PBMs are Auditing and Collecting from Pharmacies in Record Numbers – Pharmacies Should Challenge the Audit

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PBMs are Auditing and Collecting from Pharmacies in Record Numbers – Pharmacies Should Challenge the Audit

Epps & Coulson, LLP has found that a pharmacy challenging demands for repayment from the insurance carriers may be the best strategy to stay in business.  Pharmacy Benefit Managers (“PBMs”) contract with insurance carriers and self-insurers to manage the contracts and reimbursements to pharmacies.  PBMs also audit pharmacies’ activities and billing, which can result in a pharmacy losing network status, causing the pharmacy to be unable to fill prescriptions for patients covered through a specific insurance network or networks.  Audits also often result in a lookback and demand for refunds, which if not paid by the pharmacy, then often result in a lawsuit for the refund of audited sums the PBM self-claims are due.

As independent pharmacies do not wield the power of the big national well-known pharmacies, many independent pharmacies contract with a Pharmacy Services Administrative Organization (“PSAO”), which is contractually in the middle between the pharmacy and the PBM/the network payor.  The PSAO typically manages the collections for the group of independent pharmacies that contract with it and in the case of recoupment demands, the PSAO may get caught up on the litigation as well.

The pharmacy’s contracts with the PBM and PSAO typically control many of the aspects of audit liabilities.  The PBM/pharmacy relationship thus involves the PSAO, which can also be a source of headache for independent pharmacies.  For instance, when the PBM seeks to recoup payment on purported audit discrepancy sums from billings submitted by the PSAO for the pharmacy, or when the PBM offsets new billed submissions for payment, or when the PSAO is contractually bound to pay the PBM audit discrepancy to the PBM, the PSAO may demand repayment from the pharmacy or file a lawsuit against the pharmacy.

The sums under an audit demanded or offset by recoupment can range from a small number to sums that would put the independent pharmacy out of business.  The audits often overstate the sums due or incorrectly apply contractual terms to the audit analysis.  The PSAO’s demands to the independent pharmacy or its PSAO often overreach too.  The contract terms are the key.  And, even where small sums are claimed due, the risk for the independent pharmacy looms large as the PBMs can and do combine small sums due and use that as a basis for large recoupment, lawsuits and/or termination from the network.

Further, where PBMs and PSAOs pressure the pharmacy (and often, the owners) based on these contracts, the independent small-fry pharmacy sometimes just pays the sums claimed due in order to avoid the consequences of recoupment, lawsuit or termination from the network.  But, the pharmacy should challenge the audit and the interpretation of the contract terms (best to have counsel review and help negotiate the contract at the outset, before a problem ensues).  Why?  PBMs often use prior audit results and methodologies unchallenged to justify new audits and/or to further overreach.  PBMs have an incentive to do so as they typically increase their profit margin by not paying pharmacies the sums actually due.

If you have audit questions or want to know more about our General Counsel program, please contact Dawn at: dcoulson@eppscoulson.com.

Information contained in this Memo is intended for informational and educational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.  It is likely considered advertising.  Epps & Coulson, LLP encourages you to call to discuss these matters as they apply to you or your business.

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