Fighting for fair PBM auditing practices, state by state

‘Many instances of abuse’; minor clerical errors often targeted

PBM audits were happening so frequently at the five community pharmacies operated in Ohio by John Coler, BSPharm, that two staff members were assigned the task of digging through them. The problem was that the large sums of money PBMs wanted were for minute errors like misspelling a person’s name.

“We were getting audited for reasons that didn’t affect the patient, outcomes, or the payer in a negative way,” Coler told Pharmacy Today. “It was mostly clerical errors.”

Coler was tired of fighting—and spending the money to fight—for what was rightfully his.

“There needed to be some guardrails and standards in place that were realistic,” he said.

Coler was part of the group that helped craft PBM audit reform legislation in Ohio. The bill, passed by both chambers unanimously and signed by the governor this January, will make PBMs subject to reasonable audit standards by placing guidelines on when and how audits are conducted in Ohio pharmacies.

“All states should be looking at reform because there are many instances of abuse,” Antonio Ciaccia, Director of Government and Public Affairs at the Ohio Pharmacists Association, told Today.

Massachusetts recently passed similar legislation. David Johnson, Executive Vice President of the Massachusetts Pharmacists Association, said it would add some basic protections against unfair trade practices that are too often used by PBM auditors.

PBM audit reform laws in 30 states

In total, about 30 states have PBM audit reform legislation on the books. Matt DiLoreto, Senior Director of State Government Affairs at the National Community Pharmacists Association (NCPA), said the number of PBM audit reform laws in states just highlights the problem.

“We support audits for their intended purpose to seek out fraud, waste, and abuse. But PBMs seem to take advantage of their role, oftentimes targeting minor administrative typographical errors and recouping the entire costs of medications and some dispensing fees too,” DiLoreto told Today.

He said the amount pharmacists can owe from these audits can easily grow into the thousands of dollars.

“PBMs are largely unregulated and rely on ‘take it or leave it’ contracts with a pharmacy to permit abusive audit tactics,” said DiLoreto.

A federal bill was introduced last Congress but a new one has yet to be presented into the current Congress.

“The drugstore lobby wants to undermine employers’ ability to root out wasteful spending on prescription drugs,” Charles Cote, Vice President of Strategic Communications for the Pharmaceutical Care Management Association, the national association representing America’s PBMs, told Today. “That would make it harder for businesses to reduce health care costs and protect the benefits of their employees.”

Looking into additional concerns

Iowa does not have a PBM audit reform law, but a bill was signed in September 2014 giving the Iowa insurance commissioner the authority to go in and audit the PBM industry when there is a complaint filed against them by a pharmacy, a pharmacist, or an Iowa resident.

However, according to Iowa state Rep. John Forbes (D-40), BSPharm, some PBMs are not complying with the Iowa statute. In addition, PBMs filed a lawsuit against the state of Iowa claiming that the law that went into effect in September is unconstitutional.

“Many legislators on both sides of the aisle here in Iowa are concerned that a corporation can snub their nose at Iowa legislation that is designed to help protect consumers and pharmacy,” Forbes told Today.

Iowa legislators are currently drafting a bill to clarify what the Iowa insurance commissioner can do in requesting audits.

NCPA is pleased with the way states have taken action to promote fair auditing practices, but they are growing concerned that some parts of state laws will not hold up if PBMs switch to remote, electronic auditing.

“Existing state audit laws may not be able to fully protect pharmacies in the future if PBMs alter their audit tactics,” said DiLoreto.

Many of the bills that have passed in states address in-person audits. DiLoreto said NCPA is looking into the issue.

Updated February 13, 2015