Pharmacy Benefit Manager (PBM) Audit Defense for Independent Pharmacies

Our Health Care Defense Lawyers Represent Independent Pharmacies Nationwide in Pharmacy Benefit Manager (PBM) Audits.

As an independent pharmacy, you are subject to being audited by your pharmacy benefit manager (PBM). Whether you know it or not, when you signed up with your PBM, you almost certainly agreed to a clause that allows the PBM to conduct a thorough and virtually unchecked inspection of your pharmacy’s billing to the insurance companies and drug manufacturers. While these audits differ from Medicare, Medicaid, and Tricare audits in that they do not carry the risk of federal prosecution, PBM audits can still result in substantial recoupment liability and other financial penalties. 

As a result, if your pharmacy is facing a PBM audit, it is important that you engage experienced legal representation. You need a team of lawyers who understand the PBM’s role and the rules that apply when you bill the insurance companies and drug manufacturers for prescription medications. At Oberheiden, P.C., our team of health care defense lawyers offers centuries of combined experience in pharmacy audits and investigations. We can advise you of the risks involved. We can deal with the PBM audits and investigations. We can advise you of the risks involved. We can deal with the PBM auditors on your behalf. And, if necessary, we can challenge the outcome of your PBM audit in court. 

 

The PBM’s Role in the Health Care System

Pharmacy benefit managers (PBMs) are third-party intermediaries that exist in the space in between independent pharmacies and private health insurance companies and drug manufacturers. Although the original purpose of the PBM concept was to help reduce costs and streamline the payment approval process for privately-insured patients, over time, many PBMs have become impediments to independent pharmacies securing timely payment, and the audit process has transformed into a profit center for PBMs. As summarized by the National Community Pharmacists Association (NCPA):

Put our highly experienced team on your side

Dr. Nick Oberheiden
Dr. Nick Oberheiden

Attorney-at-Law & Founder

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Lynette S. Byrd
Lynette S. Byrd

Former Federal Prosecutor

Partner

Aaron L. Wiley
Aaron L. Wiley

Former Federal Prosecutor

Local Counsel

Subodh Chandra
Subodh Chandra

Former Federal Prosecutor

Local Counsel

Elizabeth K. Stepp
Elizabeth K. Stepp

Partner

Roger Bach
Roger Bach
(Non-Lawyer)

Former Special Agent, OIG

Dennis A. Wichern
Dennis A. Wichern
(Non-Lawyer)

Former Special Agent-in-Charge

Chris Quick
Chris Quick
(Non-Lawyer)

Former Special Agent, FBI

Kevin M. Sheridan
Kevin M. Sheridan
(Non-Lawyer)

Retired Supervisory Special Agent, FBI

Ray Yuen
Ray Yuen
(Non-Lawyer)

Former Supervisory Special Agent, FBI

Gamal Abdel-Hafiz
Gamal Abdel-Hafiz
(Non-Lawyer)

Former Supervisory Special Agent, FBI

[PBMs] were created as middlemen to reduce administrative costs for insurers, validate . . . patients[‘] eligibility, administer plan benefits, and negotiate costs between pharmacies and health plans. Over time, PBMs have been allowed to operate virtually unchecked. A lack of transparency in PBM practices has led several states to implement licensure/registration, fair pharmacy audit, or generic drug pricing legislation to try to level the playing field for pharmacies and patients.

However, even with these legislative controls in place, PBM audits still present a major challenge for most independent pharmacies. In many cases, PBMs will conduct non-transparent audits and then “retract” substantial sums from independent pharmacies

(in some cases in the hundreds of thousands or millions of dollars) with little, if any, explanation. Particularly when pharmacies fail to inject themselves into the audit process, PBMs will reach summary conclusions based on a limited review of actual billing data and suspect methodologies, and then pharmacy owners will be left to either (i) accept the faulty determination, or (ii) take their PBM to court.

 

Proactive and Strategic Legal Representation for PBM Audits

 

With our attorneys’ extensive experience representing pharmacies in private insurance audits and federal health care fraud audits and investigations, we are able to provide proactive and strategic representation for PBM audits. As PBM audit defense counsel, we intervene in the audit process as soon as possible, and we seek to take control of the process by challenging auditors’ methodologies and assumptions and enforcing all applicable contractual and statutory limitations. By taking an aggressive approach to audit defense, we keep PBM auditors in check, and we ensure that our pharmacy clients are not unduly subjected to recoupments, “retractions,” and other penalties.

Our attorneys’ PBM audit defense services include:

1. Pre-Audit Consultation

If you have received a letter or fax from your PBM (or its Fraud, Waste & Abuse Division), consulting with an attorney before the audit begins will allow you to anticipate any potential issues and execute a strategic defense focused on the issues (if any) at hand. When you contact us, our health care defense lawyers can arrange to meet with you promptly to assess your risks and outline your next steps. At this stage, simply letting the PBM know that you have legal representation can often significantly impact the audit process, and we can leverage our attorneys’ experience in pharmacy audits to help facilitate a prompt and favorable resolution. 

