Steps to Reduce the Risk of a PBM Audit - WellSky

Steps to Reduce the Risk of a PBM Audit Jeffrey S. Baird, Esq, Chairman of the Health Care Group, Brown & Fortunato, P.C.

Hosted by WellSky & Brown & Fortunato, P.C.

WellSky

• Formerly known as Mediware, specializing in home care solutions for HME, home infusion, and specialty pharmacy providers

• CareTend- software specifically designed for home infusion and specialty pharmacy workflows

Brown & Fortunato, P.C.

• The firm’s Health Care Group has 17 attorneys

• The Health Care Group represents pharmacies, DME suppliers, hospitals, infusion companies, labs, home health agencies, manufacturers, distributors, and other providers located throughout the U.S.

• Areas of representation include advice on fraud and abuse issues, review of marketing arrangements, joint ventures, mergers, acquisitions, audits, and advice on day-to-day regulatory issues

• The Health Care Group works closely with federal and state regulatory agencies

Jeffrey S. Baird, Esq.

• Chairman, Health Care Group, Brown & Fortunato, P.C.

• Board Certified in Health Law

• Medtrade Education Advisory Board

• AAHomecare Regulatory Council

Introduction

Introduction

•What is a PBM?

-A Pharmacy Benefit Manager, also known as a PBM, is a third party administrator contracted by health plans, employers, unions and government entities to manage prescription drug programs.

Introduction

•What does a PBM do?

-PBMs process claims from patients and pharmacies, perform utilization review and formulary management functions, handle customer service issues, develop and manage provider networks, conduct sales and marketing campaigns, and negotiate rates between pharmacies and drug manufacturers. PBMs also facilitate mail order and specialty drug dispensing services.

Introduction

•Relationship between PBM and Pharmacy

-A PBM acts as a fiscal intermediary between insurers/payors and pharmacies. The PBM’s mission is to help control the cost of drug coverage through the PBM’s network of pharmacies, benefit-specific utilization management programs, and formularies (a formulary is a list of drugs able to be prescribed by a physician for use by a plan’s participants).

Introduction

•What is a PSAO?-Pharmacy Service Administration Organizations, also known as PSAOs, provide

services intended to achieve administrative efficiencies, including contract and payment efficiencies for independent pharmacies and third-party payors/PBMs. PSAOs provide individual pharmacies with negotiating representation, assistance with applications into PBM and insurance networks, centralized claims payment, and sometimes enter into contracts with PBMs and insurance networks on behalf of pharmacies.

Introduction

•There is an old saying: “Possession is 9/10ths of the law.”

• This saying applies to PBMs. At the end of the day, the PBM “possesses the pharmacy’s money.”

Introduction• Most, if not all, PBM contracts give the PBM the right to terminate its contract with

the pharmacy with…or without…cause.

• “With cause” can include (i) misrepresentations by the pharmacy to the PBM in e.g., a recredentialing questionnaire, (ii) failure by the pharmacy to adhere to the requirements imposed by the PBM on its member pharmacies, and (iii) breach by the pharmacy of terms of the PBM contract.

• “Without cause” means exactly what it says. If the PBM simply “does not like what the pharmacy is doing,” then the PBM can terminate the contract.

PBM Recredentialing

PBM Recredentialing

•PBMs and payors must validate the credentials of pharmacies to ensure they are in good standing with state and federal laws and meet quality performance standards. Under the current approach, PBMs collect data from their network pharmacies using batch spreadsheets and questionnaires, as well as confirming they meet requirements through internal checks.

PBM Recredentialing

•PBMs will recredential pharmacies every year or couple of years, depending on the PBM, to ensure each pharmacy meets the PBM’s participation requirements.

PBM Recredentialing

•Many PBMs have recently adopted new recredentialing processes specifically for compounding pharmacies. The questionnaire asks new, specific questions of compounding pharmacies, that cover various aspects of the pharmacy’s business. The new recredentialing process also requires the pharmacy to maintain and submit Policies and Procedures relating to various aspects of pharmacy operations and billing practices, such as kickback issues, billing processes, and USP <795> compliance.

PBM Recredentialing

•Additionally, the recredentialing application inquires about (i) the use of pharmacy marketing representatives, (ii) the use of W-2 employees vs. 1099 independent contractors, (iii) central fill relationships, (iv) pre-printed prescription pads. , (v) reduction or waiver of copayments, (vi) out-of-state licensure, (vii) extent of the pharmacy’s mail-order business, and (viii) extent of the pharmacy’s compounding.

Recredentialing Questionnaire: Examples of Questions

Questions Pertaining to Mail Order

•Does your pharmacy fill prescription claims under multiple NCPDPs?

