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Pharmacy Benefit Manager (PBM) audits can threaten the stability of your pharmacy, impacting both your operations and finances. At Health Law Alliance, we specialize in defending pharmacies against aggressive PBM audit tactics, helping you avoid recoupments, network terminations, and other penalties. With experienced legal guidance, your pharmacy can navigate these audits with confidence, ensuring compliance while safeguarding your business.
Don't wait until your rights are lost. We often receive calls from pharmacies after they have been audited and terminated. The earlier we are involved, the better chance you have to prevent these severe consequences. Get us on your side today.
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Healthcare Specialty Attorneys and Consultants - Health Law Alliance specializes in healthcare law and is dedicated to defending healthcare providers and their licenses from overreach.
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Frequently Asked Questions for PBM Audits
What exactly does a PBM audit look for, and how can it impact my pharmacy?
A PBM audit examines how your pharmacy handles prescriptions, billing, and inventory to ensure everything aligns with the PBM’s rules. Auditors check for compliance and, in some cases, errors or discrepancies that might lead to repayment demands, also known as recoupments. Beyond financial losses, a serious audit finding can even lead to network termination. Our team helps you understand what auditors are looking for and guides you in reducing any vulnerabilities before they escalate.
What documents do I need to have ready for a PBM audit?
You’ll typically need to provide clear and organized prescription records, billing and claims information, inventory tracking, and, if required, patient consent documentation. Having these records in order not only speeds up the audit but also shows auditors that your pharmacy operates transparently and compliantly. We can review your records ahead of time to spot any gaps that could trigger red flags.
How can Health Law Alliance help me handle a PBM audit?
We’re here to support you every step of the way. We’ll review your documentation, guide you through the audit process, and work to resolve any issues that arise. If the audit reveals findings you believe are inaccurate, we can also represent you in disputes or appeals, pushing back on unwarranted recoupments or penalties. Our goal is to protect your pharmacy’s reputation, finances, and continued operation.
What are the main risks of a PBM audit for pharmacies like mine?
The risks can range from relatively minor adjustments to significant recoupments, where the PBM demands repayment. In some cases, unresolved issues can lead to suspension or termination from the PBM network. The best way to minimize these risks is to approach the audit proactively—having strong documentation and a clear response strategy. We provide the support and guidance needed to approach audits strategically, aiming to protect your pharmacy from worst-case outcomes.
If I disagree with the audit findings, can I appeal them?
Absolutely. If you feel the audit conclusions are unfair, there are steps you can take to challenge them. We help you evaluate the audit results and, if warranted, prepare an appeal to dispute inaccuracies or excessive recoupment demands. Having an experienced defense team on your side can make a significant difference in successfully contesting findings.
How can I make my pharmacy better prepared for future PBM audits?
Start by building a strong compliance foundation: conduct regular internal audits, train staff on documentation standards, and keep current with PBM and regulatory changes. We offer compliance consultations to help you identify any risk areas and improve your documentation practices, reducing audit stress and keeping your pharmacy well-prepared. This proactive approach can give you peace of mind and lower the chances of unexpected audit issues.
Speak to an experienced attorney today at no-cost to evaluate your situation and discuss how we can help.
Legal challenges can be complex and stressful. Our experienced attorneys are dedicated to offering personalized guidance and effective solutions to help you navigate your legal journey with confidence
PBM audits are a reality for many pharmacies, and they can be daunting. These audits are typically conducted by Pharmacy Benefit Managers (PBMs) to make sure pharmacies are following all the rules laid out in their contracts. While audits are intended to prevent fraud and ensure compliance, they can also catch pharmacies off-guard with complex requirements and unexpected findings.
In practical terms, a PBM audit involves a detailed review of your pharmacy’s records, including billing practices, prescription records, inventory management, and copay collections. Small discrepancies or missing documentation can quickly lead to hefty recoupments, fines, or even the risk of being removed from a PBM network, which could significantly impact your business.
That’s where PBM audit defense comes in. With experienced legal support, you can approach these audits proactively, ensuring you’re prepared, your records are complete, and your compliance measures are in place. PBM audit defense isn’t just about reacting to an audit—it’s about having a strategy to protect your pharmacy’s stability and reduce risks before, during, and after the audit.
Why it matters: Understanding PBM audit defense can make a critical difference for your pharmacy, turning a stressful process into one you’re ready to manage. Having an experienced team at your side can help you stay compliant, avoid costly penalties, and keep your focus on what matters: serving your patients.
