When a major pharmacy benefit manager (PBM) moves to terminate a pharmacy’s provider agreement, the consequences can be devastating. The loss of a PBM contract often means the loss of a significant portion of a pharmacy’s patient base, revenue, and long-term viability. Many pharmacies, upon receiving a termination notice, assume the decision is final and begin preparing for the worst. A recent matter handled by Frier Levitt demonstrated that this assumption can be a costly mistake.
Understanding Your Rights Under the Provider Agreement
An independent pharmacy in Texas received a termination notice from a major PBM, citing inventory shortages identified by a recent audit as the basis for termination from the PBM’s provider network. Rather than accept the decision at face value, the pharmacy engaged our firm, which immediately reviewed the provider agreement to identify every available avenue for dispute and appeal. It is typical for PBM manuals and provider agreements to contain provisions that afford pharmacies certain rights in the event of an adverse action, including the right to submit a formal dispute, request reconsideration, or participate in a hearing or meeting with the PBM’s counsel. These provisions exist for a reason, and pharmacies should treat them as critical tools rather than procedural formalities.
In response, Frier Levitt attorneys prepared and submitted a comprehensive dispute response that detailed the pharmacy’s purchasing records, demonstrated that the alleged inventory shortages had been resolved through the procurement of alternative National Drug Codes (NDCs), and outlined the ways in which the PBM’s action was inconsistent with the documentation and information presented. Specifically, the dispute was supported with documentation showing that the pharmacy had remained fully operational and capable of dispensing the medications at issue throughout the relevant time period.
Why Challenging a PBM Termination Matters
Through the submission of the dispute notice, the pharmacy requested an opportunity to engage with counsel directly in a good-faith discussion regarding the basis for the adverse action. This step proved to be pivotal. Direct engagement between attorneys allowed both sides to move beyond the often rigid and impersonal administrative process and engage in a substantive dialogue about the facts and circumstances of the case. As a result of this process, the PBM reversed its termination decision and, in lieu of termination, allowed the pharmacy to continue participation in the network, subject to certain enhanced monitoring and compliance measures. For the pharmacy, this outcome preserved its network participation, protected its patient relationships, and ensured the continued viability of its business.
This outcome underscores a principle that every pharmacy should remember: Never assume that a PBM’s adverse action is the final word. Pharmacies should exhaust every appeal right and dispute mechanism afforded to them under their provider agreements before accepting a termination or other adverse decision. Too often, pharmacies either overlook these rights entirely or engage in the dispute process without adequate preparation or legal support, significantly diminishing their chances of a favorable result.
How Frier Levitt Can Help
If your pharmacy has received a termination notice, audit finding, or other adverse action from a PBM, Frier Levitt can help. Our attorneys regularly represent pharmacies in PBM audits, network terminations, reimbursement disputes, provider agreement negotiations, and other matters affecting pharmacy operations and network participation. Contact us to speak with an attorney about your options.
