Effective pharmacy inventory management is essential to maintaining profitability, compliance, and patient care standards. With the rise of online pharmacy marketplaces, independent pharmacies have new opportunities to balance inventory levels, reduce waste, and improve cash flow. However, these digital platforms also bring new regulatory risks that every pharmacy must understand to avoid costly penalties.
The Challenge of Pharmacy Inventory Management
Managing inventory is one of the most challenging aspects of running a successful pharmacy. While many pharmacies base purchases on historical dispensing, fluctuating prescribing patterns and changing formularies make it nearly impossible to order the perfect quantity every time—particularly when attempting to ensure a pharmacy benefit manager (PBM) or government auditor’s inventory reconciliation is clear.
In many cases, returning excess inventory is not an option. To prevent waste, expired stock, or complete financial loss, pharmacies may turn to pharmacy-to-pharmacy sales, allowing sellers to recoup costs while buyers acquire needed medications efficiently and, perhaps, at a lower acquisition cost.
The Rise in the Use of Online Pharmacy Marketplaces
Traditionally, pharmacies exchanged medications through a manual process called “kindly oblige with” (KOW). Before next-day wholesaler deliveries were common, one pharmacy would request that a neighboring pharmacy “kindly oblige” with supplying a needed medication.
Over the last 15 years, this process has evolved into a digital alternative. Third-party pharmacy marketplaces now allow pharmacies to list surplus products and connect directly with other licensed buyers and sellers. These platforms have become especially popular with independent pharmacies, offering a simple way to move excess stock and improve inventory efficiency.
While these platforms appear convenient, pharmacies must understand that online transfers are still governed by legal and contractual standards. Failing to follow these rules can turn a cost-saving measure into a compliance nightmare.
Key Legal and Compliance Considerations
Online pharmacy marketplaces typically have performed limited (if any) due diligence when onboarding users. Verification commonly consisted of confirming a pharmacy’s affiliation with the National Council for Prescription Drug Programs (NCPDP), global location number (GLN), state license, and Drug Enforcement Administration (DEA) registration. However, these platforms generally do not review each transaction for regulatory and contractual compliance.
That means that legal and contractual responsibility rests entirely with the participating pharmacies.
Before conducting a sale or purchase on any third-party marketplace, pharmacies should:
- Confirm state licensure and out-of-state transfer requirements;
- Verify that total transfers do not exceed the volume allowed by state law;
- Determine whether a wholesaler distributor license is needed;
- Retain documentation of all transfers for at least the minimum required period;
- Review PBM contracts for restrictions on third-party marketplace transactions; and
- Consult with legal counsel before engaging in routine or large-scale transfers.
Compliance in Action: A Real-World Example
Pharmacies that buy or sell via online marketplaces may encounter challenges during invoice reconciliation audits, but regulatory scrutiny extends beyond PBMs’ concerns. State Boards of Pharmacy have taken an interest in transactions conducted through these platforms. For example, some boards have investigated pharmacies and the online marketplaces themselves for effectively acting as a wholesale distributor without proper licensure.
In one scenario, a pharmacy located in one state sold products to a pharmacy in another state through an online marketplace. The selling pharmacy was not licensed in the state of the purchasing pharmacy, and the marketplace facilitated the transaction. Transactions of this nature implicate multiple federal and state laws and regulations, particularly because the products are moving via interstate commerce.
Even a single sale or purchase through an online marketplace can expose a pharmacy to disciplinary action, contractual violations, or reporting obligations. Accordingly, pharmacies must conduct due diligence and maintain proper records to ensure compliance with all applicable federal and state laws, regulations, and contractual obligations before buying or selling products via pharmacy-to-pharmacy transfers.
The Risk of Noncompliance in Online Marketplace Sales
Even though most online marketplaces operate as neutral intermediaries, they have been known to cooperate with state Boards of Pharmacy, PBMs, and government agencies during audits, investigations, and subpoena requests.
Pharmacies that fail to maintain compliance with legal and contractual requirements may face:
- State Board of Pharmacy investigations;
- Administrative fines or public citations;
- Disclosure requirements to other state boards and PBMs;
- Potential loss of PBM contracts or reimbursements; or
- Damage to professional reputation.
By proactively understanding and adhering to legal and contractual requirements, pharmacies can continue to benefit from these platforms without exposing themselves to unnecessary risk.
Frequently Asked Questions
Are pharmacy-to-pharmacy sales on online marketplaces legal?
Yes—but only when conducted in accordance with state and federal laws. Pharmacies are responsible for ensuring compliance, even when using third-party platforms.
Do I need a wholesale distributor license to sell on MatchRx or Rxeed?
Possibly. Some states limit the number or volume of pharmacy-to-pharmacy transfers before a wholesale distributor license becomes mandatory.
Can PBMs or Boards of Pharmacy audit online transactions?
Absolutely. Both PBMs and state boards can request detailed transaction data from online marketplaces during compliance reviews or audits.
Protect Your Pharmacy With Legal Guidance
If your pharmacy is considering selling or purchasing medications through an online pharmacy marketplace or if you’ve received a notice of audit, investigation, or disciplinary action, it’s essential to act quickly and strategically.
Barclay Damon’s national Pharmacy Team provides trusted counsel to independent pharmacies on pharmacy-to-pharmacy transfer compliance, PBM audit defense, DEA and Board of Pharmacy investigations, and inventory and purchasing best practices.
Contact us today to schedule a consultation and protect your pharmacy’s operations, reputation, and bottom line.
If you have any questions regarding the content of this alert, please contact Amanda Rhodes, associate, at arhodes@barclaydamon.com; Brad Gallagher, co-leader of the firm's Health Care Controversies and Pharmacy Teams, at bgallagher@barclaydamon.com; or another member of the firm’s Health Care Controversies or Pharmacy Teams.