The U.S. Centers for Medicare and Medicaid Services backtracked on a plan that would have required nursing homes to hire independent pharmacists to assess residents’ prescriptions.

Regulators “decided to further study the issue for future policy considerations,” Jonathan Blum, deputy director of the agency, said in a conference call with reporters late yesterday.

The centers said in October it was considering stricter rules to oversee patients’ drug regimens, an announcement that sent the stocks of nursing home pharmacies, including Omnicare Inc. (OCR) and PharMerica Corp. (PMC), tumbling. Yesterday, the agency said it decided against the policy because it “would be highly disruptive to the industry” without reducing drug utilization.

Omnicare rose 2.9 percent to $36.46 at 10:49 a.m. in New York. PharMerica gained 1.4 percent to $12.75.

Nursing home “staff and physicians contribute significantly to the problem” along with pharmacists, the agency said in a filing. While the agency left policy the same for now, it said “changes are necessary and a requirement for consultant pharmacist independence is part of the right approach.”

Federal law requires nursing homes to review their residents’ drug regimens at least once a month. Homes “very often” contract with pharmacies that provide their drugs to also conduct the monthly reviews, sometimes at rates that are “below fair market value,” according to the government.

The relationships can create conflicts-of-interest if the pharmacists are pressured to fill prescriptions residents don’t need or substitute higher-priced drugs, the government said.
Anti-Psychotic Drugs

Blum said the agency is concerned about a class of drugs called anti-psychotics, which include AstraZeneca Plc (AZN)’s Seroquel and Eli Lilly & Co. (LLY)’s Zyprexa. The inspector general for the Health and Human Services Department has said nursing homes give anti-psychotics to elderly residents who may have a higher risk of death from the drugs, such as those with dementia.

After the Medicare agency proposed the policy change last year, people identifying themselves as current or former consultant pharmacists at nursing homes told the government that “they had experienced conflict-of-interest in the past” or confirmed that it is “an on-going problem,” the agency said.

Blum’s agency said in a statement accompanying the filing that nursing homes should voluntarily change the way they medicate residents to reduce “inappropriate prescribing,” or else the government would make changes in a future regulation.

Greg Crist, a spokesman for the American Health Care Association, which represents nursing homes, said in an e-mail that the industry would work with the government “on suggestions such as these to enhance quality in our centers.” The association has asked its members to reduce off-label use of anti-psychotics by 15 percent by the end of the year.

Omnicare, the largest nursing home pharmacy, dropped a $441 million bid to acquire PharMerica in February after the Federal Trade Commission sued to block the deal. The combined companies would have controlled as much as 60 percent of the market to distribute drugs to nursing homes, hospitals and hospices, according to Jeff Jonas, an analyst at Gabelli & Co. in Rye, New York.