Navigating the Future of Pharmacy with Digital Innovation and Compliance

In this episode, we dive deep into the world of digital pharmacy with our special guest, Heidi McKinnon, a compliance expert who has transitioned from retail pharmacy to leading compliance efforts in the digital space at Capital Rx.  

The Journey to Digital Pharmacy

Heidi McKinnon’s career path is as unique as it is inspiring. Starting as a retail pharmacist, Heidi always had a keen interest in rules and regulations, which led her to become a board of pharmacy investigator and inspector in Washington State. Her journey didn’t stop there. She ventured into the burgeoning field of digital pharmacies, working with industry giants like Amazon Pharmacy and Alto Pharmacy before joining Capital Rx as the head of compliance. 

Understanding Digital Pharmacy

Unlike traditional pharmacies that may simply have an online presence, digital pharmacies are tech-forward and often integrate advanced automation and machinery to streamline their operations. Heidi clarifies that while digital pharmacies are often confused with telepharmacies or online pharmacies, they are distinct in their approach and services. 

  • Telepharmacy: Usually refers to pharmacies in remote areas that don’t have an on-site pharmacist. 
  • Online Pharmacy: Any pharmacy with a digital platform. 
  • Digital Pharmacy: Combines the aspects of online pharmacies with advanced technological solutions to enhance patient care and service efficiency. 

Regulatory Challenges in Digital Pharmacy

Navigating the regulatory landscape is one of the biggest challenges for digital pharmacies. Heidi discusses the complexities of adhering to regulations that vary widely across states. Each state has its own set of rules, and digital pharmacies must obtain licenses to operate in each one. Additionally, there are often contradictory regulations between states, making compliance a daunting task. 

For instance, while mail-order pharmacies must acquire non-resident licenses in states where they ship, the requirements can differ significantly from one state to another. This creates a labyrinth of regulations that pharmacies must navigate to stay compliant. Heidi highlights the importance of having a dedicated team or third-party vendor to keep track of these evolving rules and ensure adherence. 

Federal Challenges and Reimbursement Issues

Apart from state regulations, federal compliance adds another layer of complexity.  Digital pharmacies face unique challenges, such as identifying red flags for prescriptions when serving patients across multiple states. 

Reimbursement is another significant issue. Digital pharmacies often find themselves in a gray area between retail and mail-order models. PBMs (Pharmacy Benefit Managers) typically categorize pharmacies based on their licensing, which affects reimbursement rates. However, digital pharmacies don’t fit neatly into existing categories, leading to potential reimbursement challenges. 

Staying Ahead in the Digital Pharmacy Space

CJ and Heidi discussed the importance of staying proactive in the face of regulatory changes. Heidi suggests attending industry conferences, such as those organized by the Healthcare Compliance Association, to stay updated on best practices and emerging trends. Networking with peers and industry experts can also provide valuable insights and resources. 

The world of digital pharmacy is evolving rapidly, bringing with it both opportunities and challenges. Compliance professionals must navigate a complex regulatory landscape, stay informed about changes, and adopt best practices to ensure their organizations remain compliant and competitive. 

 

Episode Transcript


CJ: Welcome everybody to another episode of Compliance Conversations. My name is CJ Wolf with Healthicity and we've got a great episode for you today, a great guest, Heidi McKinnon. Welcome, Heidi!  

Heidi: Thank you so much for having me. I'm very excited to be here.  

CJ: Yes, thank you for your time and willingness to share some of your expertise. Heidi, before we kind of jump into our topic, we love to hear from our guests and hear a little bit about them. What brought you to this, right? We all come to compliance and regulations in a different way and I would love to hear a little bit about your path here or whatever you want to share about what you're doing now.  

