Pharmacy to Pharmacy Inventory Transfers – Buyer Beware!

Drug shortages are pervasive to pharmacy practice – NCPA just reported an astonishing 98% of community pharmacies are experiencing drug shortages. As entrepreneurs, community pharmacy owners have always found creative ways to take care of patients. Pharmacy to pharmacy transfers are commonplace in the industry, but much has changed since Lipitor® and Prevacid® were used as currency in a legal drug exchange.

The Drug Quality and Security Act was enacted by Congress November 27, 2013. Title II of this Act was the Drug Supply Chain Security Act (DSCSA), which “outlines steps to achieve interoperable, electronic tracing of products at the package level to identify and trace certain prescription drugs as they are distributed in the United States”. The goal of the DSCSA is to secure the US drug supply chain and protect consumers from exposure to drugs that may be counterfeit, stolen, contaminated, or otherwise harmful. The FDA expects that the vast majority of prescription drug products, that are ultimately dispensed to US consumers, have flowed through the “tracked” and “traced” supply chain. The law provides for very limited exceptions where prescription medications can be sourced outside of the tracked and traced system.

In an FAQ published by the FDA, the issue of pharmacy to pharmacy transfers is addressed:

When a pharmacy sells a product to another pharmacy, do the DSCSA product tracing requirements related to transaction history, transaction information and transaction statements apply?

Yes, except for sales by a dispenser to another dispenser to fulfill a specific patient need. The law defines a “specific patient need” as the transfer of a product from one pharmacy to another to fill a prescription for an identified patient and does not include the transfer of a product from one pharmacy to another for the purpose of increasing or replenishing stock in anticipation of a potential need. You can find more information in sections 581(19) and 582(d)(1)(A)(ii) of the FD&C Act.

So, what does this mean for your pharmacy?

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If you receive a prescription for a medication that you do not have in stock, you can purchase this medication from another pharmacy and are not required to obtain the tracing information.

However, if it’s not for a specific patient need, or for an amount that exceeds the prescription in question, it is likely not exempt from tracing requirements. With gross margin compression, it’s understandable that pharmacies may use marketplaces like MatchRx, Rxeed, EzriRx or others to find deals, but you must consider DSCSA requirements (i.e., not for anticipatory needs unless you’re obtaining tracing information). These marketplaces claim DSCSA compliance pursuant to a specific patient need (see Rxeed, MatchRx, and EzriRx).

Interestingly, both MatchRx and EzriRx use an identical “industry interpretation”:

Industry interpretation for Specific Patient Need includes situations in which a dispenser has a prescription in hand for an identified patient, a recurring prescription for an identified patient, or written/electronic notice from a provider that a prescription for an identified patient is forthcoming.

What’s not a specific patient need? Any time you are increasing or replenishing stock instead of dispensing the product when you receive it. On an invoice audit, PBMs expect a product to be dispensed in short order if the pharmacy is claiming exemption from tracing requirements pursuant to a specific patient need.

Here is an excerpt directly from the OptumRx Provider Manual:

‘Any inter-pharmacy transfers or purchases made through intermediary third parties or marketplaces for the purpose of increasing or replenishing stock, and not made to fulfill a specific patient need for an identified patient, are subject to the requirement to obtain transaction history, transaction information, and a transaction statement for the product.’

The industry interpretation language for “a recurring prescription for an identified patient” has no direct reference and is not likely to hold weight with PBMs as they interpret laws as they see fit. Absent state/federal regulations to the contrary, pharmacies will have a hard time convincing PBMs that a specific purchase transaction is exempt from tracing requirements for a recurring prescription dispensed several weeks, if not months, later.

Another exemption that these marketplaces reference is purchases under a declared public health emergency (PHE). While pharmacies have become accustomed to the term since COVID, there are a multitude of currently declared PHEs ongoing simultaneously, including the Opioid Crisis (since 2017) and now Monkey Pox (2022). However, the exemption only applies when the drug shortage is a result of the PHE. Under DSCSA 581(24)(B)(iii) it states:

‘the distribution of a product for emergency medical reasons including a public health emergency declaration pursuant to section 319 of the Public Health Service Act, except that a drug shortage not caused by a public health emergency shall not constitute an emergency medical reason;’

If you are purchasing a medication that is not for a specific patient need, and readily available from your primary wholesaler, it would be difficult for a pharmacy to demonstrate that they were exempt from tracing requirements in a pharmacy-to-pharmacy transaction as a result of a drug shortage related to the PHE.

Regardless, when purchasing non-controlled inventory from another pharmacy, documentation should include:

  • Pharmacy name, address, and NCPDP number transferring from
  • Drug name, quantity, lot number, expiration date, and NDC number should all be included on the transfer invoice
  • Date of transfer and date of receipt of drug
  • Reason for transfer (e.g., complete Rx #1234)
  • Method or proof of payment (check # or credit card receipt)

Invoice shortages or invalid purchases put claims at risk of recoupment and may lead to the pharmacy having to implement a corrective action plan. In some cases, shortages can even lead to contract termination. Be sure you consider all the risks when making purchases to supplement your primary wholesaler. Would you be able to show DSCSA compliance (or exemption) and provide all required documentation necessary in case of an audit?

PAAS Tips:

  • Anticipatory purchasing from another pharmacy to restock supply requires DSCSA tracing information
  • DSCSA exemptions for PHEs apply only when the drug being purchased is in short supply due to the PHE
  • When purchasing for a Specific Patient Need, make sure to document accordingly and only procure the necessary amount for the prescription
  • Be sure to retain all supporting documentation related to the purchase and have accessible in the event of an invoice audit

Trent Thiede, PharmD, MBA