June 5, 2019
According to company marketing materials, MatchRX is an online pharmacy marketplace that allows independent pharmacies the ability to buy and sell small quantities of non-controlled, non-expired overstock prescription drugs and drugs in short supply. MatchRx specifies that its services are intended to address only situations where there is a “specific patient need” or “declared public health emergency.” Many independent pharmacies in Virginia have begun to use MatchRX, reportedly considering the benefits of the service to be a necessary component of their sustainability. Because of the value of the service, some have become tempted to use MatchRX even where “specific patient need” or “declared public health emergency” do not exist, pushing the boundaries of the legality of the MatchRX model. Importantly, where the service is used by a Virginia pharmacy in circumstances where no “specific patient need” exists, or where there is no “declared public health emergency,” the Virginia Board of Pharmacy will likely cite that activity as a violation, leaving the pharmacy no recourse but to appeal to an informal conference for further consideration.
We provide below a brief overview of the Drug Supply Chain Security Act (DSCSA) and a high-level discussion of the applicable laws and regulations specific to the Commonwealth. Specifically, we have considered the Virginia Board of Pharmacy Laws and Regulations. An entity engaging in the online service would need to also carefully consider the other applicable legal and regulatory schemes at play.
THE MATCHRX BUSINESS MODEL
Under the MatchRX model, a seller is limited to selling one full and one partial package of any unique NDC number over a 90-day period, and that product must be the original manufacturer packaging. The seller bears the responsibility of fulfilling the order with the products as advertised, including delivery and shipment. Moreover, the seller warrants that the item has been stored and handled pursuant to the manufacturer’s temperature and storage requirements. The company states that the objective of its operations is to minimize, on a national basis, pharmaceutical waste, and support patients that may not have local access to certain drugs, by providing direct dispenser-to-dispenser sale of a de minimis quantity of drugs for a “specific patient need” or “declared public health emergency.”
Member access to MatchRX services are limited to licensed pharmacists and/or pharmacy owners in active and good standing with the National Counsel for Prescription Drug Programs database. Purchasers identify products needed on the MatchRX website and order them. In response to the order, the seller ships the products via FedEx, and an automated clearinghouse transfers sale proceeds to sellers. Purchasers pay shipping costs, but no other fees are charged for their sale, and they appreciate a sizeable price discount on the products (i.e., 10-90% discount off average WAC prices). While sellers do pay a user fee to MatchRX at the time of sale, they benefit from reduced inventory waste through the process.
Drug title and possession never transfer to the MatchRX corporate entity, and the company terms and conditions clearly express that the onus is on the seller/buyer to ensure that their residing local, state, and federal laws, as well as statues and regulations regarding the transfer and sale of the prescription drugs from pharmacy to pharmacy, permit the activity. In fact, through utilizing the service, the buyer and seller agree to indemnify MatchRX from any claim of breach or violation of any law or the rights of a third party. One could argue that MatchRX has constructive notice of the expanded use practices, and/or has an obligation to monitor and restrict unintended uses–but it is clear that the MatchRx customers sit in the primary risk seat from an enforcement perspective.
Accordingly, while MatchRX may be an effective solution to addressing drug shortages and waste, Virginia pharmacies must limit use of the service to appropriate situations only. Clearly, were a product to become adulterated or misbranded, either during the shipping process or prior to the sale, the potential liability could span from individual patient claims to regulatory enforcement at the federal and state levels.
DRUG SUPPLY CHAIN SECURITY ACT SECTION 19
The DSCSA defines a “specific patient” need as the transfer of a product from one pharmacy to another to fill a prescription for an identified patient.[1] The Public Health Services Act (PHSA) provides the Department of Health and Human Services with legal authority to respond to public health emergencies.[2] To qualify as an emergency, a notice must be issued by the Department of Health Human Services. A declared public health emergency is exempt from the documentation requirements of the DSCSA.[3]
DSCSA defines drug dispensing facilities as follows:
- “Wholesale distributor” is a person (other than a manufacturer, a manufacturer’s co-licensed partner, a third-party logistics provider, or repackager) engaged in wholesale distribution.[4]
- “Dispenser” is a retail pharmacy, hospital pharmacy, or a group of chain pharmacies under common ownership and control that does not act as a wholesale distributor.[5]
- “Manufacturer” is a person that holds an application approved under section 505 or a license issued under section 351 of the PHSA for such product, or if such product is not the subject of an approved application or license, the person who manufactured the product.[6]
- “Repackager” is a person who owns or operates an establishment that repacks and relabels a product or package for further sale or distribution without a further transaction.[7]
- “Third-party logistics provider” is an entity that provides or coordinates warehousing or other logistic services of a product in interstate commerce on behalf of the manufacturer, whole sale distributer, or dispenser of a product, but does not take ownership of the product, nor have responsibility to direct the sale or disposition[8] of the product.[9]
Arguably, MatchRX does not satisfy the definition of “wholesale distributor,” as it is not engaged in the whole distribution of the drug products sold. Likewise, MatchRX is unlikely to qualify as a “dispenser,” as it is not a retail pharmacy, hospital pharmacy, or group of chain pharmacies under common ownership. Moreover, MatchRX is an independent limited liability corporation which has no corporate ties to the pharmacists/pharmacies engaged in the sale of the products. The company is also unlikely to satisfy the “manufacturer” definition as the company does not currently hold an application approved under section 505 or a license issued under section 351 of the Public Health Service Act,[10] and is not a “repackager” (as it is not responsible for repacking or relabeling the products). In fact, MatchRX never takes physical possession of any of the products sold.