•Does your pharmacy hold a license in more than one state?

• Is your pharmacy a retail walk-in pharmacy that services the general public?

• Is your pharmacy a closed door pharmacy?

• Is 25% or more of your pharmacy business mail order?


• Is your pharmacy licensed to fill prescriptions for Medicare Part D long term care providers in multiple states?

• Is your pharmacy licensed to fill prescriptions for Medicare Part D home infusion providers in multiple states?

• Is your pharmacy open for walk-in service 24 hours a day?


•Does your pharmacy offer emergency prescription services after hours?

•Does your pharmacy have a drive-through?

• Does your pharmacy offer a delivery service?

• Is your pharmacy less than or equal to ¼ mile walking distance from public transportation?


• Is your pharmacy accessible by public transportation that charges set fares, runs on fixed routes, and is available to the public?

• Does your pharmacy offer patient consultation?


• Indicate the percentage of Rx volume in each of the following settings: Open Door/Retail/Community __%; Closed Door/Clinic Facility __%; Mail Order __%; Nursing Home/LTC __%; Internet Pharmacy __%; Other __%

•Does the owner/pharmacist-in-charge currently hold any non-resident state licenses? If so, please submit a copy.


•Does your pharmacy deliver prescriptions to out-of-state customers? If yes, identify states where your pharmacy serves customers and provide out-of-state pharmacy licenses.

Polling Question

•Has your pharmacy ever had to provide information to a PBM regarding whether your pharmacy mails prescription drugs to patients?-Yes

-No

-Don’t know

Questions Pertaining to Compounding

•Does your pharmacy participate in complex compounding?

• Is your pharmacy registered/affiliated with a compounding supplier?

• Does our pharmacy have a dedicated lab/area for compounding?


•Does your pharmacy have dedicated technicians for compounding only?

• Does your pharmacy have any of the following compound equipment: unguator, hot plate, homogenizer, ointment mill, tube sealer, capsule filling system?


•Does your pharmacy anticipate filling more than 10% of retail claims as non-sterile compounds?

• What types of compounds does your pharmacy make or anticipate making: topical analgesics, hormone replacement therapy, sterile compounds, scar cream, other?


• Indicate the percentage income derived from: Medicaid __%; Medicare __%; Workers Comp __%; 340B __%; Compounds __%; Dispensing Physician __%

•Does your pharmacy provide sterile compounding medications? If yes, please provide the most current certification document (e.g., PCAB, air flow hood/HEPA filtration, etc.).


•Does your pharmacy provide compound product samples to physicians?

•Does your pharmacy provide compounding services for or through any other entities (i.e., providing compounding services through other pharmacies or directly to physicians for dispensing)?


•Does your pharmacy compound investigational/non-FDA approved compounds?

Questions Pertaining to Copayments

•Does your pharmacy ever waive or offer a reduction of member copayments? If yes, please provide a copy of your written policy relating to the waiver/reduction of copayments.

Questions Pertaining to Marketing

•Does your pharmacy contract with or employ a sales force? If yes, please describe the activities of the sales force.

Questions Pertaining to Affiliated Pharmacies

• Is your pharmacy directly or indirectly affiliated with any other pharmacies?

•List the identity of any person who has a direct or indirect ownership interest in your pharmacy.

• Do any of the pharmacy owners have a direct or indirect ownership interest in any other pharmacy?


•Have any of the owners, members, principals, officers or directors of your pharmacy owned any other pharmacies? If yes, please attach a list of the pharmacies, their NCPDP numbers, and the names of the owners, entity members, principals, officers and directors.


•Has your pharmacy ever changed names? If yes, please attach a list of the previous names, NCPDP numbers, if different, and the dates of the name changes.

•Has your pharmacy ever undergone a change in ownership? If yes, please provide a list of the previous owners' names, ownership dates, and NCPDP numbers, if different.

Questions Pertaining to Disciplinary Actions

•Has your pharmacy (or another pharmacy affiliated with your pharmacy) been disciplined by a State Board of Pharmacy, government entity or any other regulatory authority (i.e., State or Federal DEA or State Medicaid Program)? If yes, please attach explanation of action taken, Board order letter, and any other supporting documents from the State Board of Pharmacy, government entity, or other regulatory authority.


•Have any of your pharmacists, pharmacy technicians, owners or employees been disciplined by the State Board of Pharmacy, a government entity, or any other regulatory authority (i.e., State or Federal DEA or State Medicaid Program) in the last 10 years?


•Presently, or at any time in the last 10 years, has your pharmacy, its owners, principals, or any of your pharmacists been the subject of a civil lawsuit or criminal prosecution involving fraud, receipt, deception, or a similar offense involving moral turpitude?

