secure transmission of prescription data, facilitated the process and helped drive its growth.  Today, roughly 80 percent of all prescriptions are transmitted electronically.

But the stage had been set for health-related electronic signature capture years before, with the enactment of three specific pieces of legislation:

Following is a brief overview of each:

 Electronic Signatures in Global and National Commerce Act (E-SIGN)

E-SIGN was signed into law in 2000 by President William Clinton.  According to the National Telecommunications and Information Administration (NTIA), E-SIGN essentially established the validity of an electronically signed document, and invalidated prior legislation requiring written documents.

An important tenet of E-SIGN, was the establishment of an official definition of an electronic signature.  According to the law, “the term ‘electronic signature’ means an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”

According to analysis by FindLaw, the law does not mandate use of a particular technology, but instead “allows the parties to select the method of authentication that best suits their needs and security concerns.”

UETA actually preceded E-SIGN, and was adopted by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in 1999.  NCCUSL recommended UETA to the states as model legislation for regulation of electronic transactions and to date, UETA has been adopted by 47 states.  Only New York, Illinois and Washington have not adopted UETA but, according to Thomson Reuters, each has enacted similar laws.

Analysis by DocuSign notes “both UETA and the E-SIGN Act have four major requirements for an electronic signature to be recognized as valid under U.S. law.”  Those requirements include:

  1. Intent to sign – Electronic signatures, similar to traditional “wet” signatures, are only valid if each party intended to sign.
  2. Consent to do business electronically – Each party to the transaction must consent to do business electronically. As the analysis explains, establishing a consumer’s intent is only possible when the consumer has:
    1. Received a consumer consent disclosure
    2. Affirmatively agreed to use electronic records, and
    3. Not withdrawn such consent.
  3. Association of signature with the record – In order to qualify as an electronic signature under ESIGN and UETA, the system used to capture the transaction must keep an associated record that reflects the process by which the signature was created, or generate a textual or graphic statement (which is added to the signed record) proving it was executed with an electronic signature.
  4. Record retention – U.S. laws on electronic signatures and electronic transactions require that electronic signature records be capable of retention and accurate reproduction for reference by all parties or persons entitled to retain the contract or record.

While both UETA and E-SIGN apply to contracts and transactions executed across a broad scope of industries, the need for requirements specific to the healthcare industry was addressed through provisions included in the Health Insurance Portability and Accountability Act (HIPAA).

HIPAA was signed into law  in 1996 by President William Clinton, and according to the HIPAA Journal, a key aim of the original legislation was to improve the portability of health insurance coverage – ensuring employees retained health insurance coverage while between jobs.  The law was subsequently modified to address patient privacy, most notably through enactment of the HIPAA Privacy Rule which became effective in 2003, and the HIPAA Security Rule which took effect in 2005.

A key pillar of HIPAA is the determination of  acceptable uses and allowable disclosures of protected health information (PHI).  With regard to pharmacies, the HIPAA Journal notes that the statute “sets standards for the secure storage and transmission of PHI, and gives patients the right to obtain copies of their PHI.  “HIPAA compliance for pharmacies is not an option,” the Journal advises.  “The penalties for failing to comply with HIPAA can be severe.”

Among the law’s pharmacy-related provisions, is the requirement that all patients be provided with a copy of the pharmacy’s “notice of privacy practices,” and for patients to acknowledge receipt of that notice via a signature.  More specifically, the pharmacy must make a “good faith effort” to obtain the patient’s signature, and to document instances in which the patient either refused to sign, or due to extenuating circumstances, was unable to provide a signature.

HIPAA does not explicitly authorize the use of electronic signatures but, according to the HIPAA Journal, the practice is generally allowed, “provided that mechanisms are put in place  to ensure the legality and security of the contract, document, agreement or authorization, and there is no risk to the integrity of PHI.”

More specifically, the Department of Health and Human Services (HHS) website offers the following guidance:  “Currently no standards exist under HIPAA for electronic signatures.  In the absence of specific standards, covered entities must ensure any electronic signature used will result in a legally binding contract under applicable state or other law.”

Despite the absence of statutory language, HIPAA offers guidance for “conditions necessary for e-signatures,” which builds on provisions outlined in E-SIGN and UETA.  Those conditions include:

  • Legal compliance: The document, agreement or authorization must not only comply with all provisions of E-SIGN, but must also clearly demonstrate the terms, intent of the signatory, and provide the option for the signatory to receive a printed or emailed copy of the document.
  • User authentication. A system must be in place to validate the identity of all transacting parties.  This may include mechanisms such as two-step verification, specialized e-signature software, and answers to “secret” questions.
  • Message integrity. A system must be in place to prevent digitally tampering with documents after signing.
  • Non-Repudiation. In order to ensure that the signatory cannot deny having signed the agreement, e-signatures used under HPAA rules should have a timestamped audit trail indicated dates, times, location and the chain of custody.
  • Ownership and control. In order to ensure the integrity of PHI, all evidence supporting the e-signature should be on the same document under the ownership and control of the covered entity.  All other copies – except those provided for the signatory – should be shredded.

Not surprisingly, the complexity of these three statutes caused a degree of confusion among pharmacy managers and other stakeholders.  Which is why a recommendation offered by FindLaw attorneys seems to make sense:  “There is one safe rule to follow when determining which laws or regulations govern a particular healthcare transaction involving the use of electronic records or signatures:  Closely consider all of them.  Assuming each is consistent with E-SIGN, it is highly likely each will apply.”

Signature “Differentiations”

As pharmacy managers consider implementing a compliant signature collection process, it is necessary to understand the different types of “signatures” that may need to be incorporated.  These  different categories, as defined by the National Council for Prescription Drug Programs (NCPDP), include:

  • Wet signature. A wet signature refers to an original signature handwritten in ink on a piece of paper.
  • Electronic signature. As the above discussion indicated, the E-SIGN legislation defines an electronic signature as an “electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”
  • Digital signature. A digital signature is defined as the capture of a wet signature, which is reproduced electronically to create a computer-generated signature.  A digitized signature resembles a wet signature, but rather than being handwritten in ink on paper, is computer-generated.

The NCPDP makes a few distinctions with regard to these different signature categories:

  • A digital signature is a type of electronic signature, but not all electronic signatures are digital signatures.
  • For electronic prescribing of non-controlled substances, an electronic signature as defined by E-SIGN and/or state boards of pharmacy rules is required.
  • For electronic prescribing of controlled substances, more specific digital signature requirements are defined by DEA regulations.
  • Wet signatures are not an acceptable authentication method for electronic prescribing. This is because wet signatures can easily be produced by unauthorized individuals, which therefore presents a security risk.
  • Digitized signatures are not acceptable authentication methods for electronic prescribing and according to NCPDP, are expressly prohibited by many state boards of pharmacy. As NCPDP notes, “Digitized signatures are typically captured ‘one-time’ and pre-programmed to appear on every printed document where a signature is required – a process similar to a ‘rubber signature stamp.'”

Technology Considerations in Selecting a Pharmacy Electronic Signature Solution

The typical pharmacy manager would not be alone in wondering how to implement an electronic signature program that satisfies these complex requirements.  In fact, there are many pharmacy management systems that offer electronic signature functionality.

But not all have the same functionality, which means a pharmacy manager must take the time to carefully consider the capabilities and attributes of each system.

PrimeRx™ is a good example of a technology solution that is highly responsive to changing pharmacy needs, and continually offers innovative approaches for better, more efficient workflow management.   PrimeRx™ serves as the core processing center, through which key pharmacy management systems and processes are accessed.  But a suite of services, which seamlessly integrate with PrimeRx™, provide access to a wide range of processes and services.

