PBM rebate potential has been growing rapidly due to increased utilization of specialty and other high-price brand drugs. In fact, billions of PBM rebate dollars are at stake each year for health plans, their clients, and, ultimately, members. From a financial standpoint, it is more imperative than ever that health plans audit their PBM rebates to ensure they are recouping the dollar amounts they are entitled to.
For Medicare Advantage plans, auditing the PBM rebate process is a must to ensure accurate reporting to CMS and regulatory compliance. Although some plans administer this process themselves, most plans have the PBM manage this for them. But if the PBM makes mistakes (as often happens), plans are potentially on the hook for CMS compliance actions, including stiff fines and penalties.
For Medicare and Medicaid plans that have Safe Harbor protection for PBM rebates, CMS has proposed changes in point-of-sale (POS) rules so that a portion of PBM rebates benefit consumers directly. The added layer of complexity in introducing this element is expected to increase errors in PBM rebate reporting and calculations.
Given how rapidly market dynamics change, and the complexity of the ever-shifting calculations involved, the best strategy is to audit your PBM rebates. If you hire an outside auditing team, make sure they have the right experience and expertise. The auditor should preferably have worked previously in a PBM rebate department and have a detailed understanding of PBM rebates and PBM financials.
Financial Implications of PBM Rebate Audits
A PBM contractual or guarantee rebate audit is the most commonly performed type of audit of PBM rebates. A majority of health plans with 50,000 lives or more conduct these regularly. Smaller health plans can also benefit, given the high dollar amounts often involved. PBM rebate audits are cost-effective because they can generally be done without a team having to go on site, provided the right financial and other data is provided for analysis.
In 2018, we conducted 31 audits involving all of the major PBMs in which we reviewed hundreds of millions of dollars in PBM rebates paid to health plans. Here is what we learned:
Here are the most common operational problems we identify during audits that result in errors and incorrect PBM rebate amounts being paid to health plans:
Based on what we learned from our 2018 audits, here are some questions health plans should ask their PBMs to get clarity on which claims are considered rebate-eligible.
*The federal 340B Drug Discount Program requires drug manufacturers to sell outpatient drug products to a select group of “safety net” hospitals and other qualifying healthcare facilities and programs at a discounted price. Organizations that qualify for the discounts are called “covered entities.” The discounted price cannot be higher than the net price paid by Medicaid, after rebates, for the same products.
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