Pharmacy benefit managers (“PBMs”) audit pharmacies within their network to ensure their contracted pharmacies comply with their contractual obligations as well as applicable state and federal laws. However, PBMs often implement abusive audit tactics that can only be seen to improve their “bottom-line.” For pharmacies, it is critical to know how to prepare for and combat abusive PBM audits. Frier Levitt has compiled five tips for pharmacies dealing with PBM audits. By understanding and adhering to the five pointers outlined below, pharmacies should be well prepared to combat abusive PBM tactics and avoid unwarranted recoupment of funds.
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Maintain Robust Policies and Procedures
Pharmacies should maintain thorough policies and procedures which detail the pharmacy’s internal operations. Robust policies and procedures help a pharmacy comply with applicable laws and its obligations owed to PBMs according to PBM Provider Manuals and Provider Participation Agreements. In turn, maintaining and complying with policies and procedures drastically reduce the risk of discrepant audit findings and adverse PBM actions, including but not limited to, recoupment of funds and/or network termination.
When drafting policies and procedures, pharmacies should be cognizant of the terms of the agreements between the pharmacy and relevant PBMs, and structure the policies to comply with PBM contractual terms as well as applicable federal and state laws. For instance, a pharmacy’s policies and procedures should detail the pharmacy’s billing procedure and practices, including proper and timely reversal of claims when necessary. Along the same lines, one of the major PBMs requires its contracted pharmacies to dispense medication to the patient within seven (7) days of the fill date, the policy and procedures should be structured to comply with such PBM requirements.
In addition to billing procedures, pharmacy policy and procedures should cover virtually all aspects of pharmacy practice including, but not limited to, the following: (i) record/documentation maintenance; (ii) copay collection procedures; (iii) purchasing and inventory management; and (iv) dispensing practices. By outlining the pharmacy’s internal processes for each of these key areas of pharmacy practice, pharmacies will be better equipped to comply with PBM requirements and avoid adverse audit findings. Further, to ensure that the pharmacy complies with its own policies and procedures, pharmacies should endeavor to train staff regularly so that key members of pharmacy staff understand and can adhere to the policies and procedures. Finally, since PBM Provider Manuals are regularly updated, pharmacies should endeavor to update the policies and procedures as well to remain compliant with the terms of PBM Provider Manuals and changes in the law.
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Proper Record Keeping
Perhaps the most important aspect of avoiding unwarranted PBM audit findings and recoupment of funds is to maintain proper documentation to prove the pharmacy dispensed a claim in accordance with PBM terms and applicable state and federal laws. Pharmacies should retain sufficient documentation such as the following:
- proof of prescription delivery (e.g., signature logs and/or delivery confirmation)
- copay collection (e.g., itemized register receipt)
- prescription copies, including any alterations made to the prescription (e.g., changes to medication, authorization for early refills, etc.)
- inventory purchase histories
With respect to purchasing histories, pharmacies must again pay particular attention to the terms of the contractual agreements they have with PBMs. For example, as we reported here, Caremark is requiring that pharmacies notify Caremark within 21 days of any bulk purchase via email or mail for such bulk purchases to be considered in the event of an invoice reconciliation audit of the pharmacy. The requesting pharmacy must also receive an acknowledgment that Caremark received the pharmacy’s notification. By way of further example, another major PBM requires its contracted pharmacies to purchase inventory only from NABP-accredited wholesalers. Consequently, pharmacies must ensure their internal inventory records establish that all drug products were purchased from NABP-accredited wholesalers. Also, certain states require wholesalers to possess NABP accreditation to obtain a license.
Pharmacies must not only be cognizant of maintaining documentation but more specifically ensure they are maintaining the proper documentation to comply with PBM terms. With proper record-keeping practices, pharmacies can provide concrete evidence that can be used to combat unsubstantiated discrepancies identified during PBM audits.
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Conduct Self-Audit
A pharmacy should periodically conduct “self-audit” to ensure that it is following policies and procedures and to identify any discrepancies that may exist before a PBM does so. By performing a self-audit, pharmacies give themselves the opportunity to address and correct any discrepancies that may exist before PBMs impose any discipline or adverse audit findings.
When performing a self-audit, pharmacies should review the same documentation that PBMs would review during a routine audit. By way of example, pharmacies should review their prescription records (including corresponding proof of deliveries) and copay collection documentation. In addition, pharmacies should perform invoice reconciliations to identify any potential inventory shortages. During an invoice reconciliation, pharmacies should review their purchase histories for specific drugs, and compare the total amount purchased to the total amount dispensed during a specific timeframe. If the pharmacy determines it dispensed more of a given drug than its records indicate it purchased, the pharmacy is at risk of PBMs identifying the same drug invoice shortage discrepancy.
If a pharmacy discovers certain discrepancies during a self-audit, the pharmacy should take proactive measures to address the discrepancies. Proactive measures can include searching for additional supporting documentation, obtaining patient and/or prescriber attestations, and/or reversing specific claims.
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Be Familiar with PBM Audit Protocol
Each time a PBM performs an audit, it will follow a specific protocol. Often, the protocol the PBM will follow is determined by the type of audit being performed. There are three predominant types of audits – an on-site audit, a desktop audit, and a Fraud, Waste and Abuse (“FWA”) investigation.
Although all three types of audits operate in substantially the same way (but FWA investigations tend to impose shorter document submission deadlines upon pharmacies), during on-site audits, pharmacies face the additional obligation of ensuring the pharmacy’s premises are adequate and compliant. This requires the pharmacy to (i) be clean; (ii) maintain systems for handling and destroying personal health information; (iii) operate a drug refrigerator and maintain temperature logs; (iv) ensure drugs on its shelf are not expired, recalled, damaged, or altered; and (v) maintain a system for proper handling and storing of dangerous controlled substances. In addition, during on-site audits, a pharmacist-in-charge must be present to supervise additional pharmacy staff.
Regardless of the type of audit 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 imposed by the PBM. Submitting inapplicable or untimely documentation exposes pharmacies to the risk that the PBM will not accept the documents and impose significant audit findings. As such, if pharmacies feel they will not be able to compile the necessary documents by the deadline imposed by the PBM, pharmacies are encouraged to request an extension of time. Indeed, some state laws require PBMs to grant reasonable requests for an extension of time to submit documents. Regardless of a given state’s law, however, PBMs are often willing to accommodate a pharmacy’s timely request for an extension of time.
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Appeal Discrepant Audit Findings
If a PBM identifies discrepancies after performing an audit of a pharmacy, the pharmacy should appeal and dispute any audit findings to the fullest extent possible. Although PBM audits are intended to identify and prevent fraud, waste and abuse or overpayments, PBMs often use audits as a weapon to seek recoupment. Even if an audit results in relatively small clawback amounts, PBMs often combine small audit findings to justify terminating a pharmacy from its network in the future. Critically, termination from one PBM’s network often leads to additional action, including network termination from other PBMs. Accordingly, pharmacies must make every effort to reverse unwarranted audit findings to avoid more significant PBM actions in the future.
How Frier Levitt Can Help
PBMs clawback the entire amount of reimbursement on claims that were already dispensed by pharmacies. This not only causes significant financial harm to pharmacies, but also disrupts the pharmacy’s day-to-day business. Pharmacies should emphatically contest audit discrepancies and demand transparency from PBMs, especially when the pharmacy provided sufficient documentation to overturn the discrepancies. If your pharmacy is facing a PBM audit, contact Frier Levitt to speak to an attorney.
