The compounding industry has experienced a dramatic increase in the number of federal and state-level investigations and prosecutions over the past year. Headlines announcing new investigations continue to appear with alarming frequency. Investigators have focused on sales and marketing activities and have also probed telemedicine relationships and copayment collection, particularly in the context of claims billed to Tricare. While PBMs have always conducted audits of federal claims in the normal course, in the current climate, compounding pharmacies should be especially aware of the risks associated with responding to certain audit requests.
For example, Express Scripts, Inc. (ESI) has begun issuing audit requests to pharmacies that are focused solely on Tricare claims. ESI clearly represents itself as an agent of Tricare by displaying the Tricare emblem next to its own on the relevant correspondence. Unlike other audits, these investigations request information such as copies of agreements with marketing companies and suppliers and demand pharmacies to provide specific details regarding referral sources and methodologies used to verify patient-prescriber relationships. Clearly, the pharmacy “validation process” is under scrutiny and pharmacies should reexamine such processes. Importantly, these audits ask pharmacies to “certify” their answers—a method where the pharmacy swears to the accuracy of the response. ESI is not the only PBM seeking information beyond the typical prescription audit request. Other PBMs have begun requesting documents such as copies of employee agreements and even proof of payment to employees, pushing the limits of documents and information to which they are entitled under the terms of the governing PBM Manual and even pushing the boundaries of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
Pharmacies receiving these types of audit requests should be aware that providing information to ESI, acting as an agent of Tricare, as well as other PBMs carries significant risk. Specifically, certified responses and copies of agreements and other documents provided in response to an audit could be used against the pharmacy by government agencies in the event of an investigation. This means that the pharmacy’s responses have the potential to carry civil and criminal implications. In addition, pharmacies should not assume that every subpoena or request permits the disclosure of personal health information under HIPAA. Instead, pharmacies should consult competent healthcare counsel.
Frier Levitt regularly assists pharmacies in responding to PBM audits and is acutely aware of the types of activities that have been the subject of increasing government scrutiny as well as how those activities are framed within the context of governmental investigations. If your pharmacy receives an audit request seeking more than the routine request for prescriptions, contact Frier Levitt.