When it comes to PBM audits, there’s a maze of laws and regulations that pharmacies need to navigate. Pharmacy Benefit Managers (PBMs) operate under both federal and state regulations, as well as specific terms they set in contracts with pharmacies. This mix of rules can make compliance challenging, especially when requirements vary by location or change frequently.
Some key areas to be aware of include:
Why understanding these regulations matters: Knowing the laws and staying compliant with these regulations can make all the difference when facing a PBM audit. A single oversight, like a missing record or improper billing code, can lead to penalties that affect your bottom line. Working with a legal team experienced in PBM audit defense helps ensure you’re not only compliant with state and federal regulations but also prepared to meet the specific requirements of each PBM you work with.
By proactively managing compliance with these laws and contract terms, your pharmacy can reduce the risk of costly audit findings and maintain a smoother, more secure operation.
PBM audits often come with their fair share of headaches for pharmacies, and certain issues seem to pop up repeatedly. Understanding these common challenges can help you prepare in advance and avoid some of the most frequent pitfalls.
Some of the most common issues pharmacies face in PBM audits include:
Why being aware of these challenges matters: Knowing these common audit pitfalls gives you a chance to proactively address them. By conducting regular internal reviews and tightening up documentation practices, you can reduce the risk of issues that often lead to recoupments or network termination. An experienced PBM audit defense team can help you spot and correct these potential issues before they escalate, ensuring that you’re prepared and protected when audit time comes.
Facing a PBM audit can feel overwhelming, especially when the process seems complicated and time-consuming. Knowing the basic steps involved can help you feel more prepared and in control. Here’s a general outline of what to expect during a PBM audit defense:
Why understanding the audit process matters: Knowing what’s involved in a PBM audit helps you anticipate each step and stay organized throughout. It’s also important to have a clear defense strategy in place, as a well-prepared response can make all the difference in minimizing penalties or avoiding recoupments. Our team at Health Law Alliance provides guidance at every stage of the process, from the initial audit notification through any appeals, so you can stay focused on your pharmacy’s success.
PBM audits can carry serious consequences for pharmacies, especially if issues are found. Knowing the potential outcomes can help you take proactive steps to protect your business.
Some possible outcomes of a PBM audit include:
Why understanding these consequences matters: Knowing what’s at stake in a PBM audit underscores the importance of preparation and compliance. A strong audit defense strategy can help minimize these risks, protect your business, and keep your pharmacy in good standing. Our team works to defend your interests throughout the audit process, so you’re not facing these consequences alone.
PBM audits can be complex and stressful, but you don’t have to handle them alone. Health Law Alliance specializes in PBM audit defense, offering comprehensive support to protect your pharmacy from potential financial and operational impacts. Here’s how we help:
Why choose Health Law Alliance: With extensive experience in PBM audit defense, we understand the unique challenges pharmacies face. Our goal is to shield your pharmacy from the financial and operational risks of PBM audits, allowing you to focus on patient care while we handle the rest.
CVS Caremark one of the three major PBMs that control nearly 90% of the market for prescription claims processing.
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Optum is one of three major PBMs that control nearly 90% of the market for prescription claims processing.
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ESI is one of the three major PBMs that control nearly 90% of the market for prescription claims processing.
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Prime has a relationship with ESI that provides for joint provider networks and oversight by both companies.
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Medicare and Medicaid use agencies like OIG or OMIG and outside contractors to audit prescription drug claims.
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Humana is a payor that uses PBMs and other contractors to audit government and commercial drug claims.
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Qlarant is contracted with Medicare to perform fraud, waste, and abuse audits and investigations.
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Safeguard is contracted with Medicare to perform fraud, waste, and abuse audits and investigations.
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To design an effective PBM audit response strategy, providers must understand the chain of events both prior to the initiation of a PBM audit and afterwards. For example, Special Investigative Units (SIUs) are often the genesis of a pharmacy audit, and the presence or absence of "audit risk factors" is informative on potentially broader exposure beyond the claims under audit. Any decision to resolve an audit should be informed and result in a full and final settlement of all liability, but PBM audit settlements need to be structured carefully to achieve this goal.
CVS Caremark, OptumRx, and Express Scripts, control at least 80% of the market, making them the three biggest PBMs. Humana also ranks among the largest. In addition, these PBMs regulate access to networks for smaller competitors, such as ESI's partnership with Prime. Plan sponsors, such as United Health, Cigna and Aetna, are vertically integrated with these PBMs, increasing audit risk for pharmacies because network sanctions are more likely to affect a significant aspect of a pharmacy's business across both government and commercial claims.
