It is well within standard pharmacy practice to always maintain a well-stocked inventory to support the dispensing of expected prescriptions. In fact, many PBMs will require that pharmacies have sufficient inventories of a diverse range of drug products before the pharmacies can even be reviewed for credentialing into a PBM’s pharmacy networks.
With the cost of drugs increasing while reimbursement prices are decreasing, pharmacies are looking for ways to financially sustain their businesses. Such methods include taking advantage of discounted pricing for bulk purchases or discounts offered at the end of the calendar year before prices increase the following year. So long as pharmacies are ensuring that the medications in their inventory are not expired, there should be no limitation on their ability to make such purchases.
However, when PBMs conduct audits of pharmacies, particularly inventory audits, they place a limitation on the period of time from which they are willing to review purchase information. For example, if a PBM audits the pharmacy for claims submitted from January 1, 2021 to June 30, 2021, the PBM will request that the pharmacy request its wholesalers submit the purchase information for the same time period. In the light of the standard industry practices for pharmacies to make purchases of drug products in advancing of dispensing them, several PBMs will allow for an extended window of time for purchase information to be considered, typically three months. In the example above, most PBMs will allow pharmacies to submit purchase information from October 1, 2020 to December 31, 2021 in the event that this extended period of time will reconcile any perceived shortages during the original audit period.
That said, while most PBMs allow for a three-month “lookback” period, several do not. In fact, one PBM – CVS Caremark – has been particularly reluctant to allow pharmacies more than a 1-month “lookback” period, subjecting pharmacies to large dollar recoveries and even termination, despite there being no dispute that the pharmacy did in fact have sufficient inventory to support claims billed. In addition to such extreme limitations, starting in 2022, the same PBM has come out with a new bulk purchase requirement, stating that the PBM will not accept purchases made one month prior to the selected audit period unless (i) the pharmacy notifies the PBM of the intent to make a “bulk purchase” within seven days prior to the purchase and (ii) the PBM approves the bulk purchases in writing. According to the PBM, a bulk purchase is vaguely defined as more than thirty days of inventory. Of note, pharmacies are only directed to send their requests to make bulk purchases via mail rather than via email or facsimile, further suggesting that there will be significant delays before the PBM reviews and approves the request.
The introduction of this bulk sale requirement challenges the standard pharmacy’s purchasing practices. For reasons mentioned above, many pharmacies gain many advantages by making bulk purchases. With this new requirement, while it is going to place an administrative and logistical challenge in internal pharmacies policies, it is also going to subject several pharmacies to large recovery efforts and potential termination.
Pharmacies are encouraged to review their PBMs’ provider manuals and any notices regarding amendments to ensure that their practices, particularly as it relates to bulk purchases, are consistent with existing and new terms and conditions. In addition, pharmacies should understand the legal and legislative tools available to them to potentially challenge any such purchase requirements. Contact Frier Levitt today to speak to an attorney today.
