Regulation of mail-order pharmacy.

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Regulation of mail‐order pharmacy Gregory S. Munro J.D.

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Assistant Professor, School of Law , University of Montana , Missoula, MT, 59812 Published online: 23 Jul 2009.

To cite this article: Gregory S. Munro J.D. (1991) Regulation of mail‐order pharmacy, Journal of Legal Medicine, 12:1, 1-58, DOI: 10.1080/01947649109510843 To link to this article: http://dx.doi.org/10.1080/01947649109510843

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The Journal of Legal Medicine, 12:1-58 Copyright © 1991 by Hemisphere Publishing Corporation

REGULATION OF MAIL-ORDER PHARMACY

Downloaded by [New York University] at 06:20 22 May 2015

Gregory S. Munro, J.D.*

Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains. Thomas Jefferson1

INTRODUCTION Traditionally, Americans have purchased their prescription medications at corner drugstores operated by pharmacists registered under and regulated by state pharmacy practice acts that control their practices. The federal government has intruded into this system of state-regulated and community-based retail pharmacies only insofar as necessary to prevent adulteration and misbranding of drugs2 and to regulate the dispensing and delivery of controlled substances.3 Not suprisingly, the body of law developed in the United States in the last century to regulate retail pharmacy sales contemplates a transaction in which the customer hands to a neighborhood pharmacist across the counter a prescription order, written by a local physician, known by both the patient and the pharmacist. Pharmacy has traditionally been equated with individual professional practice, and

* Assistant Professor, School of Law, University of Montana. Address correspondence to Professor Munro at the School of Law, University of Montana, Missoula, MT 59812. The author thanks Dean David Forbes of the University of Montana School of Pharmacy and Allied Health Sciences, David Brushwood of the University of Florida School of Pharmacy, and Dean J. Martin Burke of the University of Montana School of Law for their comments and suggestions. The author also expresses his appreciation to Kerrylyn Whalen, R.Ph. and law student at the University of Montana, for her research assistance. The paper from which this article was developed received the James Hartley Beal Award for the Best Paper in Pharmacy Law 1990 at the Annual Meeting of the American Society for Pharmacy Law in Washington, D.C., Spring 1990. 1 Letter from Thomas Jefferson to Horatio G. Spafford (Mar. 17, 1814), reprinted in BARTLETT, FAMILIAR QUOTATIONS (14th ed. 1968). 2 3

Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301 (1938). Comprehensive Drug Abuse Prevention and Control Act of 1970, Pub. L. No. 91-513, 84 Stat. 1236 (codified as amended in scattered sections of the United States Code).

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patient safety protected by regulating the education, experience, conduct, and standards of the individual pharmacist. With the remarkable growth of mail-order pharmacy in the last decade, a new and powerful enterprise that does not fit the traditional community-based pharmacy model has emerged on the scene. The mailorder pharmacy may operate in a state hundreds, even thousands, of miles away from the patient who will never see the pharmacist face-to-face. The pharmacist (or perhaps even a lay technician) who fills the prescription most likely will not known the physician who wrote it. In fact, delivery of the prescription medication across state lines may represent the only contact the mail-order house will have with the state in which the patient lives. Mail-order pharmacy existed in the United States before this decade, although it was dormant until the 1980s.4 Awakened, it economically impacts community-based pharmacy practice and affects socially and legally the pharmacist/patient relationship. Drug manufacturers, pharmacists, patients, physicians, and employers all find themselves jostled uncomfortably by the somewhat clumsy emergence of mail order into the world of retail pharmacy. Those affected are raising questions of health, safety, and economic competition. Invariably, parties perceiving the service as a threat to public safety, health, or business call for governmental regulation. The states and the federal government, having adopted a regulatory framework that assumes state regulation of resident community-based pharmacists, now find themselves confronted with an interstate industry that is non-resident to the very states that would purport to govern it. Traditional regulation that governs the characteristics of the individual pharmacist seems ill-fitted to an enterprise that does not depend on any direct pharmacist/patient relationship and casts the pharmacist more as a quality control supervisor. Mail-order pharmacy has been born at a time when the federal government employs a "front-end" method of regulation, monitoring the development, manufacturing, and distribution of new drugs to ensure quality and purity for safety and health of consumers. But the mail-order enterprise, whose nature was unanticipated, may not be seined in this drug safety net, raising the specter of tail-end dispensing failures that could defeat the entire system. The movement for special regulation of out-of-state mail-order phar4

Judge Gerhard Gesell's findings of fact in Federal Prescription Serv. v. American Pharmaceutical Ass'n, 484 F. Supp. 1195, 1198 (D.D.C. 1980), well reflect the calm before the storm: This form of drug distribution became of competitive consequence to the established independents in the late 1950s and early 1960s. The number of mail order pharmacies was never large. Many had a brief existence and few survived for any appreciable period. As far as the record shows there were no new entrants in the 1970s.


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macy gained impetus with the death in 1987 of Iris Hemmelman of Princeton, Idaho. The death occurred when a mail-order pharmacy mistakenly dispensed coumadin (warfarin), a blood thinner, in place of the prednisone that was prescribed for Hemmelman. Criminal and civil actions were prosecuted in the wake of her death, and hearings were held before a Senate subcommittee to examine the safety of mail-order pharmacy.5 Critics of mail-order dispensing saw the Hemmelman death as a direct reflection of the hazards involved in the industry. Mail-order proponents viewed it as anecdotal evidence of risk of human error that is also inherent in community-based pharmacy. Hence, the issues arise: (1) are the mail-order pharmacies subject to regulation by the states into which they mail prescription medications? (2) is additional regulation necessary? (3) how can that regulation be accomplished? and, (4) will proposed regulation be constitutional? In the end, the solution to these issues will require nothing less than an answer to the fundamental question of public policy: is mail-order pharmacy to be deemed professional pharmacy practice, or is it better considered a drug product packaging and distribution operation? Although it is cognizable at law as a matter of public health and safety in either case, the appropriate regulatory approach will be different depending on the classification. This article traces the development of mail-order pharmacy and its impact on the world of retail pharmaceutical sales. It analyzes the practice in light of the existing regulatory scheme and evaluates proposed means of regulation. The author discusses the important role of the tort system in the regulation of health and safety in mail-order pharmacy, and makes predictions about the future of mail-order pharmacy and the method by which it will be regulated. The article calls for empirical study to determine the risk involved in mail order and for a regulatory focus on public health and safety as opposed to retail competition. Above all, the article points out the need to delineate and regulate the "out-of-state" aspect of this industry as either a professional practice to be governed by the states or as a drug product process appropriate for federal regulation.

I. BACKGROUND Mail-order pharmacy is not new. In the late 1940s, the Veterans Administration (VA) started the first mail-order pharmacy service for the ben5

Safety and Soundness Standards in the Mail Order Prescription Industry: Hearings Before the Subcomm. on Government Efficiency, Federalism, and the District of Columbia of the Comm. on Governmental Affairs, United States Senate, 100th Cong., 1st Sess. (1987).


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efit of its veteran population. The service, which offers veterans the convenience of not having to travel to \ A health care centers for maintenance medications, has grown steadily as veterans of World War II have aged and veterans of Vietnam have joined their ranks. Today, YA mail service handles 20 million prescriptions per year accounting for nearly half of the annual 43 million prescriptions dispensed by the administration.6 Thirty years ago, the American Association of Retired Persons (AARP) Pharmacy Service was begun. The AARP program is non-profit, providing both legend7 and over-the-counter drugs. With the growth of the elderly population in this country the AARP Pharmacy Service has expanded dramatically, dispensing eight million prescriptions annually through a system of 10 regional pharmaceutical centers.8 Today, it is the largest private mail-order pharmacy.9 For-profit programs funded by employers and unions have experienced the most significant growth in this decade. This growth occurred as mail-order pharmacy became a union benefit.10 Participants in the field now include large companies like Sears and J. C. Penney as well as hospitals and subsidiaries of drugstore chains like Walgreens and Thrift." Also availing themselves of the benefits are the following: Comp-U-Card, an electronic shop-at-home service based in Stamford, Connecticut and serving a million subscribers; Ford Motor Company, through its agent, Health Care Service of Chester, Pennsylvania; General Motors; and, Uniroyal.12 Finally, the ranks of subscribers include the International Ladies Garment Workers Union, the United Auto Workers, the American Federation of State, County, and Municipal Employees, and major public retirement programs in Texas and Ohio.13 Any account of the evolution of mail-order pharmacy must mention Medco Containment Services, Inc., the industry leader among private providers of mail-order services. The company dispenses more than four million prescriptions per year for more than 500 corporate clients whose employees it serves.14 The company's principal subsidiary, National 6

Enright, Mail-Order Pharmaceuticals, 44 AM. J. HOSP. PHARM. 1870 (1987). "Prescription legend" or "legend" drugs are those that may be dispensed only on the prescription of a licensed practitioner under the Food, Drug and Cosmetic Act (FDCA) § 503(b). 21 U.S.C. § 353(b). They gain their name from the requirement that each such drug bear the legend "CAUTION: Federal Law Prohibits Dispensing Without Prescription." Id. § 503(b)(4). 8 Enright, supra note 6, at 1871. 9 Id. 10 Boyd, Mail Order Prescriptions: The Controversy Continues, Michigan Pharmacist, Jan. 1986, at 4. 11 Enright, supra note 6, at 1871. 12 Boyd, supra note 10, at 4. 13 Hearings, supra note 5, at 42 (statement of Martin Wygod, CEO of Medco). 14 Id. at 633. 7


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Pharmacies, Inc. (National Rx Service) is, by virtue of its position in the field, often found at the center of controversy involving the merits or legality of mail-order pharmacy. The company whose shares are publicly traded is estimated to have 1990 sales of more than $1 billion, accounting for half of the private mail-order pharmacy market.15 In 1983, the private mail-order pharmacy sector dispensed an estimated 11 million prescriptions.16 Mail service sales of prescription drugs have grown 50% per year since 1981, from less than $100 million in that year to in excess of $750 million in 1986.17 The industry in 1990 estimates that about 60 million prescriptions, or perhaps four percent of the 1.5 billion dispensed annually, are serviced by mail for gross sales of $2.5 billion.18 Senate subcommittee hearings on safety in the mail-order prescription industry, also attributed four percent of the $21 billion retail pharmaceutical sales market to the mail-order operations.19 American Druggist magazine estimated the industry filled 56 million prescriptions in 1988.20 The expected growth of mail-order pharmacy is probably more significant than its phenomenal history. Recent industry analysis indicates that mail order will comprise about 10% of a $28 billion market by 1991.2I To date, the VA mail-order program is only being used by three million of the total 29 million veterans who use the VA health care system.22 While AARP membership increases by 350,000 persons per month, only 10% to 15% of its membership use its mail-order services.23 Membership of AARP, which was expected to exceed 30 million in 1990,24 actually reached 32,750,000.25 The trend in the funded, for-profit companies is consistent with predictions of substantial development. This commercial phenomenon might prompt one to ask who the mailorder pharmacies are and what types of entities is the industry composed? The answers to these questions are remarkably hard to find, and the difficulty of identifying the mail-order pharmacies in the United States may be an indicia of the regulatory problem. While every state pharmacy board likely can list each community15

16 17 18

19 20 21 22 23 24 25

Telephone interview with Del Konner, Executive V.P. of the American Managed Care Pharmacy Association (Dec. 7, 1990). Angorn & Cannon, Mail-Order Prescriptions, United States Pharmacist, July 1985, at 8. Hearings, supra note 5, at 44. D . Konner, Managed Care Pharmacy in the 1990s, paper presented to SCITEC Services, Inc., Conference on "Pharmaceutical Markets for the Nineties" (Nov. 2 8 , 1989). Hearings, supra note 5, at 2 (statement of Senator Jim Sasser, chairman). McCarthy, Mail-Order Continues to Grow, Am. Drug., Mar. 1988, at 3 7 - 3 8 , 4 0 . Id. Enright, supra note 6, at 1870. Id. at 1871. Id. Telephone interview with Ted Bobraw, Media Liaison for AARP (Dec. 12, 1990).


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based pharmacy dispensing to citizens of its state, it is doubtful that any such board knows which out-of-state mail-order houses are mailing into its state. Further, while the board of the state in which the mail-order pharmacy is physically resident will be able to identify it as a pharmacy, it will not necessarily know whether it is involved in mail-order distribution in other states. Neither can the Food and Drug Administration (FDA) identify the mail-order pharmacy operations. This raises the disturbing question of whether there can be adequate monitoring and supervision of a class of businesses involved in public health and safety where the members of the class cannot be identified. Some would assert that this information void alone is evidence of the insufficiency of monitoring of this means of drug dispensing. Nevertheless, the industry giants clearly can be identified as the eight members of a trade association known as American Managed Care Pharmacy Association (AMCPA),26 formerly known as the National Association of Mail Service Pharmacies. The AMCPA member companies operate 23 facilities in nine states and employ 2,000 pharmacists.27 At this time, it is fair to equate the industry with these eight companies, because they account for 90% of the mail-order pharmacy market not considering AARP and the VA.28 Hence, at present, the enterprise consists of high volume corporate entities, usually subsidiaries of companies involved in the health care industry, which subsidiaries have as their principal business mailorder dispensing of drugs. Medco's business statistics are available because the company's shares are publicly traded. Sales information on the other members is not readily available, because their shares are not publicly traded, and because some are subsidiaries of other companies. Also, the competitive nature of the relationship between the AMCPA members themselves may prevent the disclosure of the information.29 Consequently, one is unable to learn individual market shares or rank the companies in AMCPA. While it is enlightening to appreciate the role of the members of the AMCPA in the industry, it would be a mistake to assume the high volume 26

27 28 29

The members of AMCPA are: (1) Medco Containment Services, Elmwood Park, N e w Jersey (through its subsidiary, National Rx Pharmacies); (2) Baxter Prescription Service, Lincolnshire, Illinois (a subsidiary of Baxter Health Care Corporation); (3) America's Pharmacy, I n c . , Laguna Beach, California (a subsidiary of Newport Pharmaceuticals, Inc.); (4) Express Pharmacy Services, Pittsburgh, Pennsylvania (a subsidiary of J . C . Penney); (5) Flex Rx Prescription Services, I n c . , Pittsburgh, Pennsylvania (a subsidiary of Giant Eagle Foods); (6) Health Care Services, through Diagnostik, I n c . , Albuquerque, New Mexico; (7) Pharmacy Management Services, I n c . , Tampa, Florida; and, (8) ArcVentures, d/b/a Home Pharmacy, Chicago, Illinois, (a subsidiary of RushPresbyterian-St. Luke's Medical Center of Chicago). D . Konner, supra note 15. Id. Id.


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corporate subsidiary as the subject model in assessing adequacy of present monitoring and supervision and design of future regulation. Competition and economics may result in a great number of small retail pharmacies moving into the class by developing mail-order business. Any licensed pharmacy or pharmacist is free to do so. Consequently, effective regulation needs to be based on a model that makes a realistic appraisal of the nature and number of the potential members of the class of mail-order pharmacies. One can see from the statistics that this predicted growth and its attendant mechanization means that a major portion of prescription drugs in this country is going to be dispensed to patients absent a direct pharmacist/patient relationship. More importantly, they will be dispensed under a system of regulation that assumes a professional pharmacist licensed in the patient's state is involved in the transaction and attempts to protect the patient by governing the qualifications and conduct of the individual pharmacist. As a result, the regulation may be inadequate to protect consumer health and safety in the age of mail order.

II. REGULATION OF RETAIL PHARMACY The question whether mail-order pharmacy is adequately controlled requires an examination of the regulatory structure applicable to pharmacy practice in general. While pharmacy practice is state regulated, control and management of interstate production and distribution of drug products are primarily embodied in federal statutes and regulations. Federal law in this area establishes an interlocking network for monitoring the production and distribution of drugs and a closed system for the control and legitimate handling of controlled- substances. It does not purport to govern the functions involved in dispensing to ultimate consumers, which functions traditionally have been labeled as the practice of pharmacy. Because of their scope, the federal laws are examined before reviewing state regulations. , A. Federal Regulation Applicable to Pharmacy Article I of the United States Constitution reserves to Congress the power to regulate commerce among the several states. The purpose of the commerce clause was to facilitate free trade among the states.30 The Constitution does not empower Congress to legislate in the area of food and

30

Dayton Power & Light Co. v. Lindley, 58 Ohio St. 2d 465, 391 N.E.2d 716, 717 (1979).

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drugs, unless the legislation is grounded in the commerce clause.31 Consequently, it was on that basis that the federal government first regulated drugs under the Food and Drug Act of 1906.32 It has since passed other important acts regulating interstate commerce in medicines, poisons, and controlled substances and regulating use of mail for transporting those items. These acts apply to mail-order pharmacy, and it is appropriate to review them here, because their provisions must be weighed in analyzing the issue of whether the mail-order industry is sufficiently regulated.


