SB 217-PHARMACY AUDITS  2:20:34 PM CHAIR EGAN announced consideration of SB 217. DANA OWEN, staff to the Senate Labor and Commerce Committee, sponsor of SB 217, said the issue of pharmacy audits has been brought forward numerous times by local pharmacists, and an identical bill was introduced into the other body. He said Alaskan pharmacists are being bombarded with audits from the pharmacy benefits management companies (PBM), insurance companies and other state health care providers. SB 217 attempts to standardize the audit process in order to allow pharmacists to spend less time on paperwork and focus more time on patient health. Additionally, this legislation seeks to bring fairness to the unregulated and expanding practices of pharmacy audits by ending abusive practices that have harassed and harmed pharmacy businesses. While audits are necessary and even a welcome part of a good business practice, pharmacy audits have become unduly burdensome and, in many cases, predatory. So acute has this problem become that national companies have been formed to help pharmacists with audits recover millions of dollars of inappropriate audit charge backs. SB 217 will ease the burden on pharmacists by requiring uniform common sense standards and criteria for all pharmacy audits, requiring written notice of at least two weeks before an on-site pharmacy audit, requiring that an on-site audit not interfere with the health care services being provided by pharmacists by banning audits during the first seven calendar days of each month when patient volume is highest unless the pharmacy and auditor agree otherwise. MR. OWEN said that SB 217 will further eliminate the highly questionable practice of extrapolation as justification for taking back claim money. It will eliminate the unfair take back of money in cases of simple typographical errors when no financial harm has occurred to the plan's sponsor, the PBM or the patient. It will further require that audits involving clinical or professional judgment be conducted by or in consultation with a pharmacist licensed in the state. For small pharmacies, especially, audit practices that have become common are much more than mere nuisances. The time and money lost can threaten the very viability of these businesses, and SB 217 seeks to bring fairness and predictability back to the practice of pharmacy audits. SENATOR PASKVAN moved to bring SB 217, version 27-LS1411\A, before the committee for discussion purposes. CHAIR EGAN objected. 2:25:44 PM MARGARET SODEN, Alaska Pharmacists Association, said she is mostly retired as a community pharmacist in Fairbanks. She supported SB 217. When she started being a pharmacist 45 years ago, most patients paid cash for their prescriptions. Now the majority of prescriptions are billed to third parties and along with that has come audits of prescription records. SB 217 just brings some standardization and fairness into the audit process. The provisions of this bill allow pharmacists time to comply with this audit request but cause less disruption to patient care that pharmacies provide every day. 2:26:43 PM BARRY CHRISTENSEN, Co-Chair, Legislative Committee, Alaska Pharmacists Association, Ketchikan, supported SB 217. He said their members work hard every day in retail pharmacies, hospitals, nursing homes and medical clinic settings throughout the state. This legislation would help create a level playing field for pharmacists when dealing with pharmacy audits. Their membership has made this their number one legislative priority. They support the needs for audits to ensure that fraud, waste and abusive activities are checked, but they must be conducted in a fair and balanced manner allowing for a fair appeal and payment for all services performed within the patient's benefit structure. He said pharmacies generally contract with PBMs in order to fill and bill for consumers as part of the health benefit plan. PBMs are names like Express Scripts, Medco and Caremark. Nearly all prescriptions are filled electronically in real time. That is, the pharmacy sends prescription information to the PBM and in turn it sends back authorization for payment and other clinical edits of concern like high dose warnings, drug interactions et cetera. Pharmacies are reimbursed back for the cost of medication plus a dispensing fee that covers the pharmacy's cost of doing business. Typically, either the PBM or an entity contracted by the PBM will perform audits on contracted pharmacies to legitimately protect against fraud and abuse. MR. CHRISTENSEN said it has been suggested by some that pharmacies should be able to contractually deal with their auditing concerns directly with a PBM, but most Alaskan pharmacists have never been able to alter the terms of the contract given to them except for the dispensing fees. It is usually a take it or leave it offer. That is why they are asking for some standardization in auditing practices to be applicable to all plans and pharmacies in the state. 2:30:25 PM DIRK WHITE, Vice Chairman, Board of Pharmacy, Sitka, said he also serves on the Legislative Committee for the Alaska Pharmacists Association. He supported SB 217. At their February meeting they voted unanimous support for the House bill on this issue. He said the audits are onerous and emphasized that there are no errors on these prescriptions. They are valid prescriptions, and the patient has received it from their physician and brought it to the pharmacist who has filled it; it has been legally transposed and complies with the patient, pharmacist and physician triad working together to improve the health of the patient. He said the PBMs, on their own, have come up with arbitrary reasons for bringing these errors up, and a lot of times it's fishing expeditions for more money for them. It doesn't apply just to pharmaceuticals; he and his wife, who works with him as a pharmacist (and providing durable medical equipment), received a bench audit for information on two wheel chairs from 2008. One of them was $3,500 and the other was $3,800. These prescriptions came from a physician; they measured and got the wheel chair; the patients received the wheel chair and they