With regard to electronic signature capture, PrimeRx™ capabilities include:

  • Seamless integration with Surescripts. Surescripts is the dominate provider of electronic health record management systems, and a vital partner in linking doctors, payers, and pharmacies.  PrimeRx™ interfaces with the Surescripts Network Alliance to ensure seamless transmission of electronic prescriptions and timely, accurate processing of patient information.
  • Certification for NCPDP SCRIPT Standard 2017071. E-prescribing took a big step forward in early 2020, when SCRIPT Standard 2017071 became mandatory.  The new standard includes several enhancements to the prior SCRIPT Standard 10.6 including improved digital signature capabilities, to facilitate electronic prescribing of controlled substances.  Micro Merchant Systems was among the first pharmacy systems certified for the new standard, and as a result, PrimeRx™ system users were among the first to benefit from the improved functionality.
  • Tablet/iPad capability. No longer  must pharmacy staff be tethered to a point-of-sale electronic signature pad.  Instead, PrimeRx™ allows electronic signature functionality via a tablet or iPad.  This feature is especially helpful for home deliveries, and in managing pharmacy drive-thru windows.
  • Records management. PrimeRx™ automatically captures all signatures, and adds them to each patient’s record.  The system allows pharmacy managers to easily retrieve signature logs, which allows for easy compliance with PBM audit requests and internal reporting needs.  In addition, pharmacy staff can have immediate access to patient signature records, and provide requested information upon request, per HIPAA requirements.
  • Signature Validation. Consistent with HIPAA requirements, signatures are automatically date/time stamped at point of collection.  Signatures can easily be collected for a wide range of pharmacy purposes including:
    • HIPAA requirements
    • Easy-off cap requests
    • Counseling
    • Third party release authorizations.
  • Data encryption/Security. PrimeRx™ offers the highest levels of security, which include encryption of all data, and strict log-in protocols for all system users.
  • Ease of use. Perhaps as important as the signature capabilities offered in PrimeRx™, are the user-friendly interfaces that allow pharmacy staff to quickly and easily take advantage of this functionality.  Electronic prescriptions seamlessly arrive in the pharmacy’s workflow, with “flags” raised for those prescriptions requiring a patient signature.  The system automatically tracks those prescriptions, and once a signature is recorded, it is seamlessly added to a patient record, and to the pharmacy’s overall signature log.
  • Remote signature capability. The system’s PrimeDELIVERY™ in-house/wireless delivery module includes a new remote signature capability.  Through this feature, a prescription can be delivered to a patient’s residence, even if the patient is not available to sign for the package.  Instead, an advance electronic signature request is sent to the individual, through the PrimeDELIVERY™ module.  The patient then provides an electronic signature that is automatically transmitted back to the pharmacy and uploaded to the patient record.

Patient signatures serve an important purpose, and electronic signature capability facilitates the efficiency of the collection process.  Once pharmacies return to regular protocols, and are again required to capture patient signatures, pharmacy managers will find technology has kept pace, with solutions to ensure fast, accurate and non-intrusive signature collection processes.


LTC Pharmacies Find a Lifeline in Technology Management Systems, including PrimeRx™

In a 2020 benchmark report targeted at pharmacy start-ups, the National Community Pharmacists Association (NCPA) suggests pharmacies can “diversify their revenue while focusing on the health care needs of their local communities,” by offering long-term care (LTC) services.  Specifically, the report was referring to the growing need for pharmacy services among the millions of patients – including an estimated 12 million senior citizens – living in long-term care residential facilities including nursing homes, assisted living facilities, rehabilitation centers, and group homes.

The survey noted that currently 15 percent of new pharmacies provide some degree of LTC services.  Roughly 82 percent offer those services from the same pharmacy from which they dispense to non-LTC patients, with 18 percent exclusively serving LTC populations.  Among “combination” pharmacies, the average number of beds serviced is 53, a number that jumps to 107 among closed-door pharmacies.

It’s easy to see then, how offering LTC services can significantly expand a pharmacy’s revenue potential.  “Once you reach 100 residents, that’s worth about $500,000 in additional business,” Bill Popomaronis of the NCPA said in a 2019 interview with Elements Magazine.  “That number is based on the number of prescriptions that a particular patient might use and other factors, but I believe it to be a conservative number,” he added.

Research by McKesson seems to support the revenue possibilities for LTC pharmacies, with findings that include:

  • The average independent LTC pharmacy dispenses 12,460 prescriptions per month.
  • Nursing home and other long-term care facility patients receive, on average, 12 prescriptions per month (3 branded and 9 generic).
  • The average LTC pharmacy services 10 to 13 facilities, with 80 to 100 residents per facility.
  • 82 percent of LTC pharmacies experience eight or more inventory turns per year. 60 percent have more than 12 turns per year, and 38 percent have more than 15 turns per year.  Based on these numbers, the average costs of goods sold is between 61 percent and 70 percent, meaning that gross margins are in the 30-40 percent range.

But with this potential, come additional challenges and responsibilities, and lots of them.

These challenges and responsibilities come in many forms and include packaging/labeling requirements, dispensing needs, records management, reporting needs, regulatory and licensing mandates, and the list goes on.

Technology is playing an integral role in helping LTC pharmacies manage these complicated and diverse issues.  Certain pharmacy management systems, including the comprehensive PrimeRx™ solution offered by Micro Merchant Systems, include capabilities developed specifically for today’s LTC pharmacies.

Consider, for example, the need for LTC pharmacies to accommodate electronic medication records (eMARs).  Federal law mandates the creation of a medication administration record (MAR) for every patient admitted to a long-term care facility as a way to track and manage medication histories.  Those forms are increasingly in the form of technology-based eMARs, driven largely by federal mandates requiring electronic health records.

However, with multiple eMAR technology solutions currently available, LTC pharmacies must be equipped to accommodate the intricacies and nuances of a wide number of systems.  An inability to accommodate a specific technology system would essentially prohibit a pharmacy from servicing a particular facility.

The PrimeRx™ solution allows this capability.  PrimeRx™ was designed with an understanding that, within the pharmacy industry, different functions would be built using different coding and different platforms.  To address this, PrimeRx™ includes the capacity to accommodate different providers, and seamlessly integrate eMARs into PrimeRx™.

PrimeRx™ also allows pharmacies the option of creating customized eMARs, based on unique needs.

Because the use of eMARs is growing at a rapid rate, it follows that the corresponding technology is also evolving.  Micro Merchant Systems is at the forefront of these efforts, and a leader in promoting innovative solutions developed by solutions-minded technology companies.  With regard to eMAR technology, Micro Merchant Systems has partnered with several companies offering eMAR capabilities including:

PrimeRx™ seamlessly solves the eMAR integration problem, as it does multiple other challenges unique to LTC pharmacies.

A new white paper, “Using the PrimeRx™ Management System to Improve Long-Term Care Pharmacy Efficiency” highlights several of these challenges, and details the seamless ways in which technology is solving those problems.

“There are really two customers,” Randy McDonough, co-owner and director of clinical services at Iowa-based Towncrest Pharmacy told Elements. “The residents are our customers, but we’ve also got the facilities.  Ultimately we want to make sure the residents are optimizing their medications, but we’ve also got to protect the facilities.”

Helping LTC pharmacies service those two customers is all in a day’s work for high-functioning technology solutions such as PrimeRx™.  Learn more by downloading a complimentary copy of the new white paper.


Prescription Deliveries – The New Normal in Customer Service?

When CVS Pharmacy announced in mid-2018 that it had launched a nationwide prescription delivery service capable of providing next-or-second-day delivery, the news garnered significant media coverage and quite a few headlines.  And so did news from Walgreens, that came a few months later, about a new partnership with Federal Express to offer next-day prescription deliveries.  Walgreen’s new service level was to complement  the “same day” service already offered in certain markets.

Less-well-noticed though, was a release issued by the National Community Pharmacists Association (NCPA), pointing out that locally-owned pharmacies had been in the business of home delivery for years.  “According to the NCPA’s 2017 Digest, sponsored by Cardinal Health,” the release stated, “72 percent of locally-owned community pharmacies offer same-day home delivery, and 76 percent of those offer home delivery as a free service.”  The release further noted that a 2017 “flash survey” of NCPA members found 68 percent of pharmacy managers said deliveries were made in less than six hours.

“What’s all the fuss?” noted an NCPA spokesman.  “Independent pharmacies have been offering same-day home delivery – most of them at no charge to the patient – for decades.”

Since then, availability of same-day prescription delivery services has only increased.  CVS now offers same day service at 6,000 pharmacy locations across the country, with patients charged a $7.99 delivery service charge.

“Consumers continue to demand faster delivery for online orders,” CNBC noted in reporting on CVS’s same-day service.  “This is especially true with groceries that need to stay fresh and prescription drugs that customers need to take right away.  If a person is diagnosed with strep throat and fills a prescription for an antibiotic, they’re not going to wait one or two days for it to arrive.”

All this is happening, of course, as online pharmacy PillPack, owned by Amazon, threatens to disrupt traditional patient/pharmacy relationships.  PillPack offers free, monthly deliveries of regularly-prescribed medications, along with 24/7 pharmacy support.   But, as CNBC’s analysis notes, pharmacies face threats that extend beyond PillPack:  “Other start-ups are also trying to woo consumers with the ease of filling their prescriptions without ever walking into a pharmacy or standing in line.”

Patient reliance on home delivery services became especially apparent, when a new federal regulation eliminated its availability for certain diabetes testing products.

A few years ago, the NCPA  surveyed pharmacy members about home delivery practices for homebound Medicare diabetes patients.  The survey was conducted in advance of a new mandate from the Centers for Medicare and Medicaid Services (CMS) requiring Medicare beneficiaries to obtain diabetic testing supplies through an approved mail-order supplier.  This mandate effectively removed the option of having those supplies delivered by a local pharmacy.  When asked what the effects would be on their patients, 65 percent of responding pharmacists said the impact would be significant.

