HB 259-PHARMACY AUDITS 3:30:14 PM CHAIR OLSON announced that the next order of business would be HOUSE BILL NO. 259, "An Act establishing procedures and guidelines for auditing pharmacy records; and providing for an effective date." 3:31:04 PM REPRESENTATIVE JOHNSON made a motion to adopt the proposed committee substitute (CS), for HB 259, labeled 27LS0675\E, Martin, 4/9/12, as the working document. CHAIR OLSON objected for purpose of discussion. 3:31:25 PM KONRAD JACKSON, Staff, Representative Kurt Olson, Alaska State Legislature, explained the changes in the proposed committee substitute (CS), Version E of HB 259. He stated that Version E contains some minor changes from Version D. He referred to page 2, lines 6-8, which deleted the language from Version D, related to the 75 prescription cap and the error rate of 10 percent. He explained that concern was raised that 75 prescriptions was an insufficient number when auditing larger pharmacies. He further explained that a new cap was not established and the committee could consider the appropriate number of prescriptions for audits. 3:32:43 PM MR. JACKSON referred to the next change in the proposed CS, Version E, which relates to language removed on page 2, lines 10-12 of Version D. He explained language was deleted after "submitted" which read, "...unless a longer time period is specified in a contract between the pharmacist and the insurer, managed care company, hospital or medical service corporation, third-party payor, or pharmacy benefits manager." This change would mean that unless a longer time period was specified in a contract the audit of a claim would need to occur within two years - which essentially restores this paragraph to the language in the original bill. He related that concern was expressed that some possibility exists that unilateral changes could go from two years to a lengthier timeframe which would totally defeat the purpose of paragraph (4). 3:33:32 PM MR. JACKSON referred to paragraph (10), to page 2, line 27, which changes the preliminary audit delivery timeframe from 60 days to 120 days. He explained that to balance this change a new paragraph was added that reads, "The interest may not accrue during that time period." Thus from the time the audit is completed to whenever the preliminary audit report is delivered interest will not be accruing. He stated this change seems to provide balance for the pharmacists' concern that interest was accruing while the PBMs and auditors review and develop the preliminary report. 3:34:20 PM MR. JACKSON stated the next change inserts language that was in the original bill with some minor changes to paragraph (11), as follows: to the extent that an audit finds clerical or record keeping errors in a required document or record, the pharmacy may not be subject to recoupment unless there is proof of intent to commit fraud or the clerical or record keeping error results in actual financial harm to an insurer, managed care company, hospital or medical services corporation, third-party payor, pharmacy benefits manager, or a customer. MR. JACKSON explained that this goes back to paragraph (6) of the original bill relating to scrivener's errors. He highlighted that it was felt that a typographical error would not rise to level of requiring any compensation. 3:35:44 PM MR. JACKSON referred to a new paragraph adding the restriction on confidential information obtained during an audit from being used for marketing. He recalled previous testimony by pharmacists, in which pharmacists stated that after an audit a number of their clients would later receive solicitations from mail order pharmacies. He explained that this did not seem quite fair since confidential patient information exists and access to that information for audit purposes is appropriate, but not for marketing purposes. 3:36:43 PM MR. JACKSON stated the next change inserts a new paragraph [3] limiting subsequent audits to not less than 90 days following an audit. 3:36:50 PM REPRESENTATIVE SADDLER asked for the reference to the mail order solicitations. MR. JACKSON referred to page 3, lines [25-26]. 3:37:19 PM MR. JACKSON restated the change in paragraph (3), which prohibits subsequent audits within 90 days following an audit in which errors were not found. He stated that "error" does not mean a clerical or record keeping error. He pointed out that fraud auditors would not be limited to the 90-day period if significant errors or an attempt to commit fraud was discovered. He reiterated if significant problems were discovered in an audit that it seems reasonable for the PBM or auditor to conduct another audit. 3:37:53 PM MR. JACKSON pointed out the final change would change the effective date to January 1, 2013, instead of the fiscal year listed in Version D. 3:38:14 PM CHAIR OLSON offered to allow the committee time to digest the changes. 3:38:36 PM MR. JACKSON referred to page 3, lines 27-29 to subsection 19 (b), which specifies an exemption for criminal investigation or investigation or audit by a governmental agency. He suggested that the committee may wish to consider including schools or municipalities. He restated this may be a further consideration the committee may wish to ponder. [HB 259 was held over.]