THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY BARRAR, BEAR, BENNINGHOFF, B. BOYLE, BRADFORD, BRENNAN, CARROLL, COHEN, D. COSTA, DeLUCA, EVERETT, GABLER, GEORGE, GIBBONS, GOODMAN, GROVE, HARHART, HESS, HORNAMAN, KAUFFMAN, KORTZ, KULA, LONGIETTI, MARSHALL, METZGAR, MICCARELLI, MILLER, MUNDY, MURT, MUSTIO, O'NEILL, PASHINSKI, QUIGLEY, SABATINA, STEVENSON, J. TAYLOR, TOEPEL, VULAKOVICH AND WATSON, FEBRUARY 16, 2011

REFERRED TO COMMITTEE ON HEALTH, FEBRUARY 16, 2011  

AN ACT

Providing for pharmacy audit procedures.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Short title.

This act shall be known and may be cited as the Pharmacy

Audit Integrity Act.

Section 2.  Purpose and intent.

The purpose of this act is to establish minimum and uniform

standards and criteria for the audit of pharmacy records.

Section 3.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Pharmacy benefits manager" or "PBM."  A person, business or

other entity that performs pharmacy benefits management. The

term includes a person or entity acting for a PBM in a

contractual or employment relationship in the performance of

pharmacy benefits management for a managed care company,

nonprofit hospital or medical service organization, insurance

company, third-party payor or health program administered by a

department of the Commonwealth.

Section 4.  Scope of act.

This act covers any audit of the records of a pharmacy

conducted by a managed care company, nonprofit hospital or

medical service organization, insurance company, third-party

payor, pharmacy benefits manager, a health program administered

by a department of the Commonwealth or any entity that

represents a company, group or department.

Section 5.  Procedures for conducting and reporting an audit.

(a)  Procedure.--An entity conducting an audit under this act

shall conform to the following rules:

(1)  The pharmacy contract shall identify and describe in

detail the audit procedures.

(2)  The entity conducting an audit shall give the

pharmacy written notice at least two weeks prior to

conducting an initial onsite audit for each audit cycle or

requesting records for any audit conducted offsite.

(3)  The entity conducting the onsite audit shall not

interfere with the delivery of pharmacist services to a

patient and shall utilize every effort to minimize

inconvenience and disruption to pharmacy operations during

the audit process.

(4)  An audit which involves clinical or professional

judgment must be conducted by or in consultation with a

licensed pharmacist applying all applicable Pennsylvania law

and regulations.

(5)  A clerical or recordkeeping error, such as a

typographical error, scrivener's error or computer error

regarding a required document or record does not constitute

fraud, and claims relating thereto shall be subject to

neither recoupment nor criminal penalties without proof of

intent to commit fraud. However, recoupment of any payment or

overpayment made due to error, strictly limited to the amount

of the payment or overpayment plus interest, is permissible

in situations in which the pharmacy knew that services were

not covered or were provided to an ineligible recipient and

in which restitution of the amounts paid constitutes a proper

remedy pursuant to 13 Pa.C.S. Div. 2 (relating to sales).

(6)  A pharmacy may use the records of a hospital,

physician or other authorized practitioner of the healing

arts for drugs or medicinal supplies written or transmitted

by any means of communication for purposes of validating the

pharmacy record with respect to orders of refills of a legend

or narcotic drug.

(7)  A finding of an overpayment or underpayment must be

based on the actual overpayment or underpayment and may not

be projection based on the number of patients served having a

similar diagnosis or on the number of similar orders or

refills for similar drugs. This subsection or any other

section of this act does not prevent any entity from using

its collected data to target audit resources or to detect

fraud.

(8)  A finding of an overpayment shall not include the

dispensing fee amount. However, the dispensing fee does not

have to be paid in the event that a filled prescription was

not finally dispensed to or picked up for the intended

patient.

(9)  Each pharmacy shall be audited under the same

standards and parameters as other similarly situated

pharmacies audited by the entity.

(10)  The period of time covered by an audit may not go

back in time more than 18 months from the scheduled date of

the audit.

(11)  An onsite audit may not be initiated or scheduled

during the first seven calendar days of any month due to the

high volume of prescriptions filled in the pharmacy during

that time unless otherwise consented to by the pharmacy.

(12)  The auditing company may not receive payment based

on a percentage of the amount recovered.

(b)  Written report.--An entity conducting an audit under

this act shall provide the pharmacy with a written report of the

audit and comply with the following requirements:

(1)  The preliminary audit report must be delivered to

the pharmacy or its corporate parent within 90 days after the

conclusion of the audit.

(2)  A pharmacy shall be allowed at least 60 days

following receipt of the preliminary audit report in which to

produce documentation to address any discrepancy found during

the audit.

(3)  A final audit report shall be delivered to the

pharmacy or its corporate parent within 120 days after

receipt of the preliminary audit report or final appeal, as

provided for in section 6, whichever is later.

(4)  The audit report must be signed and include the

signature of any pharmacist participating in the audit.

(5)  Any recoupments of disputed funds shall only occur

after final internal disposition of the audit, including the

appeal process as set forth in section 6.

(6)  Interest shall not accrue during the audit period.

