Navigating PBM Audits

Drug Topics® talks to Trent Theide, president of PASS National, on tackling PBM audits.


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Drug Topics®: Hey Trent, thank you so much for joining us today. I wanted to turn things over to you and let you get started with an introduction to our audience.

Trent Theide: Yeah. Good afternoon, Lauren. Thank you for having me. So, my name is Trent Theide. I'm the president of PASS National; PASS stands for the pharmacy audit assistance service. We've been in business since 1993, helping independent community pharmacies with their insurance audits, and we also have a fraud, waste, and abuse HIPAA compliance component. We work with more than 5000 pharmacies across the US helping them navigate the audit process from beginning to end, including appeals and proactive guidance and advice. So, it's great to be here and share some of our guidance and all the things that we're experiencing currently.

Drug Topics®: Awesome. Great.Thank you again for joining us. We recently covered a presentation that you gave at NCPA Annual Meeting this year on, you know, PBM audits and kind of attacking those collaboratively. So, a lot of what we talked about is going to be focused on that. So, can you talk a little bit more in depth about some of the instances of fraud that have happened that you've seen that have necessitated an increase in PBM audits?

Theide: I think one of the components that we always have as part of our seminars is sharing examples of pharmacies that, we’ll call them bad actors, that are really making it difficult for the good players in the industry, the honest ethical pharmacists that are grinding away trying to make a living and then we have bad actors. And I fully believe in the saying, “One bad apple can spoil the bunch.” These individuals make it harder for those working honestly and ethically to continue to conduct business because PBMs, it forces PBMs to conduct audits to find and root out these bad actors and unfortunately, good pharmacies get caught up trying to do things whether they fail to keep good documentation or keep good records. And we're trying to educate and let members know here's the things that we're seeing, here's what to be aware of.

There are a lot of situations that occur when we talk about and I think, probably three elements that I see in fraud when we look at Department of Justice and OIG settlements. First one kind of comes around false or phantom claims. It's one of the easiest kinds of get rich quick schemes out there because you're not dispensing product, so you don't have to purchase it. So, everything that you bring in is all profits to the scheme. And so, pharmacies that are just in existence merely to bill and fill, totally not filling any claims or just billing claims and so false or phantom claims. Sometimes pharmacies can get caught up in not reversing claims. So, if you're beyond the PBM return to stock timeframes, forgetting to reverse those claims in within an appropriate time, or just putting them back in stock and not reversing them at all. So those are some common themes, and it drives invoice audits because the only way to catch a pharmacy that's submitting false or phantom claims is to conduct an invoice on it, what are you purchasing, so that they can show they can also conduct member surveys and other situations but the easiest and most obvious ways, especially if they're picking and choosing totally billing everything fraudulently, is to do an invoice audit. And those are very, pharmacies struggle with them. We'll talk about that a little bit, but false and phantom claims is probably one of the big areas where PBMs kind of use that to say we have to do invoices because we have to root out individuals that are doing this this kind of fraud.

The second area I think we've seen more recently, still tied to false and phantom, is actually secondary payer. So, we see a lot of manufacturer coupons where pharmacies, there was just a situation in New York where a pharmacy for about 5 years was billing just secondary payers for claims never dispensed and got over $7 million and so those kinds of things aren't necessitating manufacturers to be more vigilant about secondary payers and using utilizing PBMs and auditing entities to audit and ensure that the integrity of their copay assistance or foundational programs aren't in jeopardy. Gilead had a huge situation down in Florida where they were dealing with their HIV meds and making sure that patients truly qualified for programs and felt like there was a health system and clinics that were taking advantage of it. So, those certainly necessitate some of the fraudulent activity and then subsequently audits.

We also see kickbacks. Kickbacks is probably maybe the third general area that I think when we look at settlements, where paying for referrals, we can even go back to kind of the TRICARE compounding fraud schemes that were happening back in the 2013, 2015 timeframe that were very commonplace, but eventually discover that there were sales reps potentially being paid on commission or being paid and paying doctors for these referrals of complex very expensive compounding medications. It's still happening today. They're still prosecuting those fraud schemes from even 7 years ago. But now we're seeing that tied into telemedicine, right? The explosion of telemedicine even before the pandemic, but certainly pandemic related. There’re telemedicine fraud schemes where there aren't valid patient provider relationships, they're prescribing high AWP products, often out of state, mailing products to patients. And it creates this situation where PBMs use that as fuel for the fire of audits and saying we have to audit we're rooting out all these things and some of the major players were touting their ability to root out fraud during the pandemic actually that their fraud investigation units discovered more fraud during the pandemic than they had in prior years because for whatever reason, they were seeing additional fraud

Drug Topics®: That's so interesting to me. I hadn't thought about the telemedicine and how that might change and like create an opportunity for these bad actors. Probably just because as a non-pharmacist, the whole PBM system is so like, it's so over my head but like just to for somebody to sit down and find that and be like oh we can exploit this is just, I’m impressed I think?But like not in a good way.