“We have a large elderly population and are in a rural area in Minnesota,” one pharmacist noted.  “Especially in the winter during storms, many of our customers cannot leave their homes and rely on our home delivery service.”  Another pharmacist suggested patients would “be unable to follow up in maintaining their goals,” and cited the increased risk of patients developing complications and incurring added costs.

Whatever the reason, it’s clear that patients prefer the option of having their prescriptions delivered, and increasingly expect seamless, same-day service.  For pharmacy managers wanting to meet those expectations, the concept of home delivery raises a number of issues – regulatory, logistics, operational – that must be considered and addressed.

Foremost of course, is the need to ensure deliveries are made in accordance with all state and federal requirements.  HIPAA signature requirements must be met, and precautions must be taken to ensure that only eligible medications are delivered.  Prescriptions for controlled substances, for example, are subject to both federal and state regulations.  And some plans expressly prohibit home delivery of Schedule 2 controlled substances, which include oxycodone, codeine and hydrocodone, among other substances.  In addition, pharmacies certified to process electronic prescriptions for controlled substances (that demonstrate use of a technology system approved by the DEA), must meet strict recording keeping requirements.

Then there are internal pharmacy processing requirements.  How to manage inventory levels, for example, keep track of payments, update signature logs, and maintain patient records.  A pharmacy must also ensure the efficiency of the delivery process itself, by making sure drivers’ routes are optimized, and enabling real-time communication between the driver and the pharmacy.

Which is where the choice of a pharmacy technology management system comes in.

Quite frankly, with many different technology systems to choose from, pharmacy managers will need devote a fair amount of time to identify the best system to meet their overall pharmacy needs.  In investigating current offerings, a pharmacy manager may find that certain systems may excel in workflow management, or pharmacy recordkeeping, but cannot accommodate patient-friendly services like home delivery, or online reorders.

Other technology providers, start-ups for example, tend to focus on developing solutions to address a specific category of pharmacy needs.  Solutions that target inventory management, electronic prescribing, immunization management – and home delivery – are good examples of this.

A better bet though, is to identify a comprehensive pharmacy management solution that offers a “one-stop solution” for all pharmacy needs.  The PrimeRx™ operating system, offered by Micro Merchant Systems, is one example of solution that fits this bill.

The PrimeRx™ core operating system serves as “command central” for the overall system,  and offers essential functions including prescription processing, workflow management, report generation, inventory management, automated refill management, patient record management, and patient communication capabilities.

Pharmacies can build upon these critical functions, by taking advantage of any number of software modules, designed to address specific pharmacy needs.  These software modules  seamlessly integrate with PrimeRx™ and include PrimePOS™, which ensures fast, seamless point-of-sale transactions; PrimeESC™ which allows for HIPAA-compliant electronic signature capture; PrimeRxSP™ which meets the unique needs of specialty pharmacies; PrimeDMS™ document management system; and the FillMyRefills™ automatic reordering capability.

The system enables remote deliveries through its innovative PrimeDELIVERY™ module, which allows the convenience of home delivery with all transactions wirelessly transmitted back to the core PrimeRx™ management system.  Through PrimeDELIVERY™, the pharmacy essentially goes “on the road,” by ensuring an electronic paper trail records all transactions, including critically-important HIPAA-compliant electronic signatures and privacy acknowledgements.

Pharmacies can install PrimeDELIVERY™ on any Android or IOS device, which allows a high degree of flexibility in selecting a preferred tablet or phone to accompany delivery personnel.  The delivery module is HIPAA-compliant, and interacts directly with PrimeRx™ and PrimePOS™ to manage prescription deliveries and collect and record all copays.

What differentiates PrimeDELIVERY™ from other pharmacy delivery services though, is the broad range of functionality it provides, along with its attention to detail.  For example, just as busy consumers have grown tired of waiting around to sign for product deliveries, so too have patients come to expect higher levels of convenience from their pharmacies.

PrimeDELIVERY™  addresses this need  through a new “remote signature capture” capability.  This feature allows the system to generate an advance electronic signature request, which is sent to the patient ahead of a scheduled delivery.  The patient provides a signature, which is transmitted back to the pharmacy via PrimeDELIVERY™, and integrated into the patient’s record.

By collecting the signature in advance, a delivery can be made, even if the patient is not present when the delivery person arrives.

PrimeDELIVERY™ includes other capabilities that facilitate deliveries to homes, workplaces and other preferred locations.  These capabilities include:

  • Seamless tracking of each prescription. All prescriptions set for delivery are marked as “out for delivery” in the pharmacy’s system.  Once the delivery is actually made, that notation is changed to “delivered.”  If a prescription needs to be returned to the pharmacy, the patient record will automatically be updated.
  • Inventory management. Any undelivered medications are returned to inventory, with stock levels automatically adjusted.
  • HIPAA Compliance. In addition to capturing prescription pickup signatures, PrimeDELIVERY™ captures a HIPAA acknowledgement signature, and stores that information in the patient’s record.
  • One signature for multiple prescriptions. A patient can sign once to accept multiple prescriptions.  The system also allows a patient to “uncheck” specific prescriptions they may not wish to take delivery of at that specific time.
  • Data and patient security are priorities. All data is encrypted and remains highly secure throughout the transaction.
  • Seamless integration with patient records. All remote transactions are automatically uploaded to a patient’s record.  This allows the pharmacist to accurately track patient adherence and/or medication therapy progress, while also ensuring full compliance with all record-keeping requirements.

Home delivery capability is a win-win for pharmacies and patients.  Pharmacies can meet patients expectations for convenient deliveries, while also ensuring meticulous record-keeping and full compliance with all applicable regulatory mandates.  And patients benefit from not having to schedule their day around an expected delivery.

As home delivery increasingly becomes an industry standard, pharmacy managers are looking to technology providers for solutions to facilitate the integration of this service into pharmacy operations.  And as the innovative features of PrimeDELIVERY™ demonstrate, certain technology providers are already prioritizing home delivery, and helping pharmacies stay a step ahead of patient expectations.


2020 Star Ratings – Pharmacies Likely to Feel Pressure for Greater Efficiency and Improved Patient Outcomes

The Centers for Medicare & Medicaid Services (CMS) has announced that during 2020, an increased number of senior citizens will have access to higher quality Medicare Advantage (MA) and Part D prescription drug plans.  That announcement came as the agency released 2020 Star Ratings for plans operating under these programs, which indicated improved performance averages on the determinative star rating index.

“Most people with Medicare will have access to Medicare Advantage and Part D plans with four or more stars in 2020,” CMS explained in a press release, “and approximately 81 percent of Medicare Advantage enrollees with prescription drug coverage will be in plans with four and five stars in 2020, an increase from 69 percent in 2017.”

Specifically, CMS expects 52 percent of Medicare Advantage plans that offer prescription drug coverage to have an overall rating of four stars or higher, compared to approximately 45 percent during 2019.  Further, the agency notes the average star rating for all Medicare Advantage plans with prescription drug coverage has improved to 4.16 out of 5 stars, increasing from 4.02 in 2017.

With regard to Part D plans, analysis by AARP found that while scores are “much lower than those of the MA plans,” they too had shown improvement over the past year, “mainly because beneficiaries have moved from plans with lower scores to those with higher ratings.”

Overall, CMS estimates that during 2020, 28 percent of individuals enrolled in stand-alone Part D plans will be covered by plans with four or five stars, compared to three percent covered by such plans in 2018.  The average star rating for a stand-alone prescription drug plan has improved from 3.34 in 2019 to 3.50 in 2020.

In announcing these improvements, CMS Administrator Seema Verma noted improvements that have been made to Medicare Advantage and Part D programs.  “Due to recent actions CMS has made to protect and strengthen Medicare Advantage, plans are better able to compete on the basis of cost and quality,” Administrator Verma noted.  “As a result, beneficiaries are benefiting from more plan choices, lower costs, and increased quality.”

While this improvement among Medicare Advantage and Part D plans is certainly positive news, it does hold important implications for pharmacies – even though pharmacies are not specifically part of the CMS Star Rating system.

Let’s explain that.

In 2008, the Centers for Medicare and Medicaid Services (CMS) created the Five-Star Quality Rating System as a way to assess Medicare health and drug plan performance on a number of key criteria.  The purpose is to provide patients and their families with an easy way to compare plans, and ensure access to high-quality choices for their Medicare coverage.

In addition, by rewarding strong performers with financial benefits, the star ratings system seeks to incentivize low-scoring plans to improve performance.