Questions Pertaining to Legal Compliance

•Does your pharmacy use or provide pre-printed prescription forms for any of your compound preparations?

•Does any person with prescriptive authority have a direct or indirect financial interest in your pharmacy? A "financial interest" includes, but is not limited to, any direct ownership, ownership by an immediate family member (spouse, child, etc.), paid consulting relationship, waged or salaried employment relationship.


• Identify the names of all primary and secondary wholesalers/suppliers that service your pharmacy. Provide a copy of the most recent invoices from each wholesaler/supplier.

•Do you have a policy in place for setting your usual and customary price?


•Does your pharmacy have a central fill or shared services arrangement with any other pharmacy or facility? If yes, provide the corresponding licenses and identify all pharmacies/facilities with which your pharmacy has such a relationship.

•Does the sum of your Average Wholesale Price (AWP) for specialty claims exceed 50% of the sum of your AWP for all prescriptions?

Certification

• I certify that each answer on this Questionnaire is true and correct.

• I agree to notify [Name of PBM] immediately in writing in the event of a change in the information provided which would make any part of the Questionnaire untrue or inaccurate. I understand that failure to do so will be considered a breach of my Provider Agreement and could result in disciplinary action including, but not limited to, immediate termination of my Provider Agreement.

Certification

• I give [Name of PBM], and its designers, permission to contact any individual, company, organization, etc., including state and federal licensing agencies, as may be necessary to verify the information submitted herein and to ask questions about disciplinary actions, the pharmacy's license, or any pharmacist licensed, employed by or dispensing prescriptions at the pharmacy.

Certification

• I certify that training, which meets the CMS requirement for fraud, waste and compliance training, has been conducted within 90 days of hire and annually thereafter for all employees and other persons who administer or deliver the Medicare Part D benefit.

Goal of a PBM Audit

Goal of PBM Audit

•PBMs typically audit pharmacies in order to detect any improper payment by the PBM on behalf of the plan or consumer and to verify that the patient received the correct medication in the appropriate dose. PBMs will also conduct an audit on a pharmacy to verify that contracts are being adhered to.

Incorporation of Outside Documents

Incorporation of Outside Documents

•A challenge to pharmacies is the incorporation of the PBM’s policy manuals into its contracts. The manuals can end up having the same importance as the contracts. Compounding is one area of health care that is often outlined in PBM policy manuals. Due to unfamiliarity with compounding policies, a pharmacy can inadvertently violate its contract with the PBM. To ensure policies are being followed, contracts usually give the PBM the authority to conduct an audit.

Notice of Audit

Notice of Audit

•An audit usually starts by the pharmacy receiving a letter from the PBM indicating that an audit is scheduled. PBMs can conduct field/on-site audits performed at the pharmacy and involve physical observations, prescription reviews, and checks for compliance with Medicare Part D regulations. Audits by telephone are usually used to correct claim billing for a small number of claims. Desk/mail audits use automated means to review pharmacy claims and encounter data received by the PBM.

Preparing for an Audit


•The pharmacy should understand what its contract with the PBM says.

• If the PBM contract incorporates outside documents (e.g., policy manuals), then the pharmacy should understand what the outside documents say.

•The pharmacy should determine if its operations comply with the contract and outside documents.


• The pharmacy should review its previously submitted questionnaires to the PBM so that the pharmacy will know what it has represented to the PBM.

• The pharmacy should understand what the “hot button” issues are for the PBM. Examples include:

- Extent of pharmacy’s mail-order business

- Extent of pharmacy’s compounding

-Whether the pharmacy has out-of-state pharmacy licenses

- Pharmacy’s policy towards reducing or waiving copayments

-Whether the pharmacy markets through W2 employees or 1099 independent contractors


•The pharmacy should conduct limited self-audits throughout the year. Each audit will be “limited” in the sense that it will focus on a specific aspect of the pharmacy’s operation.

•Once a year, the pharmacy should hire an outside consultant to conduct a full audit of the pharmacy’s operations to determine if they are in compliance with the law in general and with the PBM contracts in particular.

Audit Response Protocol

Audit Response Protocol

•The pharmacy should adopt a formal protocol to respond to an audit. Specifically:

-Employees who open mail should be alerted to look for any envelope from a PBM.

-Employees who answer the phone should be alerted to look for phone calls from PBMs.

-When an employee is alerted to the possible existence of a PBM audit, he/she should immediately notify pharmacy management.

Responding to a Audit


• The pharmacy should consult with a health care attorney who has experience with PBMs. The attorney should (i) guide the pharmacy in responding to the audit and (ii) approve any documents that the pharmacy submits to the PBM.

• The pharmacy’s approach should be “let’s resolve the problem” as opposed to “let’s win the argument.”