1. The Federal Food, Drug and Cosmetic Act After a rash of tragic deaths of victims of defective Elixir of Sulfanilamide in 1938, Congress passed the Federal Food, Drug and Cosmetic Act of 1938 (FDCA).33 The Act regulates the manufacture, distribution, and sale of drugs by prohibiting the movement in interstate commerce of adulterated or misbranded products. In its application to drugs, the FDCA has its broadest scope, covering all aspects of development, manufacture, labeling, distribution, and sale. The FDCA defines and controls drugs,34 devices,35 and cosmetics36 and is, therefore, most pertinent to retail pharmacies that often carry all three. The FDCA prohibits from interstate commerce any of these items, if they are adulterated or misbranded.37 "Adulteration" of drugs and devices is broadly defined to include compositions of filthy, putrid, or decomposed substances, contamination through unsanitary production, and failure to meet conditions of purity, strength, and quality because of poor production 38

practices. The word "misbranded," too, is liberally defined to include labels false or misleading in any particular, labels not bearing required information on the drug and the entities producing and distributing it, and labels that fail to warn of narcotic addiction, particular dangers, uses, perishability, and a host of other information required by the FDCA.39 In essence, the FDCA requires certain information on the label of the drug product con31

Med-A-Dent Co. v. L . D . Caulk Co., 4 F.2d 126, 129 (D. Del. 1925). Ch. 3915, 34 Stat. 768-772 (1906): " A n act for preventing the manufacture, sale, or transportation of adulterated or misbranded or poisonous or deleterious foods, drugs, medicines, and liquors, and for regulating traffic therein, and for other purposes." 33 21 U.S.C. § 301 (1938). 34 FDCA § 201(g)(1), 21 U.S.C. § 321(g)(1). 35 Id. § 201(h), 21 U.S.C. § 321(h). 36 Id. § 201(i), 21 U.S.C. § 321(i). 37 Id. § 301, 21 U.S.C. § 331. 38 Id. §501, 21 U.S.C. §351. 39 Id. § 502, 21 U.S.C. § 352. 32


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tainer and a substantial amount of information to be included in a package insert. Section 503 of the FDCA40 is fundamental to the practicing retail pharmacist, insofar as it identifies the class of medications, now known as "legend" drugs, that may not be dispensed without a prescription.41 Section 503(b) requires that drugs that are habit-forming, toxic, or require professional supervision in administration shall be dispensed only on written prescription of a licensed practitioner. Such drugs are exempted from the labeling requirements set forth in section 502 for manufacturers and distributors in favor of the specific narrow labeling requirements for retail dispensing of section 503(b)(2).42 Section 505 of the FDCA controls "new drugs" for which manufacturers must file a "new drug application" (NDA).43 The term "new drug" includes drugs that are not yet recognized by experts as being safe and effective for use under a prescribed condition. A drug might be so classified because it is new in development or because it is an old drug prescribed for use under a new condition for which it is not recognized as safe and effective.44 This is important to the pharmacist dispensing a drug prescribed for a condition for which the drug is unrecognized by experts as safe and effective. This problem may be exacerbated by mail-order pharmacy where the pharmacist has no face-to-face contact with the patient to learn the condition for which the drug is being prescribed. However, because regulation of the practices of pharmacy and medicine is within the state's police power, it has been argued that, once a drug has been properly packaged and labeled, it may be dispensed by the pharmacist for an unapproved use if prescribed by a physician in the course of medical practice.45 The FDCA embodies the concept of "front-end" regulation for safety and health, by seeking to ensure product purity and consumer protection from the point of development and introduction of a new drug. Provisions of the FDCA preventing interstate commerce in adulterated or misbranded drugs apply fully to interstate mail-order pharmacy operations. Their efficacy, however, may be a function of FDA enforcement, and it appears that the FDA does not identify or monitor the mail-order pharmacies. 40 41 42

43 44 45

21 U.S.C. § 3 5 3 . Id. § 353(b). Id. § 353(b)(2). This section requires that the prescription filled at retail bear " a label containing the name and address of the dispenser, the serial number and date of the prescription or of its filling, the name of the prescriber, and, if stated in the prescription, the name of the patient, and the directions for use and cautionary statement, if any, contained in such prescription." Id. § 355. FDCA § 201(p), 21 U.S.C. § 321(p). C. DEMARCO, PHARMACY AND THE LAW 197 (2d ed. 1984).

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2. The Federal Controlled Substances Act The second major incursion into the pharmacy arena by Congress came in the form of the Comprehensive Drug Abuse Prevention and Control Act of 1970, also known as the Controlled Substances Act of 1970 (CSA).46 The CSA consolidated more than 50 pieces of legislation passed by Congress since 1914 to form a legislative package that would provide for a closed and carefully monitored system for the legitimate handling of controlled substances.47 Administered by the Drug Enforcement Administration of the United States Department of Justice, it creates a system of registration, security, and reporting for substances scheduled in five categories according to their potential for abuse. The burdens of meeting the requirements of the CSA fall primarily on pharmacists in their day-to-day operations. Section 812 of the CSA classifies controlled substances into Schedules I through V depending on their potential for abuse, currently accepted medical use, and potential for physical or psychological dependence. Schedule I includes the most dangerous drugs; Schedule V includes the least dangerous. The CSA requires every person who manufactures, delivers, or dispenses scheduled drugs to register annually with the United States Attorney General's Office.48 The CSA expressly applies to pharmacists under the definition of "practitioner"49 and also under the term "dispense,"50 which includes the act of delivering controlled substances to ultimate users. The CSA requires practitioners to take an initial inventory at the start of business and every two years after.51 Records of receipts of scheduled substances and of their disposal also must be maintained.52 Records for Class I and II substances must be kept separate, while those for Classes III, IV, and V must be "readily retrievable."53 Section 309 provides for specific requirements for prescribing and dispensing controlled substances. Finally, the CSA and regulations enacted pursuant to it impose a duty on the "practitioner" for strict security of the controlled substances in the practitioner's possession.54

46

Comprehensive Drug Abuse Prevention and Control Act of 1970, Pub. L. N o . 9 1 - 5 1 3 , 84 Stat. 1236 (1970) (its popular name is the "Controlled Substances A c t " ) .

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L. HICKMON, PHARMACY PRACTICE FOR TRIAL LAWYERS § 7-1 (1981).

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CSA § 302, 21 U . S . C . § 822. Id. § 102(20), 21 U . S . C . § 802. Id. § 102(10), 21 U . S . C . § 802(20). Id. § 3 0 7 , 21 U . S . C . § 827. Id. § 3 0 7 .

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53 54

Id.

21 C.F.R. §§ 1301.71(b), 1301.75 & 1301.76 (1990).

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3. The Federal Poison Prevention Packaging Act of 1970 Another significant direct federal regulation applicable to pharmacy is the Poison Prevention Packaging Act of 1970 (PPPA).55 The PPPA, designed to prevent poisoning of children, mandates the use of child-resistant containers. Among the substances to which it applies are most prescription drugs, including all controlled substances, as well as aspirin products and acetaminophen.


4. Federal Postal Regulations Finally, any schematic diagram of the federal circuitry regulating pharmacy must reflect the role of postal regulation. Congress has declared several categories of items "nonmailable,"56 and many drug products fall into those categories. "The basic premise of the postal mailability statutes is that anything 'which may kill or injure another, or injure the mails or other property . . . ,' is nonmailable."57 In essence, injurious articles are nonmailable.58 Among the injurious articles excluded are "all kinds of poison, and all articles and compositions containing poison."59 The class of "poisons" includes "controlled substances,"60 which are expressly declared to be "articles, compositions, or materials which may kill or injure another within the intent and meaning of 18 U.S.C. 1716."61 Because the Postal Service broadly defines a poison as "a toxic substance which may kill or injure,"62 a substantial number of drug products besides controlled substances fall into the category of poisons. This is especially true because the regulations specify classes of poisons to include certain "irritants."63 Generally, poi-

55 56

57 58

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15 U . S . C . §§ 1471-1476. 18 U . S . C . § 1716(a) (1982) states: All kinds of poison, and all articles and compositions containing poison, and all poisonous animals, insects, reptiles, and all explosives, inflammable materials, infernal machines, and mechanical, chemical, or other devices or compositions which may ignite or explode, and all disease germs or scabs, and all other natural or artificial articles, compositions, or material which may kill or injure another, or injure the mails or other property, whether or not sealed as first-class matter, are nonmailable matter and shall not be conveyed in the mails or delivered from any post office or station thereof, nor by any officer or employee of the Postal Service. 39 C.F.R. § 124.11 (1990). Id. § 124.141. That section states: "Except as provided herein, any article, composition, or material which may kill or injure another, or injure the mail or other property, is nonmailable. Harmful matter includes, but is not limited to: a. All kinds of poisons, including controlled substances."

18 U . S . C . § 1716 (1979). C.F.R. § 124.14(1990). 61 Id. § 124.364. 62 Id. § 124.361(a). 63 Id. § 1 2 4 . 3 6 1 . 60

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sons may not be conveyed in the mail or delivered by post office or letter


carrier. 64

But, Congress also established certain exceptions and conditions to "nonmailability" that are important to pharmacy. For example, items not "outwardly or of their own force dangerous or injurious to life, health, or property" may be permitted under conditions set by the Postal Service.65 Also, the Postal Service is authorized to limit transmission of poisonous drugs and medications in the mail to specified professionals such as physicians, pharmacists, and even barbers.66 Postal authorities are similarly empowered to limit the transmission of poisons for scientific use to those designated to receive them on behalf of entities with bona fide purposes.67 In addition, postal regulations authorize several exceptions important to one who mails drug products.68 Hence, controlled substances may be transmitted between: (1) persons registered with the Drug Enforcement Administration; (2) exempt military, law enforcement, and civil defense personnel in their official duties; (3) a practitioner or dispenser and an ultimate user, if the prescription medicine contains a non-narcotic controlled substance; and, (4) the Veterans Administration and certain veterans even if the prescription medicine contains a narcotic drug. Other items pertinent to pharmacy and denied conveyance in the United States mails are articles, substances, drugs, medicines, or instruments that can be used or applied for producing abortion.69 This prohibition includes written or printed documents containing information on obtaining abortion items or producing or procuring an abortion.70 However, items with legitimate uses, for which the mailer conveys them, are not banned from transmission in the mails, merely because they are capable of being "adapted" to abortion.71 Hence, "adaptable" items are not forbidden abso-

64 65 66 67

68 69 70 71

Id. 18 Id. 18

§ 124.362. U . S . C . § 1716(b) (1979). § 1716(d); 39 C.F.R. § 124.363(b) (1990). U . S . C . § 1716(e) (1982) states: The transmission in the mails of poisons for scientific use, and which are not outwardly dangerous or of their own force dangerous or injurious to life, health, or property, may be limited by the Postal Service to shipments of such articles between the manufacturers thereof, dealers therein, bona fide research or experimental scientific laboratories, and such other persons who are employees of the Federal, a State, or local government, whose official duties are comprised, in whole or in part, of the use of such poisons, and who are designated by the head of the agency in which they are employed to receive or send such articles, under such rules and regulations as the Postal Service shall prescribe. 39 U . S . C . § 124.363(a) (1989) is similar in its provisions. Id. § 124.365a. 18 U . S . C . § 1461 (1982). Id. Youngs Rubber Corp. v. C.I. Lee & C o . , 45 F.2d 103, 108 ( C C A . 1930) (construing 18 U . S . C . § 334 (1940) upon which this section was based; prior section 334 included contraceptive articles).


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lutely but only when mailed for the purpose of being unlawfully employed.72 Further, the courts have, on first amendment grounds, allowed much printed information on contraception and contraceptive devices73 and on abortion and means of abortion74 to be mailable by declaring the prohibition against mailing to be a "prior restraint" on free expression. While contraceptives were at one time banned from the mails,75 the statutory prohibition now applies only to unsolicited mailing of contraceptives and contraceptive advertising.76 Initial construction of this statute to allow "informative editorializing" while banning "commercial solicitation"77 has been followed by the United States Supreme Court's holding that mailing of multi-item flyers including prophylactics, flyers exclusively devoted to prophylactics, and informational pamphlets on prophylactics are entitled to the qualified protection accorded commercial free speech.78 The Court declared 39 U.S.C. section 3001(e)(2) unconstitutional as applied to such mailings.79 Intoxicating liquors of any kind are nonmailable.80 This prohibition may be important to a host of pharmaceutical preparations that contain alcohol as a significant ingredient. So too are "drug paraphernalia," defined as items primarily intended for use in the processing or using of controlled substances.81 The postmasters decide whether a drug, medicine, or substance is mailable.82 They too have the duty of refusing to accept the forbidden.83 But "[t]he mailer is responsible for compliance with applicable postal laws and regulations governing mailability and preparation for mailing, as well

72

73

74 75 76 77 78 79 80 81

82 83

United States v. Nicholas, 97 F.2d 510, 512 ( C C A . 1938); Davis v. United States, 62 F.2d 473, 474 ( C C A . 1933). Associated Students for Univ. of Cal. v. Attorney Gen. of the United States, 368 F. Supp. 11 ( C D . Cal. 1973). Atlanta Coop. News Project v. United States Postal Serv., 350 F. Supp. 234 (D. Ga. 1972). 18 U . S . C . § 334 (1940). 39 U . S . C . § 3001(e) (1978). Associated Students, 368 F. Supp. at 2 3 . Bolger v. Youngs Drug Prods. Corp., 463 U . S . 60, 68 (1983). Id. at 7 5 . 18 U . S . C . § 1716(f) (1982). 39 C.F.R. § 124.366a (1990) states: The term " d r u g paraphernalia" means any equipment, product, or material of any kind which is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance in violation of the Controlled Substances Act. It includes items primarily intended or designed for use in ingesting, inhaling, or otherwise introducing marijuana, cocaine, hashish, hashish oil, PCP, or amphetamines into the human body. Id. § 124.126. Id.


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as nonpostal laws and regulations pertaining to the shipment of particular matters."84 The mailer must comply with regulations regarding identification of contents,85 address marking,85 labeling,87 and preparation and packaging.88 Preparation and packaging is particularly important for drugs that are perishable, because they are declared nonmailable unless they can reach their destination in good condition in normal transit time.89 Postal regulations provide for disposal by the Postmaster of both perishable and undeliverable drugs.90 Obviously, these postal regulations will require far more attention from mail-order houses than from community-based pharmacies. However, considering the volume of drugs dispensed by mail in the industry, one might legitimately question whether the postal regulations are being honored more in the breach than in practice. In summary, the federal regulatory network prohibits the mail-order houses from dealing in misbranded and adulterated drugs (FDCA), makes them part of the closed system for the control of dangerous drugs (CSA), requires them to comply with rules for poison prevention (PPPA), and limits the use of the mails in delivering compositions deemed nonmailable (postal regulations and statutes). The FDCA and CSA ensure a monitored system of development, production, and distribution of drug products and a closed and controlled system for controlled substances for the protection of the public. The FDCA guards quality control in these areas. However, these federal regulatory tools only tangentially govern the qualifications, processes, or operations of those engaged in retail dispensing of prescription drugs to ultimate consumers. They do not provide monitoring and supervision of high-volume production-line mass dispensing of drugs by mail-order pharmacies. That task presumably belongs to the individual states. In fact, the FDA does not identify or inspect mail-order operations. Nor does federal law address the pharmacist/patient relationship or specify the qualifications of the pharmacist. The FDCA, CSA, PPPA, and postal regulations aside, the states still answer the essential questions in regulating retail pharmacy: (1) what constitutes the practice of pharmacy? (2) who can practice pharmacy? (3) who 84 85 86 87 88 89

90

Id. § 124.121. Id. §124.21. Id. § 124.22. Id. § 124.23. Id. § 124.365b. Id. § 124.61 states: "Time Factor. Mailable, perishable matter may be sent through the mail only if it can reach its destination in good condition in the normal transit time between the mailing and address points." Id. § 159.437.

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can prescribe medications and legend drugs? and, (4) what is a prescription order? The states invariably treat these questions in their respective pharmacy practice acts where the focus is on qualifications and standards of the individual professional practicing pharmacist who is deemed to be at the center of the dispensing transaction with the patient. The issues that will later be examined are whether those acts apply to regulate outof-state mail-order pharmacy and whether they will be effective in any event.


