PRINTER'S NO. 2120
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
946
Session of
2015
INTRODUCED BY BAKER, FABRIZIO, D. COSTA, STAATS, LONGIETTI,
DAVIS, GIBBONS, PICKETT, PASHINSKI, CRUZ, GROVE, McNEILL,
YOUNGBLOOD, M. K. KELLER, KILLION, P. COSTA, COHEN, THOMAS,
EVERETT, CARROLL, FARRY, SCHLOSSBERG, PHILLIPS-HILL,
M. DALEY, WARD, READSHAW, HARKINS, MURT, SAYLOR, GOODMAN,
GALLOWAY, BARRAR, BOYLE, MICCARELLI, DeLUCA, NEUMAN, MATZIE,
TOEPEL, WATSON AND KNOWLES, AUGUST 18, 2015
REFERRED TO COMMITTEE ON HEALTH, AUGUST 18, 2015
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. 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
payer, pharmacy benefits manager, a health program administered
by a department of the Commonwealth or any entity that
represents a company, group or department.
Section 3. Definitions.
The following words and phrases when used in this act shall
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Audit." A review of one or more pharmacy records conducted
by an auditing entity for payment for the provision of
prescription or nonproprietary drugs or pharmacy services.
"Auditing entity." A person, company or government entity
that performs a pharmacy audit, including a payer, pharmacy
benefit manager or third-party administrator.
"Business day." Any day of the week excluding Saturday,
Sunday and any legal holiday.
"Department." The Department of Health of the Commonwealth.
"Health care practitioner." As defined in section 102 of the
act of July 19, 1979 (P.L.130, No.48), known as the Health Care
Facilities Act.
"Nonproprietary drug." As defined in section 2(7.1) of the
act of September 27, 1961 (P.L.1700, No.699), known as the
Pharmacy Act.
"Pharmacy." As defined in section 2(12) of the Pharmacy Act.
"Pharmacy benefits management." Performing any of the
following:
(1) The procurement of prescription drugs at a
negotiated contracted rate for dispensation within this
Commonwealth to covered individuals.
(2) The administration or management of prescription
drug benefits provided by a covered entity for the benefit of
covered individuals.
(3) The provision of any of the following in conjunction
with the administration of pharmacy benefits:
(i) Mail service pharmacy.
(ii) Claims processing.
20150HB0946PN2120 - 2 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(iii) Retail network management.
(iv) Payment of claims to pharmacies for
prescription drugs dispensed to covered individuals via
retail or mail order pharmacy.
(v) Clinical formulary development and management
services, including, but not limited to, utilization
management and quality assurance programs.
(vi) Rebate contracting and administration.
(vii) Certain patient compliance, therapeutic
intervention and generic substitution programs.
(viii) Disease management programs.
(ix) Setting pharmacy reimbursement pricing and
methodologies, including maximum allowable cost, and
determining single or multiple source drugs.
"Pharmacy benefits manager" or "PBM." A person, business or
other entity that performs pharmacy benefits management.
"Pharmacy record." Any record stored electronically or as a
hard copy by a pharmacy that relates to the provision of
prescription or nonproprietary drugs or pharmacy services or any
other component of pharmacist care that is included in the
practice of pharmacy.
"Pharmacy Services Administration Organization" or "PSAO."
Any entity that contracts with pharmacies to assist with third-
party payer interactions and can provide a variety of other
administrative services. Such administrative services vary, but
may include contracting with PBMs on behalf of pharmacies and
managing pharmacies' claims payments from third-party payers.
"Plan sponsor." Any of the following that pays for or
processes a claim for payment for prescription drugs or pharmacy
services:
20150HB0946PN2120 - 3 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(1) A health insuring corporation.
(2) A person authorized to engage in the business of
sickness and accident.
(3) A person or government entity providing coverage of
prescription or nonproprietary drugs or pharmacy services to
individuals on a self-insurance basis.
(4) A group health plan, as defined in 29 U.S.C. § 1167
(relating to definitions and special rules).
(5) A service benefit plan, as referenced in 42 U.S.C. §
1396a(a)(25) (relating to state plans for medical
assistance).
(6) A Medicaid managed care organization that has
entered into a contract with the Commonwealth.
(7) Any other person or government entity that is, by
law, contract or agreement, responsible for paying or
processing a claim for payment for the provision of
prescription or nonproprietary drugs or pharmacy services.
Section 4. Procedures for conducting audits.
(a) Procedure.--An entity conducting an audit under this act
shall conform to the following rules:
(1) The pharmacy contract between a PBM and a pharmacy,
or alternatively, a PBM and a pharmacy's contracting
representative or agent shall identify and describe in detail
the audit procedures.
(2) The entity conducting an audit shall give the
pharmacy written notice at least 30 days prior to conducting
an onsite audit or requesting records for any audit conducted
offsite. The audit may be delayed 30 days at the request of
the pharmacy, one time per year, and shall only be granted if
there is good cause, including, but not limited to, a planned
20150HB0946PN2120 - 4 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
medical procedure or planned absence from work of a necessary
pharmacist. If a delay is requested by the pharmacy, the
pharmacy shall provide notice to the PBM 10 business days
prior to the day the audit is to commence.
