As a national healthcare and life sciences boutique law firm, Frier Levitt understands that Supermarket Pharmacies play a special role in the healthcare delivery system and serve patients in unique and pragmatic ways. While many from the outside looking in may perceive Supermarket Pharmacies as aligned with larger retail chain pharmacies, Supermarket Pharmacies often deal with many of the same legal issues facing independent pharmacies operating in the United States today. In addition, Supermarket Pharmacies often face a labyrinth of legal challenges when it comes to dealing with pharmacy benefit managers (PBMs) as well as state licensing agencies and boards of pharmacies since Supermarket Pharmacies often operate in multiple adjacent states with different laws, rules and regulations governing their operations on critical issues such as central fill arrangements. Supermarket Pharmacies are confronted with numerous legal issues and challenges including those related to licensing, contracting, credentialing, reimbursement, pharmacy network access, and the improper assessment of various fees and penalties against Supermarket Pharmacies that may violate various contracts and/or laws.
Supermarket Pharmacies also often operate as a “loss leader” with certain losses being justified to drive more traffic to the Supermarket. However, Supermarket Pharmacies that are willing to challenge improper PBM tactics on key issues such as reimbursement rates, do not have to accept a model where the Pharmacy operation functions only to lose. Rather, Supermarket Pharmacies can be a profit center and add significant value to the operation of the Supermarket, far beyond just increasing customer traffic. In fact, Supermarket Pharmacies have unique opportunities to excel, specifically, in the area of customer satisfaction. Numerous studies have shown that Supermarket Pharmacies consistently outperform their competitors, including larger chain pharmacies, in customer satisfaction. To seize the tremendous opportunities available to Supermarket Pharmacies and overcome the legal challenges they face, it is critical that Supermarket Pharmacies work with knowledgeable legal experts.
Frier Levitt represents Supermarket Pharmacies in various locations throughout the United States and understands the unique challenges they face including operating in a competitive environment where margins and return on investment are crucial. Supermarkets are well versed in the importance of minimizing and eliminating waste or “shrink” in the operation of their traditional grocery or food-based retail store operations—that same concept is directly applicable to the operation of a successful Supermarket Pharmacy.
Shoplifting, return fraud, employee theft, and administrative error are common examples of “shrink” in the operation of traditional retail operations including Supermarkets. Additional examples of potential “shrink” include not adequately negotiating and monitoring PBM drug reimbursement practices—this is especially pronounced in the reimbursement of generic drugs, which constitute the vast majority of the drugs dispensed by pharmacies throughout the United States today—these drugs are typically acquired and reimbursed at much lower prices than their brand name drug counterparts. PBMs reimburse Supermarket pharmacies for generic drugs under a Maximum Allowable Cost (“MAC”) pricing reimbursement scheme that PBMs have unilaterally created. Importantly, MAC reimbursement often changes on a weekly or in some cases even on a daily basis—often without notice to providers. Supermarket Pharmacies must pay close attention to PBM MAC reimbursement practices and rates to ensure that the reimbursement complies with the applicable contracts and state laws governing this type of reimbursement. Supermarkets pharmacies should be aware that many states have laws to protect MAC reimbursement appeals. Left unchecked, PBMs will often unilaterally dictate MAC reimbursement in a manner that is unsustainable for pharmacies, including Supermarket Pharmacies. In many cases PBMs reimburse generics at rates that fall below the acquisition cost of the corresponding drugs. Frier Levitt’s comprehensive understanding of the establishment of MAC pricing and MAC reimbursement enables it to find effective solutions to address this improper pricing and reimbursement tactic.
Frier Levitt also has extensive knowledge of other practices that can impact Supermarket Pharmacies’ reimbursement and overall margins including the crucial issues of Direct and Indirect Remuneration Fees (“DIR fees”), net promoter score (“NPS”), generic effective rate (“GER”). DIR fees, for example, have become one of the most detrimental policies enacted by PBMs against pharmacies, including Supermarket Pharmacies, in recent history. PBMs have improperly manipulated the term “DIR” to justify the assessment of unreasonable fees on Supermarket Pharmacies in a non-transparent manner that harms providers and directly impacts overall reimbursement. One of the most critical characteristics of DIR fees is that they are calculated retrospectively and therefore assessed against pharmacies many months after the pharmacies have been reimbursed on claims submitted to the PBM. The uncertainty of the amount of DIR fees, coupled with the impact upon pharmacy reimbursement, has had a profound impact on pharmacy operations throughout the country including on Supermarket Pharmacies. Frier Levitt has gained a comprehensive understanding of DIR fees and has had numerous successes in addressing DIR fees against PBMs on behalf of pharmacies.
In addition to legal issues directly affecting reimbursement, Frier Levitt also represents Supermarket Pharmacies in numerous other legal matters including state pharmacy licensing issues, state board of pharmacy matters including legal representation in connection with state board of pharmacy proceedings, network access issues including challenging improper denial of network access, central fill, remote processing, analysis of HUB relationships, purchases and sales of pharmacy locations, and shared services arrangements. Supermarket Pharmacies may also face increased scrutiny by PBMs and Frier Levitt stands ready to challenge issues arising from unwarranted PBM scrutiny including audits and investigations.
Frier Levitt’s legal services related to Supermarket Pharmacies include:
We also have a wealth of experience in assisting Supermarket Pharmacies in other related legal matters including in transactional matters including mergers and acquisitions. We provide tailored solutions to our clients backed by nearly 20 years of experience in the healthcare and life sciences industry. For more information, contact Frier Levitt today to speak with an attorney.