How PBMs use audits to inflate profits and intimidate independent pharmacies

A PBM makes $12,470 without providing any inventory, without counseling any patients, without interfacing with any healthcare professional on behalf of the patient and without fielding a single phone call regarding the medications prescribed.

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Under the auspices of combating fraud, waste and abuse (FWA), the Center for Medicare Services (CMS) allows Pharmacy Benefit Managers (PBMs) to conduct audits of pharmacies that allow the PBM to deduct future payments owed for mistakes found during the period audited. Some independent pharmacy owners say the rules governing the audits are unfair, and the audits themselves are used to punish pharmacy owners that are outspoken about industry practices and who are only trying to do right by their patients.

In one example recently recounted to ScriptRXed, an independent pharmacy was subjected to an audit that focused on expensive insulin products and other name brand medications. Upon completion of the audit, no fraud was found, but the PBM cited clerical errors – like failing to properly document the substitution of Humalog for Novalog on an insulin prescription – as violations (the substitution was confirmed with the doctor, it just wasn’t documented to the PBMs standards).

The penalty? A whopping $8,200 chargeback for eight original prescriptions, plus their related refills. The total profit earned by the pharmacy for all patients on all plans during the time period being audited?


The $8,200 chargeback seems especially hard to swallow when you consider the following:

The PBM already makes a “spread”, or margin, on the drugs. This is the amount of money between what the pharmacy is paid by the PBM and what the end user pays the PBM. This margin is rarely disclosed – even to the payer – but in this case our source says the average margin on these brand named prescriptions was $10 each. That’s $170 the PBM was already paid. In addition to this margin, the PBM also receives a 50% rebate from the manufacturer, which, coincidentally, was the reason the pharmacy switched the NovoLog to Humalog in the first place – because the the insulin brand not offering the rebate wasn’t on the PBM’s formulary, which means the PBM won’t pay for it.

Here’s the recap:

  • $170 in “spread” for processing the claims for these Rxs
  • $4,100 in rebates from the manufacturers
  • $8,200 in penalties from the pharmacy

Total received by the PBM for these eight prescriptions and their subsequent refills: $12,470. The PBM didn’t stock a drug, dispense a drug, or counsel any patient.

To add insult to injury, the PBM didn’t provide the pharmacy with the final results of the audit, nor did it give the 30 day notice the pharmacy says was required before the $8,200 deductions started.

The pharmacy says it got the bad news two weeks before Christmas. Instead of putting the $700 in profit for the prescriptions filled during the period audited toward Christmas bonuses, it would be paying out $8,200 to the PBM. The PBM had a very Merry Christmas, though, pocketing $12,470 for drugs paid for and dispensed to the patient by the pharmacy.

The taxpayers got a lump of coal on the deal as well – all of the prescriptions involved in the audit were written against Affordable Care Act and Medicare Part D government funded plans.


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