B. State Authority to Regulate Matters of Public Health and Welfare States, as part of their police power, have a broad prerogative to enforce standards of conduct to protect the health of their citizens.91 This authority extends to the regulation of all professions concerned with health,92 and includes the broad power to regulate the administration of drugs by the health professions.93 As a result, retail pharmacy generally has been governed under the authority reserved to the states for the protection of the health, safety, and welfare of their citizens. Each state has treated the profession of pharmacy as a privilege to be granted under conditions and subject to standards that will ensure the protection of the public.94 Hence, the professional licensing act for pharmacists in a given state can be expected to set forth requirements for education, experience, professional equipment, and moral character of the individual pharmacist.95 All states have pharmacy practice acts setting the minimum standards for the practice of pharmacy.96 The typical pharmacy practice act specifies the education, including graduation from an accredited school of pharmacy,97 required of those who would be licensed to practice pharmacy. The acts generally mandate a period of practical experience under the supervision of a licensed pharmacist for a period of six months to one year as a prerequisite to licensing.98 The acts will set forth extensive technical standards of practice that vary greatly but will commonly embrace conduct that is prohibited and allowed as well as supervision of personnel by the licensed pharmacist. Also regulated will be labeling of prescriptions and maintenance and retention of documents, such as prescription orders and 91 92 93

94 95 96 97 98

Barsky v. Board of Regents, 347 U . S . 442, 449 (1954). Id. Whalen v. Roe, 429 U . S . 589, 603 n.30 (1977) (citing Robinson v. California, 370 U . S . 660-65 (1962)); Minnesota ex rel. Whipple v. Martinson, 256 U . S . 4 1 , 45 (1921); Barsky, 347 U.S. at 449. See C. DEMARCO, supra note 4 5 , at 27-31 (explanation of the law of pharmacy licensing). Id. L. HICKMON, supra note 4 7 , at § 2 - 1 . Id. Id.


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dispensing records.99 The pharmacy practice acts also regulate the sale of poisons and toxic substances.100 Finally, the state practice acts will include requirements for minimum equipment and reference materials to be maintained by the licensed pharmacist. Most states passed these acts, which license and regulate the practice of pharmacy, in the latter part of the 1800s.101 To a great extent it can be said that pharmacy practice acts regulate pharmacy as an individual professional practice in the same manner as medical and legal practice are regulated by monitoring and supervising physicians and attorneys. They reflect an assumption that the public is best protected by regulating the quality of the pharmacist, by requirements for education, experience, practice standards, minimum equipment, and reference books. This, in turn, assumes the direct involvement of the pharmacist with the patient during the process of dispensing. When the pharmacist/patient relationship is reduced to the act of mailing and the pharmacist in the mail-order facility assumes the role of quality control supervisor instead of the traditional role in the community-based pharmacy, the safety net that assumes the traditional role is likely to contain a gaping hole. Aside from the pharmacy practice acts, the states have passed drug product selection laws that regulate the substitution of brands of drugs different from those ordered by the prescribing physician. The drug product selection laws vary widely, forbidding substitution in some cases, allowing substitution by reference to a positive formulary (a list of approved substitutions) in others, and allowing substitution by reference to a negative formulary (a list of prohibited substitutions) in a third group.102 Some require notification and permission from the prescriber, while other statutes allow substitution only by preauthorization of the prescriber on the prescription order.103 In addition, each state typically has acts relating to the adulteration of food and drugs, and the management of controlled sub104

stances. C. Federal Limits on State Regulation The states must legislate within a range of options bounded by certain federal limitations. Of importance are requirements that state laws not place unreasonable burdens on interstate commerce in violation of the commerce clause of the United States Constitution. 99

Id. Id. 1101 C. DEMARCO, supra note 45, at 42. 102 L. HICKMON, supra note 4 7 , § 3 - 3 . 103 C . D E M A R C O , supra note 4 5 , at 100. 100

104

See id., at A p p . B (State-by-State Compilation of L a w s ) ; NATIONAL ASSOCIATION O F BOARDS O F PHARMACY, SURVEY O F PHARMACY LAW 1990-1991, at Table X V I I I .

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1. Constitutional Scrutiny of State Regulation of Mail-Order Pharmacy Because protection of public health generally is left to the states under the exercise of their police power,105 individual states conceivably could enact legislation to regulate the mail-order services. However, if Congress has acted in an area, the question becomes whether that action preempts further state regulation.106 In determining whether there has been federal preemption, the courts consider the following criteria: (1) the pervasiveness of the federal regulation; (2) the dominance of the federal interest; (3) the federal and state objectives to be attained; and, (4) the existence of actual conflict between the state and federal statutes, including whether the state law is an obstacle to the purposes and objectives of Congress.107 Despite the FDCA, states still have been held to have broad police powers to regulate the administration of drugs by the health professions,108 and state regulation of the sale of drugs has not been deemed preempted by acts of Congress.109 What then of the commerce clause? The mail-order pharmacies contend that state regulation is an impermissible burden on interstate commerce, and hence, forbidden under the constitution. Not every exercise of local police power is invalid merely because it affects in some way the flow of commerce between the states."0 The states have the power to regulate matters of local concern "unavoidably inviting some regulation of interstate commerce," if Congress has not preempted such action.111 Moreover, the regulation of the practice of pharmacy and of the sale of drugs and poisons has been held peculiarly within the province of the states' police power since the demise of the traveling medicine shows.112 But an attempt to regulate is not valid merely because it professes to be a health measure.113 The United States Supreme Court has scrutinized such measures and stricken them down when they fail to pass constitutional muster."4 The test of such regulation was set forth by the court in Pike v. Bruce Church, Inc.: "Where the statute regulates even handedly to effectuate a legitimate, local public interest, and its effects on inter-state com105 106 107 108 109 110 111 112 113 114

Travelers Health A s s ' n v . Virginia, 339 U . S . 643 (1950). See Southern P a c . C o . v. Arizona, 325 U . S . 761 (1945). Pharmaceutical Soc'y of N.Y. v . Lefkowitz, 586 F.2d 9 5 3 , 958 (2d Cir. 1978). Id. Id. Great Atl. & Pac. Tea Co. v. Cottrell, 424 U.S. 366, 371 (1976). California v. Thompson, 313 U.S. 109, 113 (1941). State v. Kumpfert, 115 La. 950, 40 So. 365 (1905). Dean Milk Co. v. City of Madison, 340 U.S. 349, 354 (1930). See, e.g., id. at 353; Great Atl. & Pac. Tea Co., 424 U.S. at 366; Dixie Dairy Co. v. City of Chicago, 538 F.2d 1303 (7th Cir.), cert. denied, 429 U.S. 1001 (1976).


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merce are only incidental it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits."115 In evaluating state legislation aimed at regulating the mail-order pharmaceutical industry, three questions need be asked: (1) is the statute enacted to protect local economic interests against interstate competition? (2) will the burden imposed on interstate commerce by the statute be outweighed by the benefit to the local interest protected? and, (3) is there an alternative to the regulation that will impose a lesser burden on interstate commerce? While recognizing that incidental burdens on interstate commerce may be unavoidable when a state legislates to safeguard the health and safety of its people, the United States Supreme Court has adopted a rule of per se invalidity, if the effect of the statute is "simple economic protectionism"116 or if the Court deems the statute "parochial legislation."117 State attempts at regulation of mail-order pharmacy can be expected to be challenged as economic protectionism, because the principal promoters of the regulation are organizations of traditional community-based pharmacists such as NARD (formerly the National Association of Retail Druggists), American Pharmaceutical Association (APhA), National Association of Boards of Pharmacy (NABP), National Conference of State Pharmaceutical Association Executives (NCSPAE), and the American College of Apothecaries (ACA). The outcry of some of these organizations has been shrill."8 But protectionism will not be readily apparent in the acts, which will purport to protect public health and welfare. The courts can be expected to scrutinize each act carefully and will not wait "for the rare instance where a state artlessly discloses an avowed purpose to discriminate against interstate goods."" 9 The 1973 Iowa case of State v. Rasmussenm might be the bellwether for enforcement, if there is one. The defendant in that case, Federal Prescription Service, Inc., operated a mail-order pharmacy from Madrid, Iowa, receiving prescriptions by mail, filling them, and returning them by mail to the persons to whom they were issued. Some of the prescriptions were written by physicians (practitioners) who were not residents of Iowa 115 116 117 118

119 120

397 U . S . 137, 142 (1970). Philadelphia v. New Jersey, 437 U . S . 617, 624 (1978). Lewis v. BT Investment Managers, Inc., 447 U . S . 27 (1980). See, e.g., 110 N . A . R . D . Newsletter, N o . 17, Sept. 15, 1988; McCarthy, How RPhs Hit Back, A m . Drug., Mar. 1989, at 24-29; Dickinson, What Do Mail-Order Rxs Really Mean for Pharmacy?, U . S . Pharmacist, Oct. 1987, at 32-35; 3 Dickinson's PSAO Newsletter, N o . 11, Nov. 1988. Dean Milk Co., 340 U . S . at 354. 213 N.W.2d 661 (Iowa 1973).


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and not registered to prescribe controlled substances by the Iowa Board of Pharmacy Examiners. The board persuaded the Attorney General of the State of Iowa to seek to enjoin the service from filling prescriptions written by non-resident physicians not licensed by the board to prescribe controlled substances. Iowa's definition of "practitioner" under the Iowa Uniform Controlled Substances Act121 was limited to those acting "in the course of professional practice or research in this state."122 Because Federal Prescription Service, Inc. was filling prescriptions written by persons not acting within the "course of professional practice or research" in Iowa, the Attorney General sought to enjoin the pharmacy. The trial court concluded that to construe the statute to require that all physicians in the United States be registered in Iowa in order to prescribe drugs for Iowa residents would place an unreasonable burden on interstate commerce.123 The appellate court agreed, taking particular note of the Uniform Controlled Substance Act's purpose of being part of an "interlocking trellis" of state and federal law aimed at controlling drug abuse.124 While the court did not find the statute, on its face, to be for the protection of local economic benefit and hence per se unconstitutional, it noted that, "if the effect of the law is to insulate in-state business against interstate competition," then it is the court's responsibility to balance the purpose of the act with its effect, and to assess the state's interest in adopting that particular statute in light of any reasonable alternatives.125 The Iowa Supreme Court concluded, on application of the test, that Iowa's interest in allowing only state licensed practitioners to prescribe was outweighed by the benefits of federal registration of interstate prescribers. However, the Court of Appeals of New Mexico reached a different conclusion in Pharmaceutical Manufacturers Association v. New Mexico Board of Pharmacy,126 in applying the New Mexico Drug and Cosmetic Act.127 The Act forbade anyone from transmitting into the state dangerous 1211

122

123 124 125 126 127

IOWA C O D E § 2 0 4 . 3 0 8 (1973).

Id. § 204.101(22). T h e section states: "Practitioner" means either (a) A physician, dentist, veterinarian, scientific investigator, or other person licensed, registered o r otherwise permitted to distribute, dispense, conduct research with respect t o or t o administer a controlled substance in the course of professional practice or research in this state, (b) A pharmacy, hospital or other institution licensed, registered, o r otherwise permitted t o distribute, dispense, conduct research with respect to or to administer a controlled substance in the course of professional practice or research in this state. Rasmussen, 2 1 3 N.W.2d at 664. Id. at 665. Id. at 6 6 7 . 5 2 5 P.2d 931 ( N . M . 1974). N . M . STAT. A N N . § 54-6-26 (1953) (now renamed N e w Mexico Drug, Device and Cosmetic A c t , N . M . STAT. A N N . § 26-1-16 (1989)).


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drugs but made exception for "manufacturers or distributors, their agents or employers licensed by the board to ship dangerous drugs into the state."128 Enabling regulations provided that the act applied to all manufacturers and repackagers.129 The Pharmaceutical Manufacturers Association objected to the required state licensing and challenged the statute on constitutional grounds alleging violation of the commerce clause. The court found that the involved regulation and statutes were part of the coordinated state-federal drug abuse prevention system and that the burden of licensing and paying a fee was so small as to be outweighed by the substantial state benefit derived from control.130 The court noted no discrimination against interstate commerce or violation of equal protection, since no manufacturers were residents of New Mexico.131 On the issue of due process, the court found the proper inquiry to be "whether [the state] has taken hold of a matter within her power, or has reached beyond her borders to regulate a subject which was none of her concern, because the constitution has placed control elsewhere."132 In answering the inquiry, the court found that the state has a legitimate interest in controlling the sale or distribution of dangerous drugs. While the state "reached beyond her borders," such action did not bring "within the orbit of state power matters unrelated to any local interests." In essence, the case appears to uphold the right of the state to require registration and payment of a fee by those shipping dangerous drugs into the state. Control of the professional practice of pharmacy clearly has been a matter within a state's power. If the state reaches beyond its borders to regulate that which it deems to be professional pharmacy practice, it is merely bringing within the orbit of state power matters related to a local interest, and its regulation should be valid. On the other hand, a state reaching beyond its borders to regulate an interstate repackaging and retail distributing facility may be placing an unreasonable burden on interstate commerce. The dilemma is rooted directly in the question of whether mail-order operations are still to be considered professional pharmacy practice. If they are, then states should have the inherent power to regulate them to the extent the practice occurs in the state in any manner. If changing circumstances dictate that they not be treated as professional practices, then federal regulation by the FDCA should be considered, as will be discussed later in the article.

128 129 130 131 132

N . M . STAT. A N N . § 26-l-16(A) (1989). Pharmaceutical Manufacturers, 525 P.2d at 9 3 3 . Id. at 935. Id. at 936. Id. (quoting Osborn v. Ozlin, 310 U . S . 5 3 (1940)).

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2. The Regulatory Movement and the Antitrust Tightrope Discussion of economic protectionism and the Rasmussen case lead naturally to mention of the role of antitrust restrictions in tempering any aggressive movement to specially regulate the mail-order enterprise for the purpose of inhibiting it. In 1977, Federal Prescription Service, a mailorder pharmacy operating from Madrid, Iowa, sued the American Pharmaceutical Association (APhA) and the National Association of Retail Druggists (NARD) alleging a series of antitrust violations that could be categorized under two broad headings.133 First, the defendants were accused of conducting a campaign in the nature of a boycott directed at the public, pharmacists, and health groups to discredit mail-order pharmacies for the purpose of preventing their competition with the community-based pharmacies. Second, the defendants allegedly made a concerted effort through pharmacy organizations and regulatory boards and agencies to prevent mail-order pharmacy sales by fostering criminal and civil litigation against Federal Prescription Service and its pharmacist, Rasmussen, and by seeking passage of regulations and legislation that would hinder or stop the mail-order operations. Federal Prescription Service complained that the APhA, an organization of 60,000 pharmacists, established a policy against mail-order pharmacy based on the economic well being of its members; that APhA, the NABP, and the NCSPAE134 had met, agreed to oppose mail-order pharmacy, and discussed a legislative and administrative agenda for inhibiting it; that those organizations published their efforts and encouraged cooperation of NARD and the American Association of Apothecaries; that they promoted the particularization of the APhA Code of Ethics to make advertising and other practices necessary to the development of mail-order unethical; that they fostered a legislative campaign resulting in 16 states forbidding mail-order practice and 30 to 35 states prohibiting the advertising of prescription drugs; and, that in concert with NARD, they persuaded the AMA to pass a resolution to encourage patients not to use mail-order services. The court found the NABP, AC A, and the Iowa Board of Pharmacy, which promoted the civil litigation against Rasmussen,135 to be coconspirators. District Judge Gerhard Gesell found the initiation of litigation in Iowa and Massachusetts as well as federal and state legislative efforts to thwart mail order, to be protected first amendment activity under the United States Supreme Court decision in Eastern Railroad Presidents Conference v. 133

134 135

Federal Prescription Serv. v. American Pharmaceutical A s s ' n , 4 8 4 F. Supp. 1195, 1199 ( D . D . C . 1980). T h e acronym stands for National Conference of State Pharmaceutical Association Executives. State v. Rasmussen, 2 1 3 N.W.2d 6 6 1 (Iowa 1973).


