The warning letter is softer in tone and educates recipients about the existence of an authorized distributor network and requests that the pharmacy reviews their suppliers to confirm that they are purchasing from a secure supply chain. Letters point out that purchases made outside of the secure supply chain could mean dispensing products that are counterfeit, have been tampered with (gray market), or are not authorized for sale in the United States.
The law firm letters boldly accuse pharmacies of having an “invoice shortage” and provides spreadsheets with claims and rebate data to support their allegations. These letters threaten to harm pharmacies by withholding rebate dollars owed to PBMs and notify PBMs of the pharmacy’s “non-compliance” unless the pharmacy pays a large amount of money to make the issue “go away”.
While PAAS National® has only seen letters from LifeScan, the concept of an authorized distributor network applies to many manufacturers of OTC diabetic test strips (see list below).
Manufacturer authorized distributor lists for major diabetic test strips:
- Abbott https://www.diabetescare.abbott/support/distributors.html
- Ascensia https://www.ascensiadiabetes.com/ (click on “distributors” at the bottom of the page)
- LifeScan www.genuineonetouch.com
- Roche https://rxvp.accu-chek.com/welcome/adr_list
- Trividia HealthTM https://www.trividiahealth.com/where-to-buy/
Because diabetic test strips are classified by the FDA as OTC medical devices, they fall outside of the Drug Supply Chain Security Act (DSCSA) and there is no requirement for a “pedigree” to ensure sourced product is legitimate and not stolen, counterfeit or previously dispensed (gray market). Pharmacies should take extra care when sourcing product that is advertised at a lower cost compared to primary wholesalers. Manufacturers have developed and maintained “lists” to aid supply chain partners like pharmacies.
It is also important to understand what each of the major PBMs have to say about sourcing diabetic test strips.
- Caremark requires network pharmacies to purchase diabetic test strips from authorized distributors only
- Express Scripts requires network pharmacies to purchase diabetic test strips from authorized distributors only
- OptumRx does NOT explicitly require pharmacies to purchase test strips from authorized distributors; however, they do require that pharmacies source all products (including OTC test strips) from vendors that are both (i) licensed as a drug wholesaler in your state and (ii) an NABP accredited drug distributor.
Finally, there are two states (California and New Jersey) that have regulations pertaining to the purchase and distribution of OTC diabetic test strips.
PAAS Tips:
- Be mindful of the interplay between state pharmacy regulations, PBM contract requirements, and manufacturer distribution channels when making inventory purchase decisions – the lowest possible price may cause you to run afoul of requirements
- Contact PAAS at (608) 873-1342 or info@paasnational.com if you receive a letter from LifeScan or an affiliate law firm regarding purchases of diabetic test strips so that we can assist you in navigating a response
Medicare Part A vs Part D Billing Risks – How to Protect Your Claims
Pharmacies continue to receive PBM audit notices for claim recoupments where the [allegedly] improper Medicare coverage was billed. Medicare Part A helps cover hospital, skilled nursing facility (SNF), and hospice care stays. Medicare coverage status is typically linked to the patient’s admission and discharge dates from a Part A stay.
When a patient is covered under a Part A stay, the facility providing the stay is typically paid a per diem for the medications, supplies, and services needed during the coverage period. This means that Medicare Part D cannot (and will not) be responsible for claims billed during that time. Unfortunately, PBMs typically do not have the information at the point of sale to stop these claims from being billed inappropriately, leaving pharmacies scrambling upon retrospective review/audit.
PAAS Tips:
Changing Pharmacy Management Software? Don’t Neglect Record Retention!
When updating or changing pharmacy management software systems, pharmacies may be presented with different options to archive the files from the software they will no longer be using. While it may not seem worth the extra cost now, ensuring that you are able to retrieve appropriate data for old claims is crucial to avoiding costly audit results in the future.
Does the option you are selecting ensure you’ll be able to easily retrieve and provide copies of any required information? Prescriptions, claim data billed to the insurance, signature logs, proof of copay collection and invoice records are all items that a pharmacy would need to be able to access whenever needed. Not only for auditing purposes, but to stay within contractual record keeping requirements as well. Medicare Part D rules require all records to be retrievable for 10 years, plus the current contract year; while Commercial plans, Medicaid, state, and federal requirements can all range from 2 to 7 years.
If you can produce documentation from your old system – great! Will the details pass an audit? Ensuring that prescriptions and other documentation from an old system have all necessary elements and are not missing things like unit of measure, clinical notes, or the pickup date on a signature log is important and can save a pharmacy from having to appeal. This is also a consideration when acquiring another pharmacy’s records. Be aware of potential audit hazards with newly acquired records. Origin codes, state transfer requirements and clear links to original prescriptions should be considered during the acquisition process.
PAAS Tips:
Verify Day’s Supply on CeQur Simplicity Meal-Time Insulin Patch
CeQur SimplicityTM is a meal-time insulin patch approved for use in adult patients (over the age of 21) with Type 2 Diabetes and can replace up to 12 meal-time insulin doses. The patch delivers rapid-acting insulin in 2-unit doses through a flexible cannula by depressing two buttons, one on each side of the patch.
