Pharmacy Audit Overview

Audits by insurance companies, PBMs and third-party payers are a major threat to the practice and business of pharmacy. Too often, the on-site audit is simply a mechanism to recoup thousands of dollars, frequently from small independent pharmacies.

Once an insurance company or PBM has conducted an on-site audit, it typically notifies the pharmacy that it will recoup money by taking out payments from future money due. Many pharmacies give up a reimbursement just to continue the “privilege” of doing business with their tormentor.

It is imperative that you take steps to prevent audits, understand your rights under Texas law, voice opposition to unlawful audits and appeal any demands for recoupment. 

Types of Audits

Field/On-Site Audits
Field/On-site Audits are performed at the pharmacy and involve physical observations, prescription reviews, inventory, and checks for compliance with Medicare Part D regulations and procedures. The pharmacy usually receives advance notice, but in some rare instances they can be unannounced, such as for Medicaid. Such audits generally cover claims from the previous 12- 18 months and provide you with a range of prescriptions to have readily available beforehand.

Purchase Verification
Purchase Verification Audits review the amounts and NDCs of medications that are submitted by pharmacies from wholesale receipts. They are investigational type audits and are conducted in accordance with Third Party Payer agreements.

Investigational Audit
A pharmacy usually contacted by phone or mail and asked to provide photocopies of specific documents and records related to claims paid to pharmacy during a specified period. Documentation may include copies of original prescriptions, signature logs, computer records, and invoices showing purchase or receipt of dispensed medications. These can be as simple as comparing NDCs ordered versus those dispensed to a complex investigation about prescriber, member or potentially pharmacy fraud.

Desk/Mail Audits
Desk/Mail Audits use automated means to review pharmacy claims and encounter data received by the plan or PBM. This type of audit requires the pharmacy to locate prescription records and send them to the PBM. It is set up to evaluate prescribing patterns, physician referral patterns, utilization overrides, ingredient cost integrity, geographic prescribing reports, payment reports, and billed issues to identify possible abusive or fraudulent activity.

Prescriber/Member Audits
Prescriber Audits have specific claim information submitted by the pharmacy and is then thoroughly verified by a prescriber/physician to ensure that each party’s records coincide. It is essentially handled the same as a Desk/Mail Audit.
Member Audits are similar to the Prescriber Audit with the exception that the corresponding claims are verified with the patient/customer verification. It is essentially handled the same as a Desk/Mail Audit.

Telephone Audits
The pharmacy is contacted by the PBM usually to correct claim billing on a single or small number of claims. It is not used for large volumes of claims. Failure to comply with a telephone audit will normally result in the PBM reversing the claim and could lead to a desk or on-site audit.