Emerging PBM Audits: Prescription Drug Events (PDEs), Eligibility, and Clinical Audits

By Lynn Stauffer & Derek Frye
Thu, Jun, 22, 2017

Changes in Medicare regulations and other shifts in the regulatory landscape are creating a need for more specialized types of PBM audits. We discuss three of these emerging PBM audit types in this post: PDE Audits, Eligibility Audits, and Clinical Audits.

PBM Audits: Prescription Drug Events (PDE)

Medicare Advantage (MA) and standalone Prescription Drug Plans (PDPs) plans typically submit prescription drug claims bi-weekly to CMS, which uses the data to reimburse plans, project future cost sharing amounts, and identify which plans need a CMS audit. Medicare plans must constantly update this data to ensure accuracy. If CMS thinks the data is not accurate or valid, the agency can deny paying future claims and revoke payment for previously paid claims.

Over the years, Medicare plans have become savvier at improving the accuracy of their PDE data. But new emphasis that CMS is placing in several areas related to PDE reporting is starting to worry many Medicare plans. As a result, more are starting to weigh the importance of conducting PBM audits on PDEs.

A key area of concern involves how CMS uses PDE data submitted by plans for its annual financial reconciliation processes. This is increasingly important because of recent CMS changes to important Medicare drug benefit thresholds (Initial Coverage Limits or ICLs, Medicare coverage gap or donut hole, manufacturer gap discount calculations, and catastrophic limits). Also, CMS is auditing the financial records of one-third of all Medicare Advantage organizations each year – and will be putting special emphasis on PDE records. Based on comments CMS made in its 2016 annual Call Letter, there is a possibility that CMS, starting in 2017, will start to levy Civil Money Penalties (CMPs) against plans that submit poor PDE records or that perform poorly in the one-third financial audits.

PBM Audits: Eligibility

Member eligibility for benefits is the cornerstone of PBM claims processing. Because all claims that process or fail to process tie back to eligibility, it’s important to ensure that eligibility records are correctly maintained and updated. An eligibility PBM audit is designed to make sure each prescription claim processes within the correct plan the member signed up for; ensure that all claims processed fall within the timeframe in which the member is benefit-eligible; and ensure that the PBM maintains a correct, updated record of eligibility parameters.

Our eligibility PBM audits typically uncover problems in how eligibility file information is “translated” between the health plan and the PBM because each may have different data indicators (i.e., a member eligible for a “Gold Plan” requires different group codes and other indicators compared with members in a lower level plan but the codes aren’t captured properly).

A good eligibility PBM audit will show a list of claims that processed outside eligibility limits, as well as costs associated with these – for both the plan and the member. This information can be used to recover monies from the PBM or request operational and performance improvements.

PBM Audits: Clinical

Sometimes also called Utilization Management (UM) reviews, clinical PBM audits allow health plans to address therapeutic appropriateness, over- and underutilization of drugs, dosages, duration of treatment, drug duplications, contraindicated treatments, and adverse drug reactions. Such reviews further help health plans manage costs and steer patients toward more cost-effective and/or safer drug decision-making.

Even though PBMs should be applying the correct UM edits on prescription drug claims, they often fail to do so, meaning clients end up paying more than they should, and patients get exposed to potential safety issues. Our clinical PBM audits consistently reveal problems with PBMs NOT applying Prior Authorizations (PAs) the way health plan clients intended, largely because of inadequate documentation processes (with many “lost” in email threads). Considering that a single missed PA on a specialty drug can cost a plan thousands or tens of thousands of dollars, conducting clinical PBM audits can be beneficial.

Following a clinical PBM audit that reveals problem areas, a health plan can go back to the PBM and clarify which UM tools (prior authorizations, quantity limits, and step therapy) they want to apply against certain drugs on formulary.

Under Medicare Part D, plans are required to submit all UM edits to CMS for review and approval and adhere to their formulary rules as submitted previously to CMS. CMS scrutinizes formulary administration and how UM rules are applied during plan audits, especially regarding transition fill requirements. Plans must also submit monthly and/or quarterly formulary files to CMS. So, performing clinical PBM audits is a good way to ensure you are complying with CMS requirements and avoid possible enforcement actions by the agency.

No matter how large or small your health plan, or how much experience you have with PBMs, conducting these types of PBM audits will help improve your pharmacy operations, ensure compliance, maximize future negotiating leverage with PBMs, enhance member and beneficiary levels of service, and boost your bottom line.