Types of PBM Audits and Investigations

Pharmacy Benefit Managers (“PBMs”) regularly review network pharmacies to ensure that they are meeting terms and conditions identified in their Provider Agreements and Pharmacy Manuals. One mechanism for this review includes audits and sometimes, investigations, on pharmacies. Poor audit performance can lead to substantial recoupments, network terminations, and possibly even referrals to regulatory agencies.  It is important for a pharmacy to understand the different types of audits and investigations that a PBM may conduct so the pharmacy can better anticipate the process and be prepared if an audit or investigation is initiated on the pharmacy. Below we discuss some of the most common types of reviews PBMs are known to conduct.

Onsite Audits

Many pharmacies, particularly those located in a CMS designated “HEAT” Zone, can expect to undergo an onsite audit at the time of credentialing. Once admitted into the network, pharmacies are still subject to onsite audits during regular business hours with little to no advance notice. During an onsite audit, an auditor or investigator will visit the pharmacy and review its overall day-to-day operations to ensure that they are consistent with the PBM’s requirements. In one instance, for example, during an onsite audit, a retail pharmacy reported that the auditor had seen packages of medications with UPS labels for addresses at a distance significantly far away from the pharmacy. This prompted the auditor to question how the pharmacy services its patients and how these patients might seek this pharmacy’s services despite the distance, which, per PBMs, may be an atypical practice. In such an event of an onsite audit, pharmacies should be prepared to address such questions, and more importantly, should consult with experienced legal counsel on how to best prepare for onsite audits. In addition, during an onsite audit, pharmacies should also be prepared to pull prescription information for prescriptions identified by the auditor. Pharmacies should therefore ensure that they always maintain the requisite information and documentation related to any prescription filled and dispensed. While PBMs have resumed onsite audits after a hiatus in light of the COVID-19 pandemic, many PBMs still continue to conduct these audits virtually. Pharmacies can still expect to undergo a very similar process during a virtual audit as they would an onsite audit.

Prescription Validations

One of the most common types of audits are prescription validations which review the pharmacy’s claims prior to the PBM making any payment on the claims to the pharmacy. Often, these reviews are limited to a few prescriptions in similar nature (i.e., same drug, patient, prescriber, etc.) and require that the pharmacy provide additional supporting information to further validate the prescriptions at issue prior to the PBM fully processing the claims and making a payment to the pharmacy. It is important that pharmacies maintain sufficient documentation and information as required under relevant law and under the terms of the PBM Provider Manual and Agreement as they can expect to undergo routine prescription validations at any time and may have a limited window to submit such documents if they hope to receive timely payment.

Invoice Reconciliations

During an invoice reconciliation audit, PBMs will review the pharmacy’s purchases during a particular time period to confirm the pharmacy had sufficient inventory to support claims billed during the same time period. To conduct this review, PBMs will require that the pharmacy requests this purchase information to be sent directly from its wholesalers to the PBM for review. Some PBMs may allow for additional purchase data for one to three months prior to the audit period to be considered, particularly in instances where the pharmacy may make purchases in advance of dispensing the medication and likely maintain inventory on its shelf. If the PBM identifies that the pharmacy did not have sufficient quantities of medication purchased to support claims billed during the audit period, the PBM will allege inventory shortages against the pharmacy. As a result, the pharmacy will be required to resolve the inventory shortage discrepancies, or otherwise face recovery on the underlying claims and potential further action, including, but not limited to, network termination.

Desktop Audits

One of the most common types of audits a PBM may conduct is a desktop audit. PBMs may conduct extensive desktop audits, requiring the pharmacy to submit documentation for a large number of prescriptions, or they may conduct smaller, periodic reviews of a handful of claims at a time. In either instance, the pharmacy can reasonably expect to provide a copy of the prescription, proof of copayment, if any, prescription label, and signature log. In anticipation of a desktop audit, pharmacies should ensure that they maintain documentation in accordance with relevant federal and state laws, as well as PBM terms and conditions, particularly as the absence or incompleteness of any information may otherwise cause recovery on claims for which medications have already been dispensed and further action. Further, PBMs have been submitting complaints to the State Boards of Pharmacy recently for any unresolved PBM audit findings, however minor.

Investigations

While many investigations are similar to audits in the sense that PBMs will expect pharmacies to often produce similar, if not, the same documentation and information, investigations can be much more scrutinizing. When conducting an investigation, PBMs will take a more aggressive approach towards the pharmacy, such as providing limited response times to a request or limited appeal windows for any alleged results. In addition to conducting prescription and invoice reconciliation reviews during investigations, PBMs may also conduct further review of the pharmacy’s overall practices, particularly those related to marketing efforts the pharmacy might employ.

How Frier Levitt Can Help

It is very important for pharmacies to understand the audit and appeals process identified by the PBM that conducts such review on them. In addition, pharmacies should be aware of the potential legal tools that they can utilize in challenging audits and investigations, including applicable federal and state laws (such as fair pharmacy audit laws), as well as PBM’s own contractual requirements that can potentially provide protection during an audit. It is highly encouraged that pharmacies take every measure to challenge any unresolved audit findings as they may lead to continued recovery against the pharmacy and, in some cases, termination from the PBM’s networks. If you are undergoing an audit or investigation or have past results that you would like to further challenge, contact Frier Levitt to speak to an attorney.

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