Theide: It's very unfortunate that the bad actors have, you know, sometimes they spend so much energy and effort if they use that for good instead of finding devious ways to make money out of the system. They can be so much more successful potentially.

Drug Topics®: Right? Well, that's very interesting. So, you know, say you're an independent pharmacist and you're involved in a PBM audit, what are some of the biggest pitfalls or challenges that you and your staff might encounter during that, you know, audit process?

Theide: I would say there are two big problems that independents struggle with during audits, and the first one is what we call proof of copay collection. So PBMs, if they're suspecting a pharmacy of waiving copays or not collecting copays,they will require a pharmacy to submit proof of copay collection. It used to be years ago, you submit the prescription, and they review it. If they found something discrepant, they can look to recoup but now there's just additional elements, right? It's a signature log. And now it's proof of copay collection and so proof of copay collection can be very difficult for the independent depending on what kind of systems they have in place. And so, you know, I encourage independents when they think about proof of copay collection,can you go back two years and show how Mrs. Jones paid the $50 copay? Was it check, was a cash, was a credit card? What evidence do you have that you collected that $50? And that's very challenging for some independents. There are ways to combat that. I think we'll chat about that. But that can be very challenging proof of copay collection.

The second thing that I think is a big challenge for independents is invoice audits. So, we've alluded to these false and phantom claims driving invoice audits, but invoice audits in and of themselves are very difficult and time consuming for the independents. One of the challenges in the industry is everybody knows margin compression, right? Pharmacies are making less than the prescriptions and losing money often. And so that forces pharmacies to go out to the marketplace and try and find the best price. Well, when you go out and find the best price, what happens is we find pharmacies that have 20 or 30 wholesalers and vendor relationships, and it's such a complex web to then go back years later to prove to a PBM that you bought a purchase from one small wholesaler that was regionally based, that you only did one or a couple of transactions with this can be very, very difficult. Your paperwork, your documentation has to be so detailed and so very good. And then these wholesalers they merge up, they consolidate, and they're no longer in business, and you have to go and try and find that invoice directly from them. They won't accept invoices from the pharmacy because they suspect foul play, or an invoice was made up, so they require the wholesalers to submit all this documentation. Well, if you're working with 20 to 30 wholesalers, you can imagine the nightmare that incurs and the stress that it creates for an owner who's doing the honest and right things, but can remember every single wholesaler all along 2 years ago, where did I purchase that Biktarvy from or anything else?

It gets to be very, very challenging very quickly and so invoice audits are extremely troublesome. And then there's also the component of, even if you only have a few suppliers, you need to make sure that you're vetting them appropriately. The Drug Supply Chain Security Act uses the term authorized trading partners. So, these authorized training partners, making sure that you're buying from appropriate sources,you know,Optim as an example requires not only licensure as a wholesaler, so they don't accept OTC distributors even if it's just over the counter products like diabetic testing supplies,they require them to be licensed as a wholesaler. And they want NABP accredited drug distributor status and so Optim requires that Express Scripts and Caremark, when it comes to over the counter diabetic supplies, requires them to be authorized distributors and manufacturer. So many pharmacies get caught up in buying diabetic testing supplies from secondary sources, even if they're subsidiaries of a major wholesaler like McKesson or somewhere else. They still not be might not be authorized by the manufacturer of the diabetic testing supplies. And so, Caremark and Express Scripts catch a lot of pharmacies purchasing diabetic testing supplies, outside the appropriate channel, and that creates huge headaches and as you can imagine, recoupments even for good ethical pharmacists doing the right things, they weren't aware. They get caught up in those invoice audits. So, when I think about what pharmacies struggle with the most and especially independence, proof of copay collection and invoice audits are for sure the top two items.

Drug Topics®: Yeah, that was so interesting when you're talking about the invoice audits that you know if say a wholesaler merges and it was you know, two to three years ago you purchase from them like it seems like no matter how organized you are, there's this potential that there may be an issue that's out of your control, which is kind of unfortunate.

Theide: Absolutely. It's so hard to track down a business that's closed or consolidated to get them to produce records to find the right person. And even if you keep them right, I just want to encourage pharmacies to keep all your records all your invoices. So at least you have some supporting documentation even if you can't get a wholesaler or a merged wholesaler to respond. If you have something to point to that can bring credibility to the fact that you did purchase from a legitimate source. It's critical.