This patch was originally cleared by the FDA for a 3-day wear time and could replace up to 9 meal-time insulin doses. According to the manufacturer’s website, the FDA cleared an extension in mid-2024, allowing the wear time to increase from three days to four.
PAAS Tips:
Updated Form Expiration 12/31/2027 – Medicare Drug Coverage and Your Rights Notice
The CMS-10147 Form, also known as the Medicare Drug Coverage and Your Rights Notice, must be distributed to Medicare Part D beneficiaries when a prescription is not covered at the point-of-sale. This notice informs beneficiaries about their right to contact their Part D plan to request a coverage determination, including an exception. The distribution of the CMS-10147 form is a requirement for all pharmacies, including mail order, specialty and LTC. While documentation is not required confirming distribution of the CMS-10147, your pharmacy should have a policy and procedure in place addressing how and when the form is being distributed to patients. PBM field auditors have been known to ask questions about your process and may ask to see a copy of the form to ensure you have the most up-to-date version.
On 02/11/2025, CMS issued a memo to announce the availability of a renewed Medicare Drug Coverage and Your Rights (CMS-10147) “Pharmacy Notice”. While there were no major changes made to the form, the Office of Management and Budget (OMB) approved a new expiration date for OMB Control # 0938-0975. The new expiration date is 12/31/2027.
PAAS Tips:
Forteo® Package Size Update – Compendia Adjustment Expected April 1, 2025
As previously reported by PAAS National® in our December 2024 Newsline article, the FDA revised the product labeling for Forteo® (teriparatide injection) and its generics to accurately reflect the amount of drug delivered to the patient and not the overfill existing in the pen injector delivery device (from a 600 mcg/2.4 mL pen to a 560 mcg/2.24 mL pen). Despite this adjustment, the NCPDP billing quantity and unit still reflected the previous 2.4 mL measure.
Because this change was due to a label correction, the FDA is not requiring the manufacturers to change the NDC number or recall the boxes labeled as 600 mcg/2.4 mL. The manufacturers will simply relabel the products to reflect 560 mcg/2.24 mL instead. While the newly labeled products were expected to enter the marketplace in February 2025, the metric quantity is not expected to be updated in the drug data compendia until April, giving the compendia time to accurately prepare for this change.
This may cause some pharmacies confusion if they have already received the 2.24 mL labeled products but can only bill one pen as 2.4 mL. What should pharmacies do if this happens? PAAS still recommends …
you verify how your software currently bills Forteo® and its generics. Make sure that when submitting a claim, the metric quantity aligns with what is displayed in your software system’s compendia and that the correct cost for one pen is included in your transmission. Once the compendia updates the metric quantity to 2.24 mL, ensure your drug file is updated to accurately reflect your cost for one pen accordingly.
PAAS Tips:
Understanding Spravato® Strict Delivery Requirements
Spravato® (esketamine) is a prescription nasal spray approved for treatment-resistant depression (TRD) and major depressive disorder (MDD) with suicidal thoughts. Due to its potential for misuse and serious side effects, Spravato® is subject to strict handling, administration, and monitoring requirements under the FDA’s Risk Evaluation and Mitigation Strategy (REMS).
Strict Handling and Distribution Controls
Spravato® is classified as a Schedule III controlled substance, requiring stringent oversight:
Supervised Administration and Patient Monitoring
Patients cannot self-administer Spravato® at home. Instead, it must be given under medical supervision in a certified healthcare setting:
Required Documentation for Proof of Delivery for PBM Audits
Ensure you have proper documentation of dispensing to a certified healthcare setting. You must have the following documentation:
See our November 2019 Newsline article, Spravato® – Watch the Billing!, for proper billing information, including package size and billing units.
PAAS Tips:
When the Margins Are Thin, Self-Audit for the Win
It is no secret that margins on prescription medications have declined dramatically over the last few decades. Independent pharmacy owners are well aware of their less-than-favorable Pharmacy Benefit Manager (PBM) contracts, and their propensity to routinely audit. After working day in and day out to take care of the patients in your communities, auditors swoop in and use the smallest ambiguous detail on a prescription to recoup against a claim. It is easy to understand why many independent pharmacy owners, operators, and employees get a sour taste in their mouth at the sheer thought of PBMs and auditors.
To decrease the likelihood of an unfavorable audit, PAAS National® analysts recommend routinely performing self-audits. In fact, the 2024-2025 Self-Audit Newsline Series just wrapped up and all 12 articles can be used to help reduce your pharmacy’s risk.
What is a self-audit?
A self-audit is a process used to validate prescriptions, ensure claims are billed appropriately and confirm all applicable documentation is accounted for to substantiate the validity of a claim. Self-auditing and monitoring serve as effective tools for assessing adherence to pharmacy policies and procedures, along with ensuring compliance with external regulations. The primary objective of a pharmacy’s self-auditing program should be to prevent, detect and eliminate risks related to fraud, waste and abuse, while also mitigating PBM audit liability.
When should a self-audit be performed?
