U.S. Government Alleges Counterfeit HIV Drugs Hiding in Pharmacy-to-Pharmacy Purchases

criminals buying back empty manufacturer bottles from patients, removing pharmacy labels with lighter fluid, refilling the bottles with cheap medication or counterfeit tablets made to look like the real thing, and then selling them to cooperating pharmacies that are in on the scheme. The participating pharmacies then either dispensed the medications to patients (after billing insurance) or further distributed the drugs to unsuspecting pharmacies through online marketplaces where Drug Supply Chain Security Act (DSCSA) integrity can be compromised.

The DSCSA permits pharmacies (called “dispensers” under the law) to purchase drugs from other pharmacies – to conform to the law, these purchases must be accompanied by the pedigree to ensure that the “track and trace” paper trail remains intact. A notable exception to the DSCSA is that pharmacies may purchase drugs and do NOT have to obtain the pedigree IF the purchase is for a “specific patient need” (further discussed in December 2022 article Pharmacy to Pharmacy Inventory Transfers – Buyer Beware!)

Due to systemic underpayments by PBMs, many pharmacies have been forced to hunt for savings outside of their primary wholesaler agreement which has led to the proliferation of “pharmacy to pharmacy” purchases, resulting in routine purchases from marketplaces because products are cheaper than from regular wholesalers (despite widespread availability). The criminals know that pharmacies run on tight margins and are often desperate to find savings. These fraudsters are also smart enough to discount prices just enough to get pharmacies to buy the products, but not discount them too much as to tip off the fraud (i.e., a 5% discount is more believable than a 30% discount).

PAAS has worked with numerous pharmacies that have run into significant invoice audit problems based on large volumes of pharmacy-to-pharmacy purchases that occurred through online marketplaces. Due to these large volumes, the PBMs (mainly Caremark and OptumRx) are challenging the claim that the purchases fall under DSCSA exception and demand that pharmacies provide evidence of specific patient need, copies of selling pharmacy licenses, and copies of wholesaler invoices showing where the selling pharmacies obtained the drugs. Because of the arms-length transaction facilitated through the online marketplace, the selling pharmacies are typically not interested in getting involved. In the absence of these supporting documents to prove that the pharmacy is “innocent”, and the products are legitimate, the PBMs have presumed products are counterfeit or diverted, resulting in them seeking full recoupments (often 6- and 7-figures) from independent pharmacies!

Additionally, in the last few weeks, PAAS has seen several subpoenas being issued to independent pharmacies pursuant to Gilead II’s pending case in the U.S. District Court for the Eastern District of New York.

The DSCSA is designed to keep counterfeit and diverted medications out of the U.S. supply chain and keep patients safe. While the full implementation of electronic interoperability will not be enforced until November 27, 2026 (2 year exemption for “small dispensers”) pharmacies are still required to comply with many aspects of DSCSA including: ensuring that you purchase drugs from authorized trading partners, receive/store/provide product tracing information, and quarantine/investigate suspect and illegitimate drugs.

PAAS Tips:

• Procuring medications outside of DSCSA “Authorized Trading Partners” puts pharmacies and patients at great risk
• See this information sheet from the Partnership for Safe Medicines to help educate your staff
• See Newsline article from April 2024, Caremark Invoice Audits – Purchases from Other Pharmacies for a list of data points to record if you purchase inventory from another pharmacy