PBMs and payors use artificial intelligence and data mining across medical and pharmacy claims to identify areas of potential inquiry. Among other areas, these inquiries typically involve high-reimbursing medicines, brand/generic substitution, inventory discrepancies, co-payment collection, prior authorization, and telehealth relations. Separately, DEA conducts audits and inspections for compliance to controlled substance regulations.
Common types of PBM audits include desk audits; on-site audits; invoice audits; and prescription audits. Irrespective of the type of PBM audit, all interactions with PBMs should be taken extremely seriously and can lead to severe consequences if not handled appropriately. For example, there has been a sharp increase in the federal prosecution of pharmacists for audit-related conduct, including answering PBM questions incorrectly. Accordingly, pharmacies should consider using outside audit counsel to avoid these pitfalls.
Pharmacies can take various steps to prepare to meet PBM audits, including routine self-audits. In fact, the government publishes comprehensive guidance and a checklist to assist pharmacies in their audit planning, including self-audits around prescribing practices, controlled substance management, invoice management, and billing practices. If you need assistance designing or implementing an audit protection plan, please do not hesitate to contact us.
Defending against a PBM audit requires comprehensive knowledge of the rights, responsibilities, and intricacies of pharmacies and their laws and regulations. If your pharmacy has been identified for a PBM audit, there are a number of potential defenses available to you. The first defense against a PBM audit is to be proactive, and audit planning can lessen the chance of unfavorable findings. That said, it is often necessary to involve an attorney to hold PBMs to their obligations under law and provider agreements. For this reason, national audit services and pharmacy audit consultants are often ineffective.
Audit discrepancies and findings can be appealed based on the specific procedures outlined in the provider manuals. It is important to follow these requirements exactly, within the timeframes established, or your appeal rights could be lost and further review denied. In an appeal, it is critically important to make a complete record of why the audit findings or sanctions should be reversed, including through documentation, legal arguments, and corrective actions, if any. Depending on the outcome of the appeal, you may have further legal recourse against the PBM.
PBM audits can have severe repercussions depending on the results of the pharmacy audit, including recoupments, network sanctions, and criminal, civil and administrative investigations involving jail time, significant fines, and license revocation or exclusion. We publish a 10-part PBM Audit Guide that discusses the overlap between PBM audits and government investigations and how to successfully manage audit risk. This resource is complimentary to subscribers HERE.
Government investigations may come in many forms, but criminal matters involving potential jail time, mandatory exclusion, loss of licensure, and reputational harm are the most severe and scary scenarios that anyone can face. Unfortunately, it often is not clear, particularly at the outset, whether an investigation involves criminal violations or what your status might be in the investigation. For example, our clients might be informed that the FBI is interviewing patients, or that their partners have received subpoenas. The uncertainty that results from these types of events is particularly difficult for our clients to manage, and typically involves sleepless nights, loss of appetite, anxiety and potential depression.
Our experienced healthcare defense attorneys understand what clients are going through, and focus on providing them with insight into the government’s investigation and how best to defend it. There are a variety of potential outcomes, many of them involving far less severe ramifications than might be contemplated. Indeed, in healthcare, parallel criminal, civil, and administrative laws provide an opportunity for potential resolution of government investigations under terms that do not involve loss of liberty or livelihood. The range of outcomes that might be available depends on the evidence available to the government, but cases involving patient harm typically receive more focus from a criminal perspective than run-of-the-mill billing irregularities, particularly when the federal government is involved.
That said, there are several notable exceptions. At Health Law Alliance, our healthcare defense attorneys have decades of federal and state prosecutorial experience, and we rely on that background to highlight areas of increased risk. In particular, the below agencies focus on the prosecution of criminal healthcare fraud.