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Noerr Motor Freight."6 The so-called Noerr doctrine grants an absolute immunity from antitrust liability to genuine individual or concerted action undertaken before legislative bodies, administrative agencies, or courts. Nevertheless, the court ruled that the ban on advertising of pharmaceutical products, the concerted opposition to discounting and the application of the APhA Code of Ethics to restrict mail-order pharmacy are conducts prohibited by the Sherman Antitrust Act.137 On appeal, the United States Court of Appeals for the District of Columbia Circuit made a much broader application of the Noerr doctrine to find the activities involving lobbying, promoting enforcement through regulatory agencies and courts, and other related conduct to be protected.138 This left a narrower band of activities involving the banning of advertising, concerted opposition to discounting, and particularized applications of the APhA Code of Ethics as the remaining conduct forbidden by the court. But the appellate court also found insufficient the evidence of a causal connection between APhA's conduct and the damages complained of and reversed the damage award in its entirety.139 Hence, a principal inquiry of the courts in reviewing the activity of pharmacy-related organizations seeking to inhibit or prevent mail-order pharmacy will be whether the conduct falls within the protection of the Noerr doctrine. No violation of the Sherman Act can be predicated upon mere attempts to influence the passage or enforcement of laws.140 Nor is it actionable that the intent of those seeking action on laws is to gain advantage for themselves to the disadvantage of their competitors.141 However, if the publicity campaign, ostensibly aimed at passage of legislation, is a mere sham to cover an attempt to interfere1 directly with the business relationships of the competitor, then it will not be protected under Noerr.142 "Such activities constitute a sham if undertaken with the intent either to bar another competitor from having meaningful access to the relevant governmental body or to abuse the processes by which that governmental body functions."143 With the Federal Prescription Service case as a guideline, concerted action for the passage or enforcement of legislation or regulations applicable to mail-order pharmacy, even if motivated by competition, will be 136

365 U . S . 127 (1961). Federal Prescription Serv., 4 8 4 F. Supp. at 1207. 138 Federal Prescription Serv. v. American Pharmaceutical A s s ' n , 663 F.2d 253 ( D . C . Cir. 1981), cert, denied, 4 5 5 U . S . 9 2 8 (1982). 139 Id. at 272. 140 Noerr. 365 U.S. at 135. 141 Id. at 139. 142 Id. at 144. 143 Federal Prescription Serv., 4 8 4 F. Supp. at 1208 (citing California Motor Transp. C o . v. Trucking Unlimited, 4 0 4 U . S . 5 0 8 , 512-15 (1971)). 137

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immune from antitrust liability under Noerr. But campaigns that have elements of a boycott or whose sole function is the direct interference in the business of mail-order houses will carry a risk of antitrust liability. This risk is greatest where the focus of the regulatory movement is on the competitive aspects of mail order and its economic impact on communitybased pharmacy. The best chance of avoiding the risk is to adopt a regulatory policy based on public health and safety and not on economics.


D. Applying Existing State Pharmacy Practice Acts to Out-of-State Mail-Order Pharmacies The interstate operation of a mail-order pharmacy house is markedly different from that of a community-based retail pharmacy. In the community, the pharmacist meets the patient across the counter, accepts the prescription, is free to confirm information with the patient, fills, labels, and dispenses the medication, and often even handles the cash transaction. In mail order, the pharmacist in a facility several states away from the patient may be relegated to checking drug products and labels prepared by "technicians." Although this transaction is covered by the pharmacy practice act of the mail-order facility's home state, it is not so clear that a state act applies to the out-of-state mail-order operation. As a general rule, state pharmacy practice statutes are designed around the concept of the community-based pharmacist, so that the language often does not encompass non-resident dispensers. Consequently, attempts to enforce a state statute against a non-resident pharmacy may fail. State boards may labor under a mistaken impression that they have the power to exert control or supervision over mail-order pharmacies to whom state laws cannot be applied. Hence, a threshold question in analyzing the regulation of mail-order pharmacy will be whether the given state pharmacy act will apply to out-of-state mail-order houses. Generally, the drafters of state pharmacy practice acts did not contemplate mail-order pharmacy. Most acts fail to mention "mail order."144 But each pharmacy practice act contains terms that may determine applicability of the act to mail-order pharmacy. Defining terms such as "practice of pharmacy," "prescription," and "practitioner" becomes critical. For example, the definition of the "practice of pharmacy," which determines 144

There are some exceptions. See, e.g., OKLA. STAT. ANN. tit. 59, § 353.24 (1961), which made it "unlawful to engage in any 'mail-order' prescription business in which prescriptions are solicited and received through the mails for dispensing, or in which prescriptions are dispensed and delivered by mail to customers other than those personally known to the pharmacist in charge of a pharmacy and under circumstances clearly dictating that such method of delivery is in the best interests of the health and welfare of the customer." This provision was deleted in 1986. See also ALA. CODE § 3423-31, enacted in 1966, and requiring a permit from the state board of pharmacy for "mail-order houses."

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whether the activities of the mail-order houses are covered by a given pharmacy practice act, will vary from state to state. It is instructive to compare contrasting statutes. Consider the definition set forth in the New York Statute: "The practice of the profession of pharmacy is defined as the preparing, compounding, preserving, or the dispensing of drugs, medicines and therapeutic devices on the basis of prescriptions or other legal authority."145 This definition has been described as "product oriented."146 Contrast the New York definition with one that might be described as "service oriented," found in the newly amended Utah Pharmacy Practice Act: "Practice of pharmacy" includes any of the following: (a) interpreting prescription orders; (b) compounding, packaging, labeling, dispensing, and the coincident distribution of prescription drugs and devices; (c) participation in drug utilization review; (d) proper and safe storage of drugs and devices; (e) maintaining proper records of drugs and devices; (f) providing information on drugs or devices which may include, but is not limited to, advice relating to therapeutic values, potential hazards and uses; (g) drug product substitution; (h) supervision of pharmacist's supportive personnel; (i) the counseling of pharmacy patients concerning adverse and therapeutic effects of drugs.147

Clearly, the operation of an in state mail-order facility is covered by either type of definition. Not so clear is the question of whether the out-ofstate mail-order pharmacy that merely mails a prescription into the state is engaged in the practice of pharmacy in the receiving state. The statutory definitions of "prescription" are important. Consider the Virginia statute: "Prescription" shall mean and include an order for drugs or medical supplies, written or signed or transmitted by word of mouth, telephone, telegraph, or other means of communication to a pharmacist by a duly licensed physician, dentist, veterinarian, or other practitioner, authorized by law to prescribe and administer drugs or medical supplies.148

Note that this definition, which is described as "typical,"149 does not limit the group of prescribing practitioners to those "duly licensed in this 145 146 147 148 149

N.Y. E D U C . LAW § 6801 (McKinney 1985). C . DEMARCO, supra note 4 5 , at 4 5 . UTAH C O D E A N N . § 58-17-2 (35) (1990). See also FLA. STAT. A N N . § 465.003 (West 1989). VA. C O D E A N N . § 54.1-3401 (1988). C . DEMARCO, supra note 4 5 , at 4 5 .


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state."150 This will be significant in applying such a statute to mail order, because a mail-order pharmacy is likely to be used for filling large volumes of orders-for drugs written by out-of-state practitioners. Such orders will not be included under statutes that define prescriptions as written only by practitioners duly licensed in this state. While other states may restrict the definition of "prescription" to those orders written by practitioners licensed under the laws of the state, there are those that expressly define "prescription" to include orders by practitioners from other states.151 Florida's definition of "prescription"152 expressly includes an order by a "practitioner . . . licensed to practice in a state other than Florida" if, in the pharmacist's judgment, there is a valid physician/patient relationship and a chronic or recurrent illness is being treated.153 Georgia allows an order from a practitioner from another state "in the discretion" of the pharmacist.154 Finally, state practice acts generally will define a "practitioner" as being the person who orders the prescription dispensed.155 Other statutes may define "practitioner" without mention of geographic location, so that the class could contain physicians from any state.156 The definition may, on the other hand, expressly include out-of-state professionals, so that the particular pharmacy practice act might more broadly apply to prescription transactions involving them.157 In light of these variations, disputes will center on the issues of whether the state regulation applies if: (1) the pharmacy dispensing the legend medication is outside the state; (2) the prescriber ("practitioner") is in another state; or, (3) the order is not a "prescription," given the fact that it is not an order by a member of the defined class of in-state professionals. 150 151

152 153

154

155

156 157

See M I N N . STAT. A N N . § 151.01(16) (West 1989); N . C . G E N . STAT. § 90-85.3(t) (1988). F L A . STAT. A N N . § 465.003(4) (West 1989); G A . C O D E A N N . § 26-4-2(20) (1988); T E X . CIV. STAT. A N N . § 4542a-l(33) (1991). F L A . STAT. A N N . § 465.003(4) (West 1989). Id. The term also includes an order written or transmitted by a practitioner licensed to practice in a jurisdiction other than this state, b u t only if the pharmacist called upon t o dispense such order determines, in the exercise of his professional judgment, that the order is valid and necessary for the treatment of a chronic o r recurrent illness. G A . C O D E A N N . § 26-4-2(20) (1988). "Prescription" means an order for drugs or devices written, signed, or transmitted by word of mouth, telephone, o r telegraph by a practitioner of the healing arts; other medical practitioner licensed to write prescriptions intended for the treatment or prevention of disease of man o r animals; or, in the discretion of the dispensing pharmacist, b y a medical doctor licensed under the laws of a state other than this state. G A . C O D E A N N . § 26-4-2(19) (1988); N E V . REV. STAT. § 639.0125 (1987); N . D . CENT. C O D E § 4 3 -

13-01(17) (1960). M I N N . STAT. A N N . § 151.01(23) (West 1989). T E X . CIV. STAT. 4542a-l(30) (1991); Wis. STAT. A N N . § 450.01(17) (West 1988).


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Further complicating attempts to apply these acts to out-of-state mailorder pharmacies will be the fact that inconsistent definitions sometimes appear within the same act such as definitions of "practitioner" and "prescription" that are contradictory as to whether out-of-state physicians are included.158 Obviously, the state seeking to regulate mail-order pharmacy can resolve these disputes by enacting legislation that clearly includes the out-ofstate practitioner, pharmacy, and prescription order within the ambit of the state's regulation of pharmacy. A definition of "practice of pharmacy" should include the act of mailing or shipping a prescription drug into the state. The term "practitioner" should be drafted to include out-of-state professionals. The word "prescription" should be drafted to embrace orders written by out-of-state practitioners. Such drafting will resolve problems caused by ambiguity as to whether the act applies to the mail-order transactions. But the end result of such definitional clarity will potentially require the out-of-state mail-order houses to comply fully with the pharmacy practice acts of 50 different states, a prospect that might prompt the courts to determine that the burden on interstate commerce is unreasonable in light of the local interest being served. Mere clarification will not resolve the constitutional issues. E. Scrutinizing Requirements of the State Acts as Applied to Mail-Order Pharmacy The next question is whether the acts, if applied, can pass constitutional scrutiny under the commerce clause. Whether a state statute places an unreasonable burden on interstate commerce when considered in light of the local interest to be protected will depend on the requirements of the particular act. A 1989 nationwide survey by the National Association of Boards of Pharmacy (NABP) reveals that 20 states purport to regulate outof-state mail-order houses.159 Most do so by state pharmacy board enforcement of legislative enactments, for example, state pharmacy practice acts.160 In some cases, as will be discussed, the boards apply newly enacted statutes solely to mail-order pharmacies. The fact that 20 states claim to regulate out-of-state mail-order pharmacies does not mean that state monitoring, supervision, or enforcement of non-resident pharmacies is actually taking place in those 20 states. It is too early to tell whether the mail-order houses intend to comply with new or newly enforced statutes aimed at them, and if so to what extent. Finally, there appears to be no rush to court to enforce the statutes against mail-order operations.

158

159 160

See, e.g., G A . C O D E A N N . § 26-4-2(19) & (20) (1990); N . D . CENT. C O D E § 43-15-01 (17) & (18)

(1960); T E X . CIV. STAT. 4542a-l (30) & (33) (1991). Column, Legislation & Regulation, A m . Pharmacy, F e b . 1989, at 10. Id.


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Nevertheless, the statutes under which those 20 states profess to regulate mail-order pharmacies contain a substantial body of regulations that can be analyzed to weigh the burden they place on interstate commerce against the benefit to the local interest to be protected. The statutes may be broadly classified into three groups. The first group includes traditional pharmacy practice acts that make no mention of mail-order pharmacy,161 thereby necessitating analysis of definitions to decide applicability. Among these statutes, those of Delaware,162 Louisiana,163 Massachusetts,164 Tennessee,165 Minnesota,166 and North Carolina167 define "practitioner" or "prescription" ambiguously, so that it is not clear whether the statute applies to the out-of-state practitioner or prescription. Nevada defines "practitioner" as one "who holds a valid license to practice his profession in this state."168 This definition coupled with the Nevada statute's definition of "prescription" as "an order signed by the practitioner," may exclude out-of-state prescription orders from control of the Nevada Board of Pharmacy. Georgia ambiguously limits the definition of "practitioner" to one licensed "under the laws of this state,"169 while defining "prescription" to include an order by a physician in another state.170 Texas171 and Wisconsin172 expressly recognize "practitioners" as including professionals licensed "in another state," allowing construction that contemplates mail-order pharmacy. The next category of statutes under which boards of pharmacy seek to regulate mail-order houses are those expressly providing that mail-order operations are covered by the act, yet imposing no special requirements. 161

D E L . C O D E A N N . tit. 2 4 , §§ 2521-2591 (1974); G A . C O D E A N N . §§ 26-4-1 to 26-4-163 (1988); L A . REV. STAT. A N N . § § 1171-1208 (West 1988); MASS. A N N . LAWS ch. 112, § § 2 4 t o 4 2 A (Law. Co-op. 1985); MINN. STAT. A N N . §§ 151.01-151.41 (West 1989); NEV. REV. STAT. §§ 639.001-639.310 (1987); N . C . G E N . STAT. §§ 90-85.2 to 90-85.40 (1988); TENN. C O D E A N N . §§ 63-10-101 to 63-10309 (1986); T E X . CIV. STAT. §§ 4542a to 4542c (1989); Wis. STAT. A N N . §§ 450.01-450.18 (1988).

162

D E L . C O D E A N N . tit. 2 4 , § 2521 (1974).

163

L A . REV. STAT. A N N . § 1171 (West 1988).

164

M A S S . A N N . LAWS ch. 112, §§ 2 4 to 4 2 A ( L a w . Co-op. 1985). T E N N . C O D E A N N . § 63-10-101 (1986).

165

166 167 168 169 170

171 172

M I N N . STAT. A N N . § 151.01 (West 1989). N . C . G E N . STAT. § 90-85.3 (1988). NEV. REV. STAT. § 639.0125 (1987). G A . C O D E A N N . § 26-4-2(19) (1988). Id. § 26-4-2(20). This section states: "Prescription" means an order for drugs o r devices written, signed, or transmitted by word of mouth, telephone, or telegraph b y a practitioner of the healing arts; other medical practitioner licensed to write prescriptions for the treatment o r prevention of disease of man or animals; or, in t h e discretion of t h e dispensing pharmacist, b y a medical doctor licensed under the laws of a state other than this state. T E X . CIV. STAT. § 4542a-l(30) (1991). Wis. STAT. A N N . § 450.01(17) (1988).


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Alabama,173 Arkansas,174 Illinois,175 and North Dakota176 have such acts, although Illinois provides that the board of pharmacy may make special rules and regulations governing mail order.177 These statutes appear to require full compliance by non-resident mail-order pharmacies with all provisions of these state pharmacy practice acts as though they were in-state community-based pharmacies. Proponents of regulation will cite this evenhandedness as evidence that the statutes do not support economic protectionism. The mail-order houses will decry the burden of complying with the provisions of 50 "evenhanded" statutes as an unconstitutional burden on interstate commerce. Measures recently passed to deal specifically with mail-order pharmacy comprise the third category. California,178 Florida,179 Nebraska,180 Utah,181 and Idaho182 have enacted statutes that specifically regulate mailorder pharmacy. The acts, as a group, are best described as "disclosure" statutes, because they essentially require mail-order houses that ship into the state to identify themselves and produce evidence of compliance with regulations of their home state and the federal government. Each of the states attempting to regulate by means of new statutes that include non-resident pharmacies requires that the non-resident mail-order pharmacy be licensed in good standing in its home state.183 Statutes in California,184 Utah,185 and Idaho186 contemplate that the mail-order pharmacy also will be licensed in the receiving state. The Florida and Nebraska statutes do not appear to require licensing by the receiving state. The Nebraska statute is ambiguous because it provides for promulgation of regulations by the state's Department of Health187 and no such regulations have been adopted yet.188 Each of the new statutes will require the out-of-state mail-order house 173 174 175 176

177 178 179 180 181 182 183

A L A . C O D E § 34-23-31 (1975). ARK. STAT. A N N . § 17-91-401 (1987). ILL. A N N . STAT. c h . 1 1 1 , ¶ 4136(a) (Smith-Hurd 1987). N . D . CENT. C O D E § 43-15-34.1 (1987). Recently, Maine enacted a similar law, M E . REV. STAT. A N N . tit. 3 2 § 13751 (1990). I I I . A N N . STAT. c h . 111, ¶ 14136(a) (Smith-Hurd 1987). CAL. BUS. & PROF. C O D E § 4050.1 (West 1989). FLA. STAT. A N N . § 465.0156 (West 1989). Mail Service Prescription Drug Act, N E B . REV. STAT. § 71-2406 to 71-2409 (1989). UTAH C O D E A N N . § 58-17-15 (1989). See also VA. C O D E A N N . § 54.1-3434.1 et seq. (1990). Out-of-State Mail Service Pharmacy Licensing Act, IDAHO C O D E §§ 54-1740 to 54-1749 (1989). C A L . B U S . & PROF. C O D E § 4050.1(2) (West 1989); F L A . STAT. A N N . § 465.0156(1) (West 1989); N E B . REV. STAT. § 71-2407(a)&(c) (1989); UTAH C O D E A N N . § 58-17-15(4)&(6)(d) (1989); IDAHO

184 185 186

187 188

C O D E § 54-1743(1) (1989); VA. C O D E A N N . § 54.1-3434.1 (1990). C A L . B U S . & PROF. C O D E § 4050.1(a) (West 1989). UTAH C O D E A N N . § 58-17-15(3) (1989). IDAHO C O D E § 54-1743 (1989).

