Barclay Damon
Barclay Damon

Legal Alert

Pharmacy Update; Volume II

Recent federal and state health law changes and initiatives will affect pharmacies in the area of Medicaid reimbursement. Recognizing that health care law is a constantly changing and evolving area, we are providing continued overview of recent initiatives and policy developments that will affect Medicaid pharmacy providers in New York.

As we have discussed in prior alerts, under the Federal State Health Reform Partnership (FSHRP) negotiated between New York State and CMS, New York was required to significantly increase its Medicaid audit recoveries over a defined period of time. For federal fiscal year 2011 (ending September 30, 2011), the FSHRP target is $644 million. This requirement, coupled with reduced state and federal revenues, will result in a continued emphasis on markedly increasing audits and other recovery initiatives.

Pharmacy policy developments

Automatic refills–In a recent State Medicaid Provider Update Article, issued in July, 2010, the State has again reminded pharmacy providers that automatic refilling of prescriptions or refilling without the knowledge or permission of the beneficiary is NOT permitted under the Medicaid program. A provider may initiate contact with a beneficiary to determine if a refill is necessary. Documentation of the need for the refill must be maintained in the patient record and must include the date and time of contact, Medicaid beneficiary (or caregiver’s) name and the pharmacy contactor’s identity.

Electronic records–In another Update Article, issued in June 2010, the State reiterated its policy regarding the use of electronic records by pharmacy providers. Requirements include:

  • Maintenance by the Pharmacy of the signed prescription or fiscal order for which Medicaid is claimed for six years from the date of payment;
  • Where original records are required (such as DME fiscal orders), providers may store the originals off site and maintain copies on site. The original records must be accessible and made available upon a lawful request and the location of the records must be maintained at the pharmacy;
  • Electronic imaging of prescriptions and fiscal orders must result in exact reproduction and may be required to be authenticated; and
  • A telephone order must be reduced to writing either through an electronic record or electronic communication indicating the time of the call and initials of the pharmacist.

Retention of a hard copy of an electronic prescription is no longer required as long as it can be securely stored and produced at audit in an electronic format. Where a prescription paid by Medicare is at issue, Medicare requires records be maintained for five years longer than the applicable State’s Medicaid requirement (six years in New York). Thus for Medicare, the general policy is maintenance of records for eleven years; the most recent six years must be maintained in its original format. For non-Medicare prescriptions, we strongly recommend maintenance of all necessary records, including prescriptions, for a period of ten years. This recommendation is based upon the length of time permitted for government or private action under such laws as the Federal False Claims Act. As stated above, prescriptions reimbursed by Medicare have a longer maintenance requirement of eleven years.

Home delivery–Prescription drugs, over-the-counter products, medical/surgical supplies, and durable medical equipment can be delivered to Medicaid enrollees, provided pharmacies implement and operate a distribution and delivery system that reflects “best practices”. Formal home delivery requirements will be released in a future Provider Update article. The requirements are expected to include:

  1. All shipping and delivery costs are the responsibility of the pharmacy. Medicaid beneficiaries cannot be charged for delivery even if the provider charges non-Medicaid enrollees for the cost of delivery.
    The pharmacy must inform the beneficiary or their designee of the pharmacy’s delivery schedule, verify the date and location for the delivery and advise the Medicaid patient either verbally or in writing (e.g., a patient information leaflet) of the correct handling and storage of the delivered prescriptions.
  2. The pharmacy is accountable for proper delivery and must obtain a signature from the beneficiary or their designee confirming the delivery. A waiver signature form will not serve as confirmation of delivery. Confirmation of the delivery must be maintained by the pharmacy and must be retrievable upon audit. Electronic signatures for receipt are permitted only if retrievable and kept on file by the pharmacy.
  3. The pharmacy is liable for the cost of any prescription damaged or lost through distribution and delivery and automatic refills are not permitted.

Hiscock & Barclay, LLP has experience in assisting providers with audits, investigations and compliance initiatives. Should you need assistance with any of these matters, please contact any member of our Health Care and Human Services Practice Area.