Recently, Frier Levitt assisted a Florida-based pharmacy in challenging a major Pharmacy Benefit Manager’s (“PBM”) audit findings and successfully reversed approximately 93% of the discrepant amount. In the audit findings, the PBM asserted multiple discrepancies including drug invoice shortages, allegations of incomplete signature log or proof of delivery, invalid prescription transfers and delivery of prescription medications. Under Frier Levitt’s guidance, the pharmacy gathered supporting documentation and submitted a robust appeal response challenging the alleged discrepancies. The PBM ultimately reversed over 93% of the audit findings. Frier Levitt continues to work with the pharmacy to address and achieve a complete reversal of the remaining discrepancies.
Common PBM Practices
The excessive audit findings seen in this case are 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, we have identified certain practices PBMs regularly deploy at their contracted pharmacies’ expense:
- Unjustified Audit Findings –PBMs often exploit routine audits as a means to pursue unjustified recoupments from network pharmacies. As demonstrated in this matter, PBMs frequently cite baseless discrepancies and require pharmacies to meet overly rigid documentation standards set forth in their Provider Manuals to dispute these findings. In many instances, the discrepancies are based on minor technical violations rather than substantive issues, yet PBMs still attempt to recover substantial sums from pharmacies.
- Aggressive Terminations – In recent months, PBMs have increased the frequency at which they are terminating pharmacies from their networks. Termination decisions are frequently based on outdated audit findings involving minor sums, which are then combined with future, unrelated issues to justify contract termination. Additionally, PBMs are increasingly citing technical infractions, such as inventory sourcing restrictions, as grounds for dismissal, despite the lack of any material impact on patient care or compliance.
- Enrollment Denials – Similar to their termination practices, PBMs are increasingly denying new pharmacy enrollment applications without sound justification. A common tactic involves rejecting applications based on tenuous “affiliations” with individuals or entities previously terminated from the PBM network or subject to adverse audit findings. These alleged affiliations are often remote or irrelevant, having no bearing on the applicant pharmacy’s actual operations or compliance capabilities.
What Can Pharmacies Do to Address PBM Adverse Actions?
While PBMs are increasingly taking disciplinary actions against pharmacies, pharmacies have several effective tools at their disposal to push back against PBM overreach. One of the most important steps pharmacies can take is to implement and maintain comprehensive policies and procedures that ensure compliance with the requirements set forth in PBM Provider Manuals. By doing so, pharmacies can reduce the risk of unfavorable audit outcomes or severe sanctions and, if action is taken by a PBM, they are better positioned to respond effectively.
Moreover, PBM Provider Manuals generally include contractual appeal and dispute resolution processes. These procedures give pharmacies the right to challenge any actions or allegations made by PBMs. Taking advantage of these appeals processes is essential, not only for contesting terminations, but especially in response to audit findings. Pharmacies are strongly encouraged to appeal all audit findings, regardless of the financial impact, as even minor findings can lead to more significant PBM actions if left unchallenged. Timely appeals can result in the reversal of unfounded findings, the release of improperly withheld payments, and a reduced risk of future network termination.
Finally, there is growing momentum among state and federal lawmakers to rein in PBM misconduct. Many states have enacted Fair Audit laws that establish procedural safeguards, including clear limits on what documentation PBMs may demand, when funds can be withheld or recouped, and how audits must be conducted. As regulatory scrutiny of PBM practices increases, additional legislative protections for pharmacies are likely on the horizon.
Here, the pharmacy submitted invoices from the wholesalers demonstrating that the pharmacy did in fact maintain sufficient inventory of the products at issue, attestations confirming the quantity prescribed was appropriately dispensed, and documentation confirming the prescriptions were properly transferred. Further, in good faith, the pharmacy provided a Corrective Action Plan to demonstrate it is fully committed to compliance with all PBM requirements, in particular with the sourcing of medications and the recordkeeping related to such sourcing, revising its internal procedures and providing accompanying data.
This matter further demonstrates the importance of combating all PBM audit findings, as PBMs assert unnecessary discrepancies to use pharmacy audits as a source of revenue rather than ensuring compliance with applicable laws and contractual obligations. PBMs will use multiple adverse audit findings to justify terminating pharmacies from their network, so it is crucial for pharmacies to appeal PBM audit findings and attempt to reduce the amounts at issue to the fullest extent possible. Thus, seemingly “insignificant” amounts should be appealed to avoid additional future adverse actions by PBMs.
How Frier Levitt Can Help
Frier Levitt has decades of experience handling investigations and audits conducted by the government or payors, including PBMs. Regardless of the size of your pharmacy or the amount at stake, Frier Levitt is ready and able to assist you. Our experienced life sciences attorneys can guide your pharmacy in preparing for audits and take an aggressive approach to protect your rights. If you have questions or need help fighting adverse actions, contact us to speak to an attorney.
Frier Levitt provides strategic, industry-focused legal counsel tailored to your needs. Contact our team today to learn how we can help you.
