The UGA College of Veterinary Medicine

The University of Georgia College of Veterinary Medicine

USE OF TEACHING HOSPITAL DRUGS AND SUPPLIES

Application of The Robinson-Patman and Prescription Drug Marketing Acts

The Short Version

We can sell, use, or dispense drugs and supplies purchased by or given to the University for medically appropriate indications to inpatients of the hospital, outpatients of the hospital during medically appropriate visits at the hospital, local full service patients (for up to a year following the last visit), “dependent” animals wholly owned by and cared for by faculty, students and staff of the College of Veterinary Medicine, and to University departments for research or teaching uses.

We can not sell or dispense drugs and supplies purchased by or given to the University to walk in customers, friends, neighbors or family members of faculty, staff or students of the college of Veterinary Medicine (unless the patient fits one of the categories listed above), veterinarians associated with the University for activities not related to University functions, veterinarians not associated with the University, refills of prescriptions or sales of nonprescription items for patients not being seen as inpatients or outpatients of the hospital at the time, or any other use.

We often get requests to refill prescriptions for referral clients because the client has not been able to locate a source for a drug. The pharmacy will gladly assist the client in locating a source for the drug(s).

We also get requests from veterinary practitioners to sell drugs to them. We can not sell drugs, but we maintain a loan/borrow system that allows us to provide drugs to the practitioners for emergency needs. The drugs or supplies are replaced in kind.

These restrictions often seem overly restrictive to clients and hospital staff, but there are legal and practical reasons for them and the penalties for violations are severe. Please consult the pharmacy if you feel that the restrictions are preventing you from providing care to your patients.

The Long Version

The pharmacy frequently receives requests to sell items to, or for prescriptions to be filled for animals which belong to a neighbor, friend, colleague, or relative, or for other animals which are not patients of the Teaching Hospital. We also are frequently requested to provide drugs or supplies to veterinarians, veterinary practices, or other institutions not connected with the Teaching Hospital. Such uses of drug stocks constitute violations of federal law and can result in significant civil and criminal penalties.

The Robinson-Patman Act (part of the Clayton Antitrust Act) prohibits price discrimination by sellers of commodities. However, the Nonprofit Institutions Act provides an exemption from price discrimination restrictions for certain nonprofit institutions when commodities are purchased “for their own use.” The Teaching Hospital purchases drugs and supplies at noncompetitive prices based upon this exemption.

The Prescription Drug Marketing Act (in the Food, Drug and Cosmetic Act) prohibits the sale, purchase, or trade, or the offer to sell, purchase or trade, certain drugs obtained under the exemption of the Nonprofit Institutions Act. These drugs can be transferred between agencies within the same buying group or dispensed pursuant to a lawful prescription if the prescription falls within the "own use" requirement. However, virtually any other use is prohibited.

The words for their own use in the context of hospital uses of drugs have been defined in case law and by Federal Trade Commission advisory opinions. None of the aforementioned uses are allowed under the exemption of the Nonprofit Institutions Act.

The following uses have been defined to be “for our own use” and also meet the requirements of the Prescription Drug Marketing Act:

1) dispensation to the hospital inpatient for use in his treatment at the hospital
2) dispensation to the patient admitted to the hospital emergency facility for use in the patient's treatment there
3) dispensation to the hospital outpatient for personal use on the hospital premises
4) dispensation in the context of a genuine take-home prescription, intended for a limited and reasonable time, as a continuation or supplement to, the treatment that was administered at the hospital to the recipient while an inpatient, an outpatient or an emergency facility patient if the patient needed, and now continues to need, that treatment
5) dispensation to the hospital's employee(s) or to its student(s) for their personal use or for the personal use of their dependents
6) dispensation to a physician member of the medical staff for his personal use or for the personal use of his dependents
7) dispensation by a health maintenance organization to its members

One situation is specifically allowed under the Prescription Drug Marketing Act and though it is not covered by the Robinson-Patman Act, appears to be permissible (but has not been tested in the courts):

1) dispensation by a nonprofit institution to the general public for humanitarian purposes in emergency situations when other sources of the products are not available.