(7)  Each entity conducting an audit shall provide a copy

of the final audit report, after completion of any review

process, to the plan sponsor.

Section 6.  Appeal process.

The following shall apply:

(1)  The National Council for Prescription Drug Programs

(NCPDP) or any other recognized national industry standard

shall be used to evaluate claims submission and product size

disputes.

(2)  Each entity conducting an audit shall establish a

written appeal process under which a pharmacy may appeal an

unfavorable preliminary audit report to the entity.

(3)  If, following the appeal, the entity finds that an

unfavorable audit report or any portion thereof is

unsubstantiated, the entity shall dismiss the audit report or

said portion without the necessity of any further action.

Section 7.  Extrapolation audits.

Notwithstanding any other provision in this act, an entity

conducting an audit under this act shall not use the accounting

practice of extrapolation in calculating recoupments or

penalties for audits. An extrapolation audit means an audit of a

sample of prescription drug benefit claims submitted by a

pharmacy to the entity conducting the audit that is then used to

estimate audit results for a larger batch or group of claims not

reviewed by the auditor.

Section 8.  Third-party resources.

(a)  Third-party resources.--Entities covered by this section 

shall take all reasonable measures to ascertain the legal

liability of any third parties, including health insurers, self-

insured plans, group health plans as defined by section 607(1)

of the Employee Retirement Income Security Act of 1974 (Public

Law 93-406, 88 Stat. 829), service benefit plans, managed care

organizations, pharmacy benefit managers, the Medicare program,

other prescription drug plans or other parties that are by

statute, contract or agreement legally responsible for payment

for prescription drugs before claims become the liability of any

prescription drug plan administered by the pharmacy benefit

manager.

(b)  Identification cards and claims processing systems.--

Information regarding third-party resources identified pursuant

to subsection (a) shall be included on identification cards

issued by a PBM or prescription drug plan to persons eligible

for prescription drug benefits and shall be included in all

mechanized claims processing systems established by a PBM or

prescription drug plan, including systems required under section

1903(r) of the Social Security Act (49 Stat. 620, 42 U.S.C. §

301 et seq.). Where information regarding third-party resources

is made available to pharmacies on identification cards or

through mechanized claims processing systems, a PBM may direct a

pharmacy to submit claims for payment to such third parties

prior to submission to the PBM or prescription drug plan,

provided that this requirement shall not apply when a pharmacy

has a reasonable basis to believe that a claim is not covered by

available third-party resources based upon a diagnosis code or

other information available to the pharmacy.

(c)  Claims against pharmacies.--Provided that a pharmacy

makes reasonable inquiries of recipients regarding the

availability of third-party resources, unless a pharmacy has

actual knowledge regarding the availability of third-party

resources available to a claimant for pharmacy benefits, a

pharmacy is entitled to rely on information regarding the

availability of third-party resources provided by a PBM and

shall not be liable to repay in whole or in part for any amounts

for which any third party is liable. PBMs and prescription drug

plans are hereby authorized to and shall pursue claims from such

third-party resources. Upon the effective date of this act, this

subsection shall apply to all pending and future claims against

pharmacies asserted by PBMs or prescription drug plans,

including claims relating to benefits provided to recipients

prior to the effective date of this act.

(d)  Applicability.--This section shall apply to agencies of

the Commonwealth managing health care programs and their agents.

In addition, this section shall also apply to other entities

described in section 4 only to the extent that they engage in

coordination of benefits between multiple plans. Subsection (c)

shall apply to all section 4 entities covered by this act.

Section 9.  Fraud.

As a general rule, fraud shall not include payments for

prescriptions where the proper pharmaceutical was delivered to

the intended patient, who is eligible for benefits, in the

prescribed amounts. In addition, fraud shall not include those

errors outlined in section 5(a)(5). Nothing in this act shall

prevent investigations by the law enforcement agencies of the

Commonwealth or the United States. Further, nothing in this act

prevents the section 4 entities' use of collected data or other

information to detect actual fraud by pharmacies or pharmacy

personnel intended to defraud prescription drug plans. The

restrictions on audits in section 5(a)(10) do not apply once a

pattern of systematic fraud has been established in order to

allow for recovery of fraudulently obtained overpayments.

Section 10.  Administration of this act by Commonwealth

agencies.

Provisions of this act shall not apply to the extent

determined by applicable Federal agencies to be contrary to

Federal law or regulations or to disqualify the Commonwealth in

whole or in part for Federal financial participation in

Commonwealth health programs or other Federal benefits,

subsidies or payments. However, the Commonwealth shall

vigorously appeal any such determinations made by applicable

Federal agencies and make every effort to obtain waivers or

other agreements of understanding with Federal agencies in order

to fully implement this act. To avoid the risk that the

Commonwealth may be required to repay Federal financial

participation or other benefits, subsidies or payments, the

Commonwealth may request determinations from applicable Federal

agencies regarding whether any provisions of this act violate

Federal laws or regulations or disqualify the Commonwealth in

whole or in part for Federal financial participation in

Commonwealth health programs or other Federal benefits,

subsidies or payments.

Section 11.  Effective date.

This act shall take effect in 60 days.