Audit Best Practices: Tips for Prioritizing PBM Audits

By Derek Frye
Mon, Sep, 16, 2019

Given the many types of PBM audits that are available to benefit health plans, figuring out how to plan and schedule these can be challenging. It is simply not feasible from an operational or resource issue to conduct many PBM audits at once. A PBM audit best practice is to start with audits that are most likely to yield the greatest return, and to stagger different PBM audits out over a period of several years.

If such language is not in your PBM contract already, one audit best practice is to revise it to include a clause giving you the right to hire an outside, independent auditor to periodically conduct PBM audits.

If your plan has never done PBM audits before, another audit best practice is to first focus on PBM rebates because these will likely yield the greatest financial returns. PBM rebate audits should be conducted annually.

Download The Health Plan's Guide to Auditing PBM Contracts: Update for the 2019-2020 CMS Audit Season 

Another audit best practice is to make sure your PBM rebate audits cover a full calendar year period. Given PBM reporting lag times, it is best to wait to do the audit at least 180 days after the end of the last quarter you wish to have audited. So, to audit your PBM rebates for calendar year 2018, you will want to start your PBM audit in 3Q 2019. Because every PBM is different, another PBM audit best practice is to work with your auditor regarding timing for notifying your PBM of your intention to conduct an audit.

Even if you don’t believe there’s a need to pay for a full PBM audit of manufacturer rebate contracts, retaining a specialized PBM consulting firm can help you verify that your traditional PBM rebate guarantees are met each quarter. These firms do this by comparing your claims data and product status against information in the same subscription database that PBMs use (Medi-Span).

To help you determine which PBM audit to do when, determine where you are in your current PBM contract cycle. In general, PBM audits that are not rebate- or price-related can be staggered out and performed every other year. If you have a new PBM, you may want to prioritize doing a benefit audit first. That’s because transition years are often fraught with more PBM errors, exposing your plan to compliance risks.

Another PBM audit best practice: if your plan has little or no oversight over PBM fraud waste and abuse (FWA) programs, then consider prioritizing a pharmacy fraud waste and abuse audit.

Download The Health Plan's Guide to Auditing PBM Contracts: Update for the 2019-2020 CMS Audit Season 

For Medicare plans, highly-targeted PBM audits can be a crucial component of your overall risk assessment strategy. Every year, CMS requires Medicare plans to develop a risk assessment plan. (This is likely done by your compliance department, but might be owned by your internal audit department.) CMS mandates that all First-Tier Downstream and Related Entities (FDRs) be listed and a risk category assigned to each. Individual subject matter experts in your health plan should provide key input to the risk plan so you can determine which vendors pose the highest risks. Those with high or medium risk should be audited relative to the functions they perform and relative to the Medicare Managed Care Manual sections they’re performing against (whether compliance focused like chapter 13 or 18, or operational areas they must comply with such as chapters 7 and 16).

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