- Allowed for email bulk purchase notifications (and subsequent acknowledgements)
- Permit pharmacies to notify Caremark up to 21 days after the bulk purchase has occurred
- Repositioned from a bulk purchase request to a bulk purchase notification (seemingly automatic approval – with Caremark’s acknowledgement)
Despite some concessions, pharmacies are still left wondering how the policy impacts their business, and what they can do about it. Two items to consider:
- Understand how your drug utilization and inventory turns impact bulk purchasing, and where consideration should be given for bulk purchase notifications.
- Support advocacy efforts at the state and federal level to fight back against PBM practices. With Rutledge and Wehbi garnering support nationally, states can regulate PBMs successfully.
Understanding Caremark’s Invoice Audits
Caremark invoice audits typically review claims and aggregate purchases over a 12-month period. Upon a pharmacy’s request during the audit, the 30 days prior to the 12-month period will be included for purchase consideration. For example:
Claims date range = 1/1/2021 – 12/31/2021
Invoice date range = 12/1/2020 – 12/31/2021 (extra 30 days on the front end)
Of note, all PBMs have similar limits regarding this lookback (or buffer) period which varies from 30 to 90 days. PAAS National® has experience navigating invoice audits with purchases beyond 90 days prior to the window, but ideally, this should be on an exception basis.
Some PBMs (e.g., OptumRx) may ask for a full dispensing history report from the pharmacy to reconcile the purchases against, creating a much greater hurdle for pharmacies to jump successfully. Caremark invoice audits generally focus on Caremark claims, meaning you don’t have to prove purchases for all claims in the 12-month period, just purchases for Caremark claims.
Consider the following audit scenarios:
Audit Example 1: Pharmacy purchases exactly what they dispensed throughout claims/invoice date range
| Total Quantity Dispensed for particular NDC (all payors): |
15,000 |
| Caremark Claims Dispensed (30% of all payors for this NDC): |
4,500 |
| Bulk Purchases (outside the 30 day grace-period with no notification): |
0 |
| Purchased during invoice date range: |
15,000 |
| Result: |
Pharmacy has surplus of 10,500 |
Audit Example 2: Pharmacy bulk purchased a 6-month supply prior to the invoice date range
| Total Quantity Dispensed for particular NDC (all payors): |
15,000 |
| Caremark Claims Dispensed (30% of all payors for this NDC): |
4,500 |
| Bulk Purchases (outside the 30 day grace-period with no notification): |
7,500 (not counted) |
| Purchased during invoice date range: |
7,500 |
| Result: |
Pharmacy has surplus of 3,000 |
Audit Example 3: Pharmacy bulk purchased a 6-month supply prior to the invoice date range and Caremark represents 60% of all claims dispensed.
| Total Quantity Dispensed for particular NDC (all payors): |
15,000 |
| Caremark Claims Dispensed (60% of all payors for this NDC): |
9,000 |
| Bulk Purchases (outside the 30 day grace-period with no notification): |
7,500 (not counted) |
| Purchased during invoice date range: |
7,500 |
| Result: |
Pharmacy has shortage of 1,500 |
The percent of your claims billed to Caremark will vary compared to peers, and more importantly, every medication will have a unique percentage that is billed to Caremark. If Caremark prefers Ventolin® over ProAir® and Proventil®, then your percent of Ventolin® claims for Caremark will be proportionately greater.
It’s great to understand the situation, but who has time to calculate this for the thousands of NDCs on a pharmacy shelf? No one. So, pharmacies are going to need to make a concerted effort to think about what purchases might exceed a reasonable threshold for their pharmacy, as a percent of Caremark claims.
Frequently Asked Questions:
Does this mean that my pharmacy cannot make bulk purchases?
No. Remember that Caremark (and most other PBM) invoice audits look at aggregate purchases over a specific time period that often exceeds 12 months. Congruently, PBMs are typically comparing your total purchases against claims billed to that specific PBM. Depending on the specified date range of a future PBM invoice audit, this may be a non-issue.
There are scenarios where you are at higher risk:
- Products with low turnover/few turns
- Products where Caremark is the only PBM that covers the drug and represents a high percentage of total utilization at your pharmacy
- Situations where you have only one patient taking a particular medication and they stop for various reasons (discontinued, no longer customer) and you are stuck with open inventory on the shelf
This is a unique business decision for every pharmacy. If the bulk purchase is likely to create an invoice shortage for Caremark, we would encourage pharmacies to file for a bulk purchase notification .
Do I need to purchase inventory every 30 days to remain compliant with Caremark’s policy?