Self-audits should be performed on a routine basis, and the beauty of a self-audit is that it can be done at any time! It is a great activity for the less busy hours of a work week. The frequency can also be determined by the number of components you wish to audit. Some pharmacies will audit a small number of rotating items on a very regular basis while others may perform a larger self-audit of all elements they monitor on a less frequent schedule. Assigning an individual (or several) to perform these audits and creating a moderately flexible timeframe to complete this task is one way to ensure this important proactive measure does not fall by the wayside.
What items or components are worth the time to self-audit?
There are a wide range of components to consider auditing, which come down to the audit risks your pharmacy would face. Below is a table of high audit risk claims that are likely applicable to your pharmacy and may warrant a self-audit.
PAAS Tips:
Diabetic Test Strip Authorized Distributors – LifeScan Audits Continue!
Independent pharmacies continue to receive letters regarding the purchase of OneTouch® test strips, manufactured by LifeScan. We have seen two variations of these letters – one “warning” letter from LifeScan directly and a second letter demanding repayment for invoice shortages from a law firm acting on LifeScan’s behalf. Both letters contend that pharmacies submitted more claims for LifeScan’s OneTouch® diabetic test strip products to PBMs than are supported by purchase history from authorized distributors.
The warning letter is softer in tone and educates recipients about the existence of an authorized distributor network and requests that the pharmacy reviews their suppliers to confirm that they are purchasing from a secure supply chain. Letters point out that purchases made outside of the secure supply chain could mean dispensing products that are counterfeit, have been tampered with (gray market), or are not authorized for sale in the United States.
The law firm letters boldly accuse pharmacies of having an “invoice shortage” and provides spreadsheets with claims and rebate data to support their allegations. These letters threaten to harm pharmacies by withholding rebate dollars owed to PBMs and notify PBMs of the pharmacy’s “non-compliance” unless the pharmacy pays a large amount of money to make the issue “go away”.
While PAAS National® has only seen letters from LifeScan, the concept of an authorized distributor network applies to many manufacturers of OTC diabetic test strips (see list below).
Manufacturer authorized distributor lists for major diabetic test strips:
Because diabetic test strips are classified by the FDA as OTC medical devices, they fall outside of the Drug Supply Chain Security Act (DSCSA) and there is no requirement for a “pedigree” to ensure sourced product is legitimate and not stolen, counterfeit or previously dispensed (gray market). Pharmacies should take extra care when sourcing product that is advertised at a lower cost compared to primary wholesalers. Manufacturers have developed and maintained “lists” to aid supply chain partners like pharmacies.
It is also important to understand what each of the major PBMs have to say about sourcing diabetic test strips.
Finally, there are two states (California and New Jersey) that have regulations pertaining to the purchase and distribution of OTC diabetic test strips.
PAAS Tips:
Can Claims Under Audit Be Reversed?
You’re preparing for an upcoming desk audit, and while pulling the hard copies for a PAAS National® analyst to review, you notice a billing error. It’s a simple fix, like an incorrect days’ supply, so you try to reprocess the claim. However, now you’re hit with an unexpected rejection …
– the claim was too old to reprocess and is now stuck in your system as a reversed/unpaid claim! Without authorization or assistance from the insurance helpdesk, it can’t be re-billed. To avoid unnecessary stress, PAAS recommends leaving the identified billing errors as is, and discussing with your assigned PAAS analyst. Since each PBM has its own auditing processes and procedures, the steps to resolve a billing error vary.
You may be wondering, “Well, when is it okay to reverse a prescription if we’ve identified an error?” A prescription under audit should never be reversed, unless the PBM auditor has given explicit approval to do so. For claims not under audit, PAAS recommends sticking to a 30-day timeframe, as each PBM and/or Plan may have a unique billing window. If that claim is outside of 30 days, you’ll want to contact the insurance helpdesk and have them help you through the reversal and correction process.
Keep in mind that Prescription Validation Requests are an exception, as they often specifically indicate the allowance to reverse and correct a claim. You will want to be sure you are appropriately filling out the documentation provided by the PBM to indicate that the claim was reversed and rebilled.
PAAS Tips:
Proof of Patient Counseling Required!
Pharmacies are familiar with submitting copies of prescriptions, signature logs and proof of copay collection upon an audit request, but do you have documented proof of the offer to counsel? While the patient can accept or refuse counseling, it must be documented for Medicaid patients. PAAS National® analysts often see pharmacies with these requests during Medicaid (Payment Error Rate Measurement) audits, and pharmacies must include this documentation along with their other audit materials. Additionally, proof of patient counseling, or the offer to counsel, may be required during the credentialing process for Medicaid Managed Care programs. This requirement stems from the Omnibus Budget Reconciliation Act of 1990 (OBRA ’90), as outlined in 42 CFR §456.705. OBRA ’90, along with CMS regulations, mandates that states establish patient counseling standards for Medicaid programs in order to receive federal funding. While OBRA ’90’s primary objective was to save the federal government money through improved therapeutic outcomes, it achieved this by requiring pharmacists to offer counseling, conduct prospective drug utilization reviews (ProDUR), and maintain thorough records.
PAAS Tips: