Average Wholesale Prices (AWPs), Maximum Allowable Charges (MACs), generics versus brands, dispensing and administrative fees: the terms form an alphabet soup of acronyms against which various percentage discount formulas are then applied in your PBM contract. Then the formulas are applied against literally millions of individual pharmacy transactions.
No wonder, then, that pharmacy audits are the most common discretionary PBM audit conducted by or on behalf of health plans. A PBM audit of pharmacy transactions involves a thorough review and analysis of the discounts applied from AWP (or whatever pricing source is negotiated in the contract), as well as pharmacy dispensing fees (charged to you by the pharmacy, and paid first by your PBM) on a per claim or aggregate basis. This type of PBM audit is done to determine if all drug pricing and discount guarantees as stated in the PBM contract have been achieved for the health plan.
The constantly changing drug prices, high volume of transactions, and potential for calculation errors make PBM audits of pharmacy transactions a necessary option for most health plans. Pharmacy spending is the second-highest line item financial outlay health plans make each month – exceeded only by medical claims. And pharmacy as a percentage of total medical spend has increased because of costly specialty drugs. So, health plans have a fiduciary duty to conduct these types of PBM audits to make sure they are not leaving money on the table.
Also, there can be a lot of ambiguity in PBM contracts that can result in different interpretations of certain terms. That can lead to the wrong discounts and pricing being applied. Even terms as seemingly straightforward as brand-name versus generic discounts, or pharmacy network performance guarantees, or compound claims, may not always be clear cut. If you are not an expert in writing PBM contracts, then you have probably unknowingly negotiated terms that work in the PBM’s favor – not yours.
To recap, the benefits of doing PBM audits of pharmacy transactions include:
Here are additional insights and tips for health plans regarding PBM audits of pharmacy transactions:
PBM audits of pharmacy transactions are about more than collecting monies health plans may be owed by your PBM. These also identify contractual deficiencies and performance problems so plans can correct them.
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