Medicare plans are rated on a scale of 1 to 5 with, according to  CMS, a 1-star rating representing poor performance, and 5-stars representing excellent performance.  The official scoring matrix breaks down as follows:

5-star rating:  Excellent

4-star rating:  Above Average

3-star rating:  Average

2-star rating:  Below Average

1-star rating:  Poor.

High performers receive significant rewards for their good ratings that include major incentive bonuses (for Medicare Advantage Drug Plans)  and the ability to enroll patients year-round.  A poor performing plan will naturally not be eligible for financial bonuses, but runs the greater risk of losing eligibility to serve as a Medicare plan.

In addition, highly rated plans will attract larger numbers of patients, while poor performers will tend to lose members.  Dr. Zac Renfro, PharmD. explained in an Elements Magazine article why the ability to attract new members is critical to today’s health plans.  “Due to the Affordable Care Act (ACA), health plans and pharmacy benefit managers (PBMs) can now only keep a certain percentage of their profits,” he explained.  “The remaining amount must be used to cover the cost of the services they provide, as well as reinvesting back into the health plan or PMS’s program.”

Which is where plan enrollment becomes a factor.  “The only way that they can increase their profits,” Renfro noted, “is by increasing their patient numbers in their health plan.  Health plans that have a lower star rating tend to have a lower number of patients choosing them over higher rated plans that have similar costs.

“With pharmacies impacting a plan’s star rating so much,” Renfro added,  “they’re starting to put an emphasis on pharmacy quality scores to determine preferred networks and other performance contracting programs.”

Star Ratings – Key Criteria

While many factors contribute to a health plan’s star rating, offers a “summary” of key considerations that include:

  • Staying healthy – screening tests and vaccines: Whether members receive various screening tests, vaccines, and other check-ups to help them stay healthy.  For example, plans are assessed based on percent of plan members who receive flu vaccinations each year, the percent of female members who have regular mammograms, and the percent of plan members screened for colon cancer.
  • Managing chronic conditions: How often members with certain conditions undergo recommended tests and treatments to manage their conditions.  This includes ensuring patients with diabetes receive recommended care; that patients with high blood pressure follow recommended treatments, and that patients with bone fractures are treated for brittle bones.
  • Member experience with the health plan: Based on member ratings of a particular plan.
  • Member complaints and changes in the health plan’s performance: How often members had problems with the plan.  Includes how much the plan’s performance improved (if at all) over time.
  • Health plan customer service. How well the plan handles member calls and questions.

Prescription drug considerations

Medicare plans that cover prescription drugs are assessed on factors that include:

  • Drug plan customer service: How well the plan handles member calls and questions.
  • Member complaints and changes in the drug plan’s performance: How often members had problems with the plan.  This includes how much the plan’s performance improved (if at all) over time.
  • Member experiences with the drug plan: Member ratings of the plan.
  • Drug safety and accuracy of drug pricing. Assesses accuracy of the plan’s pricing information, and the frequency with which members are prescribed drugs in a way that is safe and clinically recommended for their condition.

Within these broad categories are several considerations that directly relate to pharmacy performance.  These factors include:

  • Ease of getting prescriptions filled when using the plan.
  • Accuracy of the plan in providing drug pricing information: This is a score based on prices members actually pay for drugs, compared with prices listed on the plan’s website.  Higher scores in this category generally mean the plan accurately listed drug prices.
  • Diabetes, blood pressure, and cholesterol medication adherence: Percent of plan members with prescriptions for these conditions “who fill their prescription often enough to cover 80 percent or more of the time they are supposed to be taking the medication.”
  • Members who had a pharmacist (or other health professional) help them understand and manage their medications. This is especially relevant for patients with medication therapy management programs.  Programs are assessed to determine frequency and quality of interactions and discussions between the pharmacist and patient.
  • Extent to which patients with diabetes are taking drugs to treat high cholesterol. As a way to lower the risk of developing heart disease, most people with diabetes should take cholesterol medication.  This rating is based on the percent of diabetic plan members who take the most effective cholesterol-lowering drugs.
  • Plan members’ complaints about prescription drug coverage: Every year, Medicare surveys people who leave their plan to determine reasons behind that decision.  Patients are specifically asked if problems with prescription drug coverage played a role with regard to:
    • Any change in medications covered by the plan
    • Any problems getting the plan to pay for their medications
    • Any problems obtaining medications, including brand name drugs; or
    • Frustration with the plan’s approval process.
  • Comprehensive medication reviews (CMRs) were added to the list of star rating categories in 2017, as a way for Centers for Medicare & Medicaid Services to assess the quality of medication therapy management services provided to Medicare beneficiaries.
  • The list was further expanded in 2019, when CMS announced that statin use for treating diabetes had been added to the list of performance indicators. According to McKesson, plans will be assessed based on the number of diabetes patients ages 40-75 who receive a statin.  For pharmacies, this means identifying diabetes patients who are not currently on a statin, and contacting their physician to recommend that one be prescribed.

According to analysis by McKesson, pharmacy-related measures are weighted heavily, and can impact up to 50 percent of a Medicare plan’s overall star rating.  It’s easy to see then, why plan administrators scrutinize pharmacy performance, and only want to engage with high-performers.

This high level of scrutiny is likely to become even more intense in 2020, as the average star rating among Medicare Advantage and Part D plans continues to increase.  Plans wishing to improve their attractiveness among beneficiaries will look to continue to improve their star ratings, with pharmacy performance an important part of that success.

Improving Pharmacy Performance with an Integrated Technology Solution

As pharmacies look to improve performance, technology will play an integral role.  Most pharmacies already rely on technology to perform at least a perfunctory level of pharmacy-related services.  But in recent years, tremendous advances in pharmacy system capabilities allow extensive data analysis, tracking and reporting functions that simply did not exist as recently as a few years ago.

With regard to improving pharmacy performance on 5-Star related categories, technology can be especially helpful in ways that include:

  • Medication Adherence. Pharmacists have a clearly-defined role in helping meet CMS directives for overseeing medication adherence for patients with chronic conditions including diabetes, high blood pressure and high cholesterol.  This is because of pharmacists’ unique position to engage patients about the importance of taking medications as prescribed, and to facilitate the adherence process.

With regard to technology, a pharmacy-specific solution can maintain patients’ prescription histories, which means a pharmacist can have immediate access to patient records when filling a prescription, or speaking with a patient about a particular medication.  Ready access to this information can help a pharmacist explain how a particular drug works, and discuss any potential side effects, which can allay patient concerns.

In addition, a pharmacy can automatically generate outbound text messages, emails and phone calls, as a way to remind patients about renewals and pickups.  These simple messages can have a tremendous impact in reminding patients that a prescription is about to run out, thereby helping to avoid a missed dosage, or even worse, a patient simply deciding to forego renewing a prescription.

  • Comprehensive Medication Review. According to the American Journal of Health-System Pharmacy, CMS directs that medication therapy management programs target patients who have two or more chronic diseases, take Medicare Part D-covered drugs, and have estimated drug spending that exceeds a CMS-established threshold.

Pharmacists may perform the CMR, which must include an action plan for improving the patient’s medication use.

Similar to technology’s role in addressing adherence, an integrated system can manage the CMR process in key ways that include:

  • Identification of eligible patients
  • Determination of ideal medication dosage and usage schedule
  • Synching of all medications so that all pick-ups occur on a single day
  • Availability of information describing purpose of each medication, along with information about potential side effects
  • Tracking of all pharmacist-patient interactions
  • Outbound texts and phone calls to remind patients about scheduled refills.


  • Ease of Obtaining Medications. According to Surescripts 2018 National Progress Report, 85 percent of all prescriptions were delivered to pharmacies electronically during 2018, a greater than 500 percent increase since 2015.  For patients, e-prescriptions eliminate an extra step in the process, since it is no longer necessary to travel to the pharmacy to drop off a prescription.  Instead, a patient can wait until notified that the prescription is ready, and then set out for a quick pick up.  One study found patient adherence improves by 10 percent when the medication is e-prescribed, compared with written prescriptions.

A comprehensive technology system ensures seamless processing of the prescription from the point it is received and recorded, entered into the queue, filled and marked for pickup.

Use of Statins.  With CMS now assessing information about diabetes patients who are prescribed statins, a pharmacy’s technology system can easily identify eligible patients, notify them about the role of statins in diabetes management, and initiate the process for obtaining a prescription.


At the same time CMS released its overall 2020 star ratings, it also released the average rating for each area of measurement.  Among areas that directly affect pharmacy performance, “medication adherence for diabetes medications” carries an average star rating of 3.9; “medication adherence for cholesterol (statins)” increased to 3.6, and “getting prescription drugs” showed an average rating of 3.5.