Heidi: Thank you. Yeah, my path is certainly, I would say different than most people that you might find as a head of compliance. I started off in pharmacy as a retail pharmacist, but once upon a time, I really wanted to be a law enforcement officer. And so, I never quite lost that love of rules and regulations, and so I had an opportunity to apply to the Washington State Board of Pharmacy, and I ended up being a board of pharmacy investigator and Inspector for Washington State for many years, and it really allowed me an opportunity to deep dive rules and regulations across all facets of pharmacy and look at it from a new perspective, not just what you're supposed to do as a pharmacist, but how the rules should be interpreted, which is different than, you know, boots on the ground, you don't really think about how I should be interpreting this regulation, it's just I have to do this. And then I ended up back in the industry and the last five years spent working in digital pharmacies at Amazon Pharmacy and Alto Pharmacy, most recently before coming to Capital Rx as head of compliance.  

CJ: Wonderful! And that's our topic today is digital pharmacy, you know to kind of just get started, we have a lot of compliance folks out there, but they might not know what that term means. I'm not sure I fully understand it. What is digital pharmacy, how does it differ from telepharmacy Internet or online kind of those different phrases and words?  

Heidi: Yes! Well, it's a good question because even myself, I was like, "Oh, don't call it. Don't say that we're a digital pharmacy. That means online pharmacy and that has bad connotations. So, because when online pharmacies first started, there really weren't any requirements, there weren't accreditations, so you started seeing nefarious actors trying to take advantage of this online pharmacy concept, but as we all know, time has evolved and ANBP has accreditations specifically for digital pharmacy.  

And so, now the way you can think of it is online means any pharmacy that might have a website or a digital platform, but telepharmacy is a completely different beast in that it's usually reserved for a pharmacy that doesn't have a pharmacist on site. And so many states started licensing telepharmacy for rural areas where you might have a pharmacy desert, people need access to their medications, but it's difficult to find a pharmacist that will work in that location, and so telepharmacy developed.  

Digital pharmacy is kind of a combination, well, it's online pharmacy, but tech forward. And so, you might see more machinery. You might see more automation, a little more outside the box thinking on what pharmacy you can do.  

CJ: Right! And so, would you say that in digital pharmacy, a patient is interacting with the technology or is it providers are interacting or is it companies or insurance companies or all of the above?  

Heidi: It really could be all of the above. Especially looking at it from a patient’s perspective, digital pharmacy is trying to ease how the patient is able to access their medications, trying to get it to them in a faster manner, mostly through delivery services, could be same day, next day or even across all 50 state lines.  

CJ: Okay, interesting! So how does for the prescription is that then submitted by the patient or is it submitted by the provider or how does that work?  

Heidi: Can be submitted by the patient. There is still some snail mail going on, but usually now it's through Electronic Prescription, so e-prescribing.  

CJ: Okay, really interesting! Well that I think helps us kind of understand that the space we're going to be talking about a little bit and your expertise. So, you know let's jump in a little bit to the regulatory challenges if you could share a little bit about the landscape of this and how can these digital pharmacies stay ahead of these changing rules, and I'm sure they're changing quickly, right?  

Heidi: They are ever evolving for sure, and as one state creates a rule, another state tends to create one that is almost contradictory and so it does start to present challenges when you start thinking across all 50 state lines. For example, when mail orders started happening, mail order pharmacies and those may have even been designed around from the PBMs perspective for their own members, they had to get state licenses where they were required. Well, not every state required a non-resident license, but then once one domino falls. They start going and they start realizing; "Oh, we should probably do this as well, because how else are we going to hold this pharmacy accountable should something go wrong or you need to file a complaint or an investigation needs to happen if they don't have a license in our state?"  

So now all 50 states, well 49, I think I don't think Massachusetts yet has created a non-resident pharmacy requirement, but there are 50 state licenses because I think DC has their own, that a mail order, pharmacy or digital pharmacy, if they're mailing across 50 states, would have to have. Now, many states started requiring pharmacists to also have a license in that state, so if you reside in, let's say, Arizona as a pharmacy that is shipping to all 50 states, that's non-resident state might say; "Oh, you need to have a pharmacist on staff. It doesn't necessarily have to be the pharmacist in charge, but you have to have a pharmacist on staff that has a license in our state who is saying yes, I attest that if something goes wrong, I take responsibility."  

CJ: Wow!  

