Additional Audit Burdens Pose A Threat To Pharmacies

Scott Newman desperately wanted to stop thousands of dollars in prescription payments from becoming pumpkins as midnight approached, forcing him to feed pages into a scanner.

Owner of Newman Family Pharmacy in Chesapeake, Virginia, he had been audited by a pharmacy benefit manager, which handles pharmacy payments for health insurers. During the rush to supply the covid-19 vaccines, he had overlooked the audit notice that came in January. Several months later, he received a final notice reminding him that he still had 120 pages of documents to be scanned and uploaded.

Additional Audit Burdens Pose A Threat To Pharmacies

As doctor visits shifted to telehealth, pharmacies’ benefit managers suspended in-person audits last year. That means pharmacists such as Newman are handling significantly more audit work during a pandemic. Benefits managers can also review a greater number of pharmacy claims – and possibly deny them – compared to years past.

In 2020, a pharmacy audit assistance service called PAAS National reported a 14% decline in the number of audits, but a 40% increase in the number of prescriptions reviewed. Due to these increases, pharmacies had to submit more documentation, and auditors stood to deny payment even if they found even minor clerical errors.

The PAAS database indicates that pharmacies spent $23,978 on average in 2020, 35 percent more than they spent in the five years prior. In October and September, PAAS members reviewed four times more prescriptions than in the previous year.

It has long been claimed that audits are little more than ways for middlemen to enrich themselves than to stop fraud, waste, and abuse. In 2015, the pharmacy benefit manager market in the U.S. grew to nearly $458 billion, up from just under $300 billion eight years earlier.

In addition to low reimbursement rates, mail-order services and chain pharmacies are increasingly supplying customers to independent pharmacies, and benefits managers are paying pharmacies fees and keeping manufacturer rebates for themselves even before the pandemic. Aside from the financial struggles of independent pharmacies, many reports indicate that they have received buyout offers from large chains owned by PBMs.

Virtual audits, say, pharmacists, drive up customer costs and increase wait times at a minimum. In worst-case scenarios, pharmacies could be penalized thousands of dollars in payments for drugs already dispensed, driving them out of business.

A number of Trent Thiede’s more than 5,000 pharmacy clients have stepped up and offered customers a free covid test and vaccination package during this crisis. In-person audits are mostly conducted by the auditors alone, with occasional requests for pharmacists to provide additional documentation.

A spokesperson for Express Scripts said that the company moved to virtual audits for safety reasons. An interview request was not responded to by CVS Caremark or OptumRx, benefits managers affiliated with CVS pharmacies. Owner of 15 Illinois pharmacies Dave Falk said he had seen an audit worth $30,000 to $40,000 for 60 to 70 prescriptions. A virtual audit forced him last fall to defend $200,000.

A pharmacist asked him to report the refrigerator temperature for perishable medication. He was horrified. Prescriptions filled months ago are not affected by this information.

The auditor initially denied Falk’s $36,000 in reimbursements, mostly because of missing patient signatures, after Falk and his pharmacist spent hours providing documentation. Last year, Falk’s had stopped collecting signatures from patients for safety reasons during the pandemic. A major trade association representing PBMs and pharmacies had agreed last year that patients wouldn’t have to sign for medication provided via mail order, delivery, or curbside pickup. It took Falk’s staff a long time to track down patients and gain their signing authority for the prescriptions, causing the auditor’s denial to change to $12,000.

During Newman’s eight years in pharmacy, he has also undergone six audits, except for the most recent, which was done in person. Newman uploaded his documentation on time for a virtual interview on behalf of Humana Health Insurance. The same goes for him.

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Hometown Pharmacy in Madison, Wisconsin, president and CEO Dan Strause said his pharmacies received audit requests coming in on more than $3 million in prescription claims last year. A quarter of his company’s total revenue was made up of that amount. According to him, pharmacists saw a corresponding spike in predatory audits, which are aimed at denying legitimate prescription payments.

The offer to buy a pharmacy by a pharmacy chain that operates its benefit manager irritates pharmacists, who acknowledge times are hard. Happy Druggist is owned by Joe Craft in central Ohio. His business is regularly targeted by companies that lose him about a week’s worth of revenue with every audit, causing him to lose at least $6,000 in payments.

It is also common that, when independent pharmacies are bought by large chains, the independents are closed and the chain pharmacy directs customers to another pharmacy that is miles away.

Thiede and many pharmacists believe virtual audits may take their place after the pandemic, although in-person audits might resume.