As beneficiaries become savvier about the importance of star ratings as a way to compare plan effectiveness, plan administrators will want to ensure their preferred pharmacy partners will help improve their ratings.  Smart pharmacy managers in turn, understand the critical role a fully-integrated technology system can have in helping to improve patient outcomes, and to document all star-related services provided to patients.





Latest Counterfeit Scare Underscores Technology’s Role in Pharmacy Drug Safety

U.S. pharmacists received a startling reminder of the urgent need for drug safety, when in November 2019, a statement was issued by the Drug Enforcement Agency (DEA) warning the public about an alarming number of counterfeit pills that had been seized throughout the nation.  “Mexican drug cartels are manufacturing mass quantities of counterfeit prescription pills containing fentanyl, a dangerous synthetic opioid that is lethal in minute doses, for distribution throughout North America,” the statement read.

The DEA said that 27 percent of the drugs seized contained potentially lethal doses of fentanyl.  Special Agent in Charge Ray Donovan, of the agency’s New York Division warned:  “Counterfeit pills have hidden dangers causing one in four users to die, according to DEA field testing.  This is a warning and a plea for parents to talk to their children about using counterfeit or diverted prescription pills – either one of them ends with death and/or devastation.”

News of the surge in potentially-lethal drugs comes as U.S. drug manufacturers, wholesale distributors, pharmacies and other parties involved in prescription drug distribution continue to implement key provisions of the 2013 Drug Quality and Security Act, which is intended to prevent counterfeit, stolen, contaminated or otherwise harmful drugs from entering the nation’s drug supply chain.


Drug Supply Chain Security Act – Working Toward a Track-and-Trace System

Specifically, Title II of that legislation, the Drug Supply Chain Security Act (DSCSA) mandates creation of “an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States.”  The system, referred to as “track and trace,” is being spearheaded by the U.S. Food and Drug Administration (FDA), and is mandated to be operational by 2023.  When fully implemented, the system will be capable of tracking a drug at the unit level throughout its supply chain.

The FDA is working to build that system, namely by working with supply chain stakeholders, and through a pilot program that was launched earlier this year to identify, build, and test required capabilities.

DSCSA Implemented in Phases

As that work continues, progress is being made to implement other provisions of the law.


A. Product Tracing

In 2015, manufacturers, wholesale drug distributors, repackagers and dispensers (primarily pharmacies) were required to provide information about the handling history of each drug sold in the U.S. market.  Specifically, each drug transaction must now be accompanied by three separate documents that include FDA-required information including:

          Transaction information (TI)

        • Proprietary or established name of the product
        • Strength and dosage form of the product
        • NDC number of the product
        • Container size
        • Number of containers
        • Lot number of the product
        • Date of the transaction
        • Date of the shipment, if more than 24 hours after the date of the transaction
        • Business name and address of the person from whom and to whom ownership is being transferred.

          Transaction history (TH)

A statement in paper or electronic form, including the transaction information for each prior transaction going back to the manufacturer of the product.

Transaction statement (TS)

A statement, in paper or electronic form that affirms the following points:

        • The entity transferring ownership in a transaction is authorized as required by DSCSA;
        • The product was received from a person who is authorized as required by DSCSA;
        • Transaction information and a transaction statement were received from the prior owner of the product, as required under the law;
        • The entity did not knowingly ship a suspect or illegitimate product;
        • The entity has system and processes in place to comply with verification requirements under the law; and
        • The entity did not knowingly provide false information, and did not knowingly alter the transaction history.

B. Product Verification

Also beginning in 2015, stakeholders are required to have in place systems and processes to comply with product verification requirements.  Specifically, this includes the ability to handle “suspect” and “Illegitimate products” that may be counterfeit, diverted, stolen, intentionally adulterated or appear otherwise unfit for distribution.

Stakeholders must have in place a process to:

    • Respond to verification requests from the FDA about suspected products;
    • Quarantine and investigate any suspect product to determine if it is illegitimate;
    • Notify trading partners and the FDA of any illegitimate product;
    • Respond to notifications of illegitimate product; and
    • Satisfy recordkeeping requirements.

C. Product Identification (Serialization)

The law established requirements for manufacturers and repackagers to print or affix a unique product identifier on the smallest individual sellable unit.  The product identifier is composed of four specific data elements:

    • National Drug Code
    • Serial number
    • Lot number
    • Expiration date.

The product identifier must be “human and machine readable,” with a two-dimensional (2-D) bar code adopted as the standard for machine processing.

The law sets out specific deadlines for compliance within each stakeholder group:

    • November 2017: Manufacturers
    • November 2018: Repackagers
    • November 2019: Wholesalers will only trade products with product identifiers
    • November 2020: Dispensers (Pharmacies) will only trade products with product identifiers.

2019:  Pharmacy Specific Requirements

Pew Charitable Trusts refers to pharmacies as “the last stop in the distribution supply chain before medicines reach patients,” and calls their participation “an essential component of the new DSCSA system.  It’s not surprising then, that several of the important components already implemented, directly affect pharmacies.  Current pharmacy responsibilities include:

1. Confirm all trading partners are properly licensed or registered.

a. Check the registration of manufacturers and repackagers by accessing the FDA’s Drug Establishments Current Registration Site — DECRS.

b. Check the licensing of wholesale distributors and third-party logistics providers. This can be done by searching the FDA’s Wholesale Distributor and Third-Party Logistics Providers Reporting database.

c. Check the licensing of pharmacies through the respective state authority.

2. Receive, store and provide product tracing documentation.

a. Only accept prescription drugs that are accompanied by three pieces of product tracing documentation:

i. Transaction Information

ii. Transaction History

iii. Transaction Statement.

b. Store the product tracing documentation in paper or electronic format for six years.

c. Generate and provide all product tracing documentation whenever a prescription drug is sold to a trading partner. (This documentation does not need to be provided when a prescription is dispensed to a patient, or sold to another pharmacy for dispensing to a patient.)

3. Investigate and properly handle suspect and illegitimate drugs.

a. Quarantine and investigate suspect prescription drugs to determine if they are illegitimate.

b. If a drug is found to be illegitimate, a pharmacy must work with the manufacturer and take specific steps to avoid inadvertent dispensing to patients. The pharmacy must also notify the FDA and the trading partner from whom the drug was purchased, and to which it may have been sold.

Looking ahead, pharmacies will face additional responsibilities that include:

    • 2020: Pharmacies will only be permitted to purchase products that include a unique product identifier.
    • 2023: The entire drug supply chain – including pharmacies – will be required to utilize the electronic track-and-trace system.


Protecting Drug Safety – the Role of Technology

As the “final link” in the drug supply chain, pharmacists have a tremendous role in the successful implementation of the DSCSA.  By the time a drug is received by a pharmacy, it has already passed through several other trade partners, and is just one step away from being dispensed to a patient.

Therefore, pharmacies must have a fail-safe process in place to ensure — not only full compliance with DSCSA – but accuracy and safety of its overall operations.  In today’s busy pharmacies, that process increasingly comes in the form of a fully-integrated technology system.  Certain technology solutions, including the PrimeRx™ system offered by Micro Merchant Systems, can allow a pharmacy to seamlessly manage compliance requirements, monitor patient wellbeing, protect against expired drugs, and seamlessly maintain records and documentation.

Important to note though, not every technology system offers the same capabilities.  This means a pharmacy manager must spend time carefully reviewing different systems, to ensure a system has the required functionality.  With regard to compliance with the Drug Supply Chain Security Act, for example, it’s important to ensure that a system’s manufacturer is aware of the evolving requirements, and understands the need to provide required capabilities.  With regard to PrimeRx™, DSCSA and safety-related competencies include:

Access to National Drug Code and other databases.  Pharmacies have long recognized the need for immediate access to the National Drug Code listing as a way to verify prescribed medications and list proper drug codes on all documentation.  Going forward, the NDC code will be an integral part of each drug’s unique identifier, which means access to the NDC registry will be essential.  In addition, pharmacies must have access to the required FDA databases to validate trading partners’ proper licensing and certification.  PrimeRx™ offers seamless access to this information, and allows pharmacy staff to quickly confirm and document all required information.

Recordkeeping.  The PrimeRx™ system offers extensive recordkeeping that allows pharmacy managers to efficiently store documentation and information about essentially all aspects of pharmacy operations.  This includes the ability to record unique notes and observations about patient interactions, along with extensive medication histories.  The system also allows for detailed inventory-related records management, including chains of custody for all drugs, expiration dates, and dispensing histories.  With regard to DSCSA compliance, the system can seamlessly process and store mandated transaction documents.  Should those documents need to be transmitted to another pharmacy, the system can automatically send the required materials.