N E B . REV. STAT. § 71-2409 (1988). Telephone interview with Katherine Brown of Nebraska Board of Examiners in Pharmacy (Dec. 10, 1990).


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29

to register with the board of the state into which it will be mailing drugs and to provide basic information similar to that required of out-of-state corporations doing business in a state. California,189 Florida,190 and Idaho191 require filing of information about owners of pharmacies and pharmacists engaged in the business. This is the type of corporate information one might expect the secretary of state to require of a corporation doing business in the state. The Utah measure provides for the filing of an application in accordance with standards set by the board of pharmacy.192 The required application contains information regarding ownership interests, location, and identity of involved pharmacists.193 Utah194 and Idaho195 require identification of a "pharmacist in charge" but do not require that such pharmacist be licensed in those states. Nebraska merely orders that the secretary of state be designated as agent for service of process.196 Although a mail-order firm may complain about the hardship of registering and providing information in all 50 states, the courts are more likely to find the burden outweighed by the local interest in protection of public health and safety.197 The recent statutes also require that the mail-order firms provide to the board of the state into which they propose to mail medications, evidence of compliance with the regulations of their "home"198 state. If statutes with this requirement become the norm, mail-order houses would have to file copies of pertinent documents of registration and annual licensing with all 50 states. However, aside from registration and disclosure requirements, these statutes impose no special requirements additional to those of the home state's pharmacy practice act. Cooperation and compliance with the laws and regulations of the home state are ordered by statute in California,199 Florida,200 Utah,201 and Idaho.202 Utah203 and Idaho204 require reporting of occurrences of accidents, 189 190 191 192

C A L . B U S . & PROF. CODE § 4050.1(a)(1) (West 1989). F L A . STAT. A N N . § 465.0156(2) (West 1989). IDAHO C O D E § 54-1743(2) (1989). UTAH C O D E A N N . § 58-17-15(6) (1989).

193

Application for Pharmacy License, State of Utah Dept. of Bus. R e g . , form 3469 (1990).

194

UTAH C O D E A N N . § 58-17-15(12)(b) (1989). IDAHO C O D E § 54-1743(1)(c) (1989).

195

196 197 198

199 200 201 202 203 204

N E B . REV. STAT. § 71-2407(d) (1988). Pharmaceutical Manufacturers Ass'n v. New Mexico Bd. of Pharmacy, 525 P.2d 9 3 ( N . M . 1974). " H o m e state" throughout this article, refers to the state of domicile of the mail-order pharmacy as opposed to the "receiving state" into which the service is mailing drugs. C A L . BUS. & PROF. C O D E § 4050.1(2) (West 1989). F L A . STAT. A N N . § 465.0156(3) (West 1989). UTAH C O D E A N N . § 58-17-15(4) (1989). IDAHO C O D E § 54-1743(4)&(5) (1989). UTAH C O D E A N N . § 58-17-15(11)(d) (1989). IDAHO C O D E § 54-1744 (1989).


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disasters, or events that cause problems in the purity, labeling, or strength of drugs, while Florida's statute mandates that this information be provided on request.205 These requirements are relatively insubstantial and probably would not be deemed to constitute a burden on interstate commerce. Also existing in the recently enacted statutes is the class of requirements for reporting drugs shipped into individual states. Idaho, for instance, requires that, at the start of each calendar quarter, an out-of-state pharmacy submit in form acceptable to its board of pharmacy, information "concerning each prescription for a scheduled controlled substance shipped, mailed or delivered to an Idaho resident."206 Utah also mandates quarterly reporting of information for each prescription filled for controlled substances,207 while California and Florida insist only that the records be maintained so as to be accessible on demand.208 Utah and Idaho provide for inspections of records and facilities in the event the home state's inspections are not adequate,209 while the other states in this category are silent on the subject. If the more stringent Idaho provisions are challenged, the issue will be whether the burden of reporting every prescription for controlled substances potentially imposed by all 50 states would outweigh the local interests involved. This type of requirement may be deemed unreasonably burdensome by the courts.210 Inspections comprise another troublesome area. While every pharmacy may be subject to on-site inspection, mail-order houses may be able to persuade courts that such potential invasions by the boards of all 50 states are an unreasonable burden on interstate commerce. Idaho, for example, gives its board the right to inspect the out-of-state pharmacy if the home state's board does not perform requested inspections or fails to obtain necessary records in doing so.211 This is a critical regulatory tool in view of the fact that so much criticism of mail-order houses involves the safety of physical operations in the production facilities. Absent the ability to conduct inspections, one might question the efficacy of attempts to regulate

205 206

207 208 209 210

211

FLA. STAT. ANN. § 465.0156(5) (West 1989). IDAHO C O D E § 54-1743(6) (1990). This is a newly enacted provision from S.B. 1124, 1st Sess. 1989 of the Idaho Legislature. Its enactment was prompted by the death of Iris Hemmelman, an Idaho victim of a mail-order drug mixup. The bill was codified as IDAHO CODE §§ 54-1740 to 1749 and is known as the Out-of-State Mail Service Pharmacy Licensing Act. UTAH C O D E ANN. § 58-17-15(6)(f) (1989). CAL. BUS. & PROF. CODE § 4050.1(3) (West 1989); FLA. STAT. ANN. § 465.0156(4) (West 1989). UTAH C O D E ANN. § 58-17-15(7) (1989); IDAHO CODE § 54-1745 (1989). It should be noted that IDAHO C O D E § 54-1743(7) (1990) provides an alternative: " I n lieu of providing the information required in subsection (6) of this section to the board, the out-of-state mail service pharmacy may submit to on-site inspection by the board." Id. § 54-1745.


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31

high volume mail-order pharmacies. Nevertheless, such inspection requirements are likely subject to successful legal challenge. Requirements affecting the professional operations of mail-order pharmacies comprise another aspect of the statutes aimed at mail-order pharmacies. This category of requirements would include state provisions that require mail-order pharmacies to operate 24-hour toll-free telephone lines no less than six days per week for a minimum 40-hour week for customer inquiries.212 Proposals have been advanced that would require that the out-of-state pharmacy employ a pharmacist licensed in the receiving state. It also has been suggested that the mail-order pharmacies maintain particular minimum hours of operation and limit the number of assistants per licensed pharmacist. However, these proposals do not appear to have been enacted by any legislature to apply specifically to mail-order houses. Such provisions will be attacked more easily if they impose burdens not borne by the in-state pharmacies. The requirement of a 24-hour tollfree telephone line is highly favored by community-based pharmacists who resent the irony of being forced to spend office time fielding telephone requests for counseling from patients of mail-order pharmacies. California,213 Florida,214 and Idaho215 each mandate that the out-ofstate pharmacy maintain a toll-free telephone line for customer consultation for a minimum of 40 hours per week over six days. Each prescription label must show the toll-free number. Utah's application for licensing requires disclosure of a "patient contact number" and listing of hours of availability for patient contact.216 Nebraska's statute contains no such requirement pending adoption of regulations. Unfortunately, the toll-free 24-hour telephone requirement may be particularly susceptible to challenge, in light of the fact that community-based pharmacies do not provide toll-free 24-hour counseling service to their customers, many of whom do not reside in the same town as the pharmacy. However, mandating toll-free telephone counseling is justified by the peculiar nature of this enterprise that involves no patient/pharmacist contact. The local interest in safety alone should be deemed to outweigh this burden, especially in light of the fact that this cost of doing business likely will be borne by community-based pharmacists and physicians who will be forced to provide counseling regarding drug products if patients have inadequate access to the mail-order houses from which they purchase the product.

212 213 214 215 216

See id. § 54-1747. CAL. BUS. & PROF. C O D E § 4050.1(b) (West 1989). FLA. STAT. ANN. § 465.0156(6) (West 1989). IDAHO CODE § 54-1747 (1989). Application for Pharmacy License, supra note 193. .


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California,217 Utah,218 and Idaho219 each mandate payment of a fee by mail-order outlets seeking licensing. Florida and Nebraska do not, which may be consistent with the fact that they do not require licensing in their states. Finally, restrictions on product substitution, including customer notification by phone or writing, are imposed under the laws of Idaho220 and Utah,221 while the Florida and Nebraska statutes are silent. Statutes that extend to out-of-state pharmacies provisions already existing for in-state houses are safer under constitutional scrutiny than statutes placing specific requirements on mail order. But the safer route begs the ultimate question: is it an unreasonable burden on interstate commerce for the mail-order pharmacies to be required to meet existing pharmacy regulation in each of the states into which they mail? This issue will arise either by attempts to apply existing traditional statutes to the emerging mail-order industry or by enforcement of new statutory provisions that require the mail-order house to comply with all statutory requirements of the receiving state regarding the following: (1) legend drugs; (2) controlled substances; (3) shipping, mailing, and delivery of excessive quantities of controlled substances; (4) generic substitution; (5) labeling; and, (6) dispensing. When weighing reasonableness of the burden imposed by those statutes against local interest the courts should, as a matter of policy, uphold two types of requirements: (1) those that inform the board of the mailorder pharmacy's identity, nature, and location and further ensure that the pharmacy is in compliance with applicable regulations in the home state; and, (2) those that are necessary by nature of the business of mail-order pharmacy, such as requirements for toll-free telephone counseling during normal business hours. As indicated earlier, under the "lesser burden" test, the courts will ask whether the same objective could be reached by a less burdensome alternative to the proposed form of regulation.222 The mail-order pharmacy industry will argue that a less burdensome alternative exists in the form of regulation by the home state in conjunction with federal regulation in the form of the FDCA, CSA, federal postal regulations, and PPPA. The fallacy state regulators see in this argument is its denial of each state's inherent power to determine the minimum standards for the public health, safety, and welfare of its citizens with regard to pharmacy. 217

C A L . B U S . & PROF. C O D E § 4050.1(c) (West 1989).

218

UTAH C O D E A N N . § 58-17-15(6)(b) (1989). IDAHO C O D E § 54-1743(3) (1989).

219

220

Id. § 54-1746.

221

UTAH C O D E A N N . § 58-17-12(2) (1989).

222

Dean Milk Co., 340 U . S . at 3 5 4 .


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33

New Jersey, for example, requires its pharmacists to keep an individual patient profile under which is recorded allergies, idiosyncracies, and chronic conditions that could relate to drug utilization with the purpose that the pharmacist will review the profile before dispensing the medication to determine possibility of adverse drug reactions or interactions.223 The mandatory patient profile has been held to be reasonable for the protection of patients in New Jersey in light of the estimated 24,000 deaths occurring in the United States each year because of adverse drug reactions.224 Twelve states now demand some form of patient profile recording by their pharmacists.225 Another example of the difference in state protections is the time requirements on "PRN"226 refill prescriptions. Physicians often authorize unlimited refills by marking a prescription with a "PRN" instruction.227 Thirty-two of the states place time requirements on "PRN" refill instruc228 tions. Ohio and Massachusetts do not recognize "PRN" as a valid refill authorization,229 and New York and North Dakota allow one refill only.230 The prohibition of Ohio and Massachusetts law can be circumvented by ordering from a mail-order facility in any one of the states that do not restrict the designation, so that the patient from Ohio or Massachusetts actually could refill the prescription forever. Practitioners commonly allow refill of prescriptions for birth control pills, while advising against taking them for more than six months to a year at a time, because of concerns about side effects from prolonged use. Yet patients can send the prescription to a mail-order house and use the drug indefinitely without returning to their physician. Some states protect their citizens by requiring patient counseling by pharmacists. It appears that 13 states require some form of counseling of the patient by the dispensing pharmacist.231 While some others encourage patient counseling by including it in their definition of practice,232 the majority of states have no counseling requirement. Such statutes would be

223

224 225 226

227 228 229 230 231

232

See Rite Aid of New Jersey, Inc. v. Board of Pharmacy, 304 A.2d 754, 755 ( N J . Super. Ct. App. Div. 1973). Id. at 757. NABP SURVEY, supra note 104, at Table XXI. " P r o re nata" is defined as "according to circumstances," DORLAND'S ILLUSTRATED MEDICAL DICTIONARY 1114 (23rd ed. 1957), and "for the occasion as it may arise," BLACK'S LAW DICTIONARY 1099 (5th ed. 1979). L. HICKMON, supra note 4 7 , at 134. NABP SURVEY, supra note 104, at Table XXI. Id. Id. Id. See Brushwood, The Informed Intermediary Doctrine and the Pharmacist's LEGAL M E D . 352 (1983). Id.

Duty to Warn, 4 J.


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troublesome for mail-order pharmacy services but for the likelihood that they are roundly ignored. Mandatory patient profiles, limits on "PRN" refills, and patient counseling are protections that reflect the distinct differences in how each state chooses to fulfill its role in public health and safety. Given the cost competitiveness of mail-order pharmacy, one would expect these facilities to gravitate away from states that would impose the burden of such requirements on high volume mail-order houses. This is not to say they are in fact doing so now. The author has no evidence that such is the case and notes the possibility only as a foreseeable problem in regulating by requiring adherence to statutes of the home state only. To allow mail-order houses to adopt this alternative means they can simply choose the state with the most lenient regulation and, by locating there, impose the permissive regulations as a sort of national standard (assuming the regulations of the home state apply to their operations in other states). Again, clarification of the role of mail-order drug dispensing as either the professional practice of pharmacy or a pharmaceutical process will help resolve this issue. If the courts resolve that this dispensing function, even on so large a scale, is best treated as professional pharmacy practice, then they also should be much more liberal in allowing the states rein in any reasonable regulation. The volume of drugs dispensed and the geographic area served by a facility need not be the tests of whether a state should be allowed to regulate the facility. By analogy, the largest law firms in the United States, numbering hundreds of attorneys and practicing from coast to coast, may provide services to states in which they are non-resident only through attorneys licensed in that state. And, each state in which the firm's licensed attorneys operate has the power to monitor and control the conduct of the attorney. If instead, the judiciary finds that mail-order pharmacy is, at its foundation, a drug product process, the impetus will arise to include mail-order dispensing within the federal framework of the FDCA either through agency regulation and judicial interpretation or legislative action. F. Defining "Mail-Order Pharmacy" for Regulatory Purposes In studying regulation of this industry, the question of what enterprises should be regulated as a mail-order pharmacy also vexes. What makes a pharmacy a mail-order house is not at all clear. One might picture the typical regulated entity as Medco Containment Services, Inc.,233 the industry giant whose income derives from the filling of four million mail-

233

See supra text accompanying notes 14-15.


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35

order prescriptions per year. But visualizing Medco as the subject of regulation can be most misleading. It may be true that Medco and companies like it are the "mail-order houses" that come first to the attention of would be regulators. But the field contains others. There are corporate drugstore chains, like Walgreens and Thrift, that are community-based pharmacy chains with substantial mail-order operations. Chain operations aside, the more perplexing dilemma may be that presented by the most standard of community-based pharmacies across the United States. It is no secret that community pharmacies in northern states mail prescription drugs to their patients who reside in the sun belt in wintertime. In rural states, such as the author's Montana home, a significant number of prescriptions are received and filled by mail through community-based pharmacies. Is it "mail order" for purposes of special regulation, if a Montana pharmacy mails a drug prescribed by an in-state physician to a Montanan residing in Arizona six months per year? Will we regulate as mail order the transaction in which the Montanan living in Arizona mails the prescription from an Arizona physician to a Montana pharmacy for filling? These are not idle questions. There appear to be no statistics available on quantity of drugs mailed from community-based pharmacies. But it seems that the practice is commonplace and may occur on a scale that will greatly vex those who hope to regulate the stereotypical mail-order houses without including the community-based pharmacies. One pharmacist managing a relatively large volume pharmacy in Montana reports that 25% of her prescriptions are handled through the mail. Special regulation of mail-order pharmacy would require answers to these questions:

1. What is mail order for purposes of regulation? Is it defined by prescription orders mailed from patients to pharmacists? Is it a function of prescriptions filled by mail? Or does it require that both the prescription and the dispensed drug travel by mail? 2. Does it depend on whether there is a pharmacist/patient relationship? How will that pharmacist/patient relationship be defined? 3. Will the class regulated be defined by the number of mailings a pharmacy makes in a given time? Or will it depend on the percentage of business that derives from mailings? 4. Does the class to be regulated include only those entities whose primary business is mail order? At what point will a community-

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based pharmacy fall into the class by reason of its volume of mail order?


