Recently, Frier Levitt assisted a Texas based pharmacy client in challenging a major Pharmacy Benefit Manager’s (“PBM”) audit findings. After receiving the initial audit findings, the Pharmacy compiled the necessary documentation to address the audit findings and Frier Levitt’s attorneys submitted the documents along with a robust appeal response. The majority of the identified discrepancies were drug invoice shortage allegations related to Covid-19 test kits. As such, the Pharmacy’s appeal response included copies of invoices which established the Pharmacy purchased far more Covid-19 test kits than it dispensed during the relevant timeframe. Despite submission of the responsive documents, the PBM issued final audit findings which reversed only one discrepancy and placed just under $100K at issue (inclusive of a 20% “audit fee”).
Under Frier Levitt’s guidance, the Pharmacy challenged the Final Findings by invoking the dispute resolution procedures warranted under the PBM Provider Manual. As part of the dispute resolution process, Frier Levitt submitted a formal notice of dispute which reiterated the Pharmacy’s position and provided irrefutable documentation, including, but not limited to, signed attestations verifying the legitimacy of the purchases in question. Following submission of the notice of dispute, our attorneys engaged in meet and confer conferences with the PBM’s representatives to discuss the alleged discrepancies in greater detail. As a result of these discussions, the PBM revised the Final Findings, and reduced the amount at issue to under $2k.
Why Pharmacies Should Appeal PBM Audit Findings
This matter is a critical example of why pharmacies must fight back against any and all PBM audit findings. Had the Pharmacy not sought assistance in addressing the Final Findings, the PBM may have upheld the discrepancies even though at least 98% of the discrepancies alleged were incorrect. It goes without saying that such a significant payment withholding/chargeback could have had dire consequences for the Pharmacy’s continued operation. Thankfully, with the help of Frier Levitt’s attorneys, the Pharmacy was able to overturn nearly 100% of discrepancies.
As shown in this matter, the amounts at issue in a PBM audit can be substantial. 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 and all audit findings. Oftentimes, pharmacies allow PBM audit findings to go uncontested due to seemingly insignificant amounts at issue. Of note, even if a PBM does not impose any additional adverse action beyond the recoupment of seemingly insignificant funds, PBMs keep track of their network pharmacies’ audit histories. Alarmingly, a PBM practice becoming far too common is reliance on prior audit histories to justify the termination of a pharmacy from its network years later. Typically, PBM reliance on old audit findings is most common during re-credentialing, when a pharmacy changes ownership, or if a pharmacy has additional adverse audit findings years later. In fact, Frier Levitt has seen instances where a major PBM sought to terminate a pharmacy due, in part, to audit findings that were roughly six years old. Thus, though small amounts may not seem “worth” disputing, failure to do so may serve as a basis for severe PBM sanctions, including network termination, down the road.
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. As such, PBMs regularly identify unwarranted discrepancies and place the onus on the Pharmacy to submit documentation in line with the stringent requirements imposed by PBM Provider Manuals to overturn the unwarranted discrepancies. Thus, even when the alleged discrepancies do not actually exist, PBMs will refuse to reverse the purported discrepancies without the precise documentation it requires—documentation that may not even be accessible to pharmacies in certain situations. Due to strict PBM supporting document requirements, it is critical that pharmacies 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 will often withhold payments owed to pharmacies during an ongoing audit, regardless of the accuracy of the alleged discrepancies. In doing so, they may place the pharmacy on an indefinite payment withholding, usually until initial audit findings are released or the discrepant amount has been fully recouped. Further, while pharmacies should contest any and all payment withholding, pharmacies must 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.
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.