Report generation.   In addition to storing this information, PrimeRx™ allows the pharmacy manager to generate detailed reports on a wide range of patient, inventory and operations topics.  This includes reports to satisfy FDA information requests regarding specific transactions, or drug investigations.  Should a pharmacy determine that a drug is illegitimate, PrimeRx™ can facilitate compliance with all FDA reporting requirements.

Bar Code Scanning.  Since the DSCSA requires all product identifiers to be available in 2-D format, it’s essential for a pharmacy technology system to be able to easily import that information.  PrimeRx™ offers the required scanning capability, and allows for information to be quickly and accurately loaded and filed.

Continuous Upgrades.  Micro Merchant Systems is a leader in the pharmacy technology industry, and has long been a pioneer in anticipating pharmacy needs.  As the FDA continues its work to identify core components of the national track-and-trace system, Micro Merchant Systems will again be at the forefront with required capabilities.  As such, PrimeRx™ customers can be assured that as the system is developed, the necessary software upgrades will be provided in a timely, efficient manner.

Counterfeit and contaminated drugs pose a legitimate threat to the global drug supply chain.  The World Health Organization reports one in 10 drugs sold in developing countries is fake or substandard, “leading to tens of thousands of deaths, many of them of African children given ineffective treatments for pneumonia and malaria.”

And while developing countries may bear the brunt of the counterfeit drug problem, no country is immune.  In a single week, officials from Health Canada seized $2.5 million worth of fake pharmaceuticals at the border.  Earlier this year the WHO reported on fake leukemia medicine circulating across Europe.  And in the United States, which has the safest drug supply in the world, as many as 19 million Americans buy medicines from foreign online pharmacies or other unlicensed sources.

Clearly, the DSCSA comes at a good time for the U.S. prescription drug industry – and American consumers. And armed with a fully-integrated technology system, the nation’s pharmacies will continue to be at the forefront of efforts to protect patients from harmful prescription drugs.

pharmacy technology solutions Categoriesnews PBM Pharmacy Technology Uncategorized

Pharmacy Technology Solutions For The DIR Fee Profit Squeeze 

Pharmacy Technology Solutions For The DIR Fee Profit Squeeze


Pharmacy technology – Earlier this year, New York City pharmacy owner Bob Hopkins told local television station WPIX that his drug reimbursement rates had decreased by 40 percent over the previous six months. “Which means,” the report noted, “every time he rings up a drug, he might be losing money.” This is why having the right pharmacy technology solutions in place to manage reimbursement data is important for your pharmacy.

This experience was echoed by another New York City pharmacist, Stephen Cilento, who co-owns Bridge Pharmacy in Bay Ridge, Brooklyn. Cilento told local publication The Brooklyn Daily Eagle as many as one-third of prescriptions filled by his pharmacy are reimbursed at a rate below his whole-sale purchase price.

Each of these pharmacy owners attributed responsibility for the reduced reimbursement rates to pharmacy benefit managers (PBMs) – the third parties that act on behalf of insurance companies and other payers to negotiate prescription drug prices with manufacturers, and determine pharmacy reimbursement rates through pharmacy technology solutions.

These examples follow findings of a study commissioned by the Pharmacists Society of the State of New York (PSSNY), which examined PBM practices statewide and found:

  • Pharmacy gross profit margins on generic drugs were reduced by 83 percent between Q1 2016 and Q4 2017;
  • Pharmacies were paid less than what it cost them to dispense a generic drug 99 percent of the time during Q4 2017; and
  • Pharmacies were paid less than the national average invoice cost of generic drugs 46 percent of the time. “In other words,” the study noted, “pharmacies were underwater on nearly half of claims.”

New York wasn’t the only state to delve into current pharmacy practices.

Last year Arkansas joined 37 other states in enacting legislation – the PBM Licensure Act – which promised to hold PBMs more accountable by requiring licensing by the state insurance department. But a year after the law took effect, pharmacy technology solutions show reports of declining reimbursement rates are still prevalent.

“There have been some improvements, but it’s far from a fixed problem,” John Vinson, executive vice president and CEO of the Arkansas Pharmacists Association told Arkansas TB&D news website. Vinson noted that just the day before, he received a call from a pharmacist who was reimbursed $20 for a drug that had cost $105 to purchase. The reimbursement rate had been $150 just a month before. Having the right pharmacy technology solutions in place will help you better keep track of your reimbursement rates.

Similar stories can be found among pharmacies nationwide. PBMs reject the notion they are at fault, and in response to the New York survey, the Pharmaceutical Care Management Association (PCMA) issued a statement that noted, in part: “The role of PBMs is to reduce prescription drug costs and improve the quality of pharmacy benefits for their clients. It is not to enrich independent drug stores, who are continuously pushing an agenda that increases their bottom line at the expense of patients.” However, having the right pharmacy technology solutions will help the pharmacy owner keep track of DIR and GER fees.

Regardless of where the fault lines, the fact remains that pharmacies have seen a sustained decrease in reimbursement rates that is affecting profitability and for many, their very existence.

But falling reimbursement rates aren’t the only profit pressures felt by today’s pharmacies. Omnipresent threats of DIR fees, price “spread” practices and reduced dispensing fees are also considerations.

According to the Healthcare Information and Management Systems Society (HIMSS), spread pricing “occurs when health plans contract with a pharmacy benefit manager to manage their prescription drug benefits, and PBMs keep a portion of the amount paid to them by the health plans for prescription drugs, instead of passing the full payments on to pharmacies. Pharmacy technology solutions can help your pharmacy better manage spread pricing.

“The spread,” HIMSS notes “is the amount between what the health plan pays the PBM and the amount the PBM reimburses the pharmacy for the beneficiary’s prescription.”

A 2019 investigative report by the New York State Senate’s Committee on Investigations and Government Operations called spread pricing a source of “significant revenue” for PBMs.

Spread pricing is most often used in conjunction with generic drugs, which account for almost 90 percent of all prescriptions dispensed in the United States. Last year, investigative reporters at Bloomberg took a nationwide look at the practice, and determined that spread pricing costs state Medicaid plans and insurance providers millions of dollars annually.

The Bloomberg reporters examined pricing and reimbursement practices for 90 different generics, across multiple state programs. This included pricing practices for aripiprazole, a generic anti-psychotic drug. The investigation found that although the market price for the drug dropped to about $20 per month during 2017, “many state Medicaid plans, including in Ohio, New York, Arizona and Texas, were still paying more than $140 a month.”

Similarly, the study found that in late 2017, “private Medicaid plans in Indiana spent more than $800 for a 30-day supply of entecavir, a hepatitis B pill that costs pharmacies less than $140 to buy. State plans paid more than $100 per prescription for generic versions of the heartburn drug Nexium, which cost pharmacies less than $25 at the time.” However, when asked, Indiana pharmacists claimed they were only receiving a “tiny slice” of those markups. “We’ve seen nothing but declining margins,” one independent pharmacy owner told the Bloomberg team. Using pharmacy technology solutions will come in handy during a pharmacy audit.

Direct and indirect remuneration (DIR) fees, according to the American Pharmacists Association (APhA), refer to “price concessions not reflected at POS for pharmacies participating in Medicare Part D networks. Accessed weeks or months after Part D beneficiaries prescriptions are filled, the retroactive fees complicate decisions about staffing and whether to expand or even keep open a business. Pharmacies may not realize until long after a prescription is filled that they didn’t even recoup their costs.”

In addition to recouping rebates and other post-POS price concessions, DIR fees can be assessed based on arbitrary factors, usually with little advance notice to the pharmacy. The New York Senate report cites DIR fees which include “costs for pharmacies to participate in a Part D preferred network, price reconciliations based on contractual rates, and compliance fees for contract-based metrics.”

National Community Pharmacists Association (NCPA) Director of Congressional Affairs Adam Harbison said in a 2019 presentation that pharmacy DIR fees “have increased 45,000 percent in less than 10 years, raising drug prices and putting many pharmacies out of business.”

Reduced Dispensing Fees Through Pharmacy Technology Solutions

Dispensing fees refer to the amount paid to a pharmacy to cover the costs of providing a drug to a patient. Several factors fall under the umbrella of a dispensing fee including labor costs, transportation, storage and patient counseling. According to RxSafe™, “the national average cost of dispensing medications is $10.55 per prescription – not including pharmacy profit – but Medicaid only reimburses a dispensing fee on average of $4.50 per prescription. Under Medicare, the pharmacist is paid even less — $2.27 per prescription. This is why pharmacy technology solutions are important. In group-health plans or private insurance, a PBM negotiates the dispensing fee with the individual pharmacies, typically at 40 percent off the usual and customary dispensing fee charge.”

