Pharmacy Fraud Waste and Abuse (FWA) Audits: Protecting the Integrity of the Benefit

By Serah Greenwalt & Derek Frye
Thu, Jun, 15, 2017

Conducting a pharmacy fraud waste and abuse audit of your PBM is an effective strategy for preserving the integrity of the pharmacy benefit, avoiding monetary losses, and protecting members from potentially serious and costly harm.

Statistics show that abuse of opioids, including many common prescription painkillers, has reached almost epidemic proportions in the United States. The Centers for Disease Control and Prevention (CDC) reported that the number of drug-overdose related deaths in the US had reached an all-time high of more than 50,000 in 2015, driven largely by increasing abuse of prescription opioids. Of the more than 20 million Americans who abused substances in 2015, about 10%, or 2 million, had a disorder involving prescription pain killers, according to the American Society of Addiction Medicine.

It’s not just individuals with addiction problems who game the system. There are also unscrupulous physicians and pharmacies that commit fraud to make money. For example, fraudulent prescription compounding occurs when a pharmacy combines two relatively low-cost drug products – and then tacks on a huge markup – to the total drug dispensing invoice before submitting the claim. With specialty drugs costing so much these days, these kinds of unjustified markups are too big to ignore.

Here’s why health plans should consider doing a pharmacy fraud waste and abuse audit:

  • Although PBMs have fraud alert systems and processes and procedures in place, they are slow to react to emerging threats, such as when a dispensing pharmacy “compounds” two low-cost drugs and puts a huge markup on the bill. Wide scale abuses of this kind that occurred several years ago involving the drugs lidocaine and gabapentin went largely unnoticed by the PBMs, causing health plans to hemorrhage dollars.
  • PBM fraud alert systems often fail to account for specific at-risk patient populations. For example, patients known to have had substance abuse problems may be placed in a case management program. But PBMs often fail to flag these individuals in their system and case managers may simply rubber stamp controlled substance claims that come through. We observed one case in Florida where 500 prescriptions for Vicodin were prescribed for one patient over a period of several months, and the PBM didn’t catch it.
  • Some regions of the country are notorious for having high levels of pharmacy fraud waste and abuse. If you plan has operations in Florida, Chicago, New Jersey, New York City, or Texas, you should conduct FWA audits.
  • Medicare Advantage plans are required to do pharmacy fraud waste and abuse monitoring. During a CMS audit, failure to show appropriate levels of monitoring and data reporting can result in health plans being cited for deficiencies in these areas, which could lead to sanctions and penalties.

Here are tips for health plans that conduct their own pharmacy fraud waste and abuse audits:

  • Request a pharmacy audit department report from your PBM on a quarterly basis.
  • Require your PBM to audit a certain percentage of your pharmacy network providers annually. You can stipulate this in your PBM contract.
  • Ask the PBM for proof of their pharmacy audit reports and get clarity on which elements they audited for.
  • Large plans can often request monthly calls with the PBM’s pharmacy audit department to discuss what their audits are finding, if there are any unusual trends being spotted, and what the PBM is doing to address these.

There are advantages to hiring an outside firm with pharmacy fraud waste and abuse auditing experience:

  • Each PBM has different processes at their audit departments, with some more rigorous than others. An outside firm that has worked with PBMs would know the strengths and weaknesses of each PBM, and, therefore, know what information to ask for in-depth. These may include how the PBM does prescriber verifications and how it conducts pharmacy invoice selection and review.
  • An outside firm that has done lots of pharmacy fraud waste and abuse audits will have seen trends in the market, will know what specific measures to look at, and can take this information back to the PBM.

In an era of rapidly increasing drug costs combined with growing addition problems, FWA audits of your PBM can play a key role in saving money and protecting the health and safety of your members.

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