Congress exempts pharmacies from ‘red flags’ rule

ALEXANDRIA, Va. — Congress handed community pharmacies a Christmas present in December, voting to exempt them from burdensome accounting requirements imposed by the Federal Trade Commission.


Both the House and Senate approved bipartisan legislation that removes community pharmacies and other small businesses from new requirements by the FTC and six other federal agencies regarding credit and debit card use. The so-called “red flags” rule, geared toward financial institutions and other creditors, requires such entities to develop and implement identity theft prevention and detection programs.


Independent pharmacies, in particular, have long sought legislative relief from the new rule, saying it would impose huge financial burdens on small-scale drug store operators by forcing them to scale up their automation and electronic reporting capabilities with expensive new systems.


The National Community Pharmacists Association hailed the votes in the House and Senate. “Community pharmacists appreciate passage of this bipartisan, bicameral legislative solution exempting pharmacies and other small businesses from the onerous FTC red flags rule, which is intended for financial institutions,” said NCPA EVP and CEO Kathleen Jaeger. “Thanks to the House ... and the Senate vote, ... community pharmacists can continue providing expert medication counseling and other services without an additional regulatory burden.”


Jaeger singled out several lawmakers in both houses for their efforts on behalf of pharmacy owner-operators. Among them: Reps. John Adler, D-N.J., Barney Frank, D-Mass., and Spencer Bachus, R-Ala., in the House; and Sens. Mark Begich, D-Alaska, and John Thune, R-S.D., who authored bipartisan legislation earlier this year to exempt many small businesses from the new rule. Key to passage in the Senate, Jaeger said, was additional support from Sens. Chris Dodd, D-Mass., and Richard Shelby, R-Ala.


“We commend Sens. Begich, Dodd, Shelby and Thune for their hard work to ensure that reasonable consumer protections can go forward without unduly burdening pharmacists and other providers with unnecessary, time-consuming requirements,” Jaeger said.


Dodd was quoted by the Congressional Record as saying that the legislation “makes clear” that pharmacists and “other types of healthcare providers and other service providers will no longer be classified as ‘creditors’ for the purposes of the red flags rule just because they do not receive payment in full from their clients at the time they provide their services, when they don’t offer or maintain accounts that pose a reasonably foreseeable risk of identity theft.”