Heidi: It's all well and good when it's only handful. I started with 17 state licenses. I went up to 23 state licenses, but as more and more states begin requiring that, what is a pharmacy to do now? You have to have either 50 pharmacists with one state license each. You have to have a pharmacist in charge that has 50 state licenses, and that's a lot to handle trust me, and then you can't just have one person that has all those state licenses, because what if they leave?  

CJ: That's right!  

Heidi: You have to have it deep, right? And so, it It's becoming almost unwieldy.  

CJ: Yeah, I can only imagine that. So, and the pharmacist then is doing, you mentioned if something goes wrong, they're responsible. So what is the pharmacist overseeing? What are they doing, kind of behind the scenes or whatever?  

Heidi: Well, typically, and speaking from experience, it is not the pharmacist themselves that's overseeing, right? It becomes the business's responsibility to ensure that the business practice adheres to those 50 state regulations, also very unwieldly, because again, one might say you can do this, another says no, you can't do this. So, you either have to tailor your operations to where the shipment is going, and that is seems unreasonable or what I have seen is that you pick the lowest common denominator. So, you have 50 state regulations, what's the most strict?  

CJ: Exactly! Well, and that, you know, that's kind of similar to what a lot of us do. You know, I've spent a lot of time with healthcare providers in the billing scenario where you have commercial payers and they have their requirements, you have Medicare and their requirements, maybe Medicaid and you just pick who's the who's the most strict because we can't keep track and it's not possible to say, well, let's find out who the payers are and then let's try to meet their requirements. Let's pick the most strict so that we're safe with everybody.  

Heidi: Yeah! I mean, even when it became a requirement to counsel patients, which it's hard to believe that that was never a requirement. But I remember when I was in pharmacy school and same as passed regulation that says, you know, pharmacists must counsel patients on the first bill. State Board of Pharmacy had that requirement at the time. And but what are you going to do? It's like, oh, I see this is a Medicare patient, I will counsel you, but oh, no, your insurance is commercial. I'm not going to counsel you, no. Board the pharmacy, then realize we need to create a regulation around this as well.  

CJ: Interesting. This is really interesting discussion. We're going to take a quick break and then we're going to come back and talk some more about regulatory challenges, reimbursement and those sorts of things with digital pharmacy. 

Welcome back from the break, everybody! We're talking with Heidi McKinnon about this interesting world of pharmacy, digital pharmacy and the regulations and compliance, she has years of experience, both the clinical side as well as the compliance side.  

So, we were talking a little bit about kind of staying ahead of those regulatory challenges. Is it a team of people who are reviewing regulations as they come out from states? Is it like what, just operationally, how are you? How does somebody work with that?  

Heidi: I believe there probably are companies that maybe help facilitate this. But if you're not large enough to be able to afford a third party vendor to help facilitate what I have seen is yes, you have a team dedicated to it, and then you'd have to perform a manual review of all 50 states now, I'm going to put a little plug in here for Bula because I do appreciate the way that they have set it up for pharmacies to create a 50 state kind of analysis, if you will depending upon the regulation you're interested in and it can become very helpful, especially when it comes to shared services. Digital pharmacies, from what I have seen, have, they're not just in one brick and mortar place, so you might have your front-end operations being performed either remotely or in a separate location than your actual dispensing operations. And so that is considered to be shared services because you are sharing this information right in different locations or across different states.  

Again, complications arise when one state allows shared services or has very definitive guidelines around shared services, but another state may have opposite and so again, how do we navigate? What is the risk? Is this a high risk? Is this a low risk? But if your provider is in one state, the patient that is in another and the pharmacy and is in the third.  

CJ: Interesting!  

Heidi: Which regulation are you supposed to follow? For what part of the process?  

CJ: Yeah, that that sounds a lot like maybe you tell me if this is a good parallel you know with before COVID there was telehealth and people were licensed in certain states. But with COVID, a lot of things went forward so quickly with the opportunity to use telehealth that some of these kind of challenges, you know, people were trying to find solutions of, you know, let's just license people so that they're licensed and all like nurses or physician, whatever. So, it sounds kind of this story is sounding a little bit like that. Is that kind of an allergy good or?  

