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HHS Guidance Expands Scope of Refill Reminders and Reasonable Costs

As we reported recently, the Department of Health and Human Services (HHS) announced its intent to issue guidance regarding prescription “refill reminder” programs that can be conducted without patient authorization by September 23, 2013.  HHS’s Office for Civil Rights (OCR) actually beat that deadline by four days, publishing its Guidance on September 19, 2013.

OCR’s guidance appears to address most – but not all – of the concerns raised in response to HHS’s January 25, 2013, final revised medical privacy regulations.  It is noteworthy that this is one of those rare situations where very similar concerns were raised by industry groups and well-recognized groups representing consumer and privacy interests.  By addressing most of the public’s concerns, it seems that OCR finally “got it right” in its new guidance.

Sponsored “refill reminder” communications that are provided to pharmacy patients outside of the retail pharmacy setting (such as by mail, e-mail, or telephone) can be conducted without express patient authorization if, among other requirements, any compensation flowing from the sponsor of the program to the pharmacy is “reasonable in amount.”  As we previously noted, HHS’s January 2013 rulemaking preamble appeared to interpret “reasonable” costs too narrowly, which had the practical effect of dissuading many pharmaceutical companies and retail pharmacies from continuing these programs.  In its Guidance, OCR recognized that a pharmacy can be compensated for “the reasonable direct and indirect costs related to the refill reminder or medication program, or other accepted communications, including labor, materials, and supplies, as well as capital and overhead costs.”  That language appears to address widespread industry concerns that indirect costs, capital costs, and overhead costs must be taken into account.

Many retail pharmacies that conduct sponsored refill reminder programs utilize the services of for-profit business associates to assist them.  These business associates run the spectrum from companies that handle ministerial printing and mail-fulfillment tasks to those that assist with design and execution of the entire program.  Some interpreted HHS’s preamble as precluding any profit for a pharmacy’s business associate.  Although OCR did not use the “P” word, it effectively agreed that a business associate can make a reasonable profit by recognizing that a business associate can receive payment for the “fair market value” of its services.  In any competitive marketplace, “fair market value” inherently includes a reasonable profit.  OCR also clarified that the path of payment flow does not affect whether patient authorization is needed.  This point is important because some companies apparently had interpreted HHS’s January 2013 preamble to require patient authorization if any funds flow directly from a sponsoring pharmaceutical company to a business associate.

Sponsored “refill reminders” that do not require patient authorization must concern a drug or biologic that is currently being prescribed.  Importantly, in response to post-rulemaking comments received, OCR’s Guidance recognized that a message about a prescription that has expired within the last 90 days is eligible for the refill reminder exception.

OCR’s Guidance declines to recognize communications about new, improved versions of the prescribed drug and about adjunctive drugs (e.g., a drug that helps address side effects of the prescribed drug) as within the scope of the refill reminder exception.  Importantly, OCR did note that sponsored messages could advise the patient to “ask your doctor” about such products, as long as the specific product is not named.  For example, OCR noted that a pharmacy could send a sponsored communication to a patient alerting the individual to possible side effects from the currently prescribed medication and suggesting that the patient ask her doctor about a medication to treat the side effects.  That sponsored message would be ok if it did not name the specific drug.

Meanwhile, as we previously highlighted, Adheris, Inc.’s lawsuit and motion for a preliminary injunction against HHS, based on the theory that HHS’s January 2013 final rule is an unconstitutional restriction of free speech protected by the First Amendment, will be the subject of a status report that is supposed to be filed in federal court on October 4.  The suit raises meaningful Constitutional questions that, if addressed, could lead to further judicial interpretation of the meaning and scope of the “heightened scrutiny” standard adopted by the Supreme Court in its 2011 decision in Sorrell v. IMS Health, Inc.  As lawyers, we look forward to opportunities for “new law.”  It is somewhat unclear what impact, if any, the new guidance will have on the lawsuit.  Stay tuned – we will!

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