(3) The entity conducting the audit shall audit no more
than 100 prescription records per onsite audit.
(4) A pharmacy may do any of the following when an audit
is performed:
(i) Validate a pharmacy record by using an original
or photocopied record of a hospital or health care
practitioner for drugs or medicinal supplies written or
transmitted electronically for purposes of validating the
pharmacy record with respect to orders of prescription
drugs.
(ii) Validate one or more claims for payment for the
provision of prescription or nonproprietary drugs or
pharmacy services by using either of the following:
(A) an original pharmacy record or photocopy of
the record; or
(B) any legal prescription complying with the
Board of Pharmacy requirements may be used to
validate claims in connection with prescriptions,
refills or changes in prescriptions. This shall
include prescription records in an electronic form or
otherwise contained digital media.
(iii) Resubmit a disputed or denied claim for
payment using any commercially reasonable method of
resubmission, including resubmission by facsimile, mail
or electronic means, provided that the period of time
when a claim may be resubmitted has not expired as
20150HB0946PN2120 - 5 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
mutually agreed upon by the contracting parties.
(5) An audit must be conducted applying only the
applicable Federal or Pennsylvania laws and regulations.
(6) 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 or absent an indication there was an
error in dispensing the prescribed drug.
(7) The finding of an overpayment shall not include the
dispensing fee amount. This provision specifically does not
include the payment of multiple dispensing fees for the same
prescription, exclusive of refills.
(8) The period of time covered by an audit may not be
more than 12 months from the scheduled date of the audit.
(9) An onsite audit may not be initiated or scheduled
during the first three business days of any month unless
consented to by the pharmacy.
(10) The auditing entity may not receive payment, by
contract, based on a percentage of the amount recovered.
(11) 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 group of claims not reviewed by
the auditor.
(12) When calculating for days' supply for topical and
20150HB0946PN2120 - 6 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
ophthalmic products, the pharmacist's reasonable,
professional judgment based on communication with the patient
or prescriber shall take precedence.
(13) The auditing entity shall not recoup payment for a
prescription which has been used by the patient in accordance
with the prescriber's instructions even if the prescriber's
instructions are different than the manufacturer's suggested
use.
(14) When directions for use include variable dosing
instructions, the highest prescribed dose must be used to
calculate day's supply, copay and allowable refill date and
quantity.
(15) The retail pharmacy's usual and customary price for
compounded medications shall be considered the reimbursable
cost unless the pricing methodology is published in the
provider contract and mutually agreed upon by the contracting
parties.
(16) A retail pharmacy shall be permitted to utilize
information regarding the availability of third-party
resources provided by a PBM and shall not be liable to repay
any amount for which a third party is liable only if a retail
pharmacy has actual knowledge regarding the availability of
third-party resources available to a claimant for pharmacy
benefits. PBMs and prescription drug plans may pursue claims
for such third-party resources.
(17) With the exception of overpayments, if a PBM
approves a claim through adjudication, the auditor may not
retroactively deny or modify the claim based upon
retroactively obtained ineligibility information, unless the
claim was fraudulent.
20150HB0946PN2120 - 7 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(18) An auditor may not deny or reject any claim
retroactively through audits in the event that the PBM or
auditor has subsequently become aware of another payer
responsible for payment of the claim following adjudication
or payment of the claim.
(b) Written report.--An auditing entity 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 60 days after the
completion of the audit. The preliminary report shall include
contact information for the individual who conducted the
audit, including telephone number, facsimile number, e-mail
and auditing firm, so that audit results, discrepancies and
procedures can be reviewed. The preliminary audit report
shall include, but is not limited to, claim level information
for any discrepancy found and total dollar amount of claims
subject to recovery.
(2) A pharmacy shall be allowed at least 60 days
following receipt of the preliminary audit report to produce
documentation to address any discrepancy found during the
audit. This shall include prescriptions not initially
provided in 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.
(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. Any recoupment
20150HB0946PN2120 - 8 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
shall be provided in writing to the pharmacy for payment.
(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. The final audit report may be
delivered electronically.
Section 5. Appeals process.
(a) General rule.--An auditing entity shall establish a
written appeals process under which a pharmacy may appeal an
unfavorable final audit report to the entity.
(b) Adjudication.--The adjudication of a claim cannot be
appealed through the audit process.
Section 6. Fraud.
(a) Exceptions.--Any rights derived from this act shall not
apply to:
(1) Audits which are the result of a complaint to the
PBM or Board of Pharmacy in which suspected fraudulent
activity or other intentional and willful misrepresentation
is evidenced by a physical review, review of claims data or
statements or other investigative methods.
(2) Concurrent reviews or desk audits that occur within
three business days of transmission of a claim where no
chargeback or recoupment is demanded.
(b) Federal law.--This act does not supersede any audit
requirements established by Federal law, including extrapolation
audits when required.
Section 7. Enforcement.
The department shall have enforcement authority and shall
take action or impose penalties to bring noncomplying entities
into full compliance with this act, including the promulgation
20150HB0946PN2120 - 9 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
of any regulations necessary to carry out this act.
Section 8. Effective date.
This act shall take effect in 90 days.
20150HB0946PN2120 - 10 -
1
2
3