Small, independent pharmacies like mine have survived many economic downturns—including the Great Recession—and have adapted to technology and the changing needs of our customers. But we face a formidable foe in the large pharmacy benefit management companies (PBMs) that manage prescription drug benefits for more than 215 million Americans. PBMs manage prescription insurance claims, and pharmacies of all sizes must enter into contracts with them in order to serve patients.
This arrangement is workable so long as there is a level playing field. But the large PBMs are increasingly bullying the mom-and-pop operations to secure larger profits for themselves.
Audits are a major problem area. Audits of pharmacy claims are, of course, a good business practice and necessary to fight fraud. We fully support the process—but it is a problem when audits are used by the large PBMs to bully a small firm out of legitimate profits.
Right now, there are no uniform auditing standards, so pharmacies are subject to whatever “rules” a PBM sets up. Because the PBMs keep the money they recover from a denied claim, they have a strong financial incentive to deny every claim.
Additionally, they frequently pay auditors based on a commission structure, adding an additional incentive to invalidate prescriptions for technical, non-substantive, and typographical errors.
This game of “gotcha” played by the PBMs encourages auditors to start with the assumption that all claims should be invalidated. Then, they search for technicalities to use as a basis for denying claims in every audit.
As a result of abusive audits, pharmacies are required to spend excessive amounts of time documenting each pharmacy claim and surviving the audits. This is time that would be much better spent on patient counseling and care.
To make matters worse, if an auditor finds that a prescription I dispensed was not done according to the rules set forth by the PBM, I am required to pay the PBM for the entire cost of the drug—not just the profit we make from dispensing the drug. I was recently audited by a PBM and was required to pay back $629 for a drug that I dispensed. The reason? I misspelled the name of the prescribing physician. My margin on this one transaction was only $23, yet I was required to pay back $629 to the PBM.
We have no power to appeal these decisions or to force the PBMs to play fair.
So, for relief, we are asking our state legislators to support state Sen. Curren Price’s bill to establish fair standards for pharmacy audits and prevent claims from being denied based on minor technicalities. SB1195 maintains the right of a PBM to audit the claims of pharmacies to identify fraud and invalid prescriptions, but takes away the incentive for the PBMs to deny as many claims as possible. It brings fairness to the audit process.
This legislation is pro-small business, pro-patient, and will not cost taxpayers a dime. It deserves the full support of the Legislature.
Odette Leonelli is the owner and Pharmacist in Charge of in Redondo Beach.