5. If one advocates applying the present practice acts to out-of-state pharmacy houses based even on a single mailing, must community-based pharmacies also comply, when they mail to their retirees in the sunbelt? These issues must be addressed in the drafting of any state or federal regulation aimed at mail-order pharmacy. If these questions seem idle, an examination of the statutes of the nine states that expressly mention mailorder pharmacy in their legislation will show that the problem is genuine. 234 Of each of these statutes expressly mentioning mail-order pharmacy one must ask, " W h o is intended to be in the regulated class?" The Alabama statute speaks to "every mail-order house" without defining "mail-order house." 235 Nevertheless, the term "mail-order house" would seem to imply that there are certain entities that are clearly recognizable as constituting the regulated class. One pictures the Medco type operations. The Arkansas legislation, on the other hand, applies to "[a]ny pharmacy operating outside the state which ships, mails, or delivers in any manner a dispensed legend drug into Arkansas . . . ."236 The California act is similar covering " a n y pharmacy located outside this state which ships, mails, or delivers in any manner, controlled substances or dangerous drugs or devices into this state . . . ,"237 California defines a "dangerous d r u g " to include any legend drug, 238 and considers pharmacies mailing such drugs into the state as "non-resident pharmacies." 239 Florida, in like manner, includes in its class "[a]ny pharmacy that is located outside this state and that ships, mails, or delivers, in any manner, a dispensed medicinal drug into this state . . . ."24° The state identifies such a pharmacy as a "non-resident special pharmacy," 241 identifying a

234 235

236 237 238 219 240

241

See supra text accompanying notes 173-82. A L A . C O D E § 34-23-31 (1975). This section states: Every mail-order house which dispenses drugs or medicines through the United States mail or otherwise from any point in the state of Alabama to any point outside of the state of Alabama, and every such business which dispenses drugs or medicines through the United States mail or otherwise from any point outside of the state of Alabama to any point within the state of Alabama shall . . . . ARK. STAT. A N N . § 17-91-401 (1987). C A L . B U S . & PROF. C O D E § 4050.1 (West 1989). Id. § 4035. Id. § 4050.1(a). F L A . STAT. A N N . § 465.0156 (West 1989).

Id.


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37

"special pharmacy" to include "every location where medicinal drugs are compounded, dispensed, stored, or sold if such locations are not otherwise defined in this subsection."242 The Arkansas, California, and Florida statutes on their face delineate the regulated class based on the act of mailing into the state. There is no exception for the northern pharmacist mailing a prescribed drug to a retiree patient wintering in the sunshine of one of those states.243 The Illinois statute governs "mail-order pharmacies,"244 which term sounds like the Alabama act's "mail-order houses." But Illinois defines a "mail-order pharmacy" on the basis of the act of mailing,245 making the class much broader than that of Alabama's mail-order houses. If one is tempted to resolve this issue by suggesting that courts will construe the statutes to include only the Medcos of the country, Nebraska's act presents an interesting twist because it does not mention the pharmacy or the mail-order house, but only the individual. The act provides: "No person operating outside of the state of Nebraska shall ship, mail, or in any manner deliver dispensed prescription drugs into the State of Nebraska ,,246

Utah247 and Idaho,248 in their recently enacted statutes, use the same comprehensive service-oriented definition of the class regulated as "outof-state mail service pharmacy." The statutes are notable for two reasons. First, they define the class in terms of counseling and providing information instead of just mailing. More importantly, the class includes only those who mail, counsel, or inform "residents" of the regulating state. In sunbelt states, this limitation may exclude from regulation the out-of-state

242 243

244

245

246 247

248

Id. § 465.003(d). North Dakota, too, has this type statute. N . D . CENT. CODE § 43-15-34.1 (1987): " A n y pharmacy operating outside the state which ships, mails, or delivers in any manner a dispensed prescription drug or legend drug into North Dakota shall . . . ." ILL. A N N . STAT. ch. 111, ¶ 4136(a) (Smith-Hurd 1987): " T h e Department shall establish rules and regulations, consistent with the provisions of this Act, governing mail-order pharmacies which sell, or offer for sale, drugs, medicines, or other pharmaceutical services in this state." Id. § 4123(n). This section states: " 'Mail-order pharmacy' means a pharmacy that is located in a state of the United States, other than Illinois, that delivers, dispenses or distributes, through the United States Postal Service or other common carrier, to Illinois residents, any substance which requires a prescription." N E B . REV. STAT. § 71-2407 (1988). UTAH CODE A N N . § 58-17-2(28). This section defines an "out-of-state mail service pharmacy" as a pharmacy located outside the state that: (a) ships, mails, or delivers by any lawful means a dispensed legend drug to a resident in this state pursuant to a legally issued prescription; (b) provides information to a resident of this state on drugs or devices which may include, but is not limited to, advice relating to therapeutic values, potential hazards, and uses; or, (c) counsels pharmacy patients residing in this state concerning adverse and therapeutic effects of drugs. IDAHO CODE § 54-1742 (1989). This section is identical to the Utah statute.


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community-based pharmacist who mails a prescription to a retiree patient or other patient temporarily visiting another state.249 The answers of these nine states to the question of who will be regulated are, if clear in any way, widely divergent. Drafters of legislation or regulations aimed at mail-order pharmacy will have to address this important issue. Ironically, it would be easier to draft regulatory language to cover an entity like Medco than a community-based pharmacy that develops mail order as part of its operation. The problem can be simplified somewhat by defining mail-order pharmacy as the mailing, shipping, or sending of prescription drug products or devices (1) from outside the state to ultimate consumers within the state, or (2) from in the state to persons outside the state who are not domiciled or residing in the state. This type of language will exclude from mail order intrastate transactions of a community-based pharmacy as well as mailings to patients visiting other states even for extended periods of time. It is more difficult, but perhaps possible also, to exclude from the definition occasional mailings of prescription drug products to patients with whom the pharmacist has a prior direct relationship. G. Equivalency of States in their Present Regulation of Pharmacy Federal law applicable to pharmacy regulates uniformly throughout the 50 states. Hence, the Controlled Substances Act (CSA) provides a closed system for the management of controlled substances in all 50 states, while the FDCA uniformly deals with adulteration and misbranding of drugs moving in interstate commerce. The PPPA applies in all states to poisons involved in interstate commerce, and the postal laws and regulations are omnipresent in their application.

249

Of course, the word "resident" often raises legal issues as to who is a resident. Resident is defined as: Any person who occupies a dwelling within the State, has a present intent to remain within the State for a period of time, and manifests the genuineness of that intent by establishing an ongoing physical presence within the State together with indicia that his presence within the State is something other than merely transitory in nature. BLACK'S LAW DICTIONARY 1309 (6th ed. 1990). "Residence" is defined as: "Personal presence at some place of abode with no present intention of definite and early removal and with purpose to remain for undetermined period, not infrequently, but not necessarily combined with design to stay permanently." Id. Finally, "reside" also adds clarity. To settle oneself or a thing in a place, to be stationed, to remain or stay, to dwell permanently or continuously, to have a settled abode for a time, to have one's residence or domicile; specifically, to be in residence, to have an abiding place to be present as an element, to inhere as a quality, to be vested as a right. Id. at 1308. Under these definitions mailing to the sunbelt-visiting retiree should be excluded from mail-order regulation.


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But what of the state lattice in the regulatory framework? Is there any uniformity? To what extent? Interstate commerce aside, do each of the states regulate pharmacy practice, drug substitution, adulteration of drugs, misbranding, packaging of poisons, and controlled substances in any kind of uniform manner? Are the pharmacy practice acts similar? These questions are relevant to the issue of whether there is a less burdensome alternative to state regulation of non-resident mail-order pharmacies. In analyzing the constitutionality of requiring an out-of-state mailorder pharmacy to comply with a given state's pharmacy practice act, the courts will consider whether there is a less burdensome alternative. If state statutes are uniform in substance, then mail-order houses can argue that compliance with the law of the "home" state in conjunction with observance of the federal statutes is a viable, reasonable, and effective alternative. The question is whether state statutes are in fact roughly equivalent. Analysis of the pharmacy laws of the 50 states to determine the equivalency of regulation might occur on two levels. First, one would want to determine whether each state has by statute addressed areas such as adulteration, misbranding, controlled substances, pharmacy practice, and poison prevention. Second, the provisions of the acts would have to be methodically compared to determine equivalency, because similarly titled acts might have provisions that vary dramatically. Also, an act that appears on its face to cover a subject such as adulterated drugs might, by its provisions, also fully cover another, such as poison prevention. Unfortunately, a methodical comparison of the provisions of the state laws in these areas is by its nature an undertaking beyond the scope of this article. Hence, this analysis is confined to the first level of comparison to determine whether each state in fact regulates selected areas relevant to pharmacy. This is not an easy task. Surveys of state drug laws as they relate to pharmacy are virtually nonexistent with the exception of that published by the NABP.250 Also, provisions that would constitute an area of regulation may be contained in a seemingly unrelated statute. Nevertheless, analysis of the NABP survey can be helpful.251 It appears that all 52 of the NABP members have state or quasi government "boards" or "commissions" of "pharmacy" or "pharmacy examiners."252 Titles vary somewhat, but it is doubtful that the function varies. All states have provisions for appointment of board 250 251

252

N A B P SURVEY, supra note 104. T h e National Association of Boards of Pharmacy serves the boards governing pharmacy in all 50 states either as active or associate members, plus the District of Columbia and Puerto Rico. Its survey of the law covers statutes relating to Organizational Law (of the boards), Pharmacist Licensing, Internship Requirements, and Drug Laws. N A B P SURVEY, supra note 104, at Table II.


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members,253 reprinting by the board of laws and regulations,254 as well as rule and regulation making, licensing, and license revocation authority.255 As to the pharmacists, all states appear to require some form of prior practical experience, the amount and nature of which varies widely.256 All require graduation from a college of pharmacy.257 Except for California, all states utilize the National Association of Boards of Pharmacy Licensure Examination (NABPLEX).258 Forty-six states require continuing education for relicensure.259 The NABP describes the continuing education requirements as being fairly uniform in type and prescribed range of acceptable subject matter.260 But, the corollary is that some states do not require continuing education. There are a number of variables in the state reciprocity requirements making them difficult to capsulize.261 Nevertheless, all states provide for reciprocity under stated conditions. All states provide for the issuance, renewal, and revocation of licenses, and there is a great deal of uniformity in requirements in this area.262 Finally, every state requires a pharmacy permit for drug distribution and specifies minimum standards of equipment required.263 Turning to the area of state statutory drug restrictions, the NABP Survey indicates that 37 states and the District of Columbia have enacted some form of the Model Food and Drug Act.264 The remaining 13 states each have a "food and drug" statute dealing with adulterated and misbranded foods. These acts, while invariably designed to protect the public from adulterated and misbranded foods, vary widely in their provisions and the items to which they apply. Only 10 states appear to have uniform dangerous drug acts.265 Fourteen others show no acts specifically dealing with dangerous drugs, while the remaining states all report dangerous drug acts enforced by different governmental agencies.266 Seven states report enactment of Uniform Controlled Substances Acts, while all states purport to have "controlled substances" acts.267 The 253

Id. at Table III. Id. at Table I. 255 Id. at Table II. 236 Id. at Table V. 254

257

Id. Id. at Table VI. 259 Id. at Table IX. 260 Id. 261 See id. at Tables X & XI. 262 See id. at Tables XIII & XIV. 253 Id. at Table XVII. 264 Id. at Table XVIII. 265 Id. 266 Id. 267 Id. 258

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NABP survey does not reflect the extent to which the states regulate poison packaging and prevention. As can be seen, information on equivalency of state statutes is anything but clear. One can fairly conclude only that all states have a "food and drug" act as well as statutes dealing with dangerous drugs and controlled substances. The variation in the provisions of these statutes as well as the agencies responsible for their enforcement makes conclusions about their equivalency most speculative. In any event, it is doubtful that any empirical basis exists for limiting regulation of mail-order facilities to control by their home state on the basis of any assumption of direct equivalency in state regulation of pharmacy. III. ALTERNATIVES IN REGULATION A. An Available Federal Alternative to State Regulation of Mail-Order Houses If the unique characteristics of interstate mail-order pharmacy make it inappropriate for regulation as professional practice, and regulatory systems based on a professional practice model are outmoded and burdensome, then regulators might approach mail-order operations as interstate drug product packaging and distributing entities whose operations merit monitoring and supervision in the same sense as pharmaceutical manufacturers. This would entail moving the primary regulatory emphasis from the states to the federal government. Congressional intervention is not on the horizon. Even those who seek to leash mail-order pharmacy seem to intend for the states to hold the leash. However, this does not mean the federal government lacks an avenue by which to enter this area. The regulatory machinery for federal management of this burgeoning interstate industry may be available under the FDCA, should the FDA elect to use it. The FDCA can be interpreted to give the Food and Drug Administration authority broad enough to monitor the safety of mail-order houses. Section 510 of the Act in part defines those to whom the act applies to include those involved in "repackaging" drug products: [T]he term "manufacture, preparation, propagation, compounding, or processing" shall include repackaging or otherwise changing the container, wrapper, or labeling of any drug package or package device in furtherance of the distribution of the drug or device from the original place of manufacture to the person who makes final delivery or sale to the ultimate consumer or user . . . . 268

268

21 U.S.C. § 360(a)(1) (1984).


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Mail-order houses buy mass quantities of drug products for repackaging and labeling for national distribution and might be included in the definition. The question of whether mail-order houses are repackaging "in furtherance of the distribution of the drug or device from the original place of manufacture to the person who makes final delivery or sale to the ultimate consumer or user" must be answered. However, there appear to be no cases on point. Considering the massive volume of the industry giants,269 the fact that they do not fill prescriptions from stock bottles, and that they prepackage drugs, policy would indicate they should be considered "repackagers" within the meaning of the statute. If the FDA deemed the mail-order houses "repackagers," then they would be required to register with the FDA annually, designating their names, places of business, and all places where they operate.270 Establishments registered with the Secretary are subject to inspection by the FDA.271 This right of inspection of included establishments is broad enough to allow the agency comprehensive ability to probe and examine operations of the mail-order facilities.272 But section 510 of the Act also provides for exclusion of retail pharmacies from the application of the section.273 Whether the mail-order houses would be exempted from section 510 of the FDCA as retail pharmacies depends on whether they "manufacture, prepare, propagate, compound, or process drugs or devices for sale other than in the regular course of their business of dispensing or selling drugs or devices at retail."274 If their processing is only "in the regular course of their business of dispensing or

269 270 271 272

273

274

See supra text accompanying notes 2 6 - 2 9 . 21 U . S . C . § 360(b) (1984). FDCA § 510(h), 21 U . S . C . § 360(h) (1984). FDCA § 704, 21 U . S . C . § 374. The section states: In the case of any factory, warehouse, establishment, or consulting laboratory in which prescription drugs or restricted devices are manufactured, processed, packed, or held, the inspection shall extend to all things therein (including records, files, papers, processes, controls, and facilities) bearing on whether prescription drugs or restricted devices which are adulterated or misbranded within the meaning of this Act, or which may not be manufactured, introduced into interstate commerce, or sold, or offered for sale by reason of any provision of this Act, have been or are being manufactured, processed, packed, transported, or held in any such place, or otherwise bearing on violation of this Act. 21 U . S . C . § 360(g) (1984). This section states: Exclusions from application of section. The foregoing subsections of this section shall not apply to—(1) pharmacies which maintain establishments in conformity with any applicable local laws regulating the practice of pharmacy and medicine and which are regularly engaged in dispensing prescription drugs or devices, upon prescriptions of practitioners licensed to administer such drugs or devices to patients under the care of such practitioners in the course of their professional practice, and which do not manufacture, prepare, propagate, compound, or process drugs or devices for sale other than in the regular course of their business of dispensing or selling drugs or devices at retail. Id.


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selling drugs or devices at retail," then they are exempt from this avenue of regulation. This "practice of pharmacy defense"275 is reflected in two cases that provide some criteria for determining whether a practice is "in the regular course" of retail pharmacy. First, in Cedars North Towers Pharmacy, Inc. v. United States of America,216 the pharmacy was preparing, packaging, and shipping drugs developed by a Dr. Fulton for treating patients suffering from acne. Cedars sought to avoid registration under section 510 of the Act on the ground that it was exempt under subsection (g), being a pharmacy operating in the regular course of business. The court granted the government's motion for summary judgment and denied Cedars' motion concluding that Cedars' activities clearly transcended the level of normal pharmacy operation.277 The court noted the factors relevant in deciding whether a pharmacy qualifies for the exemption set out in 360(g)(1): (i) Whether particular drugs are being compounded on a regular basis as opposed to periodic compounding of different drugs; (ii) Whether drugs are being compounded primarily for individual patient prescriptions as opposed to orders contemplating larger amounts for office use; (iii) The geographic area of distribution; (iv) Whether any form of advertising or promotion is being utilized; (v) The percentage of gross income received from sales of particular compounded drugs; and (vi) Whether particular compounded drugs are being offered at wholesale prices. This list of factors is not intended to be exhaustive and other factors may be appropriate for consideration in cases arising in a different factual context.278

The court, in holding Cedars to be a manufacturer under section 510, noted Cedars' pharmacy's heavy distribution of advertising literature and the fact that its national sales of the Fulton drugs amounted to 17% of Cedars' gross sales as indicia that the company's drug distribution was not in the regular course of retail pharmacy. Hence, the company was not exempted from section 510 of the FDCA. The "practice of pharmacy defense" also was raised unsuccessfully in United States v. Sene X Eleemosynary Corp., Inc. ,279 a case in which the government sought to enjoin a group including a registered pharmacist and a pharmacy corporation, among other defendants, from distributing in interstate commerce a drug that was not the subject of a "new drug" application as required by section 505 of the Act.280 The defendants were com275 276

277 278 279 280

United States v. Sene X Eleemosynary Corp., 479 F. Supp. 970, 978 (S.D. Fla. 1979). Cedars N . Towers Pharmacy v. United States, reprinted in Food, Drug and Cosmetic Law Reports (CCH) ¶ 38,200 (S.D. Fla. Aug. 2 0 , 1978). Id. Id. 479 F. Supp. 970, 978 (S.D. Fla. 1978). 21 U . S . C . § 3 5 5 .


