Frier Levitt Overturns PBM Audit Findings, Recovering Nearly $1 Million for Pharmacy Client

In a significant victory, Frier Levitt assisted a New York based pharmacy client in successfully challenging audit findings by a major Pharmacy Benefit Manager (“PBM”) resulting in the retrieval of over $1.1 million.  In the Initial Findings, the PBM asserted multiple discrepancies, the majority of which involved allegations of inventory shortages at the pharmacy.  To make matters worse, the PBM began withholding payment from the pharmacy exceeding $1.3 million. 

Under Frier Levitt’s guidance, the pharmacy gathered significant supporting documentation to disprove the PBM’s audit findings.  After reviewing the provided documents, our attorneys determined that the Audit Findings were dramatically overstated.  Frier Levitt’s attorneys submitted multiple appeal responses and engaged in numerous telephonic conferences with the PBM’s legal counsel; each time reiterating the pharmacy’s arguments and emphasizing key pieces of supporting documents that contradicted Caremark’s allegations.  As a result of the appeal responses and conversations with the PBM, as of this writing

As a result of these appeal responses and ongoing conversations with the PBM, we have successfully reduced the disputed amount to approximately $150,000 and secure the return of nearly $1.2 million that was wrongfully withheld from the pharmacy.  While our efforts to continue to further reduce the remaining $150,000, ongoing conversations with the PBM are still in progress.

Why Pharmacies Should Appeal PBM Audit Findings

This matter is a critical example of why pharmacies must contest any PBM audit findings.  In this instance, the PBM alleged discrepancies and withheld funds totaling over $1.1 million.  Had the pharmacy not sought assistance to address these audit findings, the PBM may have maintained the inaccuracies, despite at least 90% of the discrepancies the PBM claimed were incorrect.  Such a significant payment withholding/chargeback could have had severe consequences for the pharmacy’s operations. 

This case illustrates the significant amounts that can be at stake during  a PBM audit.  Regardless of the amount at issue, however, it is imperative for pharmacies to utilize the contractual appeal process outlined in their PBM agreements to combat any audit findings.  Often, pharmacies allow PBM audit findings to go uncontested due to seemingly insignificant amounts at issue.  However, it is worth noting that PBMs keep track of their network pharmacies’ audit histories even if a PBM does not impose any additional adverse action beyond the recoupment of seemingly insignificant funds..  Alarmingly, a PBM practice becoming far too common is the reliance on prior audit histories to justify the termination of a pharmacy from its network years later. This is particularly common during re-credentialing, changes in pharmacy ownership, or if a pharmacy has additional adverse audit findings years later. Frier Levitt has seen instances where a major PBM sought to terminate a pharmacy based partly on audit findings from approximately six years prior.   Therefore, even small amounts may not seem “worth” disputing, failure to do so may serve as a basis for severe PBM sanctions, including network termination, in the future.

PBM Audits and Payment Withholdings

PBMs often attempt to use routine audits as a tool to seek unwarranted recoupment of funds from their contracted pharmacies. They regularly identify unwarranted discrepancies and place the onus on the pharmacy to submit documentation that meets the stringent requirements imposed by PBM Provider Manuals to challenge these discrepancies.  Thus, even when the alleged discrepancies are unfounded, PBMs will refuse to reverse their findings without the precise documentation it requires—documentation that may not be readily accessible to pharmacies in certain situations.  It is therefore vital for pharmacies to adhere to proper document retention policies and procedures specifically designed to ensure the pharmacy maintains the necessary records to overturn unjustified PBM discrepancies. 

In addition, as exemplified through this case study, PBMs often withhold payments owed to pharmacies during an ongoing audit, regardless of the accuracy of the alleged discrepancies.  In doing so, they place the pharmacy on an indefinite payment withholding, usually until initial audit findings are released or the discrepant amount is fully recouped.  Pharmacies should contest any and all payment withholding and demand that PBMs return any funds withheld in excess of the amount at issue in the audit findings.  Unfortunately, tactics like excessive payment withholding and erroneous audit findings are becoming increasingly common in the industry.

How Frier Levitt Can Help

Regardless of the size of your pharmacy or the amount at stake, Frier Levitt is prepared to assist you successfully challenge PBM abuses of your pharmacy.  Our experienced life sciences attorneys can provide guidance as your pharmacy prepares for audits and take an aggressive approach in defending your rights following a PBM audit.  If you have questions or need help fighting adverse PBM actions, contact us to speak to one of our attorneys.