- It is highly unlikely that the PBM will back down and concede to the pharmacy.

-On the other hand, unless the facts are egregious, there is a reasonable possibility that the PBM will agree to an amicable resolution.


• It is important that the pharmacy meet the deadlines imposed by the PBM. The PBM will likely agree to a reasonable request for a deadline extension.

• It is equally important that the information submitted by the pharmacy be complete and accurate.

Responding to a Questionnaire

Responding to Questionnaire

•Every year or two, the PBM will require the pharmacy to complete and submit a questionnaire.

•The questionnaire will be lengthy and will require the pharmacy to provide detailed information.

•Examples of information requested include:


-The pharmacy’s policy on collection of copayments and, perhaps more importantly, the pharmacy’s history of collecting copayments. The pharmacy is legally and contractually required to make a reasonable effort to collect copayments. The pharmacy cannot routinely reduce or waive copayments.


-Whether the pharmacy is marketing through 1099 independent contractors or W2 employees. If the pharmacy is paying commissions to 1099 independent contractors who are generating government program patients for the pharmacy, then the federal anti-kickback statute will be violated. If the pharmacy is paying commissions to 1099 independent contracts who are only generating non-government program patients for the pharmacy, then while the federal anti-kickback statute will not be implicated, applicable state anti-kickback statutes may be violated. On the other hand, payment of commissions to bona fide W2 employees is acceptable.


- The extent to which the pharmacy is engaged in mail-order. If the pharmacy is in the PBM’s retail network, then the contract between the pharmacy and PBM will restrict the extent to which the pharmacy can engage in mail order. It is important that the pharmacy answer the “mail order” questions accurately . . . even if doing so jeopardizes the pharmacy’s ability to be in the retail network. If the pharmacy represents that it engages in less mail order than what it actually engages in, then the PBM will likely eventually find out about it . . . in which case the pharmacy runs the risk of contract termination and recoupment. If the pharmacy’s contract with the PBM is terminated, then there is the possibility that the pharmacy will be required to report the termination to other PBMs.


-The extent to which the pharmacy is engaged in compounding. Over the last several years, PBMs have been “burned” by pharmacies that have compounded pain and scar creams and have billed PBMs exorbitant fees for the creams. As such, PBMS are placing restrictions on the extent of compounding that retail network pharmacies can engage in. It is important that the pharmacy accurately disclose the extent to which it engages in compounding.


-The extent to which the pharmacy, or owner of the pharmacy, is affiliated with other pharmacies. The reason the PBM is asking questions about “affiliated” pharmacies is to determine if the owner of the pharmacy (that is answering the questionnaire) is trying to “stay one step ahead of the posse” by opening up new pharmacies that are added to the PBM’s retail network . . . and are engaging in large scale mail order and/or compounding.


- Information regarding out-of-state pharmacy licenses issued to the pharmacy. Out-of-state pharmacy licenses suggest that the pharmacy is engaged in mail order.

Polling Question

•Has your pharmacy ever been audited or investigated by a PBM?-Yes

-No

-Don’t know

Reasons for Termination by the PBM

Reasons for Termination by PBM

•Pharmacy is engaged in mail-order-Many PBMs have their own mail-order pharmacy.

- PBMs do not like their contract retail pharmacies to compete with the PBMs’ mail-order pharmacies.

-Most recredentialing questionnaires inquire about the extent of the pharmacy’s mail-order business. If the pharmacy discloses information that it is engaged in mail-order beyond a certain threshold, then the PBM may decide to terminate the contract.

- Or if the PBM finds out (through other means) that the pharmacy is engaged in mail-order beyond a certain threshold, then the PBM may decide to terminate the contract.


•Pharmacy is engaged in compounding- TRICARE and PBMs have been “burned” by some compounding pharmacies.

- For several years, a number of compounding pharmacies contracted with marketing/lead generation companies (“LGCs”) to generate patients who wanted compounded pain and scar creams.

- The compounding pharmacies would dispense the pain/scar creams and bill the PBMs an exorbitant amount per month/per patient for the creams.

- The commercial insurers (that were footing the bills) came down on the PBMs.

- In turn, PBMs do not want their contract retail pharmacies to be engaged in compounding in a meaningful way.


-Most recredentialing questionnaires inquire about the extent of the pharmacy’s compounding. If the pharmacy discloses information that it is engaged in compounding beyond a certain threshold, then the PBM may decide to terminate the contract.

-Or if the PBM finds out (through other means) that the pharmacy is engaged in compounding beyond a certain threshold, then the PBM may decide to terminate the contract.


•Pharmacy is routinely waiving copayments

-Federal law, most state laws, and most PBM contracts require the pharmacy to “take reasonable steps” to collect copayments.