The Medicare Fraud Strike Force, operated by the U.S. Department of Justice (DOJ) in regions across the country, is particularly adept at prosecuting healthcare fraud criminal matters. Medicare Fraud Strike Force Teams harness data analytics and the combined resources of federal, state, and local law enforcement entities to prevent and combat healthcare fraud, waste, and abuse. More specifically, the Strike Force uses advanced data analysis techniques to identify aberrant billing levels in healthcare fraud “hot spots” – cities with high levels of billing fraud – combined with traditional investigative techniques to target suspicious billing patterns in addition to emerging schemes and fraudulent practices that move from one location to another.First established in March 2007, prosecutors operate in 16 Strike Forces, including the National Rapid Response Strike Force based in Washington, DC. The Strike Force Model centers on a cross-agency collaborative approach, bringing together the investigative and analytical resources of DOJ’s Fraud Section, the Federal Bureau of Investigation (FBI), the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG), the Centers for Medicare & Medicaid Services (CMS), Drug Enforcement Administration (DEA), Defense Criminal Investigative Service (DCIS), Federal Deposit Insurance Corporation Office of the Inspector General (FDIC-OIG), Internal Revenue Service (IRS), Department of Labor-OIG, United States Postal Service – Office of the Inspector General (USPS-OIG), Veterans Administration – Office of the Inspector General (VA-OIG), and other agencies. Strike Force Health Care Fraud and Prescription Opioid teams are located across the country, as depicted by the chart below:
The Medicare Strike Force has filed thousands of criminal actions and indictments and recovered billions of dollars in assets resulting from healthcare fraud. The Strike Force teams bring together the Office of Inspector General (OIG), the Department of Justice (DOJ), Offices of the United States Attorneys (USAOs), the Federal Bureau of Investigation (FBI), local law enforcement, and others. These attorneys and investigators have a proven record of success in analyzing data and investigative intelligence to quickly identify fraud and bring prosecutions. The interagency collaboration also enhances the effectiveness of the Strike Force model. For example, OIG refers credible allegations of fraud to the Centers for Medicare & Medicaid Services (CMS) so that it can suspend payments to the alleged healthcare fraud perpetrators, thereby preventing losses to federal programs. Finally, the Medicare Strike Force does not focus exclusively on healthcare fraud but also prosecutes wire fraud, mail fraud, bank fraud, money laundering offenses, violations of the Anti-Kickback Statute (AKS), false statements offenses, Title 42 offenses, Title 26 offenses, and Title 21 offenses, in the highest intensity regions.
The Medicare Strike Force is a specialized department within the DOJ’s Health Care Fraud Unit, based in Washington, D.C., with operations across the country. DOJ’s Health Care Fraud Unit is led by over 80 experienced white-collar prosecutors who focus solely on prosecuting the nation’s most complicated healthcare fraud matters and the illegal prescription, distribution, and diversion of opioids and other controlled substances. The Health Care Fraud Unit’s mission is to protect the public treasury from wide-scale healthcare fraud, protect patients from significant fraudulent schemes that result in patient harm, and to detect, limit, and deter fraud and illegal prescription, distribution, and diversion of controlled substance offenses. The Health Care Fraud Unit endeavors to prosecute defendants who orchestrate schemes that result in the loss of hundreds of millions or billions of dollars, the distribution of tens of millions of opioids or controlled substances, and complex money laundering, tax, and other financial crime offenses.
The Health Care Fraud Unit prides itself on conducting the most trials of any DOJ component, including the U.S. Attorney's Offices. DOJ prosecutors, referred to as “Trial Attorneys,” have participated in the largest and most complex healthcare fraud and opioid distribution trials in the country. Notably, the Health Care Fraud Unit is a leader in using advanced data analytics and algorithmic methods to identify newly emerging healthcare fraud schemes and to target the most egregious fraudsters. The Health Care Fraud Unit’s team of dedicated data analysts works with prosecutors to identify, investigate, and prosecute cases using data analytics. At the Health Law Alliance, our healthcare defense attorneys have extensive experience in the use of data analytics to identify potential fraud, waste, and abuse, having served as the Chief Compliance Officer and Executive Leadership Team member for UnitedHealth Group, with oversight of Optum and UnitedHealthcare, including Special Investigative Units (SIUs) within those platforms.
The Health Care Fraud Unit’s cases are complex and wide-reaching. In particular, the National Rapid Response Strike Force was created in 2020 to investigate and prosecute fraud cases involving major healthcare providers that operate in multiple jurisdictions. The National Rapid Response Strike Force coordinates with the Civil Division’s Fraud Section and Consumer Protection Branch, U.S. Attorneys’ Offices across the country, state Medicaid Fraud Control Units (MFCUs), the FBI, HHS-OIG, and other agency partners to investigate and prosecute multi-jurisdictional and corporate healthcare fraud. The National Rapid Response Strike Force’s recent successes include the conviction of owners of a multi-state network of rural hospitals in a $1 billion billing fraud matter; the $500 million global resolution with Tenet Healthcare Corporation and related individual prosecutions for a hospital kickback scheme; the prosecution of billions of dollars in telemedicine fraud; prosecution of over $1 billion in fraudulent addiction rehabilitation facility fraud as part of the Sober Homes Initiative; and leadership of the Unit’s efforts to prosecute those seeking to criminally exploit the COVID-19 pandemic, including the conviction at trial of the President of a Silicon Valley technology company for healthcare fraud, illegal kickback, and securities fraud related to the announcement of purportedly revolutionary testing for COVID-19 using only a few drops of blood, i.e., Elizabeth Holmes and associates.