Several types of dispensation have been defined as not permissible:

1) dispensation in the context of a prescription refill for a former hospital patient
2) dispensation to a physician member of the medical staff for his use in a private practice unconnected with the hospital, or for any other nonpersonal use
3) dispensation to the walk-in buyer at a hospital pharmacy
4) dispensation by a nonprofit hospital to other entities outside of its buying group
5) dispensation by state and local government hospitals to the general public

The penalties for violations are substantial. They can include:

1) termination of price discounts, recall of products in stock, and financial liability for fines and penalties paid by sellers and requirements to repay the difference between discounted prices and competitive prices for past purchases
2) criminal prosecution under the Clayton Act ($100,000-500,000 fine, 1 year in prison)
3) criminal prosecution under the Prescription Drug Marketing Act (a felony punishable by a $250,000-500,000 fine and up to 10 years in prison.)
4) civil suits by competitors (treble damages + legal expenses + interest)
5) civil and criminal prosecution for fraudulent misrepresentation
6) prosecution under the Racketeering Influenced and Corrupt Organizations Act (RICO), subject to treble damages and divestiture penalties. (Two violations in a ten year period are all that is required for prosecution.)
7) financial responsibility for injury to the ultimate user of the product
8) civil and criminal prosecution under the Federal Food, Drug and Cosmetic Act if the product becomes adulterated or misbranded, even if participation in such activities was unintentional or was undertaken without knowledge of the consequences. (Any person who adulterates or misbrands a drug, as well as anyone who introduces, delivers or receives drugs which have been or will be misbranded or adulterated is subject to prosecution.) ($100,000-500,000 fine, 1 year in jail for misdemeanor, 10 years for felony violations)

Application of these laws in a veterinary hospital setting is very direct in some situations and requires extrapolation in others. It is clear that commodities purchased under the exemptions may be used to treat inpatients, outpatients and emergency patients of the hospital, to dispense reasonable amounts of drugs as go home prescriptions and to provide drugs to the general public in valid emergencies. It is equally clear that they may not be used to refill prescriptions for referral cases after they are discharged from the hospital, fill prescriptions written by practitioners who are not connected with the hospital, provide drugs or supplies to individuals or institutions not connected with the hospital, or to provide drugs or supplies to practitioners associated with the hospital if they are to be used on patients not associated with the hospital.

Clearly animals can not be considered to be patients of the hospital in the absence of a valid veterinarian-client-patient relationship. This relationship was originally defined by the American Veterinary Medical Association and the definition has been accepted by the Food and Drug Administration, the Georgia Board of of Veterinary Medicine, the Georgia Veterinary Medical Association and carries the force of law through the AMDUCA regulations.

A valid veterinarian-client-relationship is one in which:

1) A veterinarian has assumed the responsibility for making medical judgments regarding the health of (an) animal(s) and the need for medical treatment, and the client (the owner of the animal or animals or other caretaker) has agreed to follow the instructions of the veterinarian;

2) There is sufficient knowledge of the animal(s) by the veterinarian to initiate at least a general or preliminary diagnosis of the medical condition of the animal(s); and

3) The practicing veterinarian is readily available for followup in case of adverse reactions or failure of the regimen of therapy. Such a relationship can exist only when the veterinarian has recently seen and is personally acquainted with the keeping and care of the animal(s) by virtue of examination of the animal(s), and/or by medically appropriate and timely visits to the premises where the animal(s) are kept.

Commodities purchased under the exemptions may be used for research and teaching activities by other schools, colleges and departments of the University, since they are in the same buying group. However, they may not be provided to non-university institutions even if they are engaged in research with the university. Some vendors also restrict use of certain commodities to the College of Veterinary Medicine as a requirement to qualify for special prices.

Hospital and College policy allows faculty, students and staff of the College of Veterinary Medicine to obtain drugs and supplies from the hospital for treatment of their personal animals. This requires acceptance of the concept that these animals are "dependents" of a member of the "hospital family." To meet this requirement the animals in question must be wholly owned by the member of the hospital family and that member must have total financial responsibility for the care of the animal. Clearly, the pet animal living at the member's residence would fit this interpretation, whereas the syndicated breeding animal would not.

Protection of our exemption from price discrimination laws is of great financial importance to the teaching program at the College of Veterinary Medicine. Since personnel in the pharmacy and the hospital director's office are often required to sign agreements with suppliers that the commodities will be used for our "own use" as defined by law, compliance is very important to the pharmacy. For these reasons, pharmacy staff members may not fill requests for drugs or supplies if there is doubt as to whether the requests comply with permissible uses under these laws.

References

1. American Hospital Association Office of General Council, Legal Implications of Hospital Resales of Pharmaceuticals, Am J Hosp Pharm. 1986;43:1951-1957.
2. 15 U.S.C. Sec 13.
3. 425 U.S. 1 (1976).
4. 460 U.S. 150 (1983).
5. 18 U.S.C. Sec. 1961 et seq.
6. Greenberg, RB, Robinson-Patman Update: DeModena v. Kaiser Foundation Health Plan, Am J Hosp Pharm. 1985;42:1572-1574.
7. P.L. 100-293 (100th Cong.,2nd ses., 1988), 102 Stat.95, amending the Federal Food,Drug and Cosmetic Act, 21 USC 301 et seq