Published in Frier Levitt
As the traditional pharmacy benefit manager (PBM) framework faces mounting economic and political pressure, pharmaceutical companies are increasingly rethinking how products reach patients. Ongoing federal scrutiny of drug pricing, combined with reimbursement constraints and utilization controls, has accelerated the shift toward direct-to-consumer (DTC) distribution and engagement strategies. As DTC pharmacy models continue to expand across therapeutic categories and business structures, they are increasingly subject to overlapping federal and state regulatory requirements. Often developed in response to reimbursement pressure, utilization controls, and other constraints imposed by PBMs, these models present meaningful commercial opportunity, but they also raise complex compliance considerations that must be addressed early and deliberately.
Key Legal and Regulatory Considerations for DTC Models
While DTC programs offer commercial upside, they sit at the intersection of multiple regulatory regimes, each of which requires careful structuring. Stakeholders entering this space should evaluate, at minimum, the following legal considerations:
- Federal and State Fraud-and-Abuse Risks (Anti-Kickback Statute, Beneficiary Inducement, Fee-Splitting)
Manufacturer-to-pharmacy financial relationships may raise concerns under the federal Anti-Kickback Statute (AKS), especially where patient steering, volume-based compensation, or preferential access to a pharmacy exists. All forms of remuneration by and between the parties, such as discounts, data-sharing payments, “per-script” fees, or marketing support, require rigorous review. In addition, even where federal dollars are not involved, state-level fee-splitting, Corporate Practice of Medicine (CPOM), and inducement statutes must be considered, which can often be more restrictive than federal law and may prohibit certain revenue-alignment models between telemedicine providers, pharmacies, and manufacturers.
- Telemedicine Compliance
DTC programs that involve virtual prescribing must ensure compliance with state rules and requirements surrounding the practice of telemedicine, including state licensure requirements for prescribing providers seeing patients throughout the country, as well as telemedicine prescribing rules (including restrictions around controlled substances, modality requirements, and in-person evaluations). Further, DTC operators must evaluate each state’s CPOM prohibitions, which limit how manufacturers or pharmacies may interact with or provide oversight of telemedicine providers. Finally, all DTC arrangements need to be structured to comply with traditional documentation, informed consent, and continuity-of-care obligations incumbent on any telephysician-patient relationship.
- Pharmacy Regulatory and Operational Considerations
Likewise, pharmacies participating in DTC models must consider a wide array of legal and regulatory concerns. Many state Boards of Pharmacy provide restrictions on advertising, white-labeling of dispensed products, and partnering with non-pharmacy entities. In addition, pharmacies need to meet applicable requirements for patient counseling, pharmacy staffing, and remote processing in each state into which they dispense. Finally, pharmacies are responsible for complying with REMS programs (where applicable) and state-level clinical monitoring rules, along with USP standards and FDA requirements when dispensing compounded medications.
- Payor and PBM Contracting Issues
Unsurprisingly, DTC models can create friction with PBMs and payors. In instances where the DTC program seeks to incorporate insurance billing, PBMs could take issue, suggesting that the manufacturer’s DTC program is perceived as steering patients toward a specific pharmacy or increasing utilization of a potentially non-preferred product. Likewise, even where the DTC program does not involve insurance billing, PBMs have taken issue with contracted pharmacies dispensing products for cash when the patients are insured and the drugs are otherwise covered. Similarly, a pharmacy’s participation in a DTC program could create “usual and customary” pricing conflicts if the DTC price is lower than the price being billed to the PBM for the same drug.
- Contractual Considerations Between Manufacturers, Pharmacies, and Third-Party Vendors
Apart from the legal and regulatory considerations, DTC models typically require a large suite of different agreements, with much consideration required to ensure proper contracting structure and to avoid liability. These agreements include:
- Master services or fulfillment agreements between manufacturers and pharmacies
- Telemedicine provider or network agreements
- Data-use and data-sharing agreements
- Marketing and patient-engagement vendor agreements
- White-label or co-branding arrangements
In negotiating these agreements, stakeholders must pay keen attention to indemnification, audit rights, pricing, and service-level commitments. Ultimately, these agreements must be aligned to avoid structural conflicts, fee-splitting issues, or unintended inducement risk.
Conclusion
While DTC pharmacy models present a significant opportunity for manufacturers and pharmacies, they function within one of the most heavily regulated segments of the healthcare industry. Even seemingly small design choices, such as how marketing costs are allocated, how telemedicine providers are compensated, or how patient data is shared, can create significant regulatory exposure.
How Frier Levitt Can Help
Manufacturers, pharmacies, and emerging DTC platforms should engage experienced healthcare counsel early in the process to ensure their models are compliant, scalable, and defensible. Frier Levitt has extensive experience advising pharmaceutical companies, technology platforms, telemedicine providers, specialty pharmacies, and other innovators on structuring DTC pathways that balance commercial objectives with rigorous legal compliance.
If your organization is exploring a DTC launch, restructuring an existing program, or evaluating partnerships with pharmacies or telemedicine providers, our team can help you navigate these issues and design a compliant pathway forward.
