Pharmacy benefit managers (PBMs) have audited pharmacies on drug purchases for some time, seeking to compare total claims billed to the PBM versus quantities purchased by the pharmacy. When quantities billed to the PBM exceed the demonstrated inventory on hand by the pharmacy, the PBMs issue discrepancy findings and seek to take back large amounts from pharmacies.
One trend that has begun to crop up more often in recent months relates to apparent inventory shortfalls because pharmacies fail to provide purchase information on medications sourced directly from pharmaceutical manufacturers.
When conducting inventory reconciliations, as they are often referred to, PBMs will request that the pharmacy cause all of its wholesalers and suppliers to provide “purchase history reports” for a specified period of time directly to the PBM, preferably in Excel format. PBMs will then tally up compare the total quantities purchased from all suppliers versus total quantities billed to the PBM during that same date range. If one of the pharmacy’s wholesalers fails to submit a report or the pharmacy forgets to include one of its suppliers on its list of wholesalers, it may result in the PBM coming back with alleged discrepancies for inventory shortfall. With the rise of pharmacy-pharmaceutical manufacturer relationships, many pharmacies (especially specialty pharmacies) are sourcing a great detail of their products directly from the manufacturers, outside their normal wholesale distribution channels. Too often we have seen pharmacies inadvertently omit purchases made directly from manufacturers when responding to inventory audits, resulting in perceived discrepancies.
Because inventory shortfall is often viewed as indicia of “fraud, waste and abuse” by Medicare contractors (including PBMs), a finding of this type of discrepancy can result not only in large takebacks, but potentially network termination, program exclusion, or even civil/criminal prosecution. Therefore, it is critical for pharmacies to act extremely diligently when responding to PBM inventory reconciliation audits and investigations, and to ensure that all suppliers – including purchases made directly from manufacturers – are included. Frier Levitt routinely represents pharmacies in handling inventory audits. If your pharmacy has received an invoice reconciliation request, or is facing an audit for inventory shortfalls, contact Frier Levitt today.