No, and Caremark has removed the original reference that created confusion (strikethrough text below has been removed)
Caremark will not accept purchases occurring outside of thirty (30) days prior to the selected date range unless: (1) Provider notifies Caremark in writing of its intent to make a bulk purchase (i.e., more than thirty (30) days of inventory) of a Covered Item…
What purchases are likely to be an issue?
If the original purchase is outside the invoice date range, it will represent a problem unless you are purchasing enough product during the date range to support Caremark claims. Note, some PBMs reconcile to the 11-digit NDC level.
- Consider an invoice audit for the calendar year 2021. You purchase NDC A prior to the invoice audit date range on 11/30/2020 and use NDC A to dispense for the next 4 months (12/1/2020 – 3/31/2021). The wholesaler subsequently switches the preferred generic, so your future purchases (during the audit window) are for a different product, NDC B.
- You have a patient on Biktarvy® who passes away. You have a quantity remaining on your shelf that cannot be returned to the wholesaler and you’re unable to move the inventory. A year later a new patient starts on Biktarvy® and you use the remaining stock on hand.
These scenarios will likely need to be challenged by a pharmacy in arbitration to get Caremark to relent.
Is this legal?
At a minimum, the requirement is anticompetitive and deserves to be challenged. This type of conduct further supports the Federal Trade Commission investigating the monopolistic practices of PBMs and vertical integration. Surely no CVS Pharmacy is submitting bulk purchase notifications and yet they have dead inventory that would create an issue if Caremark were to audit their pharmacies.
Have pharmacies really been terminated as a result of bulk purchases?
Unexplained invoice audit shortages are serious business and PBMs are quick to conclude that pharmacies are engaged in fraud if the pharmacy cannot provide good reasons for (and solutions to resolve) the shortages.
There are many reasons for invoice shortages other than fraud and include things like: auditor math errors, wholesaler failed to respond, issues with units of measure, wrong NDC billed, wrong quantity billed, wrong time frame, claim not reversed successfully, and more.
While most invoice audits do NOT result in contract termination, any unsupported claims are subject to recoupment. The challenge with invoice audit shortages is trying to find the “root cause(s)” of individual drug shortages so that pharmacies can implement the right corrective actions to prevent a recurrence. This takes some internal investigating and PAAS has extensive experience guiding pharmacies if you are ever in this situation.
What should we do today?
There is no one-size-fits-all answer for every pharmacy. The bottom line is that there is audit risk when making bulk purchases as ALL PBMs have limited lookback periods as explained above. It is important to understand that PBMs look at aggregate purchases over an extended window and that the lookback periods are relative to a yet to be defined audit date range.
Short-term considerations
- Notify Caremark of your intent, or execution, of a bulk purchase no later than 21 days after the purchase at: pharmacyaudit@cvshealth.com
-
- Caremark will acknowledge receipt of the notice – retain this for your records!
- Re-evaluate pros and cons of existing pharmacy buying habits
- Is the larger pack size less expensive, or just more convenient?
- Re-evaluate how you handle stale inventory to reduce risk (return to wholesaler, reverse distributor, pharmacy-to-pharmacy sale in accordance with Drug Supply Chain Security Act 3T exemption)
- See February 2022 Newsline article Caremark® expands “Aberrant” Language and Restricts Bulk Purchases.
Long-term considerations
- Engage PAAS when you are involved in a PBM invoice audit
- Continue advocacy through state and national pharmacy associations to shine a light on unfair PBM practices that make it harder to take care of your patients and remain in business
A Lifeline for Pharmacy Audits
“Five letters strike fear in the hearts of pharmacists all around: audit. In 2022, audits are on the rise, and pharmacies need to be on guard. Luckily, Trent Thiede can guide you through the process of your next audit. Trent is the President of PAAS National®, an audit assistance service dedicated to helping pharmacies survive predatory audits, compliance issues, and whatever new tricks PBMs keep up their sleeves. In this episode, Trent explains how you can stay prepared, proactive, and protected next time your pharmacy faces an audit,” stated Pioneer Rx Pharmacy Software.
Join Trent Thiede, President of PAAS National® in the most recent podcast A Lifeline for Pharmacy Audits, hosted by Jeff Key, President of PioneerRx and Marsha Bivins, Director of Marketing of PioneerRx
Understanding Caremark’s Restrictions on Bulk Purchases
Community pharmacies have been fed up with PBM antics for a long time. Egregious audits, absurd DIR fees, arduous credentialing requirements, unconscionable contracts; we run out of adjectives before we run out of PBM issues. Amidst the backdrop of a public health emergency and drug supply chain shortages – where pharmacies and staff are being pushed to the brink – Caremark has further clarified their policy to constrain a pharmacy’s ability to maintain profitability.