received wonderful benefit from them. Now if he cannot produce all the paperwork that the PBM wants, they will take that money back. It may very well close down that portion of his business because they made only about $500 on each one of those wheel chairs. SENATOR PASKVAN asked if there is any regulation or control on how much of the savings is passed on to the employer/consumer when they negotiate prices. How transparent is that? MR. WHITE said he didn't know if any of that money even goes back to the insurance companies. It's not transparent to him. SENATOR GIESSEL asked how many other states have these kinds of sidebars on an audit process. MR. WHITE replied 15 other states. SENATOR MENARD said she personally thought two weeks' notice before the audit is too little time and asked what other states are doing. MR. WHITE answered that he was speculating, because this is model legislation that came from the National Community Pharmacy Association. He would think that it's fairly similar. He agreed with her. CHAIR EGAN said he assumed it's no time now. MR. WHITE responded that they generally try to give some notice; it could be an hour or two. SENATOR MENARD asked him to clarify what happens if the prescription is for 30 pills but at some point you give 31 because a person might traveling or something. MR. WHITE replied that they might have been talking more about the number of days' supply. A pharmacist may put it down as a 31 day supply or the physician has written a prescription for just a 30 day supply and the patient has asked for more because he would be gone longer. In that case, he would call the physician and explain and ask for an extra week or so. For whatever reason the PBMs might not like that. SENATOR MENARD thanked him for that clarification. She missed the step that the physician is directing him that he may add one or two pills. MR. WHITE said taking it upon himself to do that would be a violation of the Board's rules and regulations. 2:37:08 PM CINDY LAUBACHER, Senior Director of Government Affairs, Medco Health Solutions, opposed SB 217. She said Medco is one of the PBMs they have been hearing about this afternoon. They currently manage the pharmacy benefit for approximately 20 percent of the residents of Alaska. They are here today because they have a responsibility to their clients who rely on them to protect them from fraud, waste and abuse that may occur within the pharmacy network they contract with Medco to use. The auditing of prescription claim reimbursement is a necessary component of participation in that prescription drug program. Their plan sponsors, which include labor unions, health plans, state and federal governments require them to perform a number of services including monitoring of prescription claim reimbursements, conducting audits of prescription claims and the recovery of overpayments to the pharmacy by the plan's sponsor. She said they are required to audit not only to the State Board of Pharmacy rules but also to the plan requirements. That includes Medicare Part B and maybe 30 other clients. Their pharmacy audit program focuses on a number of activities including on-site and desk audits, patient and physician analysis of Medicare Part B claims and claims analysis to identify potentially aberrant trends. Their clients demand that they minimize the number prescriptions claims that are inaccurate, involve fraud, waste or abuse or are not in accordance with plan requirements. An effective audit program helps to protect the financial integrity of the pharmacy network by identifying those claims that resulted in overpayments and recovering overcharges where appropriate. She emphasized, "When we recover, we're recovering on behalf our clients; the money doesn't go to us. This is money owed to our clients." SENATOR MENARD asked if they act like a collection agency or do they have to pay someone to go through that process. MS. LAUBACHER replied that their auditors are internal and the auditors are paid pursuant to the contract as set forth by the client. SENATOR PASKVAN asked what percentage of the audits uncover fraud. MS. LAUBACHER replied that she would have to get a number for him, but it is a big problem in the Medicaid business. They have a pharmacy network of some 58,000 pharmacies and do quarterly analyses to look for trends. 2:41:23 PM SENATOR PASKVAN said he understood this to be draft legislation that has been adopted by a national organization and assumed that this language does not violate Medicare or Medicaid standards. MS. LAUBACHER didn't agree. The rules under Medicare and Medicaid are much different than what this allows for. This would restrict how far back they can look, but they can go back 10 years for Medicare. This bill doesn't exempt Medicare and Medicaid yet, but it probably will because of that. SENATOR PASKVAN asked if state law can overrule the federal standard of Medicare and Medicaid. MR. LAUBACHER answered no. There are typically exemptions in the law for Medicare and Medicaid, but even if there weren't they would argue a claim involving Medicaid or Medicare would not be subject to this statute. 2:43:29 PM SENATOR GIESSEL said the sidebars of the audit seem quite reasonable. Certainly, pharmacies are incredibly busy the first seven days of a month and asked what specifically wouldn't work for Medco. MR. LAUBACHER replied that the problem with the timeframe is that lots of states are restricting the time for audits. That reduces the amount of time they have to go into all pharmacies by about a week. The amount of notice has to do with preventing fraud. They have had instances where they notify someone that they're coming in to do an audit, and the "bad actors" disappear or cover up by making changes in the "scrips." She wasn't saying that happened in the State of Alaska, however. 2:45:36 PM SCOTT WATTS, owner, Ron's Apothecary Shop, Juneau, said he supported SB 217. He explained that contracts they sign with the PBMs are "pretty much take it or leave it." This bill levels the playing field so they can't be taken advantage of by these audits. CHAIR EGAN said that concluded public testimony on SB 217 for today and that it would be held.