-Pharmacies are prohibited from routinely waiving copayments.

-A pharmacy can waive copayments, on a patient-by-patient basis, if the patient submits financial information justifying the waiver.


-A pharmacy cannot advertise, or otherwise let a patient know in advance, that the pharmacy might waive the copayment if the patient submits financial information justifying the waiver.

-Rather, when the pharmacy delivers the drug, it should tell the patient what his/her copayment is…and request payment.

-Only if the patient responds by saying that he/she does not have the ability to pay the copayment can the pharmacy suggest to the patient that he/she complete a financial hardship waiver form.


-After reviewing the completed financial hardship waiver form, if the pharmacy concludes that the patient cannot pay the copayment, then the pharmacy can waive it.

-The pharmacy needs to avoid sham (i) copayment assistance programs and (ii) “insurance” programs.

-As part of the recredentialing process, the PBM may ask the pharmacy to provide information and documents that pertain to the collection of copayments by the pharmacy. If the information/documents provided by the pharmacy indicate that the pharmacy is routinely waiving copayments, then the PBM may decide to terminate the contract.


•Pharmacy markets through 1099 independent contractors-The federal anti-kickback statute (“AKS”) states that a pharmacy cannot “give anything

of value” to a person/entity in exchange for the person/entity referring (or arranging for the referral of) patients to the pharmacy who are covered by a federal government health care program.

-Each state has an anti-kickback statute that essentially says the same thing as the AKS. Some state anti-kickback statutes apply only when the payor is the state Medicaid program. Other state anti-kickback statutes apply even if the payor is a commercial insurer or a cash-paying patient.


- If a pharmacy pays percentage compensation to a 1099 independent contractor (individual sales rep or LGC) that arranges for the referral of government health care program patients to the pharmacy, then the AKS is implicated…and an applicable state anti-kickback statute may be implicated.

-As part of the recredentialing process, the PBM may ask the pharmacy to provide information and documents pertaining to the use by the pharmacy of 1099 independent contractors for marketing. If the information/documents provided by the pharmacy indicate that the pharmacy is paying commissions to 1099 independent contractors, then the PBM may decide to terminate the contract.

Response to PBM Termination Letter


•The first thing that the pharmacy needs to realize is that it and the PBM have unequal bargaining positions.

•Specifically, the PBM (i) “possesses the pharmacy’s money” and (ii) has an unlimited capacity to litigate with the pharmacy.


• If the pharmacy sues the PBM, or threatens to sue, then the PBM will not be fazed.

•The approach that has the best chance of being successful is for the pharmacy to contact the PBM in order to “work the problem.”

•The termination letter will likely give a reason for the termination. The pharmacy should attempt to work with the PBM to address – and resolve – that “reason.”


• If the pharmacy is unsuccessful at resolving the termination “at the lower level,” then the pharmacy’s attorney should reach out to one of the PBM’s in-house attorneys.

PBM Termination Letter (Mail Order)


• "Retail pharmacies in [Name of PBM]’s pharmacy network are not permitted to deliver prescription drugs, durable medical equipment or prescribed diabetic supplies through mail delivery services, such as the U.S. Postal Service, UPS, DHL, Federal Express or similar national, regional or local common carriers.”


• "Pursuant to Section __ of the [Provider] Agreement, 'Mail Order Pharmacy Services are explicitly excluded from [the Provider] Agreement.' Retail pharmacies are only permitted to distribute prescription drugs, durable medical equipment or prescribed diabetic supplies to [Name of PBM] members through customer pick-up or same delivery."


• "Upon a review of claims submitted by [Name of Pharmacy] to [Name of PBM], it appears that [Name of Pharmacy] is currently providing mail-order pharmacy services, which constitutes a material breach of [Section __ ] of the Provider Agreement.“

• "Therefore, [Name of PBM] is terminating the [Provider] Agreement pursuant to Section __ of [Provider] Agreement because [Name of Pharmacy] provided mail-order pharmacy services in violation of the [Provider] Agreement."


• “[Name of PBM] is providing [Name of Pharmacy] with the opportunity to cure this material breach by executing and returning the enclosed attestation within 30 calendar days from the date of receipt of this notice. If [Name of PBM] does not receive the executed Attestation within this time period, [Name of PBM] will terminate the Agreement effective _______."

