Pharmacy benefit managers (PBMs) regularly conduct audits on pharmacies to review their performance in relation to the PBM’s terms and conditions. There are several different types of compliance audits that PBMs may initiate, such as desktop, on-site, invoice or virtual. In order to be prepared for audits, pharmacies are encouraged to proactively undertake efforts to ensure compliance with the PBM’s Provider Agreement and Provider Manual, including those identified in the PBM Audit Checklist.

Generally, audits are routine and occur during similar times throughout a pharmacy’s participation in a PBM network to ensure general pharmacy compliance. While some PBMs will conduct audits directly, others will contract with third-party audit companies to assist in the process. For example, some pharmacies can expect an audit every three years during the same time of the year without fail, while others may experience many more audits, raising the concern of why a pharmacy may be audited. That said, there may be several reasons why a pharmacy may be “flagged” or audited and, below, we explore some scenarios that may lead to an audit.

Outlier pharmacy

One of the most common reasons for an audit is the pharmacy being audited is considered an “outlier” in the network. For example, in a retail pharmacy network, a PBM may identify certain parameters relating to the dispensing practices that are typical of a retail pharmacy. More specifically, certain PBMs will expect that a typical retail pharmacy services patients in its local community for a wide range of medications primarily comprised of “maintenance medications.”

To the extent that a pharmacy may be servicing patients located significantly further away from the pharmacy, the pharmacy could expect to face more scrutiny, particularly if the patients are outside of the permitted delivery radius. That said, in the event of an audit, pharmacies that service patients that reside in a distance outside of their “local” community should ensure that they maintain accurate documentation that reflects the patients’ receipt of medications. Such documentation should include a signature at the time of an in-person pickup of the prescription or a valid signature during the time of delivery.

Similarly, pharmacies could also be expected to be flagged if the pharmacy dispenses a higher percentage of its overall claims in one therapeutic category or for particular drug products that are not considered maintenance medications.

Likewise, a pharmacy could anticipate more PBM scrutiny if the pharmacy’s drug mix is limited to certain medical conditions. To that end, pharmacies should ensure that all prescriptions are valid and the result of an appropriate patient-prescriber relationship prior to dispensing a prescription to any patient.

Change in practices

As identified above, pharmacies participating in a PBM’s networks are regularly reviewed and scrutinized, particularly if they are considered an “outlier.” In addition to such instances, PBMs may flag a pharmacy for an audit if there is a sudden change to the pharmacy’s practices. For example, a PBM may be alerted if a pharmacy that had been historically processing a relatively consistent number of prescriptions suddenly begins dispensing a higher volume of prescriptions, including those that suggest the aforementioned outlier tendencies.

While there may be several explanations for an increase in prescriptions (e.g., neighboring pharmacy closed and prescriptions were transferred over), the sudden change in volume may trigger an audit of the pharmacy. In some instances, pharmacies may also be requested to provide responses to a set of questions posed by the PBM as part of the audit process. Such questions might be focused on the pharmacy’s process to validate prescriptions or what the pharmacy’s marketing practices are. In addition to ensuring that the pharmacy maintains the appropriate documentation to demonstrate the valid dispensing of prescriptions, the pharmacy should also ensure that its practices are consistent with the PBM’s terms and conditions as outlined in its provider agreements and manuals, as well as federal and state laws.

Contact an experienced attorney today

While it is certainly important to address audits and any alleged results that may follow in order to avoid recoupment and potential termination, it is equally important to be proactive in an effort to avoid any such issues.

Harini Bupathi and Dae Y. Lee are an associate and senior counsel, respectively, at Frier Levitt, a boutique law firm focused exclusively on health care and life sciences.