The PBM audit process for inventory purchases has changed considerably in recent months and an apathetic attitude can cost you your business. Historically, PBM invoice audits have been very narrow, focusing on select claims. The PBMs typically requested proof of purchase for specific NDCs identified as a component of a single audited claim. Pharmacies were responsible for contacting the respective wholesalers to request they send a purchase report directly to the audit department for the identified NDC’s only. The process was simple with low financial and contractual risk, as long as you actually purchased and dispensed the NDCs that were billed. In most cases a pharmacy would have ample purchases to cover any audited claims.
In today’s market, many of the PBMs are conducting an entirely different type of invoice audit. Instead of requesting specific NDCs, PBMs are requiring proof of ALL invoices by your pharmacy for up to a 2-year period and sometimes even proof of payment via cancelled checks and credit card statements. This may be a simple request if you are the rare pharmacy that purchases all drug products from a single wholesaler. It is more likely, however, that your pharmacy has an excellent procurement process and purchases from multiple wholesalers. Many pharmacies utilize a large primary wholesaler, two to three smaller wholesalers, and possibly six to twelve individual suppliers where specific products were purchased during a prior 2-year period. Shortages identified during invoice audit have led to pharmacies experiencing material financial and contractual loss.
Let us consider a plausible scenario. Late Tuesday evening you finally open the huge stack of mail from Monday and discover an invoice audit request from your favorite PBM for ALL purchases and returns from ALL suppliers including proof of purchase via bank statements for the last 12 months. The PBM requires that all invoices be sent directly from the respective wholesalers before the specified 15 day deadline. The three to six months battle has officially been initiated, with a company that sends the remittance checks, which allows you to make payroll and keep your business open. If you do not maintain an accurate perpetual or on hand inventory, destruction and returns processes and your invoices have not been appropriately archived, financial disaster is imminent and contract cancellation is a possibility.
It can be a major endeavor for an independent pharmacy to reach out to all wholesalers, distributors, and suppliers where purchases have been made for drug and OTC products in the last year. This type of audit can quickly escalate to the point of the PBM pending millions of dollars from your pharmacy. Does your pharmacy have automatic or even a manual process in place to ensure you are billing for the correct NDC? Have you verified whether or not all of your vendors are licensed to sell drug products in your state of practice? If they are not licensed, are they utilizing a licensed 3PL? Do you have an efficient and accurate process to archive all invoices electronically or manually? Can you provide track and trace documentation for all product purchases and returns if requested? Can you provide proof of purchase via check, credit card, or other payment vendors? Does your pharmacy keep an accurate electronic perpetual inventory? Is your returns process an integral part of maintaining an accurate on hand inventory?
Your pharmacy is not only held accountable to the federal and state rules and regulations, but also to the internal and sometimes unrealistic contractual requirements of the PBMs regarding drug inventory. Isn’t it very ironic that many pharmacies run the risk of losing their business as a result of being busy and successful? In today’s market, maintaining an accurate inventory is instrumental to mitigating the risk of financial and contractual loss with the PBMs.
Pharmacy Compliance Consulting is a consulting company owned and operated by prior PBM auditors and insiders. We know your contracts, manuals, federal and state laws and rights as a pharmacy provider. We are here to help your pharmacy survive, not only invoice audits, but any other types of audits and interactions as well. Be smart… Audit recoupment is not a cost of doing business. Give us a call to prepare your pharmacy for the inevitable future audit or to assist with your current audit.
Christopher L. Gruber, Pharm-D
Mark Newkirk, Pharm-D
Pharmacy Compliance Consulting, LLC
2539 John Hawkins Pkwy
Ste 101, PMB 207
Hoover, AL 35244