Attestation Requested by PBM (Mail Order)


•The following is language from an attestation that a PBM required from the pharmacy that received the termination letter contained in the preceding slides:


- "The pharmacy reiterates its agreement that it will not ship any prescription drugs, durable medical equipment or prescribed diabetic supplies by U.S. Mail, Federal Express, DHL, UPS or similar national, regional or local carrier.“

- "The pharmacy understands that the Pharmacy Provider Agreement permits it to provide same day home delivery to [Name of PBM] members residing in [Name of State].“

- "If the pharmacy violates any of the representations in this attestation, the pharmacy agrees that any such violation constitutes grounds for immediate termination pursuant to Section __ of the [Provider] Agreement."

PBM Termination Letter (Compounding)


• “[Name of PBM] has made enhancements to its network participation criteria regarding compound Prescription Drug Services thresholds for pharmacies participating in [Name of PBM]’s pharmacy networks.”

• “Your pharmacy has been identified as currently processing compound Prescription Drug Services that exceed ten (10%) percent, which does not comply with [Name of PBM]’s network participation criteria.”


• “This letter serves as notice that [Name of PBM] is invoking its right to terminate [Name of Pharmacy] from [Name of PBM]’s pharmacy networks. Pursuant to [Section __ of the Provider Agreement (“Agreement”)] between [Name of PBM] and [Name of Pharmacy]. [Name of PBM] has elected to terminate the Agreement effective ____.”


• “If your pharmacy believes its dispensing practices for compound Prescription Drug Service complies with [Name of PBM]’s criteria described above and you wish to appeal your pharmacy’s termination, please submit a written appeal to the attention of the Pharmacy Network Contracting Department within 30 calendar days or as otherwise required by law from the date of this letter….[Name of PBM] will review your request and provide a response to your pharmacy based on its determination.”

Cease and Desist Letter From PBM (Contacting Insurer)


• “In accordance with the [Name of PBM] Network Provider Manual and Section __ of the [Name of PBM] Pharmacy Provider Agreement (collectively, the “Agreement”), this letter constitutes notice by [Name of PBM] of [Name of Pharmacy]’s breach of the Agreement.”

• “[Name of PBM] learned that [Name of Pharmacy] has been contacting [Name of Insurer] directly with questions and concerns.”


• “As part of its Agreement to participate in [Name of PBM] networks, [Name of Pharmacy] agreed to the terms and conditions of the Agreement, including [Section __ ], which states: [Name of Pharmacy] hereby agrees…that it shall not engage in any conduct or communications, including, but not limited to, contacting any media or a Sponsor and/or a Sponsor’s Members or other party without the prior consent of [Name of PBM]….”


• “Based on the foregoing…[Name of PBM] hereby demands that [Name of Pharmacy] cease and desist with all communication to any and all Sponsors.”

Rescission of Termination Letter (Mail Order)


• “[Name of PBM] has completed its review of the information provided as part of the [Date] appeal hearing regarding the decision to terminate [Name of Pharmacy] for cause from participation in all of [Name of PBM]’s, provider networks.”


• “Please be advised that after discussion and deliberation, [Name of PBM] hereby rescinds its original decision to terminate [Name of Pharmacy] for cause from all [Name of PBM] provider networks conditioned on [Name of Pharmacy]’s acceptance of the following probationary conditions and Corrective Action Requirements:


- [Name of Pharmacy] is required to re-evaluate [its] internal procedures to ensure compliance with the [Name of PBM] mailing prohibition restrictions and update all applicable policies and procedures [that include] proof of the remediation effort.

- [Name of Pharmacy] agrees to comply with the terms and conditions of the Agreement and Provider Manual.

- [Name of Pharmacy] will need to respond in writing with an understanding of the mailing prohibition and the compliance with state laws….”


• “If [Name of Pharmacy] fails to agree or comply or is found in violation at a later time, [Name of Pharmacy] will be subject to termination from all [Name of PBM] provider networks for no less than five (5) years.”

Information Request From PBM (Mail Order)


• “In [Name of Pharmacy]’s application, dated _____, [Name of Pharmacy] requested to be contracted with [Name of PBM] as a Retail Provider. The Provider Agreement defines a Retail Provider as: …a pharmacy that primarily fills and sells prescriptions via a retail, storefront location, is determined by [Name of PBM] to fulfill a [Name of PBM] business need with respect to participation in its retail networks…shall not include mail-order, specialty, home infusion, dispensing physician, or internet pharmacies….”


• “[Name of PBM] requests that [Name of Pharmacy] supply [Name of PBM] with a written attestation stating that [Name of Pharmacy] will comply with all aspects of [Name of PBM]’s defined criteria….”

• “At a minimum, [Name of Pharmacy]’s attestation must contain the following:


- [Name of Pharmacy]’s statement that it will not mail, ship, send or otherwise transport prescriptions to [Name of PBM] members [that] are greater than 50 miles from the pharmacy.

-A list of each of [Name of Pharmacy]’s non-resident pharmacy licenses.