Drug Topics®: Sure, so you know, that kind of leads right into my next question, which is, you know, how can pharmacists be proactive in order to make the audit process as easy as possible when it does happen?

Theide: Yeah, I think the first thing when we look at proof of copay collection is getting an integrated point-of-sale system. So many pharmacies out there today, especially as independents, still don't have an integrated point-of-sale system, they have an old school registered, they can just pull it down and they can make change or anything else and that's, it just doesn't work in today's day and age anymore,unfortunately.With proof of copy collection, you need to have a point-of-sale system that can produce receipts for you for any time that you know, you can go back to Mrs. Jones receipt from two years ago. I see she paid by check, or cash, or credit card and it has documentation to support that. So, if a pharmacy doesn't have any integrated point-of-sale system it’s one of the first things that I would say is proactive and preventative in terms of trying to prevent recoupments for pharmacies.

The other thing on the purchasing side is two things. One is limiting your suppliers. I know it's hard and I know sometimes the deals and the fact that you have to find the best price to stay viable is important. And so, I would never tell a pharmacy they can only have five vendors or wholesalers or six. But try and limit them. Make sure they're credible. Make sure you vet them, makes sure that the PBMs, that they're accredited, that they're licensed as a wholesaler in your state, that if you're buying test strips from them, that they're authorized by the manufacturer because it's too much to manage individual PBM requirements.

You kind of have to globally be conservative and say I want a wholesaler that's going to fit all the criteria, no matter who I'm billing. It's hard to be very strategic and so limiting the wholesalers and entities that you work with and just keeping scrupulous documentation of your invoices if you're going to work with many, make sure you tick the bill of lading or the invoice out of the box and you have a file and a folder that you remember all this is where I got this drug from at this time, because it will come into question potentially on an invoice audit and it's years later. It's not like they're going to ask you tomorrow where you got that drug two days ago, they're going to ask you years later where who knows if staff and turnover or anything else will be there to remember oh yeah, I put this invoice here or we ordered from there because of X, Y, or Z. Very challenging so that I think those two items in integrated point-of-sale system, limiting in vetting appropriately your wholesale distributors will help avoid the big headaches that sometimes pharmacies experienced when they walk into audits.

Drug Topics®: Awesome. Yeah, no, I think those are really good, like practical and actionable tips that someone can take away from this. So that's great. So, you didn't touch on this a little bit. But I would love to talk more about some specific discrepancies that audits might flag and how pharmacists can be prepared to respond.

Theide: Yeah, I think so specific discrepancies, right? When you think about audits, audits are all about data analytics. These are big PBMs, billion-dollar entities that have nothing but money and time to look at claims and they look at they look at outliers. So, they're identifying, when you get selected for an audit, chances are they've already identified red flags within your billing practices that are warranted them coming. Not always, but the vast majority of the time. They have identified outlying claims or things in that they don't like about your dispensing practices that warrant an audit. Sometimes it might be over utilization of a particular drug or of a prescriber that's over prescribing. It could be relationship of prescribers and patients in your geographic area. Or simple billing claims.

I think pharmacies often aren't aware of technicians. You know the goal of a technician, I remember being a technician 20 plus years ago, the goal was just to get the claim through the claim process to take care of the patient. But sometimes in doing so you're building that PBM, 3, 4 or 5 times to try and force the claim to go through and you're editing different variables of that claim to try and get the PBM to accept the claim. Well, they view that not as “Oh, Susie is just trying to get the claim through” but hey, there's a real problem with this claim, and now I'm going to question whether they're actually billing it correctly. So those are huge red flags for a PBM, and I'll give you an example where you know, plan limits are exceeded in a pharmacy changes the day supply but not the quantity, so it was 90 for a 90-day supply. And this is a blatant issue but 90 now billed for 30-day supply.

The PBM is going to instantly know that there's something not right here you just billed 90 for 90 We rejected that claim. Now you billed 90 for 30. Either you accidentally billed 90 for 90, which does happen but more likely to pharmacy billed correctly the first time and is now trying to force the claim to go through due to plan limits. All those things, trigger audits and sometimes that pharmacist on the back end or that owner checking the claims doesn't know that their frontline technician adjudicated this claim 4, 5, 6 times to try and force it to go through. It's the same thing with, PBMs will look at claims submitted in quick succession. And so, an example of a claim billed for a prescription for Proventil was written for Proventil HFA. It's not covered, it's not formulary. So, the pharmacy automatically switches that to Ventolin HFA and rebills the claim and it goes through. Well, the PBM knows that within a minute, you didn't call the doctor, get the doctor on the phone to authorize the substitution from Proventil to Ventolin. So, it's an automatic they're going to assume that's an invalid substitution without further documentation. And one of the things that pharmacies can do is, documentation is critical right?