While this restriction is now formalized in the Provider Manual, it has been Caremark’s informal policy to only consider purchases 30 days prior to the audit date range. Caremark initially provided an avenue for exceptions to this policy by allowing pharmacies to request bulk purchases via U.S. mail 7 days in advance of an intended purchase. Requiring pharmacies to mail the request was intentional, making the process difficult and drawn out for pharmacies to request and receive approval. In response to strong provider pushback, Caremark issued a rare mid-year update to their Bulk Purchasing Notification on May 6, 2022. Primarily, the update has done three things:
Despite some concessions, pharmacies are still left wondering how the policy impacts their business, and what they can do about it. Two items to consider:
Understanding Caremark’s Invoice Audits
Caremark invoice audits typically review claims and aggregate purchases over a 12-month period. Upon a pharmacy’s request during the audit, the 30 days prior to the 12-month period will be included for purchase consideration. For example:
Claims date range = 1/1/2021 – 12/31/2021
Invoice date range = 12/1/2020 – 12/31/2021 (extra 30 days on the front end)
Of note, all PBMs have similar limits regarding this lookback (or buffer) period which varies from 30 to 90 days. PAAS National® has experience navigating invoice audits with purchases beyond 90 days prior to the window, but ideally, this should be on an exception basis.
Some PBMs (e.g., OptumRx) may ask for a full dispensing history report from the pharmacy to reconcile the purchases against, creating a much greater hurdle for pharmacies to jump successfully. Caremark invoice audits generally focus on Caremark claims, meaning you don’t have to prove purchases for all claims in the 12-month period, just purchases for Caremark claims.
Consider the following audit scenarios:
Audit Example 1: Pharmacy purchases exactly what they dispensed throughout claims/invoice date range
Audit Example 2: Pharmacy bulk purchased a 6-month supply prior to the invoice date range
Audit Example 3: Pharmacy bulk purchased a 6-month supply prior to the invoice date range and Caremark represents 60% of all claims dispensed.
The percent of your claims billed to Caremark will vary compared to peers, and more importantly, every medication will have a unique percentage that is billed to Caremark. If Caremark prefers Ventolin® over ProAir® and Proventil®, then your percent of Ventolin® claims for Caremark will be proportionately greater.
It’s great to understand the situation, but who has time to calculate this for the thousands of NDCs on a pharmacy shelf? No one. So, pharmacies are going to need to make a concerted effort to think about what purchases might exceed a reasonable threshold for their pharmacy, as a percent of Caremark claims.
Frequently Asked Questions:
Does this mean that my pharmacy cannot make bulk purchases?
No. Remember that Caremark (and most other PBM) invoice audits look at aggregate purchases over a specific time period that often exceeds 12 months. Congruently, PBMs are typically comparing your total purchases against claims billed to that specific PBM. Depending on the specified date range of a future PBM invoice audit, this may be a non-issue.
There are scenarios where you are at higher risk:
This is a unique business decision for every pharmacy. If the bulk purchase is likely to create an invoice shortage for Caremark, we would encourage pharmacies to file for a bulk purchase notification .
Do I need to purchase inventory every 30 days to remain compliant with Caremark’s policy?
No, and Caremark has removed the original reference that created confusion (strikethrough text below has been removed)
Caremark will not accept purchases occurring outside of thirty (30) days prior to the selected date range unless: (1) Provider notifies Caremark in writing of its intent to make a bulk purchase
(i.e., more than thirty (30) days of inventory)of a Covered Item…What purchases are likely to be an issue?
If the original purchase is outside the invoice date range, it will represent a problem unless you are purchasing enough product during the date range to support Caremark claims. Note, some PBMs reconcile to the 11-digit NDC level.
These scenarios will likely need to be challenged by a pharmacy in arbitration to get Caremark to relent.
Is this legal?
At a minimum, the requirement is anticompetitive and deserves to be challenged. This type of conduct further supports the Federal Trade Commission investigating the monopolistic practices of PBMs and vertical integration. Surely no CVS Pharmacy is submitting bulk purchase notifications and yet they have dead inventory that would create an issue if Caremark were to audit their pharmacies.
Have pharmacies really been terminated as a result of bulk purchases?
Unexplained invoice audit shortages are serious business and PBMs are quick to conclude that pharmacies are engaged in fraud if the pharmacy cannot provide good reasons for (and solutions to resolve) the shortages.
There are many reasons for invoice shortages other than fraud and include things like: auditor math errors, wholesaler failed to respond, issues with units of measure, wrong NDC billed, wrong quantity billed, wrong time frame, claim not reversed successfully, and more.
While most invoice audits do NOT result in contract termination, any unsupported claims are subject to recoupment. The challenge with invoice audit shortages is trying to find the “root cause(s)” of individual drug shortages so that pharmacies can implement the right corrective actions to prevent a recurrence. This takes some internal investigating and PAAS has extensive experience guiding pharmacies if you are ever in this situation.
