Pharmacy Audit Integrity Act Enacted Into Law

One of the proposed laws most sought-after by the West Virginia Pharmacists Association during 2017 was Senate Bill 522 – the Pharmacy Audit Integrity Act – which was passed by lawmakers during the last days of the session, then signed into law by Governor Jim Justice.   The intent of the bill was to establish uniformity with auditing procedures undertaken by pharmacy benefit managers and entities engaged by insurance companies to audit claims submitted by pharmacies.

“The lead sponsor of the bill was Senator Ed Gaunch,” said Richard Stevens, WVPA Executive Director and Lobbyist.   Other sponsors of Senate Bill 522 were Senators Ryan Ferns, Craig Blair, Ron Stollings and Tom Takubo.   “After passage by the Senate, the bill was sent to the House of Delegates where it was referred to committee for a hearing and debate, just as it did in the Senate prior to passing,” he said.

“I ran into a delay in the House when the Committee chair and attorney expressed concern that only 250 prescription claims could be audited along with other language in the bill about one hour before the committee meeting started.   I explained the adjudication process results in claims either being denied or approved before the pharmacy dispenses the prescription, and that this process was very thorough.  The attorney ultimately accepted my explanation and requested I stand by for questions during the committee meeting,” said Stevens.   “I spent time talking to committee members before they went into committee, which avoided questions during the committee hearing.”   Below are highlights of Senate Bill 522.

An entity conducting a pharmacy audit shall conform to the following rules:

  1. Except as otherwise provided by federal or state law, an auditing entity conducting a pharmacy audit may have access to a pharmacy’s previous audit report if the report was prepared by that auditing entity.
  2. Information collected during an audit shall be confidential by law.
  3. The auditing entity may not compensate an employee or contractor solely based on the amount claimed or the actual amount recouped by the pharmacy being audited.
  4. The auditor shall provide the pharmacy with at least 14 calendar day notice of the forthcoming audit.
  5. The auditor shall not audit a pharmacy during the first five business days of any month.
  6. The auditor shall accept paper or electronic signature logs as documentation.
  7. Prior to leaving the pharmacy after the on-site portion of the audit, the auditor shall provide the pharmacy a complete list of pharmacy records reviewed.
  8. A pharmacy audit that involves clinical judgment shall be conducted by, or in consultation with, a pharmacist.
  9.  A auditor may not cover: (a) a period of more than 24 months after the date a claim was submitted; or (b) more than 250 prescriptions.
  10. A auditor may not use extrapolation to calculate penalties or amounts to be charged back or recouped, unless allowed by federal law.
  11. A auditor may not include dispensing fees in the calculation of over-payments.

A pharmacy may do any of the following when a pharmacy audit is performed:

  • A pharmacy may use authentic and verifiable statements or records, including medication administration records of a nursing home, assisted living facility, hospital or health care provider with prescriptive authority, to validate the pharmacy record and deliver; and
  • A pharmacy may use any valid prescription, including medication administration records, facsimiles, electronic prescriptions, electronically stored images of prescriptions, electronically created annotations or documented telephone calls from the prescriber to validate claims in connection with prescriptions.

An entity conducting a audit shall provide the pharmacy with a written report of the audit and comply with the following requirements:

  1. The report must be given the pharmacy within 60 calendar days after the audit is completed.
  2. A pharmacy is given 30 calendar days following receipt of the preliminary audit report to respond to the findings of the report.
  3. A final audit report is to be given the pharmacy no later than 90 days after completion of the audit.
  4. The final audit report may be delivered electronically.
  5. A pharmacy may not be subject to a charge-back or recoupment of a clerical or record-keeping error in a required document unless the error resulted in over-payment to the pharmacy.
  6. An auditor may not recoup or collect penalties from a pharmacy until the time to file an appeal has passed.
  7. If an identified discrepancy in an audit exceeds $25,000, future payment to the pharmacy in excess of that amount may be withheld pending adjudication of an appeal.
  8. No interest may accrue during the audit period.

A pharmacy may appeal a final audit report in accordance with procedures established by the entity conducting the audit.

Prior to conducting business in West Virginia, a pharmacy benefits manager or auditing entity shall register with the Insurance Commission, and pay a fee as determined by the Commission.