MatchRX is more likely to satisfy the definition of the “third-party logistics provider” as it is a corporation which provides logistical support between selling and buying pharmacies and does not take possession of title to the product or hold itself out to be responsible for the disposition of the products. However, it should be noted, that DSCSA does not define the term “direct the sale.” Taking a conservative approach, it is possible that MatchRX may not satisfy all the elements required to qualify as a third-party logistics provider, as it may be argued that MatchRX has the responsibility (in whole or in part) of the direct sale of drug products, as they receive payment directly from purchasers and then pay sellers the remaining sale funds via automated clearing house. Taking a plain English approach, it is possible that MatchRX may continue to satisfy the third-party logistics provider definition because although they may be involved in the sale of the products, the offer and acceptance of the transaction comes directly from the seller and purchaser, and MatchRX merely facilitates the transfer of these funds after fulfilling its own fees.
VIRGINIA BOARD OF PHARMACY LAWS & REGULATIONS
The Virginia Code regulates wholesale distributors, manufacturers, warehouses and third-party logistics providers[11] and indicates that all third-party logistics providers operating in the Commonwealth must hold a valid, unrevoked permit issued by the Board (effective March 22, 2019).[12] Furthermore, all non-resident third-party logistics providers must establish, maintain, and adhere to written policies and procedures for the proper receipt, security, storage, inventory and distribution of prescription drugs.[13] It is unclear, based upon published information, whether MatchRX meets these requirements.
The MatchRX website acknowledges that each state has its own statute, and states that the corporate entity operates only in those states which allow such sales. However, the website also warns members that they bear the onus of reviewing the state rules and regulations regarding the transfer of prescription drugs from pharmacy to pharmacy. Unfortunately, MatchRX does not indicate whether it has an active license in compliance with the Virginia Administrative Code. On the contrary, the MatchRX user agreement provides that selling members must warrant that they themselves comply with all applicable local, state, federal, and international laws, statues and regulations and that the seller must agree to indemnify MatchRX from any claim of breach or violation of any law or the rights of a third party.
The Virginia Code also provides for standards associated with issuing a copy of a prescription that can be filled or refilled. A copy of a prescription shall be given upon request by one pharmacy to another pharmacy provided the drug can be filled or refilled pursuant to § 54.1-3410 and 54.1-3411, and provided the patient has given permission for the transfer.[14] One pharmacy may fill prescriptions and deliver the prescriptions to a second pharmacy for patient pickup or direct delivery to the patient provided the two pharmacies have the same owner, or have a written contract or agreement specifying the services to be provided by each pharmacy, the responsibilities of each pharmacy, and the manner in which each pharmacy will comply with all applicable federal and state laws.[15]
Clearly, to assure that use of the MatchRX services is permissible, a selling member in Virginia must be sure that MatchRX has satisfied the required permit requirements and has in place the required policies and procedures, and the purchasing member must likewise review related Virginia state rules. Moreover, the purchasing party must have a written contract or agreement in place specifying the services to be provided by each pharmacy, express their responsibilities, and corroborate that each party follows all applicable federal/state laws.
VIRGINIA PHARMACY PERMISSIBLE USE OF MATCHRX
On its face, MatchRX appears to be the solution to drug shortages and overstock issues so long as the DSCSA conditions for “specific patient need” are met or the PHSA indicates that there is a “declared public health emergency.” However, the rules and regulations in Virginia provide that all third-party logistics providers must obtain a valid permit issued by the Board in order to engage in such commercial transactions. Based on the company’s marketing materials and website, there is no indication of whether this permit has been obtained. Moreover, it is unclear whether MatchRX would satisfy the third-party logistics provider elements as the DSCSA does not define the term “direct the sale.”
Purchasing members must also ensure that they are in compliance with the Virginia Code, which requires that each pharmacy have a written contract of agreement outlining services to be provided, responsibilities, and regulatory compliance.
If you have any questions about these issues, please contact a member of the Hancock Daniel Life Sciences team.
The information contained in this advisory is for general educational purposes only. It is presented with the understanding that neither the author nor Hancock, Daniel & Johnson, P.C, is offering any legal or other professional services. Since the law in many areas is complex and can change rapidly, this information may not apply to a given factual situation and can become outdated. Individuals desiring legal advice should consult legal counsel for up-to-date and fact-specific advice. Under no circumstances will the author or Hancock, Daniel & Johnson, P.C. be liable for any direct, indirect, or consequential damages resulting from the use of this material.
[1] Such term does not include the transfer of a product from one pharmacy to another for the purposes of increasing or replenishing stock in anticipation of a potential need (§ 581(19)).
[2] § 581(H)(a) and (b).
[3] § 24(B)(iii).
[4] DSCSA, § 29.
[5] DSCSA, § (3)(A).
[6] DSCSA, § 10.
[7] DSCSA, § 16(A) and (B).
[8] The term “disposition,” with respect to a product within the possession or control of an entity, means the removal of such product from the pharmaceutical distribution supply chain, which may include disposal or return of the product for disposal or other appropriate handling and other actions, such as retaining a sample of the product for further additional physical examination or laboratory analysis of the product by a manufacturer or regulatory or law enforcement agency (DSCSA, section 4).
[9] DSCSA, § 22.
[10] MatchRX website does not provide licensing information.
[11] Virginia Administrative Code, Chapter 50, § 10-150.
[12] § 54.1-3435.4:1.
[13] Virginia Administrative Code, Chapter 50, § 150.
[14] § 110-20-360(A).
[15] Virginia Administrative Code, Chapter 20, § 110-20-275(B).