Heidi: Oh yes, I would say it's definitely parallels and COVID almost allowed the opportunity, like you said to push forward in a very quick manner that wouldn't necessarily have occurred had COVID not happened.  

CJ: Exactly! You know, we see that a lot in history in general. Like I come from a medical background and a lot of medical advances in the science happened during war when on the battlefield when you're trying to do certain things and it's like look, this is emergency we got to try something and you know and so sometimes, not that I not that any of us want these things to happen, but we history has shown that these types of things push forward certain technologies or processes, and then you can see some of the benefits, did you so with that in mind, did digital pharmacy see a big push in COVID or was that is it been more of a steady increase?  

Heidi: For sure. No, no. And I had just started with Amazon Pharmacy right before COVID hit. And so it was, you know, it was good, I think, because the framework was already there for digital pharmacies to be able to step in and assist during that time where people didn't want definitely want to go stand in lines at their local retail, you know, brick and mortar and the challenges I think are boards of pharmacy actually being able to keep up with the technology and the advancements right that have been happening before COVID, but then again, COVID pushed on this little tidal wave and I was there, I saw how challenging it is to have any kind of regulation, even edited, even changed right to get it through legislature. And I can understand the challenges that they're in, but they also need to understand the technology as it's happening and think about the future when they're making these rules and regulations.  

CJ: Yeah, from a very high level and having been in compliance for 25 years, it seems like those always lag behind the technical advances either in operations or in science. There's always kind of this lag unfortunately. So, we were talking about state laws, it sounds like a lot of what pharmacies are working with are the state laws because a lot of that is regulated at the state level. Are there federal laws as well? Would you say that much more of the challenges on the state side or are there federal challenges?  

Heidi: Oh, there's definitely federal challenges for sure. One in particular, the DEA. Their rules and regulations move even slower than state boards of pharmacy.  

CJ: I can see that!  

Heidi: And there's still this concept that a pharmacy is a brick and mortar. And so, you're trying to implement this framework in a space that where it doesn't really work anymore. For example, just trying to identify whether or not the patient should be considered or the prescriber even should be considered a red flag. Well, one of those attributes is, well, how far away is the patient from the pharmacy? How far away is the provider from the pharmacy? Well, if you're dispensing across all 50 states, that can't really. And holding a digital pharmacy, accountable to the same standard as a walk in retail, no longer seems applicable. And so, as a digital pharmacy, how do you navigate risk or how do you identify red flags? What does it look like? Those are another federal challenge.  

CJ: Yeah, so interesting! Let's shift a little bit to talk about reimbursement, if that's okay. So, you've talked about the digital pharmacies may be located in a different state than the patient. So, there's costs, right? associated with shipping, packaging, all this, how does reimbursement work in your world?  

Heidi: Yeah, that is a really good question, because if you're not a cash only pharmacy, you are beholden to your reimbursement is, right? from the PBMs. And obviously if you want to grow your business, you're going to accept insurance for those, most of us have insurance and you know in the US. But traditionally, PBMs will look at how you are licensed. So, if you are licensed as a retail pharmacy, they will reimburse you at a retail level. If you're licensed as a mail order pharmacy, they're going to reimburse you just like if you were a long-term care, if you were a hospital.  

And so even after speaking with NABP about this, NABP is like; "We don't create a license based on what a pharmacy is going to get reimbursed from the PBM. Like we, we create a license based on the need. Is there a need for this new license?" And so, then it becomes, you know, go backwards. Okay, now it's between the pharmacy and the PBMs. But PBMs traditionally have not identified digital pharmacy as a platform, even in the NCPDP, which you need to submit the claim, identifying yourself as either retail or mail order or long-term care or hospital and NCPDP doesn't have a field, yet, for digital pharmacy, digital pharmacy is this new concept that's somewhere in between retail and mail order.  

CJ: Wow! Yeah, that was what I was going to ask you is it sounds like there's two license types, retail and mail order. Is that correct or are there other license types?  

