In a recent success, Frier Levitt’s life sciences attorneys assisted a Georgia-based pharmacy in reversing ninety-six percent (96%) of a major PBM’s audit findings. As discussed in greater detail in our recent article, although reversing nearly all discrepancies at issue was viewed as a major success for the pharmacy, the PBM egregiously withheld over three times the amount at issue in the audit findings. Consequently, after receiving the re-finalized audit findings which left only two claims at issue, Frier Levitt immediately turned its attention to securing a prompt return of the wrongfully withheld funds. Thankfully, after issuing a formal demand letter instructing the PBM to immediately release the excessive withholdings, the PBM obliged and remitted payment in full to the Pharmacy.
Common PBM Practices
The excessive payment withholdings seen in this case is only one example of abusive PBM tactics that have become far too routine in pharmacies’ dealings with PBMs. Being aware of such practices and how they can be remedied is crucial to avoiding negative outcomes for your pharmacy. Through extensive experience and knowledge of the industry, Frier Levitt’s attorneys have identified certain practices PBMs regularly deploy at their contracted pharmacies’ expense:
- Unjustified Audit Findings – PBMs often attempt to use routine audits as a tool to seek unwarranted recoupment of funds from their network pharmacies. As such, and as was the case in this matter, PBMs regularly identify unwarranted discrepancies and place the onus on the Pharmacy to submit documentation in line with stringent requirements imposed by PBM Provider Manuals to overturn the discrepancies. Far too often, PBMs assert discrepancies premised on mere technical violations of the Provider Manual, and seek to recoup potentially significant amounts of money from pharmacies.
- Payment Withholdings and Payment Suspension – As exemplified through this case study, PBMs regularly withhold payments owed to pharmacies during an ongoing audit, regardless of the accuracy of the alleged discrepancies. Many states have enacted Fair Audit laws which prevent PBMs from recouping or withholding funds from a pharmacy until the pharmacy has fully exhausted its right to appeal the audit findings at issue. However, not only do PBMs fail to abide by applicable Fair Audit laws, but this matter establishes that PBMs will withhold payments far in excess of any amounts at issue.
- Aggressive Terminations – In recent months, PBMs have increased the frequency at which they are terminating pharmacies from their networks. In turn, the “justifications” for terminating pharmacy contracts have become less and less convincing. For instance, PBMs frequently terminate pharmacies based on old audit findings, some of which may place only a small amount at issue. PBMs combine these seemingly settled and insignificant audit findings with any future findings to support their decision to terminate. Likewise, PBMs are increasingly relying on mere technical violations of PBM Provider Manuals, such as limitations on where and from which vendors pharmacies can source their inventory, to remove pharmacies from their networks.
- Enrollment Denials – Like terminations, PBMs are denying pharmacy enrollment applications at an increasing rate, and similarly attempt to use less than compelling justifications to bar entry to such networks. To illustrate, PBMs frequently deny enrollment applications where the applicant is “affiliated” with an individual or pharmacy who was previously terminated from the PBM’s network or received adverse audit findings from the PBM. However, the “affiliation” PBMs seek to rely on are often extremely attenuated and have no real impact on the applicant-pharmacy’s operations or ability to abide by the PBM’s terms and conditions.
What Can Pharmacies do to Address PBM Adverse Actions?
Although PBMs are imposing more frequent disciplinary actions against pharmacies, there is good news for pharmacies as pharmacies possess a variety of tools at their disposal to combat PBM abuse. Pharmacies are encouraged to proactively maintain a robust set of policies and procedures that ensure compliance with applicable PBM Provider Manual obligations. In doing so, pharmacies are well-equipped to avoid any adverse audit findings or more severe sanctions and, in the event PBM adverse action is taken, pharmacies are better equipped to address the PBM’s allegations.
In addition, each PBM Manual affords pharmacies with a contractual appeals and dispute resolution process. As such, if and when a PBM takes action against a pharmacy, the pharmacy has the ability to contest any and all allegations. Utilizing the contractual appeals process is critical for pharmacies to address various PBM issues, including terminations, but perhaps most notably as it relates to PBM audit findings. Pharmacies are encouraged to appeal any and all audit findings, regardless of the amount at issue, to avoid more serious PBM actions down the road. By challenging any adverse audit findings, pharmacies can reverse any unwarranted audit findings and excessive payment withholdings, as well as seriously reduce the risk of termination at some point in the future.
Finally, government bodies at both the state and federal level are showing increased determination to combat PBM abuse. Certain state statutes, like Fair Audit laws, provide pharmacies with an added layer of protection and dictate the procedures PBMs must follow when conducting pharmacy audits, the types of documentation they must accept, and when they are prohibited from recouping funds. As states begin to hone in on common PBM tactics, it can be expected that states will consider enacting additional safeguards to protect pharmacies from PBM abuse.
How Frier Levitt Can Help
Regardless of the size of your pharmacy or the amount at stake, Frier Levitt is ready and able to assist you in successfully challenging PBM abuse of your pharmacy. Our life sciences attorneys are prepared to provide guidance as your pharmacy prepares for audits as well as take an aggressive approach to fight for your rights following a PBM audit. If you have questions or need help fighting adverse PBM actions, contact us to speak to an attorney.