When you're doing and have to make changes to a claim whether you're billing for a smaller quantity, whether you had to substitute for something formulary, documenting with what we call a clinical note. So clinical annotation or a note on the prescription, whether that's electronic or physically on a hardcopy that typically contains four elements. That's who you spoke with and their title at the doctor's office: Nurse Suzy, Dr. Jones. What you spoke about: “Hey, you know Proventil wasn't on formulary was it okay to switch to Ventolin?”Of course, the provider would say okay. Maybe even the time that that note occurred or that call happened, and then the pharmacist initials or whoever is signing off on that.

Those are important things to think about and also producing that documentation on an audit. So, if you're getting audited and you have the electronic note, but you don't provide that note to the auditor, that's an automatic, you know, failure or potentially a failure. And it's hard to prove that after the fact, “Oh, no, I have this note in the system.” Well, now they're going to suspect that maybe not. It's harder to have them accepted much better provided upfront, provide the documentation to consider it. A lot of challenges with that when we think about that, so I think focusing on that even just the general filling and billing discrepancies most pharmacies will just get caught up with simple claims issues where they're filling and billing, and PBMs and auditors get very particular. They're paying someone whether it's an on-site, they're paying someone to be there, or they're having someone remotely, they get very tick tacky, and it gets very frustrating for us, very frustrating for pharmacies, because it's not related to anything close to fraud, waste or abuse. Like we started the conversation with, we've got these bad actors and we’ve got to root them out. Very different than a technical issue with a prescription you didn't have an address, transfer requirement. I mean, that gets so tick tacky and very typical and frustrating for pharmacies, because it could be on a very expensive claim. And so, making sure that documentation and everything is full and complete on a prescription is just critical for trying to avoid that.

Drug Topics®: Yeah, it seems like it really is such a difference between like you said between those bad actors, and then the people who are pharmacists who are just trying to help and say, “Okay, well, this isn't covered. Let me see how I can kind of make this happen.” And it's not with any ill intention. It's just to kind of patient their medicine. And that's very interesting.

Theide: Yeah, it just depends, you know, depends on the substitution, right? There are certain things that pharmacists can do within the realm and some of that they can’t, and it is very frustrating for pharmacies that are trying to take care of patients and the vast, vast majority of community and independent pharmacies are good players. It's a very small realm of bad actors, but it is, there's a huge spectrum of so many claims that I'm not even dispensing, purchasing, or getting the patients versus what we had a technicality on a claim but now you want thousands of dollars. I mean, the average audit is over $15,000. So, in recoupment, so it's very substantial for small mom and pop independents. Just getting caught up in any on it.

Drug Topics®: So, I think that was all that I had for you, but I just want to kind of give you the opportunity if there are any other you know, key takeaways or any points that we didn't touch on that you might want to just kind of close off with. I wanted to just turn the floor over to you.

Theide: Yeah, I think probably I'd like to conclude with we're a firm believer in the best offense is a good defense. And so, making sure you're doing the right things up front because audits come 2 or 3 years after the claims you’re billing today or 2 to 3 years down the road, your audit. And so, making sure that you're filling and billing claims accurately is key. Educating staff, making sure they understand the importance of not adjuvating claims 6 times if you don't have to, or making sure that if you do that, that it's appropriate that it's you know, you're still billing claim accurately, and not manipulating it just to bypass some plan limit, or DUR, or something else that's occurring. So, educating staff and it's something that pass you know, we're, we help pharmacies when they're in and on it.

And so, we guide them through and help them review claims and making sure that pharmacies appreciate and understand what all the tick tacky issues are with those prescriptions. But we're also focused on proactive education we spend a lot of time writing a monthly newsletter and providing proactive tips and tools that can help train staff to be proactive to not build claims incorrectly in the first place so that they're less likely to raise red flags at the PBM and have to succumb to an audit, and face pulling invoices, or anything else, the more you can avoid putting a target on your back, the better off you are and the more you can prolong getting audited or doing anything else. So proactive education and guidance and working with staff to train and making sure that everyone has a goal of understanding the audit risks is something that would be a great, great takeaway for everyone as well.

Drug Topics®: Awesome. Well, thank you again, Trent for taking the time to do this interview. That was super interesting. I learned a lot and none of this really applies to me. So, I'm sure our audience that you know will also take a lot away from it. But thank you again.

Theide: My pleasure. Lauren, thank you so much for having me.