How Pharmacies Can Prepare for PBM Audits and Challenge Audit Results

Published - Written by Harini M. Bupathi, Esq., Dae Y. Lee, Pharm.D., Esq., CPBS, Jesse C. Dresser, Esq.

Pharmacy benefit managers (PBMs) utilize audits to monitor a pharmacy’s performance and recover any payments made improperly to pharmacies. Although the stated purpose is to ensure that pharmacies are in compliance with a particular PBM’s terms and conditions, PBMs are notorious for auditing pharmacies with the intent of seeking large recoveries, including a clawback of the entire reimbursement amount paid on a prescription claim in addition to an audit fee proportionate to the recovery amount. Audits will not only impact a pharmacy’s day-to-day operation but may also lead to additional sanctions, including network termination. Thus, it is critical to understand how to respond to an audit in an expeditious and efficient manner. 

There are several different types of audits that a PBM may conduct—desktop, in-person, inventory reconciliations, prepayment reviews, and more recently, virtual audits. In some instances, PBMs may couple audits, and it is common for a PBM to conduct a desktop audit of a pharmacy’s prescription records as well as an invoice audit of the pharmacy’s purchase and dispensing history (ie, invoice reconciliation audit). Further, when PBMs conduct audits, they are rarely transparent in communicating what might have initiated the audit of the pharmacy. Audits are a standard part of a pharmacy’s participation in the network, and an extensive audit of prescription records and purchase history generally occurs every 2 to 3 years. Other times, though, some audits occur as a result of the PBM wanting to closely review a pharmacy for a particular issue (eg, when a pharmacy’s dispensing volume rapidly increases, when a pharmacy dispenses a large percentage of medications in one therapeutic category, or even when a pharmacy’s patients reside in a relatively far distance from the pharmacy). Although the following is not intended to serve an extensive review of PBM audits and the tools to tackle them, it does provide some background to allow pharmacies to have a grasp when addressing them. 

Audit

When a pharmacy is first notified of an audit, often by way of a formal written request, it is important to review the audit request closely. Pharmacies should pay particular attention to any deadlines identified, any points of contact (such as an auditor), and the information being requested. Immediately upon receipt of the audit request, pharmacies should gather the requested information and prior to submitting this information to the auditor, pharmacies should conduct an internal review of the information and documentation to be submitted. Should pharmacies come across any issues in the documentation, they should seek to provide supplemental information and documentation to cure any potential deficiencies and prevent a larger recovery effort. An ounce of prevention goes a long way.

Initial Results

After reviewing the submitted documentation, the PBM’s auditor may follow up with additional requests for clarification or if there is missing information.  Following the auditor’s review, the PBM will issue “initial audit results” to the pharmacy that identifies any discrepancies associated with the pharmacy’s prescription and/or purchase records. Upon receipt of the initial audit results, it is important that pharmacies review the alleged discrepancies (and any associated comments), the potential appeal documentation required to resolve the discrepancies, and any related administrative issues (such as the deadline and method to appeal). From there, pharmacies should engage in diligent efforts to try to identify the bases of the discrepancies and obtain supporting documentation required to appeal the discrepancies. One such example may relate to member denials that result when a member inadvertently denies receiving a medication from the pharmacy when contacted by an auditor. To resolve the discrepancy, the pharmacy is often required to provide a written statement or an attestation that confirms the patient’s receipt and authorization of the prescription. To the extent the pharmacy requires additional time to respond to the initial audit results, most PBMs provide a limited extension of time to allow the pharmacy to submit its appeal.

Final Results

After the pharmacy’s appeal is submitted, the PBM auditor will review the appeal to identify whether the response is sufficient to resolve the discrepancies in the initial audit results. In many instances, PBM auditors refuse to deviate from their strict documentation guidelines despite a pharmacy’s substantiating documentation, and therefore, uphold discrepancies when issuing “final audit results.” Should there be any discrepancies that remain outstanding in the final audit results, pharmacies are highly encouraged to explore their contractual rights to challenge the final audit results further, as the failure to resolve could result in a full recovery of the audit amount, a potential audit fee, and network suspension/termination.

 Importantly, there are several legal tools available to pharmacies that undergo an audit, including protections granted by a state’s Fair Audit Laws. Such Fair Audit Laws may limit the number of prescriptions that the PBM may review, how long a PBM can take before issuing initial and final audit results, and even recoveries on minor, clerical issues.  As such, when pharmacies receive audit requests, they should review the requests and any subsequent results closely, work diligently to resolve the results, and leverage any applicable protections under relevant law. Given the complexity of audits and the threatening consequences that might result from audits, pharmacies are highly encouraged to seek assistance from legal counsel when addressing an audit request.

Jesse C. Dresser, Esq. is a Partner at Frier Levitt, Dae Y. Lee, Esq., PharmD. is Senior Counsel in the Firm and one of the pharmacist-attorneys, and Harini Bupathi , Esq. is an Associate in the Firm. Frier Levitt is a boutique healthcare and life sciences firm that has served the respective industries and stakeholders for over 20 years. Learn more at www.frierlevitt.com.

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