How to Avoid Fines From PBM Pharmacy Audits

PBM pharmacy audits

As vice president of operations and general counsel for Family Pharmacy in Aiken, South Carolina, Stuart Johnson has faced many on-site and desk audits, and none of them have been quite the same.

“Some of our experiences have been like receiving a root canal without any numbing agents, while others have been as simple as a trip to the grocery store with a well-behaved toddler,” he said.

Although audits are meant to prevent fraud, waste, and abuse, stories proliferate of PBM audit abuse, with pharmacies losing up to tens of thousands of dollars in recoupments not for fraud, but for simple errors.

In Johnson’s experience, PBMs may even deny claims for no reason at all. “Over recent years, we have seen an increase in PBM auditors finding things that truly don’t exist as well as ‘losing’ pages,” he said. “Many of the claims that the auditors initially deny, upon review for appeal they find payment was correct even without added documentation.”

A pharmacy might receive a PBM audit at any time and for a variety of reasons. According to Jahred Enriquez, lead auditor at Pharmacy Providers of Oklahoma, a PSAO that provides an audit solution service RxProtect, some audit triggers include not properly documenting the hard copy for things such as DAW (dispense as written), refilling a prescription early, non-specific directions on a hard copy, waiving copays, and not obtaining a patient signature upon prescription pickup. Any discrepancies will result in recoupment of payments or the withholding of future payments—usually the full amount of the claim. Sometimes, in rare cases, they may even result in network termination.

With the increase of PBM audits and the variety of tactics they might use to deny claims, proactive strategies and strategic appeals are essential to minimizing denials and recoupments.

Proactive strategies

When it comes to audits, nothing is more important than documentation. PBMs require hard copies for adjustments in quantities for plan requirements, patient requests, or clarifications from the prescriber. Every change or override you make in the pharmacy should be explained with written documentation. If you’re audited, it will “help paint a picture for the auditor on the history of that particular prescription,” Enriquez said. “The auditors are not always aware of what may have caused something to change and any information you can provide as to why something came to be will help prevent audit recovery.”

Enriquez emphasized the importance of establishing protocols for audits, including processes for timely reversal of prescriptions returned to stock, monthly employee checks with the Office of Inspector General (OIG) and the System of Award Management (SAM), and appropriate monitoring and prevention measures to combat fraud, waste, and abuse (FWA). Formal weekly and monthly procedures protect you from non-compliance and safeguard you from being blindsided by costly chargebacks. He strongly recommends dedicating a staff member to audit tasks along with formal policies. “These will ensure it is done timely and correctly, every time,” he said.

He also recommends performing regular self-audits for the previous week. Start by identifying high-dollar medications, which will be the most likely targets and typically require additional information. A few to look out for include insulin, inhalers, injectables, and any claims that may have been submitted with a DAW. In Johnson’s experience, insulin prescriptions and topicals have generated the most audits. You can run weekly reports through your pharmacy software, but services like PPOk’s RxProtect relieve you of this burden by running routine, proactive reports to identify these claims for you.

Days’ supply, typically calculated by the quantity and directions on the prescription, is a common culprit in denials and very important to PBMs, Enriquez said. If there is any ambiguity in the directions, contact the prescriber for verification, and make sure to document who you spoke to and when. Ambiguities can include quantities on medication—whether the prescription was intended as one box or one pen on injectables such as Lovenox, for example.

Days’ supply has been one of the most frequent citations in Johnson’s pharmacy, especially when it comes to topicals. PBMs have now expanded citations to include not just improper days’ supply but also incorrect daily amount to apply. “Getting confirmation and documentation from the physician as to what amount to apply and where is highly important,” Johnson said. “This is what I feel like I spend more time on with appeals than anything.”

Audit laws vary from state to state, so it’s important to become familiar with yours. “Most states have a pharmacy audit integrity act or language within their pharmacy lawbook or state legislation that provides rights and requirements for audits and auditing entities,” Enriquez explained. “Researching these laws and having them readily available if you find yourself in an audit can be extremely helpful when navigating the audit phases and requirements.”

Johnson, a lawyer, makes sure to be diligent in this regard, not only in educating himself on state laws but also on each of the PBM’s “nitpicky requirements.” He said, “This is easier said than done due to PBMs not providing any transparency and changing their requirements as much as many people change their underwear.” At Family Pharmacy, they conduct regular staff training that includes current audit trends and practices.

“My goal in this tough area of business is to try and not make the same mistake twice.” Johnson said. “If we do, then we as management have failed to train our staff. We try to remind our pharmacists and technicians, without micromanaging, that it is important to remember the little details are as important as the big details.“

All of these proactive measures will go a long way to minimize losses from PBM audits. But it requires diligence, vigilance, and a lot of time. “Most pharmacies are unaware of the ins and outs of the audit phases, the PBM requirements, and their rights through their state’s pharmacy audit law,” Enriquez said. “RxProtect excels at identifying potential issues with prescriptions and providing remedies to prevent audit recovery.”


Top 10 Audit Discrepancies

1. Lack of calculable directions for the prescription
2. Lack of documentation for DAWs
3. Miscalculated day supply
4. Early refill due to a miscalculated day supply
5. Missing patient signature for prescription pickup
6. Failing to collect a minimum monthly amount on patient charge accounts
7. Cutting quantities without documentation as to why the quantity was cut
8. Not documenting rejection override information
9. Missing information on transfer orders
10. Not providing the requested information before the audit due date


Making an appeal

Denials during an audit don’t necessarily spell doom for your pharmacy. There is always the option to appeal, and many pharmacies, like Johnson’s, are frequently successful in overturning denials.

Before you get to the appeal, you will need to put together an initial audit response, which Johnson says is the most important element to a successful appeal. Make your response as easy to read and navigate as possible. Number the pages and include your NPI and NCPDP on every page, he advised. “If you have a thorough initial audit response, the appeal usually only requires a few extra notes and potentially additional supporting documents.”

For the appeal, make sure to thoroughly read through the initial audit findings, as the PBM appeal process can have “a tricky component.” Keep your response in total alignment with the PBM requirements and don’t fax it in if you can avoid it. “Faxing, even in 2020, lends to illegible documents, missing pages, potential nonproof of receipt even though you have a transaction log on your end, and potential for poor scans,” Johnson said.

Your appeal should also be formatted for clarity. Johnson’s appeals always include a cover sheet for each claim, which outlines the claim number, drug number, denial reason, and the supporting documentation to show that the claim was properly paid. “Ultimately, thorough but concise explanations as to why the claim is paid, along with supporting documentation, is key to a successful appeal,” he said.

If the appeal fails, there still may be options. “Some audits have phases beyond the appeal phase in which the pharmacy may submit a final rebuttal to a committee,” Enriquez said. “While the audit may be final, there are always options to continue to fight the recovery.”

For pharmacies anxious about audits, Johnson has some encouragement. “We all will make mistakes, overlook simple things, and will put patient care over a PBM’s desires. Pharmacists care about people more than they care about PBMs, so there will always be some audit recoupments,” he said. “PBM auditors are bullies and will always try to back you in the corner. However, if you show them that you will not back down, are doing things properly, and have an inkling of organization about you, then they will inquire with your stores much less frequently.“


From the Magazine

This article was published in our quarterly print magazine, which covers relevant topics in greater depth featuring leading experts in the industry. Subscribe to receive the quarterly print issue in your mailbox. All registered independent pharmacies in the U.S. are eligible to receive a free subscription.

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