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pounding a drug they called GH-3 in several forms for the treatment of various disorders. The active ingredient was procaine hydrochloride, a local anesthetic most people would recognize from its proprietary name, Novocaine. One of the defendants, doing business as "Club Sene X," promoted the products by mailings and received prescription orders that were then provided to the pharmacy for filling. The pharmacy returned the prescription medications to the defendant Dr. Kratz, who was connected with Club Sene X, and he packaged and mailed the product to the patients. The court noted involvement in interstate commerce insofar as the procaine used in filling the orders was shipped to the defendant pharmacy in interstate commerce from Bofors America in Edison, New Jersey.281 Records showed that the products also were shipped to patients in interstate commerce.282 Finally, the court noted "circumstantial evidence of interstate shipment in the form of GH-3 prescriptions written by doctors practicing outside the State of Florida."283 The court held that the defendants were not exempt from the new drug provisions of the FDCA and enjoined them from distributing GH-3.284 In doing so, it specifically addressed the "practice of pharmacy" defense and set out some criteria for measuring whether an operation is within the regular course of pharmacy practice.285 For example, the court found it important that the corporation disseminated literature resulting in memberships and prescription orders that were referred to a single pharmacy.286 The court also noted the absence of a one-on-one relationship between the pharmacist and the patients, "a customary characteristic in the usual practice of pharmacy."287 In fact, the court noted, "[T]here is no relationship at all between the patients and the pharmacy."288 The court also pointed to the handling of "a large volume of out-ofstate business for prescriptions for GH-3, prescriptions written by physicians who are not known to Mr. Sabastier, [the pharmacist] and, as a practical matter, could not have been known to him."289 Finally, the court deemed significant the pharmacy's practice of dispensing a single product line on a routine basis instead of a broad range of drugs expected in the usual practice of pharmacy.290 Cedars and Sene X Eleemosynary are not cases about stereotypical 281 282 283 284 285 286 287 288 289 290

Sene X, 479 F. Supp. at 9 7 3 . Id. Id. Id. at 9 7 9 . Id. at 9 7 8 . Id. Id. Id. Id. Id. at 979.


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mail-order houses like Medco. Also the facts of these cases are somewhat peculiar, because both involve new products under section 505 of the Act and pharmacies dispensing a primary drug product line. But, the characteristics of their operations that resulted in the court's denial of the practice of pharmacy defense are not so readily differentiated. For example, the lack of a "one-on-one relationship" or any relationship at all between the mailorder pharmacy and the patient as noted in Sene X stands out as does the fact that the prescriptions are written by physicians not known to the pharmacist.291 Of the criteria applied in Cedars, "geographic area of distribution" is significant for mail-order houses that operate nationwide. The question "Whether any form of advertising or promotion is being utilized"292 will reflect another characteristic of mail-order houses that might prompt a court to deny them the "practice of pharmacy" defense. On the other hand, Cedars places emphasis on whether "particular drugs" are being compounded, are the basis for the company's income, or are offered at wholesale prices.293 The issue of regulation of mail-order houses does not seem to revolve around those with an emphasis on particular drugs. Despite these considerations, sections 510 and 704 of the Act, when construed in light of the criteria for applying the pharmacy exemption, may provide a viable means of federal regulation of the mail-order houses by the FDA. In the aftermath of Iris Hemmelman's death, a petition was filed with the FDA requesting that the agency exercise this statutory authority to subject mail-order drug companies to Current Good Manufacturing Practices regulations.294 The petition made certain policy arguments one might adopt in calling for this form of federal intervention: (1) mail-order houses "use highly mechanized, high-volume, high-pressure procedures that require disintegration and reassembly of dispensing functions under conditions of stress"; (2) volume in the mail-order houses "is so muchgreater than any regular pharmacy's volume that a single system mistake inherently implicates more patients"; and, (3) local prosecutors do not have the resources to enforce state laws against the mail-order industry.295 Federal regulation under the FDCA would not be an easy answer. The attempt would have to survive judicial challenge. The mail-order industry would contend that they are not within the class regulated under 291 292 293 294

295

id. Cedars, Food, Drug and Cosmetic Law Reports (CCH) ¶ 38,200. Id. FDA Docket No. 88P-0367, Petition of James Dickinson (filed Oct. 18, 1988; denied Nov. 29, 1990). James Dickinson is the editor of Dickinson's PSAO, a monthly newsletter for pharmaceutical services administrative organizations, and a most vocal opponent of the mail-order drug houses. The newsletter, not surprisingly, is highly critical of the mail-order industry. Dickinson's PSAO Newsletter, Nov. 1988, at 3 .


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section 510 of the Act.296 They also would argue that they are excluded under the "practice of pharmacy" defense on the basis of the same section. The specter of the practice of pharmacy defense illustrates the necessity of deciding the professional status of mail-order dispensing. The practice of pharmacy defense is consistent with the professional practice of pharmacy, which can be regulated adequately by the states, if the courts will allow reasonable application of state pharmacy practice acts to non-resident mail-order houses. Equally logical would be a judicial determination that mail-order pharmacy is outside the regular course of pharmacy practice resulting in denial of the defense and allowing regulation under the FDCA as a section 510 entity engaged in "repackaging" drug products and, hence, subject to inspection and monitoring. Of course, any effort at regulation by the FDA would result in objection to state attempts at enforcement of pharmacy practice acts on the basis of federal preemption. B. Developing a Prototype from the Newly Enacted State Legislation If courts deem mail-order pharmacy to be the professional pharmacy practice, then the states should be allowed to assert jurisdiction over outof-state mail-order houses, and regulators need to develop a prototype statute for the monitoring and supervision of the activities of mail-order houses in the respective states. One means of developing such a prototype is to analyze the statutes of jurisdictions that assert state regulation of the industry.297 If one were to take the liberty of extrapolating, from statutes of the states that expressly purport to regulate mail-order pharmacy, those provisions that might best be used to govern out-of-state mail-order pharmacies, the resulting prototype statute might contain the following provisions: 1. Licensing by the Receiving State. Each of the regulating states requires licensing of mail-order pharmacy services in the receiving state, licensing being a clear assertion of regulatory power by the state, as differentiated from "registration," which by definition, may not involve requirements of qualification and testing. 2. Corporate and Individual Information on the Pharmacy and its Pharmacists. Such information will become more important if growth trends in mail-order pharmacy continue, because it is impossible to predict which pharmacies or pharmacists will enter the field. The prospect of financially unstable but aggressive 296 297

21 U . S . C . § 360(g) (1984). See supra text accompanying notes 159-231.

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companies soliciting thousands of prescription orders and then failing to fill them while sliding into insolvency is a single contingency that illustrates the wisdom of requiring a substantial amount of professional, organizational, and financial information.


3. Licensing in the Home State. This type of provision ensures that, at a minimum, the mail-order pharmacy will be subject to the same regulation as other pharmacies in the home state. 4. Designation of a Pharmacist in Charge Licensed in the Home State. This provision is required for licensure in any state. Some argue that the mail-order house should have a pharmacist on staff who is licensed in every state into which the facility intends to mail. 5. Payment of a Licensing Fee. 6. Maintenance and Retention of Records on Prescriptions for Controlled Substances Shipped to Consumers in the State. This provision permits inspection by the board or submission of information to the board on demand. Some states require submission of quarterly reports on controlled substances shipped to residents. The better provision requires the keeping of such information for inspection or submission on demand, because resident pharmacies are not required to submit such reports. 7. Compliance with Home State's Laws Regarding Facilities, Records, and Operations. Compliance with each state's mandates regarding operations, recordkeeping, and personnel would be physically impossible, making it more practicable to meet the home state's criteria for facilities, records, and operations. 8. Granting of Inspections, if the Home State's Examinations are Inadequate. Regulators might want to remove the contingency for inadequacy of home state inspections, because the power to inspect seems so critical to an operation where evaluation of hazard, risk, and danger depend on inspection of the physical conditions and procedures. 9. Filing of Occurrence Reports. This type of provision, requiring reporting of hazardous incidents, injuries, and accidents, should be considered a necessity for the sake of allowing regulators a minimum notice of problems and some sort of empirical data on the safety of mail-order facilities and operations. 10. Maintenance of Adequate Toll-Free Telephone Consultation with Pharmacist. Access to a pharmacist should be available on the

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basis of a minimum 40-hour, six-day week with label notice of the phone number. This provision might have to specify a standard for adequacy in terms of numbers of phone lines and qualifications of persons answering. 11. Restrictions on Drug Substitution, Including Notification of the Customer of Any Substitution. This prototype is a synthesis of regulatory provisions that have emerged out of the legislative process as appropriate tools for state regulation of non-resident mail-order pharmacies. It forms what might be termed a "disclosure" statute, whose purpose is to ensure that the regulatory board is provided minimum information regarding identity, location, and nature of the mail-order entities, for monitoring purposes. Such a statute would not control methods or other aspects of the operation of the facilities, but would allow the monitoring and supervision on somewhat the same basis as that exercised over community-based pharmacies. It is necessary that state legislation aimed at non-resident mail-order pharmacy houses contain the requirements of the prototype. It is doubtful that fewer requirements than those specified in the prototype will do any more than give a false appearance of regulatory control and safety. It is also predictable that this type of legislation will be the norm as states, attempting to design regulation that will survive constitutional challenge, find that more burdensome requirements will not pass muster. C. The Proposal of the National Association of Boards of Pharmacy The NABP Task Force on Out-of-State Pharmacies drafted provisions for inclusion in model legislation for the regulation of mail-order pharmacy.298 After circulation for comment by interested pharmacy groups, the provisions were adopted by NABP as a model for regulation of out-of-state pharmacies.299 The Model Regulations are specific to mail-order pharmacy and well illustrate the complex problems involved in attempting state regulation of this industry. In its first paragraph, the model regulation provides: "Registration (Licensure). No Non-Resident Pharmacy shall ship, mail, or deliver prescription drugs and/or devices to a patient in this state unless registered (licensed) by the (state) Board of Pharmacy."300 In its breadth, the provision will, if adopted, include community-based pharmacies that make single 298

NABP, TASK FORCE ON OUT-OF-STATE PHARMACIES (Feb. 10-11, 1989).

299

NABP Resolution 85-3-89: Model Regulations on Out-of-State Pharmacies (adopted May 10, 1989). Id. ¶1

300


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mailings to their patients vacationing in other states. It is doubtful that the NABP intended to entangle community-based pharmacies in this regulatory net. There is no provision to exclude the occasional mailing of medicines to patients with whom the pharmacist has established a direct pharmacist/ patient relationship. Enactment of this model regulation will result in enforcement that is either selective, because boards of pharmacy may avoid enforcing it against community-based pharmacies, or inadequate, because the boards will fail to enforce it against many pharmacies. If enforced uniformly, it would be burdensome on the community-based entities least in need of regulation. The NABP model regulation would require registration (licensure) in the home and receiving states.301 Use of the language, "Registration (Licensure)" in the model act is troublesome. Some state practice acts use the term "registration" while others use "licensure," both appearing to mean the granting of permission to practice what one normally associates with the act of licensing. Consequently, one might think that the NABP was simply accommodating both uses. However, it appears the drafters intended the options of "licensing" or simply "registering,"where "registering" means providing information and paying a fee without taking tests or •

i•

•

•

302

meeting licensing requirements. Among the conditions of "Registration (Licensure)" listed in the model regulation, is the requirement that the non-resident pharmacy "[B]e registered (licensed) and in good standing in the State of (home state)."303 One can assume the drafters mean licensing in the context of taking tests and meeting licensing criteria. Will it be the same in the receiving state? The ambiguity of this provision makes unclear the nature of the burden being placed on this bit of interstate commerce. The model regulation mandates that the mail-order house "Maintain pharmacy hours that permit the timely dispensing of drugs to [state's! patients and provide reasonable access to the [state'sl patients to consult with a licensed pharmacist about such patients' medications."304 This provision, which is consistent with, but much less specific than, the "prototype's" requirement that the pharmacy be open at least 40 hours over a six-day work week, is somewhat general and attempts to avoid the trap of selectively requiring specific hours of mail-order houses that are not required of community-based pharmacies. The NABP model, like the "prototype," requires that there be a toll301 302

303 304

Id.¶3(a). See NABP Chickens Out on Mail-Order Pharmacy Licensing, Dickinson's PSAO Newsletter, Sept. 1989, at 3 . NABP Model Regulations, supra note 2 9 9 , ¶ 3(a). Id. ¶ 3(d).


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free telephone number for communication between the patient and a pharmacist that would be affixed to each legend drug product container.305 Although this provision should be upheld by courts as being necessary in light of the lack of direct pharmacist/patient relationship in this industry, it may be of little value without more specific requirements. Does an industry giant mailing 10,000 prescriptions per day meet the statute by having a single toll-free line? The basic issue here is whether public health requires that some minimum semblance of the pharmacist/patient relationship exist. To what extent will the industry be allowed to delete that relationship? The model regulation provides for maintenance, in readily retrievable form, of records of legend drugs or devices shipped to the receiving state, but does not call for the filing of quarterly reports with the receiving state.306 There is no clear provision for inspection of the records. The model regulation requires the non-resident pharmacy to "[S]upply upon request, all information needed by the (state) Board of Pharmacy to carry out the Board's responsibilities under the statutes and regulations pertaining to Non-resident Pharmacies."307 But, it contains no inspection provisions. Although inspections by states into which drugs are being shipped would present a burden that the mail-order industry likely would cite as unreasonable, absence of such a provision is most detrimental to effective regulation. NABP's proposal requires compliance with "all the statutory and regulatory requirements of the state . . . including those that are different from federal law or regulation" for controlled substances, drug product selection, and dispensing prescriptions in accordance with quantity indicated by the prescriber.308 Hence, NABP would in essence potentially require compliance with the laws and regulations of all 50 states in these areas as opposed to requiring compliance with the laws of the home state only. This provision, of course, increases the risk of challenge, because it sets the stage for the question of whether the mail-order houses will be required to comply with the laws of all 50 states. NABP also calls for a policy and procedures manual setting forth "normal delivery protocols and times," procedures to be followed if the drug is unavailable or delayed in delivery, a policy on delivery of drug products for acute illness, and a policy for interim dosage when the patient reports the medication is not received.309 This proposal is peculiar to regulation of mail-order houses, and is not seen in regulation of the community-

305

Id. ¶ 3(e). Id. ¶ 3(b). 307 Id. ¶ 3(c). 308 Id: ¶ 4. 306

309

Id. ¶ 5.


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based pharmacies, which makes it a likely candidate for judicial challenge. The model regulation provides for initiating disciplinary action against a non-resident pharmacy by filing a complaint with the home state's board of pharmacy.310 If no action is taken by the home state's board of pharmacy within 90 days, "disciplinary proceedings may be instituted in (state) before the board." It is doubtful that the board would wield any jurisdiction or power under such a provision that would allow it to take any effective action. The "catch 22" that hampers the NABP in its proposal is fashioning a legislative tool that will effectively collar the industry without constituting an unreasonable burden on interstate commerce when potentially enforced by 50 states. The NABP model regulation involves substantially more burden than the "prototype" that would be developed from the newly enacted state legislation. Ultimately, the legislatures must decide whether they wish to ensure that their constituents have precisely the same protection when purchasing through mail-order houses as through community-based pharmacies or whether to assume that the regulation of the mail-order pharmacy's home state provides relatively equivalent protection. The prototype state regulation relies on the rough equivalency of regulation by the home state and the federal government. Review of the NABP model regulation, the statutes from which the prototype state regulation was developed, and legal opinions delineating areas of potential invalidity in proposed legislation3" allows one to anticipate the type of regulation that will become the standard in this area. Hence, one can predict that "disclosure" type statutes will be the rule, if regulators follow the path of least resistance. Regulatory bodies will accept the premise that the laws and regulations of other states are roughly equivalent in their protection to that provided consumers in the receiving state when they deal with community-based pharmacists. Such statutes invariably will mandate licensing by the home state, divulging of information about the business entity and pharmacists involved, payment of fees, and designation of a pharmacist-in-charge licensed only by the home state. Reporting on shipping of controlled substances likely will give way to requirements that records be maintained adequately and be available on request. Requirements for contingent inspections, filing of occurrence reports, and requirements for patient/ pharmacist communication, such as toll-free telephone numbers, will con310 311

Id. ¶ 6. See Attorney General of Ohio, O p . No. 82-032 (May 4, 1982); Attorney General of Nebraska, Op. No. 57 (Apr. 4 , 1982); Attorney General of Wisconsin, O p . , OAG 33-83 (Aug. 2 3 , 1983); Opinion Letter of Miller, Singer, & Raives, P.C. to Governor of Wisconsin (Mar. 17, 1986) (written on behalf of AARP; copy available from author); Opinion letter of Foley & Lardner to J . C . Penney C o . (June 26, 1984).

