Pharmacy Benefit Managers (“PBMs”) routinely conduct audits on participating pharmacies in which the focus is an invoice reconciliation. During such invoice reconciliation audits – which can be routine audits or targeted fraud, waste and abuse investigations – PBMs review the pharmacy’s purchasing records over a set period of time and compare it with claims billed by the pharmacy during that same time period. To demonstrate that the pharmacy did in fact have sufficient inventory of the drug products, the pharmacy provides supporting documents including, invoices and/or purchase summaries directly from the wholesalers, as well as documentation of any inventory reports of pharmacy-to-pharmacy transfers. That said, we have seen PBMs place many expectations on the pharmacy’s ability to demonstrate it had sufficient inventory throughout a certain time frame. A common observation has been that many pharmacies have had difficulty meeting PBM expectations of producing purchase documentation.
As such, pharmacies should maintain independent records of their purchase information for the period of time required under applicable State and Federal law, as well as under the relevant PBM terms and conditions. In particular, all PBMs require pharmacies to source medication solely from authorized, licensed, and/or accredited wholesalers/vendors. While wholesalers may promote their credentials, pharmacies should independently confirm the wholesaler’s credentials in accordance with all PBM Provider Manual Terms and Conditions to ensure compliance.
Furthermore, some of the major PBMs include terms in their Provider Manuals that require pharmacies to purchase products, such as diabetic test strips, from an “Authorized Distributor” only or directly from the test strip manufacturer. Manufacturers of diabetic test strips typically list their Authorized Distributors on their websites. Thus, before purchasing diabetic test strips from a wholesaler, pharmacies should cross-check the manufacturer’s Authorized Distributors to verify that the Manufacturer has authorized the seller to sell the product. Some PBMs have even made manufacturers “third party beneficiaries” under these provisions.
In addition to verifying documentation provided by wholesalers during an audit, pharmacies should independently maintain complete and accurate information related to their purchases, especially where the wholesaler is no longer in existence and is unable to provide purchase history upon request to the PBM, or where wholesalers may provide inaccurate information as a result of oversight.
We recommend pharmacies undergoing an invoice reconciliation audit with a PBM take proactive efforts to resolve discrepancies, as discrepancies that are left unresolved can become the basis for further action against the pharmacy by the PBM. Further, purchase history shortfalls have been used as bases for referrals to government agencies for civil or criminal prosecution. Despite this, preventative tools exist too. In addition to keeping an accurate accounting of wholesaler records and maintaining an up-to-date inventory management system, pharmacies can proactively conduct “mock” audits to review their purchases against claims billed to each PBM, and catch and resolve discrepancies proactively, before they are raised by PBMs.
If your pharmacy is faced with inventory shortfalls during a PBM audit or investigation, please contact Frier Levitt to speak to an attorney today.
