1Providing for pharmacy audit procedures.

2The General Assembly of the Commonwealth of Pennsylvania
3hereby enacts as follows:

4Section 1. Short title.

5This act shall be known and may be cited as the Pharmacy
6Audit Integrity Act.

7Section 2. Purpose and intent.

8The purpose of this act is to establish minimum and uniform
9standards and criteria for the audit of pharmacy records.

10Section 3. Definitions.

11The following words and phrases when used in this act shall
12have the meanings given to them in this section unless the
13context clearly indicates otherwise:

14"Pharmacy benefits manager" or "PBM." A person, business or
15other entity that performs pharmacy benefits management. The
16term includes a person or entity acting for a PBM in a
17contractual or employment relationship in the performance of

1pharmacy benefits management for a managed care company,
2nonprofit hospital or medical service organization, insurance
3company, third-party payor or health program administered by a
4department of the Commonwealth.

5Section 4. Scope of act.

6This act covers any audit of the records of a pharmacy
7conducted by a managed care company, nonprofit hospital or
8medical service organization, insurance company, third-party
9payor, pharmacy benefits manager, a health program administered
10by a department of the Commonwealth or any entity that
11represents a company, group or department.

12Section 5. Procedures for conducting and reporting an audit.

13(a) Procedure.--An entity conducting an audit under this act
14shall conform to the following rules:

15(1) The pharmacy contract shall identify and describe in
16detail the audit procedures.

17(2) The entity conducting an audit shall give the
18pharmacy written notice at least 30 days prior to conducting
19an initial onsite audit for each audit cycle or requesting 
20records for any audit conducted offsite, and such notice 
21shall identify the prescriptions subject to the audit.

22(3) The entity conducting the audit shall audit no more
23than 100 prescription records per audit, and the pharmacy's
24purchase orders or invoices shall not be subject to the
25audit.

26(4) The entity conducting the onsite audit shall not
27interfere with the delivery of pharmacist services to a
28patient and shall utilize every effort to minimize
29inconvenience and disruption to pharmacy operations during
30the audit process.

1(5) An audit that involves clinical or professional
2judgment must be conducted by or in consultation with a
3licensed Pennsylvania pharmacist applying only the
4applicable Federal or State law and regulations.

5(6) A clerical or recordkeeping error, such as a
6typographical error, scrivener's error or computer error
7regarding a required document or record does not constitute
8fraud, and claims relating thereto shall be subject to
9neither recoupment nor criminal penalties without proof of
10intent to commit fraud. However, recoupment of any payment or 
11overpayment made due to error, strictly limited to the amount 
12of the payment or overpayment plus interest, is permissible 
13in situations in which the pharmacy knew that services were 
14not covered or were provided to an ineligible recipient and 
15in which restitution of the amounts paid constitutes a proper 
16remedy pursuant to 13 Pa.C.S. Div. 2 (relating to sales).

17(7) A pharmacy may use the records of a hospital,
18physician or other authorized practitioner of the healing
19arts for drugs or medicinal supplies written or transmitted
20by any means of communication for purposes of validating the
21pharmacy record with respect to orders of refills of a legend
22or narcotic drug.

23(8) Any legal prescription, complying with the Board of
24Pharmacy requirements, may be used to validate claims in
25connection with prescriptions, refills or changes in
26prescriptions. This shall include prescription records in
27electronic form or otherwise contained in digital media.

28(9) A finding of an overpayment or underpayment must be
29based on the actual overpayment or underpayment and may not
30be projection based on the number of patients served having a

1similar diagnosis or on the number of similar orders or
2refills for similar drugs. This subsection or any other 
3section of this act does not prevent any entity from using 
4its collected data to target audit resources or to detect 
5fraud.

6(10) A finding of an overpayment shall not include the
7dispensing fee amount. However, the dispensing fee does not 
8have to be paid in the event that a filled prescription was 
9not finally dispensed to or picked up for the intended 
10patient.