In addition, in 2022, the DOJ Criminal Division announced the formation of the New England Prescription Opioid (NEPO) Strike Force, a joint law enforcement effort to investigate and prosecute healthcare fraud schemes in the New England region, and to prosecute individuals involved in the illegal distribution of prescription opioids and other controlled substances. NEPO leverages the success of the October 2018 formation of the Appalachian Regional Prescription Opioid (ARPO) Strike Force, a joint effort between DOJ, FBI, HHS-OIG, DEA, and state and local law enforcement to combat healthcare fraud and the opioid epidemic in locations that have been harmed significantly by addiction. ARPO has partnered with federal and state law enforcement and U.S. Attorneys’ Offices throughout Alabama, Kentucky, Ohio, Virginia, Tennessee, and West Virginia to prosecute medical professionals involved in the illegal prescription and distribution of opioids.
In addition to DOJ’s Strike Forces and Health Care Fraud Units, all of the U.S. Attorneys’ Offices are staffed by federal prosecutors, referred to as Assistant United States Attorneys (AUSAs), who investigate and prosecute healthcare fraud crimes in their respective jurisdictions. There are 93 U.S. Attorneys’ Offices in the country, and the U.S. Attorney in each district is the chief federal law enforcement officer, reporting to the Attorney General of the United States. The U.S. Attorneys’ Offices are coordinated by the Executive Office for U.S. Attorneys, which oversees the DOJ’s Health Care Fraud and Abuse Act Program, established as part of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). To most, HIPAA is better known for privacy and nondiscrimination rules, but the statute also created a number of healthcare offenses and enforcement tools, including the “HIPAA subpoena,” and mandated that the DOJ and HHS-OIG coordinate to support efforts to investigate and prosecute healthcare fraud.
To this end, HIPAA provided a funding source, specifically requiring that amounts equaling recoveries from healthcare fraud investigations be deposited in or transferred to the Federal Hospital Insurance Trust Fund. Recoveries are then appropriated from the Trust Fund to the Health Care Fraud and Abuse Control Account in an amount the Attorney General and HHS Secretary certify annually are necessary to finance healthcare fraud enforcement activities. Appropriations from the Control Account fund attorneys, investigators, and litigation support to combat healthcare fraud. Since 1997, over $57 billion has been collected by the DOJ and HHS. Of that, nearly $40 billion has been returned to the Medicare Trust Funds, an average of approximately $1.5 billion per year, and Medicaid, Tricare, the Veteran’s Administration, among others. In the same period, 13,628 defendants have been convicted of healthcare fraud offenses, an average of 545 every year. These numbers are startling, to be sure.
All states also operate Medicaid Fraud Control Units (MFCUs), typically within the State Attorney General’s Office, to investigate and prosecute Medicaid-related fraud. The Social Security Act (SSA) requires each state to effectively operate an MFCU unless the Secretary of Health and Human Services (HHS) determines that (1) the operation of a Unit would not be cost-effective because minimal Medicaid fraud exists in a particular state; and (2) the state has other adequate safeguards to protect enrollees from abuse or neglect. MFCUs are funded jointly by the federal and state governments. Each Unit receives a federal grant award equivalent to 90 percent of total expenditures for new Units and 75 percent for all other Units.
MFCU cases often begin as referrals from external sources or are generated from data mining. MFCU staff review referrals of possible fraud to determine the potential for criminal prosecution or civil action. If the Unit accepts a referral, the case may result in various outcomes. Criminal prosecutions may result in convictions; civil actions may result in civil settlements. Both criminal prosecutions and civil actions routinely include the assessment of monetary recoveries. The approach of the MFCUs varies state-by-state, with some offices, such as Pennsylvania’s MFCU, that pursue criminal cases exclusively. In other words, the Pennsylvania MFCU will either bring a criminal case or decline the matter completely; that office does not interpret its enabling statutes to permit the resolution of investigations on civil terms. Other state MFCUs, however, investigate and prosecute both criminal and civil cases. The OIG has the authority to exclude convicted individuals and entities from any federally funded healthcare program, such as Medicaid, on the basis of convictions referred from MFCUs. In addition to achieving these outcomes, MFCUs may also make recommendations to their state governments to strengthen program integrity.
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