-A list of all pharmacies that share, in whole or in part, any ownership with [Name of Pharmacy].

-A list of any and all discipline received by [Name of Pharmacy], owners and any other pharmacy with shared ownership.”

Polling Question

•Has your pharmacy ever received a termination letter from a PBM?-Yes

-No

-Don’t know

Litigation Against PBMs

Litigation Against PBMs•Park Irmat Drug Corp. v. Express Scripts, et al, Case No. 17-cv-00979 (E.D. Mo.), filed in March 2017.

-Pharmacy complaint against Express Scripts over alleged actions by Express Scripts and PBM co-conspirators to suppress competition by independent pharmacies that desire to provide mail-order pharmacy services. The pharmacy alleges that the defendant’s conduct (i) violates the Sherman Act, (ii) constitutes a breach of contract and (iii) violates certain states’ any willing provider laws.


-The complaint claims that Irmat had disclosed to Express Scripts in a July 2015 recredentialing application that 65% of its business was its mail-order pharmacy operations. The complaint alleges that a month later, Express Scripts renewed Irmat’s credentials to be in the Express Scripts pharmacy networks and, based on that approval, Irmat invested millions of dollars in its nationwide mail-order business. The complaint alleges that in May 2016, Express Scripts sent Irmat a cease-and-desist letter and officially terminated the contract two months later.


-The Court dismissed the case for failure to state a claim:

• Irmat failed to show a conspiracy between PBMs in violation of the Sherman Act.

• Irmat failed to show a breach of contract because the contract required Irmat to be a “retail provider,” which precluded it from engaging in mail-order services.

•Express Scripts and other PBMs do not come within the reach of the states’ “any willing provider” laws


•Boss v. CVS Health Corp., Case No. 3:17-cv-01823 (D.N.J.), filed March 2017. Lawsuit is ongoing.

-Class action lawsuit against leading drug manufacturers and PBMs alleging collusion to fix prices for insulin, leading to skyrocketing costs and windfall profits for the PBMs.


•The plaintiffs allege that the PBMs used their role as gatekeepers between health plans and drug manufacturers to steer plans toward certain drugs, such as insulin treatments used by individuals with diabetes. The drug manufacturers then allegedly upsurge retail prices on those drugs and share excess profits with the PBMs through their rebate system. The plaintiffs claim that such actions are responsible for price increases of more than 150% in the insulin treatments sold by manufacturers.


-Motion to dismiss is before the court

-Case was consolidated with two other cases into In re Insulin Pricing Litigation, Case No. 3:17-cv-00699, and just recently unconsolidated on 11/7/2018


•Precision Rx Compounding LLC et al., v. Express Scripts Holding Co. et al., case number 4:16-cv-00069 (E.D. Mo.), filed in January 2016.

-Pharmacies sued Express Scripts in January 2016, accusing it and other PBMs of cutting the compounding pharmacies from the market in violation of federal and state antitrust laws, the Florida Deceptive and Unfair Trade Practices Act and other statutes and causing more than $100 million in damages.

https://www.law360.com/cases/569980d61da9fb5192000001


- In August 2016, a Missouri federal court denied Express Scripts’ motion to dismiss the antitrust lawsuit, stating that the pharmacies sufficiently supported their contention that Express Scripts worked together with other PBMs toward ending insurance coverage for the compounded drugs provided by the pharmacies.


-The pharmacies alleged that Express Scripts started requiring prior authorizations for prescriptions, which were mostly rejected, and sent inaccurate information to patients and physicians in the hope of cutting the amount it paid to the smaller pharmacies by 95%. Customers were then allegedly (i) diverted to specialty pharmacies where Express Scripts holds a financial stake or (ii) forced to rely on regularly available drugs.


-The parties attended an ADR conference on 11/1/2018 and achieved a settlement. Settlement to be completed on or before 2/1/19.


•Anthem v. Express Scripts, Inc., Case No. 1:16-cv-2048 (S.D.N.Y.), filed March 2016. Lawsuit is ongoing.

-Anthem accused Express Scripts of breaching its management services agreement by charging inflated prices and refusing to renegotiate in good faith. Among the several additional claims, Anthem said Express Scripts did not properly comply with regulations set out by CMS regarding Medicare Part D claims. Anthem is seeking around $15 billion in damages.


-Anthem’s suit stems from a contractually mandated periodic pricing review conducted by a third party, which concluded that Express Scripts had exceeded the competitive benchmark by $3 billion annually, or $13 billion over the remainder of the 10-year contract with Anthem, and $1.8 billion for the post-termination transition. Under the contract, Express Scripts would serve as the sole provider of pharmacy benefit management services for Anthem's health insurance plans from 2009 through 2019.