For many pharmacies, the cumulative effect of reduced reimbursement rates, increased DIR fees, decreased dispensing fees, and spread pricing can seem overwhelming. And it probably helps explain why a 2019 survey of New York City pharmacists found 99 percent are concerned about negative consequences for their businesses, with 70 percent saying they had already laid off workers or reduced store hours.

Pharmacists Seek Legislative, Regulatory Relief

With so much at stake, it’s not surprising that pharmacies across the nation are joining forces to fight what many perceive to be existential threats. At the federal regulatory level, a 2019 industry-led effort came close to persuading the U.S. Department of Health and Human Services to revise Medicare Part D pricing structures so that point-of-sale pricing would include all pharmacy price concessions. Although that effort ultimately failed, it marked the closest the agency has come to addressing the issue.

Legislation has also been introduced in the U.S. Congress, S.988/H.R. 803, the “Improving Transparency and Accuracy in Medicare Part D Spending Act,” which among things, would prohibit retroactive pharmacy DIR fees.

At the state level, the National Conference of State Legislators (NCSL) reports state auditors in Kentucky, New York, Ohio, Pennsylvania, Texas and West Virginia have begun looking into pharmacy spread pricing practices in their states, although no legislative solutions have yet been enacted.

Also at the state level, laws have been enacted in 38 states seeking to hold PBAs accountable by imposing limits on pharmacy audits, and/or by imposing PBA registration requirements.

Pharmacy Technology Solutions to the Rescue

It just may be though, that a pharmacy’s best weapon could be its pharmacy technology system – the same system that serves as “command central” in managing everything from daily workflow to seamless refills to inventory and records management.

Pharmacy managers may be surprised to learn they are really just scratching the surface when it comes to accessing the full scope of their pharmacy technology system’s capabilities. A pharmacy that relies on its system for “refill management,” for example, may not take the next logical step of linking to an automated inventory management system.

A pharmacy manager may be pleasantly surprised to learn that its existing technology system offers significant options to improve efficiency, thereby off-setting some of the onerous and costly effects of declining reimbursement rates and other PBA-related issues.

  • Minimize mistakes. Since a pharmacy has little control over its drug reimbursements, it can better manage the dispensing process to minimize mistakes and ensure full reimbursements are received. Pharmacy technology solutions can help in several key areas:
    • Proper drug codes. An advanced pharmacy technology system will be linked to the National Drug Code, which will ensure proper identification codes are included on claims. Erroneous classifications can lead to improper reimbursement, and even outright claims denial.
    • Proper dispensing. An automatic pharmacy dispensing system will ensure that accurate quantities of a drug are measured. This eliminates any risk of human error, which can occur when a pharmacy technician becomes distracted, or simply makes a mistake.
    • On-time refills. Refills-filled-too-soon is another top reason for reimbursement denials. A pharmacy technology based refill system will automatically monitor a patient’s record, and alert the pharmacist if a refill order has been requested before the appropriate date. Improper refills are also a major “red flag” for PBM auditors, so a refill-management process has the added benefit of helping to minimize the risk of an audit.
  • Improved pharmacy inventory management. With a pharmacy technology solution enabled, automatic order system in place, a pharmacy can minimize the risk of holding expired or obsolete drugs in its inventory. In addition, pharmacy technology solutions will continually track bin contents, and alert pharmacy staff when a prescription has not been picked up. The system will generate a reminder to the patient and, ultimately, will add any unclaimed medication back into inventory.

Not only will improved pharmacy inventory management help control spending, but a pharmacy can also free up valuable storage space, to offer additional in-demand products.

  • Pharmacy eCare Plans. A relatively new trend in healthcare management is the emergence of pharmacy eCare plans. Through an eCare plan, a pharmacy maintains – and regularly updates — comprehensive records for all services provided to a patient including medication history, consultations, lifestyle plans, and medication adherence strategies. The eCare plan can be shared across a patient’s team of healthcare providers, and used to validate pharmacy reimbursement claims for value-added services.


  • Increasing number of prescriptions. An obvious way for a pharmacy to improve profitability is to increase the number of prescriptions filled. A pharmacy can achieve this by improving patient adherence rates (described below), or by expanding its viability as a “preferred network pharmacy.” This can be accomplished through metric-based reporting, which will allow a pharmacy to easily document its efficiency to health plans and PBMs.


  • Demonstrate efficiency for plans looking to boost star ratings. A pharmacy can also use metric-based reporting to demonstrate its performance to health plans looking to maintain – or improve – their “star rating.”

A pharmacy that prioritizes responsiveness to Centers for Medicare and Medicaid Services (CMS) Five-Star Rating requirements could improve its appeal as a “preferred pharmacy,” thereby potentially increasing its customer base. Pharmacy Technology related capabilities include:

  • Medication Adherence: A Pharmacy technology system provides the pharmacist with ready access to a patient’s medication history, which can be used to explain how a particular drug works, and discuss any potential side effects.

In addition, a pharmacy can automatically generate outbound text messages, emails and phone calls, as a way to remind patients about renewals and pickups.

  • Comprehensive Medication Review. An integrated system can manage CMR process requirements in key ways that include:
    • Identification of eligible patients
    • Determination of ideal medication dosages and usage schedules
    • Syncing of all medications so that all pick-ups occur on a single day
    • Availability of information describing purpose of each medication, along with information about potential side effects
    • Tracking of all pharmacist-patient interactions
    • Outbound texts and phone calls to remind patients about scheduled refills.
  • Ease of Obtaining Medications. A comprehensive pharmacy technology system will allow electronic transmission of a prescription, and seamless processing from the point it is received and recorded, entered into the queue, filled and marked for pickup.

In addition, many systems now offer apps that allow for 24/7 refill orders, whereby a patient can quickly request a refill from any internet-connected device.

  • Use of Statins. With CMS now assessing information about diabetes patients who are prescribed statins, a pharmacy’s technology system can easily identify affected patients, notify them about the role of statins in diabetes management, and initiate the process for obtaining a prescription.


  • Key Performance Indicators. A pharmacy can rely on its pharmacy technology system for customized reporting on self-identified metrics. An advanced system will allow detailed analysis of that data, and provide a pharmacy manager quick access to reports and graphs detailing performance across a range of functions. This detailed reporting can help a pharmacy manager easily determine strengths and weaknesses within the operation.

As pharmacists continue to face an array of profit-squeezing forces, they can find relief by unleashing the full power of their pharmacy technology system. Although technology can’t eliminate these fees and processes, it can help a pharmacy fight back, and even identify new opportunities for profit and growth.

by Micro Merchant Systems

Categoriesnews Pharmacy Audits

Pharmacy Audits Are On The Rise – Pharmacy Audit Solution

Pharmacy Audits are on the Rise

A Comprehensive Pharmacy Audit Solution Ensures 24/7 Readiness

A few years ago, the Michigan Pharmacists Association hosted a webinar on the topic of “pharmacy audits,” during which former state attorney general John Wright advised pharmacists that “because of technology, technically, you are always being audited.”

Wright went on to explain:  “Pharmacy Auditors have automated systems to look at your processes and what is happening in pharmacies, and are always looking at data for clues they can use to trigger pharmacy audits, so really you are always being audited.”

This bleak assessment would seem to be supported by reports from different pharmacists about the frequency and scope of audits their pharmacies have experienced in recent times.

A popular blog written by an Iowa pharmacy owner, for example, detailed the author’s pharmacy audit experiences.

“Over my career as a pharmacy owner, we have faced over $1,000,000 worth of pharmacy audited claims, and the PBMs have attempted to charge back over 10% of that amount,” the author wrote.  “A single pharmacy audit may include over 100 individual prescriptions representing as many as 250 dispense dates and may represent over $100,000 in sales.”

This particular pharmacist went on to note his near-100 percent success rate in defending his pharmacies from unfair charge-backs – a process that required a considerable investment of time and energy.

Similar examples were reported by Health Mart, which cited one Pennsylvania pharmacy owner whose three stores were audited “about 30 times” in a single year.  Another owner of five pharmacies in Ohio said his staff typically handles three-to-five pharmacy audits at any given time.

It would certainly seem then, that pharmacy audits have become an inevitable part of today’s pharmacy operations.  For a pharmacy that has not yet been subject to a pharmacy audit, the question is not “if” an audit is in its future, but “when” will it occur?

Stay focused on the underlying purpose of a pharmacy audit.

As a pharmacy owner considers the potential implications of a pharmacy audit, it’s important to stay focused on the underlying purpose of a pharmacy audit:  Parties paying for services want to make sure they are not paying too much, and that organizations with which they engage are acting in good faith, and in full compliance with all regulatory requirements.

