NACDS supports Florida hospital in case against Department of Labor

May 15, 2011

Are pharmacies subcontractors when they fill prescriptions for TRICARE, the federal health program for military personnel? Not according to the National Association of Chain Drugs Stores.

Key Points

Are pharmacies that fill prescriptions for TRICARE, the federal health program for military personnel, subcontractors? Not according to the National Association of Chain Drug Stores (NACDS), which filed an amicus curiae brief earlier this year to support its position.

The case pits Florida Hospital of Orlando, which provides medical care to military personnel, family members, and retirees under the TRICARE system, against the Department of Labor (DOL). A DOL administrative law judge (ALJ) ruled that the hospital is a federal subcontractor and must meet detailed new record-keeping and employment requirements for federal contractors.

A broad ruling

"Pharmacies are not party to this case," Bell told Drug Topics. "However, it is entirely possible that [DOL] could extend this wording well beyond hospitals. This ruling talks about 'providers,' not about 'hospitals.'"

A December 2010 directive from DOL cites the Orlando case and notes that third parties providing services under Medicare Part D can be considered subcontractors and subject to DOL regulations.

The example cites a pharmaceutical company that contracts with a healthcare plan to provide prescription medications under a Part D Medicare Advantage program. Pharmacists and pharmacies are not mentioned specifically, but the directive outlines broad definitions of "provider" that include "hospitals and medical facilities, doctors and medical professionals, and any other professional, company, or entity that provides medical services and supplies."

Florida Hospital of Orlando provides medical services to TRICARE beneficiaries under a contract with Humana Military Healthcare Services, a wholly owned subsidiary of health insurer Humana Inc. The hospital says that provision of medical services under a Humana contract does not make the hospital a federal subcontractor. DOL holds that providing medical care to TRICARE beneficiaries does make a provider a federal subcontractor and subject to specific employment-related tracking and reporting requirements.

Where pharmacies come in

The hospital is currently appealing the ruling made by the administrative law judge. If the ruling is upheld in full, Bell said, it is possible that the broad definition of "provider" could be expanded to include pharmacies. NACDS said that most of the 39,000 pharmacies operated by its member chains provide retail pharmacy services to the TRICARE population of about 9 million beneficiaries.

Meeting DOL reporting requirements would add tens of thousands to hundreds of thousands of dollars annually to operating expenses, depending on chain size. Some chains say the cost of meeting DOL reporting requirements would surpass their total TRICARE sales revenue.

In addition, meeting the DOL reporting requirements on race, gender, and disability could put chains at risk of violating federal antidiscrimination laws. The NACDS brief noted that most chains avoid asking the kinds of questions about race, gender, and disability that the DOL requires in order to minimize potential liability under the Civil Rights Act of 1964 and requirements established by the Equal Employment Opportunity Commission.

Possible consequences

"Our goal is to let the agency know that a decision against the hospital has ramifications beyond this one hospital," Bell said. "Our aim is to put pharmacy on their radar screen. If you are going to apply a new burden for which the costs may outweigh the profits, you may well see pharmacies withdrawing their participation in TRICARE. That would not be in the best interests of the federal government, pharmacies, and least of all our military beneficiaries and their dependents."