11(11) Each pharmacy shall be audited under the same
12standards and parameters as other similarly situated
13pharmacies audited by the entity.

14(12) The period of time covered by an audit may not go
15back in time more than six months from the scheduled date of
16the audit.

17(13) An onsite audit may not be initiated or scheduled
18during the first seven calendar days of any month due to the
19high volume of prescriptions filled in the pharmacy during
20that time unless otherwise consented to by the pharmacy.

21(14) The auditing company may not receive payment based
22on a percentage of the amount recovered.

23(b) Written report.--An entity conducting an audit under
24this act shall provide the pharmacy with a written report of the
25audit and comply with the following requirements:

26(1) The preliminary audit report must be delivered to
27the pharmacy or its corporate parent within 90 days after the
28initiation of the audit.

29(2) A pharmacy shall be allowed at least 60 days
30following receipt of the preliminary audit report in which to

1produce documentation to address any discrepancy found during
2the audit.

3(3) A final audit report shall be delivered to the
4pharmacy or its corporate parent within 120 days after
5receipt of the preliminary audit report or final appeal, as
6provided for in section 6, whichever is later.

7(4) The audit report must be signed and include the
8signature of any pharmacist participating in the audit.

9(5) Any recoupments of disputed funds shall only occur
10after final internal disposition of the audit, including the
11appeal process as set forth in section 6. Except with the
12consent of a pharmacy, no recoupment may be deducted against
13future remittance and any recoupment shall be invoiced to the
14pharmacy for payment.

15(6) Interest shall not accrue during the audit period.

16(7) Each entity conducting an audit shall provide a copy
17of the final audit report, after completion of any review
18process, to the plan sponsor.

19Section 6. Audit parameters.

20(a) General rule.--Audit parameters shall use consumer-
21oriented parameters based on manufacturer listings or
22recommendations as follows:

23(1) When calculating days supply for drops,
24manufacturer-stated estimates of drops per ml shall take
25precedence over pharmacy benefit manager general guidelines.

26(2) When calculating days supply for topical products,
27the pharmacist's judgment, based on communication with the
28patient or prescriber, shall take precedence.

29(3) When the smallest manufacturer of a use package is
30dispensed, the patient should be charged only one copay,

1regardless of actual days supply.

2(4) When directions for use include variable dosing
3parameters, the highest prescribed dose must be used to
4calculate days supply, copay and allowable refill date and
5quantity.

6(5) Manufacturer guidelines on beyond use dating must be
7used when calculating days supply, copay and allowable refill
8date and quantity.

9(b) Reimbursable cost.--The retail pharmacy's usual and
10customary price for compounded medications shall be considered
11the reimbursable cost unless an alternate price is published in
12the provider contract and signed by both parties.

13Section 7. Appeal process.

14The following shall apply:

15(1) The National Council for Prescription Drug Programs
16(NCPDP) or any other recognized national industry standard
17shall be used to evaluate claims submissions and product size
18disputes.

19(2) Each entity conducting an audit shall establish a
20written appeal process under which a pharmacy may appeal an
21unfavorable preliminary audit report to the entity.

22(3) If, following the appeal, the entity finds that an
23unfavorable audit report or any portion thereof is
24unsubstantiated, the entity shall dismiss the audit report or
25said portion without the necessity of any further action.

26Section 8. Extrapolation audits.

27Notwithstanding any other provision in this act, an entity
28conducting an audit under this act shall not use the accounting
29practice of extrapolation in calculating recoupments or
30penalties for audits. An extrapolation audit means an audit of a

1sample of prescription drug benefit claims submitted by a
2pharmacy to the entity conducting the audit that is then used to
3estimate audit results for a larger batch or group of claims not
4reviewed by the auditor.

5Section 9. Third-party resources.

