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With its interpretation, HHS effectively eliminated approximately $1.50 per reminder in payments made to pharmacies by drug manufacturers.
Federal healthcare privacy regulators and the nation's pharmacies, as well as drug manufacturers, are at odds over part of the Health Insurance Portability and Accountability Act (HIPAA): the Omnibus Rule (Rule) released by the Department of Health and Human Services (HHS) in January 2013. The section in contention deals with restrictions imposed on reimbursements for refill reminders sent to patients.
In general, with respect to its marketing provisions, the Rule strengthened HIPAA’s existing privacy rule. Specifically, patients must authorize use of their protected health information (PHI) in any communication that is paid for by a drug manufacturer, if the patient information relates to the product promoted in the communication. The Rule sets forth the more stringent privacy provisions pursuant to the statute better known as the American Recovery and Reinvestment Act of 2009 (ARRA).
Notwithstanding the patient authorization restriction, ARRA carved out a specific exemption for the use of PHI without patient authorization for third-party-funded marketing of prescription-reminder refills.
ARRA permits payments from drug manufacturers to pharmacies for reminder-refill mailings, but only if the payments are found to be “reasonable in amount.”
However, rather than define this term itself, Congress tasked HHS to define what the term “reasonable” means in this context. HHS, in turn, concluded that the term “reasonable in amount” should mean that pharmacies should not be able to profit from refill reminders.
Historically, payments made by drug manufacturers to pharmacies vary, but are typically in the range of $1.50 for each refill reminder. With its interpretation, HHS effectively eliminated such a reimbursement.
Critics have complained that HHS’ Office of Civil Rights narrowly interpreted the exception to the authorization requirement for paid prescription-refill reminders. These same critics want “reasonable” compensation defined much more broadly, to account for specific costs when calculating profitability.
At least one major retail pharmacy chain has decided to end its refill-reminder program as a result of HHS’ interpretation of the ARRA provisions, to the possible detriment of patient medication adherence and compliance programs.
A statement from the Center for Democracy and Technology has indicated that “clarifications would make the regulatory language regarding the refill reminder exception more consistent with other public health exceptions to the patient authorization requirement, such as the sale of PHI for research purposes. They also would bring HHS in line with Congress’ original intent in drafting the refill-reminder exception in the HITECH Act, which is to promote and encourage these important medication adherence and patient education programs.”
The same interest group specifically asked HHS’ Office for Civil Rights “to clarify that: (1) entering into a business associate agreement with a third party in order to carry out a refill reminder program - a common practice among pharmacies - does not automatically trigger a patient authorization requirement; and (2) ‘reasonable in amount’ payment for refill reminder programs includes all reasonable direct and indirect costs related to them.”
Even though HHS has determined that a pharmacy is entitled only to an amount that is not profitable, one possible workaround for the interested parties would be to obtain patient permission or an official “authorization” to receive the refill reminders. In that case, a pharmacy would be able to market to the patient until the patient withdraws the authorization.
If such a workaround could be realized operationally, then the “reasonable in amount” requirement would not apply, and pharmacies could continue to profit from the refill reminders.
Other responses could include: Congressional statutory intervention, successful persuasion of HHS to alter its point of view, or a legal challenge to the statutory interpretation put forth by HHS.
Ned Milenkovichis a partner and chair of the drug and pharmacy legal practice at Roetzel and Andress LPA. He is also vice chairman of the Illinois State Board of Pharmacy. Contact Ned at 312-582-1676 or at firstname.lastname@example.org.