That said, it’s critical for a pharmacy owner to have a good understanding of current pharmacy audit practices, and information about how to proactively prepare for an audit. That preparation begins with meticulous documentation and record-keeping as a way to minimize the disruption and adverse consequences of a pharmacy audit.  A comprehensive pharmacy software solution can provide a high degree of confidence that all records are in order, but a pharmacy owner must have an appreciation for the “bigger picture” of today’s pharmacy audit practices.

pharmacy audit

For starters, a pharmacy manager must realize that pharmacy audits can come at any time, and in many forms.

In general, pharmacy audits are usually initiated by a party which may include:

  • Pharmacy Benefit Managers. (Caremark, Express Scripts, OptumRx, etc.)
  • Private insurance companies. In many instances, pharmacy audits are outsourced to external audit companies that operate on a “bounty” basis whereby the auditor is paid a percentage of monies recovered in the pharmacy audit. Thus, these companies have a financial incentive to uncover wrongdoing.
  • Government Agencies (Medicaid/Medicare or, if fraud is suspected, the Drug Enforcement Agency).

Regardless of which party initiates the pharmacy audit, the goal is generally the same – to uncover wrongdoing and recover funds believed to have been erroneously paid to the pharmacy.

Many Different Types of Pharmacy Audits

According to the American Pharmacy Cooperative, Inc. (ACPI),  common types of pharmacy audits include:

  • Desk/mail audits. An auditor will contact a pharmacy by automated means and request specific pharmacy claims and/or additional information. The pharmacy will accumulate the requested information and send the documents to the auditor.  According to ACPI, the desk audit is “set up to evaluate  prescribing patterns, physician referral patterns, utilization overrides, ingredient cost integrity, geographic prescription reports, payment reports, and billing issues to identify possible abusive or fraudulent activity.”
  • Telephone pharmacy audit. The pharmacy receives a phone call from an auditor and is asked to clarify information included on a single claim, or a small number of claims.
  • Prescriber audits. Claims provided by a pharmacy are “thoroughly verified” by a prescriber/physician to ensure all parties records coincide. The prescriber audit is essentially handled the same way as a desk audit.
  • Member audits. Claims provided by a pharmacy are validated by specific patients/members. This type of audit is also handled in the same manner as desk audits.
  • On-site/Field pharmacy audits. As the name implies, this type of pharmacy audit takes place within the pharmacy, with an auditor being on-site for an undetermined length of time.  ACPI notes key features of the on-site audit which include physical observations, prescription reviews, inventory, and checks for compliance with Part D regulations and procedures.

Pharmacy Owner Audit

Pharmacy Audit Notification

Most pharmacy owners are notified 2-3 weeks in advance, and informed about the scope of the pharmacy audit.  This provides the pharmacy owner with time to assemble the requested documents – something that can easily be accomplished via a good pharmacy software system. Requested information may include:

  • List of prescriptions filled during specific date range
  • Signature logs
  • Billing records
  • Policies and procedures
  • Compound formula worksheets
  • Written policies regarding compounding.

According to Pharmacy Times, the on-site pharmacy audit has “the potential to become a really big deal.”  A typical pharmacy audit will review claims going back 24 months, with an auditor reviewing as many as 100 prescriptions in one afternoon.  Any discrepancies may be subject to an adjustment, unless a pharmacy manager can produce documentation to support the claim.  “Something as simple as an undocumented refill in the computer may amount to thousands of dollars in adjustments.”

In some instances – “rare instances” according to ACPI – pharmacy owners are not notified in advance.  This type of “unannounced” pharmacy audit can result in a less efficient investigation, since the pharmacy owner has not had time to prepare necessary records and documents.  But, the unannounced visit can provide a more reliable indication of a pharmacy’s day-to-day operations.  Should a pharmacy owner face an unexpected visit from the pharmacy auditor, Cardinal Health provides a few steps to follow:

  • Verify the identity of the individual. Request identification and call the phone number listed on the individual’s business card to verify employment.
  • Inquire about the scope of the pharmacy audit and document the answer in writing.
  • Ask how long the auditor will be on-site and determine the number of records that will be subject to examination.
  • Ask for time to ensure proper staff coverage.
  • Direct pharmacy staff that all questions should be directed to the pharmacy owner or manager.
  • Ensure staff is aware of pharmacy policies for partial refills, prescriptions that are not picked up, procedure for drugs not covered by Medicare Part D, and other key pharmacy processes, in case questions are asked of them.
  • Do not allow the auditor to roam the pharmacy unattended. Instead, if the pharmacy auditor wants to check on refrigerator temperature, or manually review shelf inventory, or any other process, the pharmacy manger should either accompany the auditor, or provide the requested information.


  • Investigational Audit. According to ACPI, “providers are contacted normally by telephone or mail and asked to provide photocopies of specific documents and records related to claims paid to the provider during a specified period of time.  Documentation may include copies of original prescriptions, signature logs, computer records, and invoices showing purchase or receipt of dispensed medications.  These can be as simple as comparing National Drug Codes (NDCs) ordered versus those dispensed, or a more  complex investigation involving the prescriber, member or potential pharmacy fraud.”


  • Invoice Audits. In this type of audit, auditors review NDCs and amounts for medications submitted by pharmacies from wholesaler receipts.  According to ACPI, invoice pharmacy audits can be classified as “investigational” audits, and are in accordance with third party payor agreements.

Pharmacy Audit Documentation and Record-keeping

Hanging over all pharmacy audits, of course, is the threat of financial repercussions, including claw backs of fees determined to have been paid in error, penalties, contract cancellations, and the possibility of an audit finding triggering a larger investigation.  One Ohio pharmacist told Pharmacy Today that his five community pharmacies were under such scrutiny by pharmacy auditors that two staff members were assigned to deal with audit matters. “The problem,” he noted, “was that the large sums of money Pharmacy Benefit Managers (PBMs) wanted were for minute errors like misspelling a person’s name.

“We were getting audited for reasons that didn’t affect the patient outcomes, or the payer in a negative way,” the pharmacy owner noted. “It was mostly clerical errors.”

While no two pharmacy audits are ever exactly the same, most have a few key elements in common, namely the need to provide seamless documentation trails for all critical pharmacy transactions, including prescribing and billing practices, invoice and inventory records and controlled substance management.

Which is why the most important audit just might be the one that takes place proactively within a pharmacy, before the pharmacy audit notice arrives, or an unannounced pharmacy auditor arrives on a pharmacy’s doorstep. A pharmacy self-audit can allow a pharmacy to self-identify potential areas of vulnerability, and implement quality best practices that will ensure top-notch record-keeping.

Improper documentation is a top reason for pharmacy audit penalties.

“Think about what you do, how you handle your documentation now,” advised John Wright in the Michigan Pharmacists Association webinar.  “Don’t wait until the pharmacy auditor comes in and you’re kicking yourself because you’re going to lose $10-or-$20,000 because you didn’t have your documentation filled out correctly.”

But what exactly are the documentation snafus that can trigger a pharmacy audit?  Elements magazine, produced by PBA Health lists five common mistakes:

  • Filling unauthorized prescription refills, and failure to accurately document refills.
  • Failure to maintain hard copies of prescription records.
  • Failure to dispense correct drug quantity
  • Using incorrect Dispense-as-Written (DAW) codes.
  • Insufficient directions for use.

Your Pharmacy Audit Software Solution – An Essential Tool in Audit Preparedness

The good news for pharmacy managers though, is that whereas locating required documentation and records used to mean hours spent hunting through file boxes, today that information can be just a few clicks away.  A pharmacy’s technology solution, which already serves as the pharmacy workhorse by facilitating pharmacy workflow and prescription filling processes, can also be a one-stop solution for most-requested pharmacy audit documents.

A comprehensive pharmacy software system will allow for the capture, archiving and storage of critical capabilities including:

  • Electronic signature logs
  • Proof of prescription pick-ups and deliveries
  • Copies of all prescriptions, both front and back
  • Payment documentation
  • Coordination of benefits
  • Prescription inventory records
  • Copies of all pharmacy correspondence, including exchanges between the pharmacy and patient
  • Automatic inventory management and reordering procedures
  • Automatic inventory adjustments to reflect medications returned to stock
  • Verification of prescriber credentials
  • Assignment of NDC codes
  • Proper billing practices for generic and brand-name drugs
  • Documentation for controlled substance handling
  • Automatic warning trigger for potential over-prescribing of opioids and other controlled drug categories.
  • Automatic triggers to reduce dispensing errors; and
  • Seamless insurance claims management.

Easy access to any of these data elements can be a tremendous time-saver in preparing for a pharmacy audit, and allow pharmacy managers to address auditor documentation requests.

Although pharmacy audits have become almost inevitable, they no longer have to strike fear and dread within pharmacy managers and owners.  Instead, as Michigan’s John Wright notes, they are “survivable,” especially for a pharmacy that has done its due diligence and has good internal controls and records management processes in place.