2. PBM Audit Intervention and Representation

During PBM audits, our attorneys work directly with PBM auditors on behalf of our pharmacy clients. We will aggressively challenge all improper demands, flawed methodologies, and misguided assumptions, and we will work diligently to ensure that your pharmacy is not hit with substantial penalties. Regardless of whether your pharmacy’s billing practices are fully compliant or there are issues that need to be addressed, you have defenses available, and our attorneys can use these defenses to protect you. 

3. Post-Audit Representation and Negotiation

If you have received an unfavorable PBM audit determination, this is not the end of the road. PBMs are private companies; and, while your pharmacy is contractually bound to comply with all applicable billing rules and regulations, PBM audit determinations do not carry the force of law. If your pharmacy is facing recoupments and other financial penalties, our attorneys can assess the validity of the PBM’s conclusions and negotiate for a reduction (or removal) of the penalties imposed. 

4. PBM Audit Litigation

While most issues can be resolved during the audit process itself, in some cases litigation will be necessary. We represent pharmacies in litigation during and after PBM audits, including requests for injunctive relief (i.e. to prevent overreaching by PBM auditors) and post-audit actions to challenge unfavorable audit determinations. 

5. Pharmacy Billing Compliance Counseling

In addition to providing audit defense representation, our attorneys also counsel our pharmacy clients regarding billing compliance. We can help you develop and implement a comprehensive compliance program designed to prevent PBM audits and to protect your pharmacy in the event of an audit or a federal Medicare, Medicaid, or Tricare fraud investigation. From assessing your pharmacy’s needs to drafting policies and procedures and providing training to pharmacy personnel, we can provide full-service compliance representation that is custom-tailored to your pharmacy practice.

 

PBM Audit Frequently-Asked Questions (FAQs)

 

Q: What entities are PBMs?

There are numerous PBMs operating in various jurisdictions across the United States. Some of the largest and most well-known PBMs are:

  • Aetna
  • Anthem (IngenioRx)
  • Blue Care Network
  • Blue Cross/Blue Shield
  • Caremark
  • Cigna
  • Express Scripts
  • Humana
  • MedOne Healthcare Systems
  • Medco
  • MeridianRx
  • OptumRX (UnitedHealth Group)

You can find a more-comprehensive (but not exhaustive) list on the Pharmacy Benefit Management Institute (PBMI) website: Pharmacy Benefit Manager Directory.

 

Q: What is the difference between a desktop audit and an on-site audit (or “field” audit)?

Desktop audit is are conducted remotely, while on-site audits (or “field” audits) involve PBM auditors physically inspecting pharmacies’ books and records on location. While desk audits tend to involve less-complex issues than on-site audits, both require experienced legal representation. 

Q: How are PBMs regulated in the United States?

PBMs are regulated at the state level. Approximately half of all states have licensing or registration requirements as well as legislation designed to ensure fair and transparent audits and drug pricing. Most other states have some (but not all) of these protections in place, while a handful of states have not adopted any PBM-specific laws or regulations.

Q: What are some examples of common issues during PBM audits?

During pharmacy audits, PBMs will look for any excuse to demand recoupments and secure other financial penalties. Some of the most-common allegations against pharmacies in PBM audits include:

  • Failure to collect co-pays
  • Discrepancies between billings and drug inventory
  • Reliance on fraudulent prescriptions
  • Lack of substantiating documentation (i.e. signature log or proof of delivery)
  • Other intentional and unintentional billing violations

Q: What rights do pharmacies have during PBM audits?

A pharmacy’s rights during a PBM audit depend on the terms of the pharmacy’s specific PBM contract and the state in which it operates. While individual laws, vary, in states that have fair audit laws, pharmacies’ rights generally include:

  • Reasonable notice of the audit period
  • Limited look-back period (i.e. 24 months)
  • Reimbursement for improperly-denied claims
  • Timely receipt of the audit determination
  • Substantiation of demands for recoupments 

Q: Do I have to give the PBM all of the information it is requesting?

Not necessarily. While PBMs typically reserve broad contractual rights to demand information from pharmacies during the audit process, it is not unusual for auditors to make demands that exceed the scope of their contractual authority. Your attorney at Oberheiden, P.C. can help you make an informed decision about what records you provide (and don’t provide) to your PBM.

Q: Can my pharmacy be terminated from its PBM network?

Potentially. Along with recoupments (or “retractions”), PBMs can potentially impose penalties including denial of pending claims, cease-and-desist demands, withholding or offsetting of future billings, and contract termination.

 

Speak with a Pharmacy Audit Defense Lawyer at Oberheiden, P.C.

If your pharmacy is facing a PBM audit (or the consequences of a PBM audit), we encourage you to contact us promptly to discuss your situation in confidence. To speak with a member of our defense team as soon as possible, call 214-469-9009 or request a free consultation online now. 

If you are under
investigation
you should contact us today

Contact the Experienced Attorneys of Oberheiden, P.C. Now for a Confidential Consultation

Contact Us Now