PBM Audit Overview
Audits are an unavoidable part of participation in PBM networks. Although PBMs claim that audits are meant to protect its members from fraudulent or wasteful claims, PBMs often use audits as a means of identifying minor, hyper-technical violations, if any, of their Provider Manual or Agreement to recoup monies from pharmacies rather than identify any instances of actual fraud, waste, or abuse. One of the most common steps of a PBM audit or investigation is the performance of an invoice or inventory reconciliation on the Pharmacy’s records. In order to confirm the legitimacy of the claims billed by their network pharmacies, PBMs will compare the quantities of drug products, often on an NDC-level, for which pharmacies submitted claims against the purchases made by the pharmacies during the relevant time period. Ideally, the quantity purchased should be the same, if not greater than the quantity billed and dispensed during the audit period. However, PBMs often cite discrepancies between the quantity purchased and quantity dispensed, alleging overpayments made to the pharmacy and seeking recovery and potential further adverse action, such as network termination.
Billing the Correct NDC
It is critical that pharmacies maintain sufficient quantities to support claims billed at any time, and it is equally critical that pharmacies submit the correct NDC at the time of claims submission. While such errors can be the result of simple clerical errors made during the submission of claims, PBMs may consider these inconsistencies as instances of fraud, particularly when pricing and reimbursement rates vary between NDCs. From a PBM’s perspective, recoupment of payments tied to incorrect NDCs is justified on multiple grounds, particularly when pharmacies may be receiving an overpayment by submitting a claim for an NDC with higher reimbursement than what was actually dispensed. Often, this is the case when a pharmacy submits a claim for a brand medication but dispenses the generic. Even if done unintentionally, PBMs will likely subject the pharmacy to a full recovery of the claims at issue.
In addition, the submission of claims under NDCs that are different than what was ultimately dispensed to and received by patients, can also result in the appearance of inventory shortfalls. For context, PBMs identify potential inventory shortfalls by comparing the total quantity of drug products dispensed against the total quantity of drug products that were billed within a certain period of time at an NDC-level. Therefore, when performing an inventory reconciliation, the PBM will only credit pharmacies for purchases of the NDC that were actually submitted for reimbursement. As such, it will appear as though the pharmacy’s purchases do not support the claims billed, even if the relevant prescriptions were in fact dispensed and all that was different were the last two digits of the NDC, which often relate to the package size of the medication. Despite dispensing and billing identical medications, PBMs often take concern and allege inventory shortages, and in turn, overpayments, when the NDC billed and the NDC dispensed do not match.
Steps for Maintaining Compliance
To mitigate these risks, pharmacies must adopt a proactive approach to ensure accurate billing practices. This includes training staff to understand the critical nature of NDC accuracy, ensuring that any pharmacy software is identifying the correct NDCs being dispensed or purchased, and performing internal audits regularly to detect irregularities. Pharmacies should also make sure that they are actively maintaining records related to inventory purchases and dispensing activity to ensure that such documentation is readily available in the event of an audit. However, even where PBMs attempt to use NDC billing errors to justify recoupment, pharmacies should understand what avenues they have to be able to resolve any audits or adverse actions (i.e. network terminations) over these issues. It is important for pharmacies to understand the rationale behind these audits and to implement safeguards to prevent misbilling, to appeal adverse audit findings over these discrepancies, and to protect themselves from further disciplinary action by PBMs that could jeopardize their network status.
How Frier Levitt Can Help
If you are going through an audit or investigation that involves an inventory or invoice reconciliation, Frier Levitt can help coordinate efforts to obtain responsive appeal documentation, as well as prepare a substantive response to the discrepancies alleged by your PBM. Contact us to speak with an attorney today.
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