Heidi: Well, there's other license sites, but not for what they're doing, they're not a long-term care pharmacy, they're not a hospital. Retail makes sense because you're going to get the best reimbursement, because it's 30 day, it's acute. It's right now the patients walking up and needs it immediately; mail order is typically 90 days. You could have more technology. It's you're not going to get reimbursed quite as much because the idea is you don't need as much labor to address those acute care needs. What happens when you allow walk-in? When you deliver same day and you mail across 50 states? Well, you're not getting reimbursed for your packaging or your shipping and it creates this never ending struggle, really, on how to how to maximize your reimbursements without there being a set platform for it.  

CJ: That's really interesting. So, from the perspective of trying to change that, is that something that state legislators have to change, you mentioned, I think that the licensing body, but I might not have caught the acronym. So, who changes that and how do people, you know, push for that change?  

Heidi: So, NABP is the National Association of Boards of Pharmacy and they help the pharmacy write their rules. They have blueprints for rules and regulations that the boards of pharmacy can lean into. But I kind of almost agree with them because boards of pharmacy are there to maintain the compliance, not to talk about your reimbursement with PBMs. It's just that PBMs have leaned on; "Oh, well, you can't say you're doing this because you're licensed." But again, PBMs also say; "Well, if you're a retail pharmacy, you can't ship more than 51% of your prescriptions or we're going to call you a mail order pharmacy regardless of what your license is." So, PBMs really hold the ownership to be able to think outside the box and say; ''Okay, we see what you're doing as a practice as a business, we do believe our clients and the members would benefit from this type of pharmacy and what this pharmacy is offering. Let's talk!" 

CJ: Yeah, it sounds a lot like, it really sounds like the patient experience and what the norm becomes is really going to push it, right? So, it's very similar to when you know only physicians can prescribe and then now, we got nurse practitioners and PAs in some states, pharmacists can prescribe for certain drugs and for certain scenarios, and so it seems like that's because that's what the people want. That's what the people need, right? That maybe the physicians do all this, we need other people involved. So that is, is that accurate? It sounds very similar to that story.  

Heidi: Yes, I think it is accurate, and you know, if a digital pharmacy started and they just couldn't sell the product, they just didn't have any patients that were buying into it. It be a non-issue but that's not the case and more and more patients are seeing the virtue of it. I can just go online or I can download this app and I can tell my physician I like my prescription center. There is a need for it. There is a demand for it. And so, I do think it's worth discussing and talking about to get appropriate reimbursement. 

CJ: Yeah, it sounds, you know, again, going back to the telehealth story. It's like our lives are becoming more and more digital and things on the phone. It's like if I can pay my bills and I can go to school, you know, online, I want to be able to see my doctor online and want to be able to receive my medications digitally, you know, for this digital process. And so, I can totally see that.  

Well, Heidi, this has been really fascinating. We're kind of coming to the end of our time. Do you have any last-minute thoughts or comments people in compliance what like? So, let's, I don't know if I'm a compliance officer and I'm not an expert like you, but I'm starting to get involved in this space. You know, where do you go? Resources, anything like that you might want to share before we go?  

Heidi: Yeah, it's the best thing I ever did was attend a Healthcare Compliance Association meeting because coming up through the ranks, if you will, in pharmacy and even being a board of pharmacy investigator and Inspector. I still didn't fully understand the office of the Inspector General's seven elements of compliance and that to me was very eye opening and really opened up the opportunities once I got my CHC to delve into different aspects of healthcare compliance.  

CJ: Yeah, yeah, very good. I would agree. I think there's lots of value there and you know kind of connecting with other people in your situation, right? Making your friends, colleagues that you can bounce ideas off.  

Heidi: For sure!  

CJ: So well, Heidi, thank you so much for your time and your willingness to share.  

Heidi: Thank you for having me, I appreciate it!  

CJ: Yes, and thank you to all of our listeners for listening to another episode of Compliance Conversations. We hope to see you back again. We always do request that if you have topics or speakers that you think would make good material for the podcast, please share with us! Until next time everyone, take care!

Questions or Comments?