Month: December 2020

FTC’s First Monetary Sanctions Against Six CBD Companies

Posted on December 23, 2020 by - Government Affairs, Pharmacy

On December 17, 2020, the Federal Trade Commission (“FTC” or “Commission”) announced that the Commission entered into settlements with six sellers of CBD-containing products.  The settlements were the result of the Commission’s enforcement sweep called “Operation CBDeceit,” which is the Commission’s ongoing effort to protect consumers from false, deceptive, and misleading health claims made by CBD companies.  In the settlements, the FTC has ordered each of the companies and the officers to immediately stop making unsupported health claims and pay monetary judgments to the FTC.  This recent enforcement is a significant development in the CBD industry for reasons discussed below.
This is the first enforcement action whereby the FTC imposed monetary sanctions upon CBD companies as well as the corporate officers for claiming unsubstantiated health claims.  The FTC claims that the violators including the corporate officers made a wide range of scientifically unsupported claims about their products’ ability to treat serious health conditions, including cancer, heart disease, hypertension, Alzheimer’s disease, and others.  These allegations are no different than the ones made by the FTC or the Food and Drug Administration (“FDA”) in prior enforcement actions.  What is unique about the recent settlements is that the Commission is holding the corporate officers responsible for participating in the illicit marketing of the CBD products.  It is axiomatic that the Commission will continue to enforce strict regulations over not only the CBD companies but also the corporate officers. Moreover, the violators were ordered to notify consumers about the settlements through various means.  For example, one of the companies was ordered to provide a notice on all of its social media accounts including Facebook, Twitter, Instagram, or YouTube as well as on the first page of the company’s website.  The notice must include a copy of the order.  Furthermore, five of the six settlements required the violators to pay damages ranging from $20,000 to $85,000.
Certainly, the FTC’s recent enforcement action is a key development in the CBD regulation while the industry has proliferated exponentially over the last couple years.  Additionally, there has been a series of lawsuits, which mimicked allegations raised in the FDA’s warning letters, filed against CBD companies.  It is imperative that CBD stakeholders promoting their products in line with applicable Federal and State laws.
How Frier Levitt Can Help
Given the possibility of lawsuits as well as conflicting state and federal law that only complicate regulations on hemp and its derivative products, CBD stakeholders should seek competent counseling to mitigate the risks of unwanted attention by the government or civil lawsuits.  Also, a cursory search using the search terms hemp revealed over 4,000 trademarks and applications. Clearly, the United States Patent and Trademark Office has opened the door for hemp containing products.  The trademarkabilty of such products and services is a nuanced and evolving issue.  If your company handles hemp and its derivatives, contact us today to speak to an attorney.

PBM Licensure and Regulation Model Act

Posted on December 1, 2020 by - Government Affairs

The current United States marketplace for the regulation of pharmacy benefits is a patchwork of inconsistent (and in some cases non-existent) state laws, state and federal agency regulations, agency manuals and federal laws. Uniform state laws would pave the way for more certainty and less confusion.  A Model Act with uniform state laws would be welcomed, so long as the Model Act properly took into account the interests of all stakeholders, including patients.  Unfortunately, the currently proposed Model Act does not do so.

On October 26, 2020, the National Association of Insurance Commissioners (NAIC) approved a Pharmacy Benefit Manager (“PBM” ) Licensure and Regulation Model Act (“The Model Act”) which essentially mirrors that previously developed by the National Conference of Insurance Legislators (NCOIL).  The Model Act puts forth a template for states’ regulation of unfair PBM practices. Over the past few years, pharmacies have filed dozens of lawsuits and countless “confidential” arbitrations against PBMs for various unfair business practices such as network terminations, refusals to permit pharmacies into restricted PBM networks, lack of transparency regarding both rebates and spread pricing, as well as direct and indirect remuneration (“DIR fees”) and predatory reimbursement rates generally. A number of these have been consumer class action lawsuits. For their part, the PBM lobby group, Pharmaceutical Care Management Association (“PCMA”) has filed dozens of lawsuits attacking newly enacted state laws.

Stronger state regulation may obviate the need for some of these lawsuits. The key provisions of the Model include:

  • Requiring that PBMs operating in a state to obtain licensure with each state’s governing authority
  • Providing for state authority for the audit of PBMs for compliance with the Model’s provisions
  • Placing a “fiduciary duty” on PBMs to protect the financial interests of their Plan Sponsor clients
  • Banning Gag Clauses in PBM contracts that unceremoniously prevent pharmacies from telling patients the truth about drug pricing

The proposed Model is primarily directed at PBM licensure and omits specific guidance other than passingly mentioning many of the abusive PBM business practice provisions that individual states have enacted. The Model does little to address many of the important issues for pharmacies such as PBM network adequacy, data reporting requirements under state price-gouging laws, reimbursement claw back prohibitions, spread pricing, rebate transparency, DIR fees, network termination, network access, Maximum Allowable Cost (“MAC”) pricing appeals, prohibitions and limitations on the corporate practice of medicine, procedures limiting  PBM audits of pharmacies, , medical loss ratio (MLR) compliance, reimbursement lists or payment methodology used by PBMs, and transparency provisions. Instead, the Model leaves it up to the states to customize their regulations.

Pharmacy groups are seeking to have these important provisions be added to the provisions that a State Commissioner would be required to adopt, rather than having them as permissive or optional provisions.  Perhaps the most important provision for pharmacies and states in the Model is the narrowing of the language to minimize potential Employee Retirement Income Security Act (ERISA) challenges. Comments have been requested from interested parties on this draft which is expected to be finalized by the end of the year.

How Frier Levitt Can Help

Frier Levitt, LLC offers a full range of Government Affairs/Advocacy services to assist pharmacies and other stakeholders work with state and federal legislators and regulators to adopt favorable PBM legislation, prepare position papers, testimony and comments. Frier Levitt, LLC has experience handling thousands of PBM-related matters for pharmacies, health plans, Plan Sponsors, wholesalers, drug manufacturers and other healthcare providers. PBM audits can make or break an independent pharmacy’s business. Contact Frier Levitt today to speak with our PBM attorneys, many of whom are also pharmacists.