-Express Scripts counterclaimed that Anthem breached the contract because it did not negotiate in good faith, as required by the contract, and it breached the implied covenant of good faith and fair dealing. Additionally, Express Scripts counterclaimed that Anthem was unjustly enriched.

-The Court granted Anthem’s motion to dismiss Express Scripts’ counterclaims for unjust enrichment and breach of the implied covenant of good faith and fair dealing.

- Lawsuit is ongoing.


•United States ex rel. DiMattia et al. v. Medco Health Solutions, Inc., Case No. 13-1285 (D.Del.), filed July 24, 2013.

-The United States alleged that Medco (now part of Express Scripts) violated the False Claims Act. In particular, the United States alleged that Medco solicited remuneration from AstraZeneca in exchange for identifying Nexium as the “sole and exclusive” proton pump inhibitor on certain of Medco’s prescription drug lists. As a result of this deal, Medco allegedly received reduced prices on AstraZeneca drugs: Prilosec, Toprol XL and Plendil. Medco settled the case in May 2015 and agreed to pay $7.9 million to resolve the kickback allegations.


•Albert's Pharmacy, Inc. et al v. Catamaran Corporation, Civ. No. 3:15-cv-00290-UN2 (M.D. Pa.), filed February 2015. Lawsuit is ongoing.

-55 independent pharmacies sued Catamaran, alleging that Catamaran inflated patient costs while simultaneously underpaying pharmacies. Specifically, the pharmacies argue that Catamaran set rates below cost, made pricing data inaccessible, did not update data, and provided no transparency on how drugs rebates are applied. As a result of Catamaran’s alleged practices, the pharmacies contend that their business and continued delivery of patient care are at risk.


-Motion to Dismiss and to Compel Arbitration against 28 of 29 plaintiffs due to arbitration clauses contained in their contracts

-Remaining plaintiff is Lakeview Pharmacy of Racine.


• In re EpiPen ERISA Litigation (Klein et al v. Prime Therapeutics, LLC et al), Case No. 0:17-cv-01884 (D. MN.). Lawsuit is ongoing.- Class action lawsuit against Prime Therapeutics, Express Scripts, and CVS Health on behalf of

EpiPen purchasers with ERISA health plans for contributing to EpiPen price inflation by negotiating for rebates for the PBMs and breaching their fiduciary duty to plan members

- Complaint alleges that PBMs, despite a fiduciary duty to negotiate lower prices, have negotiated increased prices combined with higher rebates, and that the PBMs have kept portions of the increased rebates as profit, while the overall price of EpiPens for consumers is higher. At the same time, the complaint alleges the PBMs stopped covering EpiPen competitors.


-The complaint also alleges that the PBMs’ conduct has caused EpiPen deductible payments to increase by nearly 1600% and EpiPen coinsurance payments to increase by more than 1500%

-Defendant PBMs filed a Motion to Dismiss and the court dismissed Plaintiffs’ claims of self-dealing, but did not dismiss their claims for breach of fiduciary duty


•Kimberly A. Negron v. Cigna, Case No. 3:16-cv-01702 (D. CT). Lawsuit is ongoing.

-Class action lawsuit alleging that Cigna engaged in a scheme to defraud ERISA patients in violation of ERISA and RICO.

-Complaint alleges that Cigna required network pharmacies to charge insured patients unauthorized and excessive amounts, sometimes more than 10 times the actual amount that Cigna pays the pharmacies for such drugs. The complaint also alleges that Cigna then clawed back the excessive payments.


•HM Compounding Services, LLC v. Express Scripts, Inc., Case No. 4:14-cv-01858 (E.D. Mo.)

-HMC alleged Express Scripts wrongly terminated a provider agreement and conspired with other PBMs in violation of the Sherman Act, ERISA, and New York’s antitrust, any willing provider, and deceptive trade practices laws.

-HMC argued that the scheme’s purpose was to exclude HMC and other independent compounding pharmacies from the pharmacy services and prescription drug market, thereby reducing competition in that market in order to drive patients to Express Scripts and other PBMs.


-Express Scripts, Inc. counterclaimed for breach of contract, arguing that HMC did not collect contractually-required copayments from patients.

-Judge put antitrust claims on hold and went forward with breach of contract claims.

-The parties settled the case on 11/13/2018.

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• CareTend: Complete business management software for home infusion, specialty pharmacy, and HME

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Questions?

For more information contact:

Jeffrey S. Baird, Esq.

Brown & Fortunato, [email protected]

WellSky11711 W 79th St., Lenexa, KS 66214 855-WellSky wellsky.com

mailto:[email protected]

Steps to Reduce the Risk of a PBM Audit - WellSky

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