Rx Audits Are Vital to Fiduciary Duty

Are There Red Flags in Your PBM Contract?

Any behind-the-scenes business practices of Pharmacy Benefit Managers (PBMs) can put Group Health Plan (GHP) sponsors and their executives in ever-greater legal jeopardy. The recent tightening of legal and regulatory requirements directly targets increasing transparency in PBM operations.

The bottom line is that GHPs need to review existing and new contracts and negotiate (insist on) certain changes.

• The No Surprises Act in the Consolidated Appropriations Act (CAA) of 2021 adds new legal and regulatory requirements to the longstanding transparency rules under the ACA and fiduciary requirements under ERISA. These have significant implications for Pharmacy Benefit Plans.

We’ve often seen restrictive non-disclosure language in agreements when auditing pharmacy plans and medical plans. They impede required oversight, often accompany gag and rebate-retention clauses, and compromise transparency. If you haven’t already, it’s essential to review your PBM contract and have them removed.

Once PBM business practices are unmasked, independent Rx audits offered by firms like ours at TFG Partners are essential to conduct legally required oversight and ensure compliance. Giving us full access allows us to check for compliance, and we offer perspective on plan performance and suggest areas for improvement.

Reduce Fiduciary Liability from PBM Contracts

Pharmacy plan sponsors have significant and increasing fiduciary duties and legal obligations to keep costs reasonable and all actions in the best interest of PBM plan members. In addition, ERISA has a personal liability provision covering individual fiduciaries along with the plan sponsor—the No Surprises Act of 2021, which includes provisions about cost transparency in addition to ERISA’s fiduciary requirements.

• Protect the interests of plan participants
• Reduce the chance of lawsuits and regulatory penalties
• Safeguard your company or organization’s reputation

The law requires plans to proactively monitor PBMs to justify costs, ensure members’ best interests are served, and that fees are reasonable. Therefore, PBMs must be transparent in disclosing all fees to allow for effective and required oversight of pharmacy claim audits to occur.

Monitoring PBM Business Practices is Now Required

Pharmacy claim audits are an essential part of the CAA’s monitoring requirements. Plan sponsors must now conduct routinely scheduled audits and performance reviews. One of the best and most effective ways to do it is with our cost-effective continuous monitoring service. It keeps audit software running in the background and allows us to provide you with easy to read reporting and insights. We catch mistakes in real-time, check for compliance issues, give you data on plan performance, and suggest improvements.

Avoiding the myriad penalties and legal liabilities for non-compliance are excellent reasons to consider continuous monitoring, but it’s good for your bottom line apart from those. The price of our services is customarily well below the savings your plan will realize as we flag errors and suggest system improvements. It’s a win-win for cost containment and regulatory compliance.

Member Fiduciary Breach Lawsuits are a New Concern

One of the newest legal developments affecting group health and plans is class-action fiduciary breach lawsuits brought on behalf of members. Therefore, active PBM oversight, including claim audits, is essential to ensure that costs are justified and participants’ interests are prioritized.

In the unfortunate event of a lawsuit, frequent audits or continuous monitoring provide data to help build a legal defense—and they demonstrate that your plan takes its oversight responsibilities seriously and is consistent and diligent in its efforts.

Your Formulary and Promised Discounts, Rebates, and Costs

On the financial and cost containment side of the equation, auditing pharmacy claims is always advantageous for GHPs. We double-check to ensure the rules are followed and proper credits are made.

• Discounts: Are all discount performance guarantees met as promised in your contract, and not compromised by hidden exclusions, offsets or other reclassifications or hidden calculations that effectively increase member co-pays and/or the total cost of your plan.
• Rebates: Are the promised rebates properly credited to your account in full (not reduced by PBM skimming)? Claim audits can provide the answer.
• Your formulary: Are generics being dispensed instead of name brands when available? Double-checking your PBM’s work is a natural part of claim auditing.
• Your realistic costs: Finally, benchmarking the cost of your medications against more realistic standards such as CMS’s National Average Drug Acquisition Costs (NADAC), a standard of costs based on what retail pharmacies actually pay and get reimbursed can help identify outliers, so you can notify PBM’s if there are excessive payment concerns.

At TFG Partners, we pioneered the 100-percent audit method, which replaced random sample audits, ushering in an era of greater accuracy and value in claim reviews.

 

 

Pharmacy Claim Audits and Your Fiduciary Duty

If you haven’t already, review your PBM contract to ensure it and the related operations are fully transparent. Once you have done this, begin the ongoing and proactive review the law now requires, which will include frequent claims audits or our recommended continuous monitoring of Rx claim payments.

Proactive oversight with administrative and legal support is essential to keeping your GHP and its pharmacy benefit program running cost-effectively and within the spirit of the law. A well-run plan benefits its sponsor and members equally and avoids legal and regulatory headaches.