With the continuing turmoil in the compound and specialty pharmacy industry, many stakeholders are looking for a quick exit. A pharmacy owner may be presented with a stock purchase agreement, which at first, would seem to solve his problems: an all cash offer for all of the shares of the pharmacy, minimal, if any representations and warranties from the Seller, and the assumption by the Buyer of the liabilities of the pharmacy going forward.
As enticing as such an offer might be for an owner/Seller simply looking to cease operations as quickly as possible, Seller needs to be extremely cautious to ensure that he does not get burned after the closing. The critical issue is ensuring that the applicable Board of Pharmacy, Medicare, Medicaid, and Pharmacy Benefits Managers (PBMs) are all properly notified of the transfer of ownership and any approvals for the transfer are timely received.
While these notice requirements in most instances are the responsibility of the Buyer, there have been cases where unscrupulous pharmacy operators/Buyers have deliberately failed to do so. The facts may vary slightly from case to case, but the basic story is the same: Buyer acquires a distressed pharmacy and quickly engages in aggressive billing and sales practices. In a few months, a PBM notices and then conducts an audit. Instead of paying back what is owed, Buyer shuts down the pharmacy and declares bankruptcy. However, due to the operator’s failure to notify the PBM of the change of ownership, the PBM may seek recourse against the Seller, as the PBM is unaware that the Seller (former owner) is no longer operating the pharmacy. To make matters worse, the stock purchase agreement signed by Seller may not grant meaningful indemnification rights against the new operator, Buyer. Seller, who previously thought his issues with PBMs were finally over, suddenly finds himself facing an expensive audit and potentially regulatory issues, all due to an unscrupulous Buyer who treated the pharmacy as a disposable “burner.”
Selling your pharmacy requires involvement by experienced attorneys who can protect you from surprises that often arise after closing. If you are looking to sell your pharmacy or have already been presented with an offer, contact Frier Levitt today.
