As a result of Frier Levitt’s intervention, a major New York pharmacy is now able to continue its participation in a major PBM’s provider network, despite the PBM’s attempt to terminate the pharmacy on the basis of drug inventory shortages. Drug inventory or invoice shortages continue to be one of the most common PBM audit and investigation findings that pharmacies often find themselves facing financial recoupment or network termination over. Recently, Frier Levitt successfully resolved a New York pharmacy’s pending termination over alleged drug inventory shortages.
How an Unresolved PBM Audit Led to Termination
While PBMs may move to terminate pharmacies based on “significant” audit findings, PBMs have increasingly been terminating pharmacies even in instances where there is a minor dollar amount at issue or only a small number of discrepancies alleged.
In this instance, the pharmacy underwent an investigative audit with a major PBM and appealed the initial findings that alleged a number of drug inventory shortages independently. While the pharmacy received final findings that were substantively reduced and subjected the pharmacy to a small monetary chargeback, allegations of drug inventory shortages nevertheless existed. Specifically, the pharmacy was identified to have misbilled the incorrect NDC for two drug products and was unable to provide sufficient records to account for a third drug product. Although the pharmacy had provided sufficient documentation to demonstrate patients received their appropriate medication, given the perceived drug shortages caused by oversight in claims submission and recordkeeping, the PBM maintained such discrepancies. The pharmacy, with the understanding it was a relatively minor chargeback, chose not to exhaust further resources and did not work to challenge the findings further. However, the PBM sought termination over the final findings, at which point the pharmacy retained Frier Levitt to help challenge such action.
As was the case here, pharmacies are commonly terminated based on shortfalls alleged to be identified during a recent audit, despite the minor number of drug products at issue. While the decision to terminate a pharmacy based on what may otherwise appear to be a small amount of claims (as compared to the total claims billed by a pharmacy) it is important to remember that PBMs are focused on the pharmacy’s ability to comply with the terms and conditions of its provider manual, and not necessarily focused on the recovery of any monetary amount, when assessing a pharmacy’s future participation. Ultimately, it is the conduct itself and the potential recurrence of that conduct that is at issue. Accordingly, inventory shortages typically will trigger further disciplinary action against a pharmacy, no matter how few drug products are actually alleged to be short or the total dollar amount at issue. Therefore, it is even more crucial that pharmacies fight back against adverse audit findings or any other disciplinary action, at the very least, through the channels outlined in the terms and conditions of a PBM’s provider manual.
The Importance of Engaging Effective Legal Counsel
Following the issuance of the notice of termination, Frier Levitt took full advantage of the opportunity to appeal afforded by the pharmacy’s Provider Manual through the submission of a formal appeal and engagement in a formal dispute resolution meeting. Frier Levitt leveraged relevant laws in the framing of its arguments and highlighted the inaccuracies of the PBM’s actions, and importantly, contended that the shortages, even if upheld as true, did not justify the pharmacy’s termination. Ultimately, Frier Levitt represented the pharmacy in a productive discussion regarding the termination with representatives from the PBM and was able to resolve any concerns related to the underlying audit findings and to the pharmacy’s commitment to being a compliant provider.
Successful Recission of Network Termination
After the successful resolution of the pending network termination of the pharmacy, the PBM nevertheless required the pharmacy to demonstrate that any issues that led to the termination do not recur. Frier Levitt worked with the pharmacy to develop and implement a robust standard operating procedure that addressed the underlying cause of the shortages, including on areas related to claims submission on an NDC level and recordkeeping for any purchases made, and guided the pharmacy in the submission of such policy to the PBM.
It is very common for PBMs to require additional terms and conditions in order to resolve a pending termination, but it is important for pharmacies to ensure that such terms and conditions are reasonable and that they do not limit their rights to challenge any adverse action by a PBM in the future.
Key Takeaways on Drug Inventory Shortages and Billing Compliance
As a term and condition of participation, many PBMs require that providers submit accurate claims that reflect the NDC actually dispensed to its members. As a result, PBMs commonly refuse to consider purchases of any drug products with NDCs other than those submitted for reimbursement when performing an invoice reconciliation of the pharmacy’s dispensing and purchasing records. This is an issue that can occur when there is a difference in package size, a different manufacturer, or when billing for the brand name drug but dispensing the generic equivalent, or vice versa. While there is limited financial difference in reimbursement to pharmacies in most instances, billing for a brand name drug but dispensing the generic equivalent is particularly concerning for PBMs as it results in a higher reimbursement to the pharmacy, which PBMs consider to be an overpayment. Pharmacies should ensure they submit the correct NDC at the time of claims submission and ensure compliant billing practices to avoid adverse action.
How Frier Levitt Can Help
If you have recently received adverse audit findings and are concerned about the potential termination of your pharmacy, or have recently been terminated by a PBM, Frier Levitt can help. Contact us to speak to an attorney.
