PHARMACY ALERT: Defunct RDC Sparking PBM Investigations and Threatened Terminations of Pharmacies

Frier Levitt has reported in the past about Rochester Drug Cooperative (“RDC”), including how its guilty plea with the federal government for its role in the opioid crisis demonstrated major compliance failures from which other pharmacies should learn, as well as the downstream effects of the investigation, including subpoenas of pharmacies.  Recently, Frier Levitt has become aware of another downstream effect of the now defunct RDC – PBM investigations of pharmacies that purchased drug products from RDC.  Pharmacies that purchased products from RDC should be on alert and prepared to respond to these investigations or risk termination. 

PBMs will often investigate suspected Fraud, Waste, and Abuse (“FWA”) in pharmacies, and pharmacy staff should be aware of the difference between these investigations and a typical audit.  Depending on the state in which the pharmacy operates, the difference between an “audit” and “investigation” can be substantial, as a pharmacy may have significantly more rights under an audit than an investigation. Typically, PBMs will initiate invoice audits or investigations that include a review of a pharmacy’s purchase history against its dispensing history to identify whether there are any shortfalls in the pharmacy’s inventory. In doing so, PBMs will require that a pharmacy request its wholesalers submit the pharmacy’s purchase history directly to the auditor.  In this case, Frier Levitt has found that a major PBM has targeted some pharmacies for investigation in connection with the purchase of products from RDC, going so far as to issue notices of termination where pharmacies are unable to have RDC produce documentation of the pharmacies’ purchases to the PBM auditor for review.

PBMs rarely accept invoices directly from pharmacies—instead, invoices or purchase history reports are typically required to be sent directly to the PBM from the wholesaler.  In the case of RDC, which is no longer in operation, those invoices may not be sent at all.  In such instances, the PBM may still uphold its termination decision, even though the pharmacy may not have engaged in any FWA activity.   Recently, Frier Levitt has assisted a pharmacy in overcoming this issue after taking diligent efforts to obtain the pharmacy’s purchase history with RDC and engaging in a discussion with the PBM to detail the circumstances and resolve the pending termination.

That said, pharmacies should take special care to retain all invoices and other purchasing information to avoid possible consequences that may result when a wholesaler closes its doors, or even when the wholesaler provides inaccurate information to the PBM.

How Frier Levitt Can Help

The experienced pharmacy attorneys at Frier Levitt handle every aspect of pharmacy operations and offers flat fees for drafting pharmacy Standard Operating Procedures (“SOPs”), as well as assistance with credentialing and pharmacy contracting.  Frier Levitt attorneys specialize in responding to PBM audits and investigations, and if necessary, litigation to challenge termination and other adverse PBM actions.  If your pharmacy is being investigated in connection with RDC or any other reason, contact us today and speak with one of our pharmacy attorneys.

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