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tinue to appear in the acts because they seem peculiarly necessary to the monitoring and operation of pharmacies when the patient never sees the pharmacist face-to-face. The problem is that such statutes will not be effective to ensure safety in the production line type setting in which this enterprise's drug products are dispensed. Given the nature of the operations of mail-order houses, inspection, monitoring, and supervision of production facilities may be a regulatory necessity.


D. The Role of the Tort System in Regulating Safety in Mail-Order Pharmacy Will any legislation that does not impose unreasonable burdens on interstate commerce be adequate to achieve the level of protection demanded in the name of public health and safety in community-based pharmacies? Will it be effective in dealing with the perceived safety hazards involved in high volume delivery of legend drugs? The issues are problematic. To avoid a declaration of invalidity in a constitutional challenge alleging unreasonable burden on interstate commerce, the prototype regulation that could be developed from the newly enacted state legislation is stripped of most requirements pertaining to the actual operation of the mail-order pharmacy. Hence, for example, there are no restrictions on the number of prescriptions per hour that a pharmacist may fill, the number of assistants per registered pharmacist, or the types of equipment or procedures that may be used. Those who want to address the hazards in an operation involving a "high speed quota system, untrained technicians, 50- to 80hour work weeks and 14-hour days, as well as a poorly designed filling system"312 will be frustrated by this seemingly ineffective effort at regulation. Will disparity in regulation allow the mail-order houses a competitive advantage in costs, gained because they expose their customers to risks deemed unacceptable by the community-based pharmacies? The answer may involve the proverbial "good news and bad news." The bad news is that state attempts to regulate interstate mail-order pharmacy are poor vehicles for ensuring the product safety necessary in this instance. Here, one deals with safety concepts of "hazard," "risk," and "danger."313 High speed quota systems, untrained workers, and 14-hour days in a drug delivery system are "hazards," those being conditions or changing sets of circumstances presenting a potential for injury to the consumer.314 They

312 313 314

Hearings, supra note 5, at 12 (testimony of anonymous pharmacist no. 1). See Philo & Rine, The Danger Never Was Obvious, 1 J. PROD. LIAB. 12 (1977). Id. at 13.


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present "risks," those being percentage probabilities that consumers will be injured. The "unreasonable" or "unacceptable" combination of hazard and risk is "danger."315 Regulation should promote a system that complies with good product safety standards for the elimination or minimization of this danger. Although much maligned in present public opinion, the tort system is the "good news" in this respect. It can serve as a regulating system that enforces by imposing liability when there is a breach of product safety standards. If a mail-order house operates with a five percent error rate in filling prescriptions,316 management must know that the failure will be reflected in consumer injuries or deaths, which in turn will result in claims for the consequential and direct costs borne by the consumer as well as the costs of the claims and litigation process. Ultimately, the cost may be reflected in insurance premium adjustments dictated by the underwriters as a result of the bad loss experience. Hence, any cost savings attributable to procedures that expose customers to dangers unacceptable to the pharmacy industry as a whole will provide a short-term competitive advantage only and may have a grave impact later when assessed by claims settlement or jury verdict. This is not to suggest that addressing patient injury after the fact in the tort system is preferable to prevention by sound regulation. But neither is it appropriate to think of regulation by the tort system as something that occurs only after the accident. In fact, unlike the regulation being discussed, the tort system has been operating to regulate health and safety in the entire pharmacy arena, since its inception. Any competent manager is aware of this "regulation" and will conclude immediately that a five percent error rate where brain damage, death, or paralysis may result, is corporate suicide in view of the size and number of potential tort claims and the probable damage to the company's public image. Further, in some jurisdictions, punitive damages are allowed under a standard of reckless or wanton disregard for the safety of others.317 The risk of a punitive damage award, considering insurance coverage problems and the wild card nature of the verdict size, tempers the extent to which corporate managers may choose to expose consumers to risk of injury or death to gain a competitive cost edge. 315 316 317

Id. Hearings, supra note 5, at 12 (testimony of anonymous pharmacist no. 1). See, e.g., Owens v. Parker Drilling C o . , 207 Mont. 4 4 6 , 4 4 8 , 676 P.2d 162, 164 (1984): When a person knows or has a reason to know of facts which create a high degree of risk of harm to the substantial interests of another, and either deliberately proceeds to act in conscious disregard of or indifference to that risk, his conduct meets the standard of willful, wanton, and/or reckless to which the law of this State will allow imposition of punitive damages on the basis of presumed malice.


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Although state pharmacy practice acts may not have contemplated mail order and may be ill-suited when applied to that enterprise, the common law of torts as it applies to pharmacies has no such problem and makes no distinction between community-based and mail-order pharmacies in the duty owed to customers. The standard of "ordinary care" in pharmacy is peculiar to that profession: "A pharmacist owes a duty of ordinary care in practicing his profession but such care requires the highest degree of prudence, thoughtfulness, and diligence, and it is proportional to the danger involved."318 What is reasonable and prudent is judged by national standards now, given improved communication and education.319 Moreover, under common law, when a pharmacist fills a prescription, that pharmacist has a duty to: "compound the drug prescribed, use due and proper care in filling the prescription, use the proper methods in the compounding process, and to ensure that the drug is not adulterated with a foreign substance."320 The Uniform Commercial Code also provides a basis for liability under theories of express warranty,321 implied warranty of merchantability,322 and implied warranty of fitness for a particular purpose.323 Such practices as those described in testimony by the "anonymous pharmacists" at the Senate hearings324 will breach the standard of care required of pharmacists and are certain to result in breach of warranties, exposing the pharmacy to liability for all resulting damages. It is true that regulation inherent in the tort system takes time to have any effect. Dangerous practices must result in viable tort cases for injury or death, which must in turn be pressed as claims until settlements or judgments are won. But this system has been in effect from the inception of mail order, and a legislative plan of regulation takes years to implement. Because the explosive growth in mail-order houses is so recent, the impact of cases like Iris Hemmelman's federal civil lawsuit may just now be felt by the industry. Tort liability will impose costs on the mail-order industry that will offset savings made by sacrificing customer safety. These costs will in turn reduce the competitive margin that the mail-order industry claims over the community-based pharmacies. This claimed margin may be illusory in the first place, often being the product of "comparing the costs of generic 318

319 320

Eldridge v. Eli Lilly & C o . , 138 Ill. A p p . 3d 124, 4 8 5 N.E.2d 5 5 1 , 552 (1985); Jones v. Irvin, 602 F. Supp. 399, 4 0 0 (1985). Brune v. Belinkoff, 235 N.E.2d 793 (Mass. 1968). Ramirez v. Richardson-Merrill, Inc., 628 F. Supp. 8 5 , 88 ( E . D . Pa. 1986).

321

SELECTED COMMERCIAL STATUTES, U . C . C . § 2-313 (West 1987).

322

Id. § 2-314. Id. § 2-315. Hearings, supra note 5, at 12-30.

323 324

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products dispensed by mail-order pharmacies to the costs of brand-name products dispensed by traditional pharmacies."325 Comparing the costs of brand name products carried by each sector may reflect no significant difference.326 Moreover, a study reported in the American Journal of Hospital Pharmacy shows how nebulous the competitive edge may be: A recent study examined costs associated with mail-service and community pharmacies. Sponsored by Pharmaceutical Card System (PCS), a third-party claims processor based in Scottsdale, Arizona, and conducted by the actuarial firm of Sieben and Associates, the study found that when unit costs are considered, mail-service pharmaceuticals cost 4% less. However, when data on PCS third-party plans offering a mail-order option were analyzed for a total of 225,000 adult card holders and their spouses, 12 months' experience demonstrated that overall cost to the employer increased by 5% when mail-order services were used, largely because of increased use. Wastage was also cited as a contributing factor, related to changes in prescription, adverse-reaction experience, and diminished need.327

A study conducted by Brandeis University and the University of Maryland and released by the Health Care Finance Administration reports . that the cost of mail-order pharmacy medication averages just two cents a day less than community pharmacy medications.328 It may be that the community-based pharmacies experience their greatest frustration at the thought that the proposed regulatory schemes will be ineffective at preventing mail-order houses from gaining a competitive edge on costs by exposing their customers to dangers the community pharmacists find unacceptable. But the tort system is effective in assessing costs of customer injury and death against the enterprise that caused the damage. This will reduce the competitive edge, and may have long-term implications in slowing the growth of mail order. CONCLUSION Can we predict the direction and intensity of the regulatory wind in the area of mail-order pharmacy? Perhaps. But the prediction assumes both the regulators and the mail-order services are at substantial risk and will act to avoid a confrontation that might cost them legal positions. The mailorder pharmacy industry is at risk, because a challenge to the enforcement 325 326 327 328

Boyd, supra note 10, at 6. Id. Enright, supra note 6, at 1872. Martin, Mail Order and Community Pharmacy Prices Are Similar, Study Finds. NS30 AM. PHARM. 23 (1990).


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of a reasonable statute might result in a court decision that each of the states has within its power to protect public health and welfare and the authority to impose substantial regulation on an interstate mail-order pharmacy. The states are at risk because an aggressive attempt at enforcement of a statute or regulation could just as easily result in a declaration that the enactment constitutes an unreasonable burden on interstate commerce. To gain any direction and clarity in this area, society must decide whether mail-order pharmacy will be regulated as the traditional professional practice of pharmacy, to be governed by the states as a matter of public health, or as a drug product repackaging and distribution process, to be monitored and supervised by the federal government. Neither is an unreasonable alternative. The prospect of regulating out-of-state mail-order houses by allowing states to govern the individual professionals operating the houses is analogous to regulation of the large interstate law firms. Although such firms are clearly interstate, commonly employing hundreds of professionals and providing services to clients nationally, each of the professionals is subject to licensing and regulation in each state in which he or she provides professional services. Each state may regulate the conduct of those practicing in the state in any manner. If, on the other hand, society deems the mail-order pharmacies too far removed from professional practice to be regulated like community-based pharmacists, then one need look no further than the pharmaceutical manufacturing industry for a model upon which to base regulation. The real detriment to public health and safety will occur if, in paralysis over the issue of the nature of mail-order pharmacy services, ineffective regulation takes place. The importance of this issue to pharmacy should not be overlooked. If the courts tend to treat mail-order pharmacy as something other than the professional practice of pharmacy, then the profession will suffer a setback in its efforts to maintain and build dispensing as a professional function. Changing the role of pharmacists to quality control supervisors will erode the professional practice aspect of pharmacy. This will be true especially if the courts place their imprimatur on such a new role by impairing the states' ability to regulate the pharmacists employed in the non-resident mail-order houses. This is not to denigrate the federal alternative in regulation, but it is pointed out as a matter of policy for the profession to weigh in assessing its recommendations for monitoring this enterprise. The challenge is to better monitor the mail-order dispensing of drugs for public health and safety. Questions of competition between the traditional community-based pharmacies and the mail-order houses should be of secondary importance to regulators. Issues of cost competitiveness will be resolved in the marketplace. The primary and key issue that should occupy regulators is whether the public is adequately protected by the present


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federal and state regulatory web whose spinners did not contemplate the management of mail-order pharmacy. Regulators need to abandon anecdotal evidence and seek answers based on empirical data determining whether there are abnormal risks in mail-order pharmacy and whether mail order's patients are subjected to risks patients of community-based pharmacies do not suffer. There appears to be scant research regarding the safety of community-based dispensing, mail-order dispensing, and comparison of the two. Since enactment of the FDCA, the approach to drug safety in the United States has been one of front-end quality assurance in drug manufacturing and distribution. The FDA system of notice and comment before rule making and inspection make voluntary compliance as easy as possible in a system designed to avoid problems. This is the perceived defect of the tort system as a regulatory device. It is tail-end quality assurance and, as such, runs against the grain of the FDA model. The program of front-end quality assurance provides from the outset that drugs move through the chain in as pure a form as possible. The risk to the system is the potential failure at the tail end in dispensing the drug to the patient. Improper monitoring or supervision can result in a weak link that results in failure of the whole chain. The purity and quality of the coumadin that killed Iris Hemmelman in Princeton, Idaho, was assured by the present front-end regulatory model. That she received the wrong drug was the result of a dispensing failure that defeated the entire system and resulted in her death. Regulators should opt for a form of regulation that complements the FDCA and offers front-end protection for the public. There is no apparent movement by the federal government to legislate in the area and thereby preempt the states. Nor is it clear whether the industry will comply with regulations propounded by states other than their own, especially in cases of newly enacted statutes such as those in the states from which the prototype state regulation was developed. If the states adopt a standardized model legislation that requires disclosure of owners, location, and pharmacy personnel, while imposing only those burdens peculiarly and reasonably necessary to regulate this new enterprise, such as requirements reflected in the prototype state resolution noted in Section III.B. above, then the courts would do well to foster enforcement of the statutes. Such acts do not constitute economic protectionism. They are a reasonable extension of state regulation to professional pharmacy practice, which is particularly within the orbit of state power. The burdens of disclosure, reporting, inspection, recordkeeping, and telephone communication with patients, especially insofar as they are somewhat uniformly required by the states, should be deemed reasonable by the courts.


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Mail-order pharmacy will be a permanent component of the retail pharmacy sales industry. If its edges are as rough as its critics suggest, the tort system will smooth them, until the enterprise becomes a responsible part of the consumer business world. Absent any bold initiatives, regulation by the states likely will take the form of control by the home state and monitoring of information by the receiving states under disclosure type statutes that will be of questionable efficacy. Both the mail-order industry and state regulators can be expected to choose their course carefully to avoid what could be an all or nothing gamble in court over the enforcement of a state's regulation. The courts could hold that mail-order pharmacies are simply not subject to regulation by receiving states. Or they could decide that the prototype state regulation or similar legislation is not unreasonably burdensome on interstate commerce in light of the local interest in the public health, safety, and welfare of the receiving state's citizens. The gravity of risk to the disputants will be great. Such jeopardy may induce in both the mailorder industry and its regulators an implicit agreement that disclosure type legislation is the appropriate means to regulate this emerging retail phenomenon. Public health and safety will best be served if society decides whether mail-order pharmacy is in essence the practice of a profession to be regulated as such or a drug product process to be monitored and controlled under a regulatory model like that employed for drug manufacturers. Unless the creature is defined, the appropriate net cannot be designed, and the present one is ill fitted to the task of protecting those to whom the industry dispenses.

Regulation of mail-order pharmacy. A critique.

The pharmacy gaze: bodies in pharmacy practice.

Social Pharmacy and Clinical Pharmacy-Joining Forces.

Disruption Coming to Pharmacy and Pharmacy Education.

Role of pharmacy education in growing the pharmacy practice model.

Refer-To-Pharmacy: Pharmacy for the Next Generation Now! A Short Communication for Pharmacy.

Doctor of pharmacy.

Pharmacy perspective.

Veterinary pharmacy.

Bringing More Veterinary Pharmacy into the Pharmacy Curriculum.

Pharmacy Dashboard: An Innovative Process for Pharmacy Workload and Productivity.

Toward a pharmacy curriculum theory: spiral integration for pharmacy education.

Change: the future of pharmacy.

Academy of Managed Care Pharmacy.

Stewardship of the pharmacy enterprise.

Pharmacy Practice in Nepal.

Pharmacy-veterinary medicine.

Evidence-Based Pharmacy Practice?

StrengthsFinder Signature Themes of Talent in Doctor of Pharmacy Students in Five Midwestern Pharmacy Schools.

Implementation and Use of the Pharmacy Curriculum Outcomes Assessment at US Schools of Pharmacy.

Fellowships in community pharmacy research: Experiences of five schools and colleges of pharmacy.

Prevalence of hazardous alcohol use among pharmacy students at nine U.S. schools of pharmacy.

Factors influencing pharmacy students' attitudes towards pharmacy practice research and strategies for promoting research interest in pharmacy practice.

Pharmacy Practice in Australia.