6(a) Third-party resources.--Entities covered by this section
7shall take all reasonable measures to ascertain the legal
8liability of any third parties, including health insurers, self-
9insured plans, group health plans as defined by section 607(1)
10of the Employee Retirement Income Security Act of 1974 (Public
11Law 93-406, 88 Stat. 829), service benefit plans, managed care
12organizations, pharmacy benefit managers, the Medicare program,
13other prescription drug plans or other parties that are by
14statute, contract or agreement legally responsible for payment
15for prescription drugs before claims become the liability of any
16prescription drug plan administered by the pharmacy benefit
17manager.

18(b) Identification cards and claims processing systems.--
19Information regarding third-party resources identified pursuant
20to subsection (a) shall be included on identification cards
21issued by a PBM or prescription drug plan to persons eligible
22for prescription drug benefits and shall be included in all
23mechanized claims processing systems established by a PBM or
24prescription drug plan, including systems required under section
251903(r) of the Social Security Act (49 Stat. 620, 42 U.S.C. § 
26301 et seq.). Where information regarding third-party resources
27is made available to pharmacies on identification cards or
28through mechanized claims processing systems, a PBM may direct a
29pharmacy to submit claims for payment to such third parties
30prior to submission to the PBM or prescription drug plan,

1provided that this requirement shall not apply when a pharmacy
2has a reasonable basis to believe that a claim is not covered by
3available third-party resources based upon a diagnosis code or
4other information available to the pharmacy.

5(c) Claims against pharmacies.--Provided that a pharmacy
6makes reasonable inquiries of recipients regarding the
7availability of third-party resources, unless a pharmacy has
8actual knowledge regarding the availability of third-party
9resources available to a claimant for pharmacy benefits, a
10pharmacy is entitled to rely on information regarding the
11availability of third-party resources provided by a PBM and
12shall not be liable to repay in whole or in part for any amounts
13for which any third party is liable. PBMs and prescription drug
14plans are authorized to and shall pursue claims from such third-
15party resources. Upon the effective date of this act, this
16subsection shall apply to all pending and future claims against
17pharmacies asserted by PBMs or prescription drug plans,
18including claims relating to benefits provided to recipients
19prior to the effective date of this act.

20(d) Applicability.--This section shall apply to agencies of
21the Commonwealth managing health care programs and their agents.
22In addition, this section shall also apply to other entities
23described in section 4 only to the extent that they engage in
24coordination of benefits between multiple plans. Subsection (c)
25shall apply to all section 4 entities covered by this act.

26Section 10. Fraud.

27As a general rule, fraud shall not include payments for
28prescriptions where the proper pharmaceutical was delivered to
29the intended patient, who is eligible for benefits, in the
30prescribed amounts. In addition, fraud shall not include those

1errors outlined in section 5(a)(5). Nothing in this act shall
2prevent investigations by the law enforcement agencies of the
3United States or the Commonwealth. Further, nothing in this act
4prevents the section 4 entities' use of collected data or other
5information to detect actual fraud by pharmacies or pharmacy
6personnel intended to defraud prescription drug plans. The
7restrictions on audits in section 5(a)(10) do not apply once a
8pattern of systematic fraud has been established in order to
9allow for recovery of fraudulently obtained overpayments.

10Section 11. Administration of this act by Commonwealth
11agencies.

12Provisions of this act shall not apply to the extent
13determined by applicable Federal agencies to be contrary to
14Federal law or regulations or to disqualify the Commonwealth in
15whole or in part for Federal financial participation in
16Commonwealth health programs or other Federal benefits,
17subsidies or payments. However, the Commonwealth shall
18vigorously appeal any such determinations made by applicable
19Federal agencies and make every effort to obtain waivers or
20other agreements of understanding with Federal agencies in order
21to fully implement this act. To avoid the risk that the
22Commonwealth may be required to repay Federal financial
23participation or other benefits, subsidies or payments, the
24Commonwealth may request determinations from applicable Federal
25agencies regarding whether any provisions of this act violate
26Federal laws or regulations or disqualify the Commonwealth in
27whole or in part for Federal financial participation in
28Commonwealth health programs or other Federal benefits,
29subsidies or payments.

30Section 12. Effective date.

1This act shall take effect in 60 days.