Pharmacy Alert: Combating PBM Audits Through Supporting Documents

Regardless of the size of your pharmacy, pharmacy benefit manager (“PBM”) audits are inevitable. While these audits are promoted as a means to ensure network pharmacies operate in compliance with the terms of PBM Provider Manuals and federal and state laws, PBMs often assert unwarranted discrepancies against pharmacies in an effort to enhance PBM profits. Consequently, pharmacies must know how to prepare for, and perhaps more importantly, how to combat abusive PBM audits, unjustified allegations of discrepancies, and associated recoupments. Each PBM outlines specific audit appeal procedures in their Provider Manuals that allow contracted pharmacies to challenge unwarranted audit findings. Overturning illegitimate audit findings is often a matter of providing the appropriate supporting documentation. By understanding what types of supporting documentation PBMs are looking for to overturn or avoid discrepant audit findings, pharmacies are able to retain important documentation and avoid serious PBM sanctions, including, but not limited to recoupment of funds and network termination.

Common Discrepancy #1: Drug Invoice Shortage

PBMs identify drug invoice shortage (“DIS”) discrepancies when a pharmacy fails to provide sufficient purchase histories to justify the amount of a specific product it billed to the PBM. Essentially, DIS discrepancies are nothing more than a mere numbers game—did the pharmacy purchase a specific product in quantities that equal or exceed the amounts it billed to the PBM, provided, however, that the purchases are from the appropriate review period, typically within thirty (30) days of the audit period. Ideally, wholesalers from which the pharmacies purchased inventory will be able to provide purchase summaries directly to the PBM. However, pharmacies often acquire inventory from a variety of sources. For instance, if permissible under applicable State law, pharmacies may obtain inventory from other pharmacies. Depending on the source of the pharmacy’s inventory, different documents may be required to substantiate the purchases and avoid DIS discrepancies.

To illustrate, in instances where pharmacies purchase inventory from other pharmacies, a simple purchase summary, while sufficient to support purchases from licensed wholesalers, are inadequate to substantiate pharmacy-to-pharmacy purchases according to many major PBMs. In these situations, pharmacies must make sure they receive not only invoices from selling pharmacies, but also complete Transaction Statements, Transaction Histories, and Transaction Information in accordance with the Drug Supply Chain Security Act (“DSCSA”). Moreover, regardless of the source of inventory, pharmacies should be sure to retain proof of payment such as a checks, receipts, or paid invoices to further establish the legitimacy of their inventory purchases. Ultimately, when pharmacies are cognizant of retaining proper purchase history documentation, proof of payment, and, if necessary, additional documentation pursuant to the DCSCA, they are well-positioned to avoid unwarranted DIS discrepancies.

Common Discrepancy #2: Copay

In the overwhelming majority of cases, pharmacies are obligated to collect copayment from patients at the point of sale. Failure to do so or provide sufficient documentation to prove copay collection results in PBMs’ identification of copay discrepancies in the course of an audit. Of note, copay discrepancies can sometimes be the most difficult to overturn as PBMs normally require substantial documentation to overturn copay discrepancies.

Overturning copay discrepancies typically requires a pharmacy to provide point-of-sale receipts or a front and back copy of the check used to pay for the copay, as well as a patient attestation confirming the copay has been remitted. However, despite the overwhelming proof provided by the aforementioned documentation, most major PBMs put additional, unreasonable requirements in place to overturn copay discrepancies. For example, in instances where copays are paid in cash, a copy of the receipt and patient attestation alone are insufficient proof of copay collection in the eyes of a PBM. In these situations, pharmacies are often required to provide bank statements showing cash deposits to “adequately” prove copay collection. Further, many PBMs contact members directly during an audit and inquire as to whether the patient remitted the necessary copay. Since PBMs routinely audit claims that are multiple years old, it is not uncommon for patients to simply forget whether they paid their copays. If a patient denies paying a copay or doesn’t remember whether they paid their copay, PBMs will consider this a “denial,” and some PBMs will even refuse to accept patient attestations as a way to overcome the purported denial. Nonetheless, pharmacies can avoid the potentially difficult path to overturn copay discrepancies by retaining appropriate documentation of copay collection and providing it to PBMs during the audit.

Common Discrepancy #3: Prior Authorization Deviation

In an effort to reduce prescription drug costs, prescription benefit plans regularly implement utilization management programs such as prior authorization and step therapy requirements. When prescription benefit plans implement prior authorization requirements, prescribers are asked to submit certain documents to PBMs and/or payors demonstrating the medical necessity of a particular drug. Typically, prior authorization requirements apply to high-cost brand-name drugs and are intended to force patients to utilize cheaper, generic drugs before receiving branded medications. Likewise, prescription plans implement step therapy programs, which require patients to utilize cheaper generic alternatives before they are eligible to receive branded medications, to reduce the plan’s prescription drug costs. From a pharmacy perspective, step therapy and prior authorization requirements must be strictly adhered to. When a pharmacy deviates or circumvents prior authorization and step therapy requirements, the pharmacy and the dispensing pharmacist are subject to significant liability; not only from PBMs, but potentially from government authorities as well.

To avoid the potentially serious consequences of prior authorization or step therapy discrepancies, pharmacies must strictly adhere to any step therapy programs in place and ensure prescribers are submitting necessary prior authorization documents. Only through proper adherence to these programs will pharmacies be able to submit appropriate documentation (such as prescriber attestations confirming proper submission of prior authorization documents or previous prescription fills of “step one” drugs) to overturn unwarranted prior authorization/step-therapy discrepancies.

Conclusion

Regardless of the type of audit being performed, PBMs will require pharmacies to submit specific documentation for review. Pharmacies must pay particular attention to the type of records requested and adhere to the deadline to submit the documents required by the PBM. Submitting inapplicable or untimely documentation exposes pharmacies to the risk of significant and potentially unwarranted audit findings.

Additionally, if a PBM identifies discrepancies after performing an audit of a pharmacy, the pharmacy must use the contractual appeal process to dispute any audit findings to the fullest extent possible. Although PBM audits are supposedly intended to identify and prevent fraud, waste, and abuse, PBMs often use audits as a tactic to seek recoupment and increase their own profits at the expense of independent pharmacies. More troubling, even if an audit results in relatively small clawback amounts, PBMs often combine small audit findings from past audits to justify terminating a pharmacy from its network at some point in the future. Critically, termination from one PBM’s network often leads to additional sanctions, including network termination by other PBMs. Accordingly, pharmacies must make every effort to reverse unwarranted audit findings to avoid more significant PBM action down the road.

How Frier Levitt Can Help

Regardless of the size of your pharmacy or the amount at stake, Frier Levitt can assist your pharmacy in preparing for and successfully challenging a PBM’s audit findings or network termination. Our life science attorneys are prepared to guide your pharmacy as you prepare for a PBM audit, as well as provide an aggressive approach to fight for your rights following a PBM audit or termination. If you have any questions or need help fighting a PBM audit, contact us to speak to an attorney.