What should we do today?
There is no one-size-fits-all answer for every pharmacy. The bottom line is that there is audit risk when making bulk purchases as ALL PBMs have limited lookback periods as explained above. It is important to understand that PBMs look at aggregate purchases over an extended window and that the lookback periods are relative to a yet to be defined audit date range.
Short-term considerations
Long-term considerations
Prime Therapeutics and Express Scripts Partnership Muddies On-site Audits and Results
In December of 2019, Express Scripts (ESI) and Prime Therapeutics LLC (Prime) announced a three year partnership “designed to deliver more affordable care for clients and their members by enhancing pharmacy networks and pharmaceutical manufacturer value.” This partnership was designed to allow both companies to operate independently with ESI providing services to Prime, including performing some audits.
This partnership has led to some confusion for pharmacies since on-site audits have resumed around the country. ESI has been sending out numerous audit notices, all with ESI branding, which includes phrasing that the audit “may include one or more claims submitted to Prime Therapeutics, LLC.” If pharmacies miss this sentence, they may be underprepared when the auditor arrives having only reviewed ESI documents and forgetting to review Prime claims, and associated documents, as well.
Further confusion arises when results are returned. These results may be emailed to the pharmacy by an ESI auditor and include estimated chargeback amounts. The email may note that any estimated recoupments for Prime claims are automatically generated as 50% or 100% recovery based on the type of discrepancy found. The email also briefly states that Prime will send a statement with actual recoupment amounts once the audit is final.
Once the audit is final, and the pharmacy receives this Claim Adjustment Report from Prime, they may be confused again! This document will come with Prime branding, not ESI, and will have no link to the original audit beyond the prescription numbers that had been audited. Pharmacies may have a hard time understanding where this statement came from if they do not recall the brief mentions of Prime throughout the ESI audit process.
These adjustment reports will include the actual recovery amount and any refunds owed to the patient, usually due to a copay change. The pharmacy is expected to give this refund amount back to the patient and keep a record of doing so. Pharmacies are not allowed to request reimbursement from the patient if additional copays were incurred since the pharmacy is responsible for submitting claims correctly at the time of dispensing.
PAAS Tips:
Who’s Initiating Your Audit – Plan Sponsor, PBM or Audit Contractor?
There are numerous entities that may initiate and perform pharmacy audits. While the actual audit process does not vary significantly, there are a few important nuances to understand.
First, the further down the hierarchy (sponsor à PBM à audit contractor), the more opportunities for administrative headaches as each entity has their own processes to deal with. Typically pharmacies must “work their way up”, one level at a time. This does have a benefit in that it may offer more opportunities to appeal an unfavorable finding.
Second, audits initiated by plan sponsors are more common when there is suspicion of fraud, or the audit is labeled as an “investigation”. This is not to say that all audits initiated by sponsors are indications of additional threat.
Here are some examples of common players at each level:
PAAS Tips:
Best Practice for Entering Transfers with Partial Refills Remaining
Transfer prescriptions carry a high audit risk due to the additional documentation required based on state regulations. Pharmacies receiving transferred prescriptions know that sometimes the quantity received is not always a number that is easy to enter in the pharmacy’s software system. The following scenario outlines the most common issue.
If your pharmacy software system does not allow you to enter 90 tablets plus 2.7 refills, then the safest way to enter the prescription is for 333 tablets plus 0 refills, with a dispensed quantity of 90 tablets. However, beware of these additional audit pitfalls:
PAAS Tips:
Copays for Pharmacy Staff and Family
PAAS National® analysts occasionally field questions related to copay collection, particularly with respect to prescriptions for pharmacy employees and their families. While it is certainly most convenient to fill prescriptions at the pharmacy you spend 8-10 hours at every day, it is important to make sure that copay amounts due are collected and documented.
We frequently see PBM audits request documentation such as prescription copies and proof of copay collection for pharmacy employees – they are looking for pharmacies that may be cutting corners on documentation, billing claims where a valid prescription does not exist, or waiving copays as an employee benefit.
Please consider the PAAS tips below to avoid PBM audit problems.
PAAS Tips:
New Dispensing Platform? Be Ready in Case of an Audit!
Pharmacies updating or changing their dispensing platform may face unique audit issues. A top priority PAAS National® recommends for pharmacies going through a software migration is to ensure access to records from your old system. This accessibility is crucial in being able to respond to audit requests.
Record keeping requirements are often overlooked during software changes.
Storage of pharmacy files may be expensive, but audit recoupments for missing documents are typically costlier. Research your pharmacy’s record storage process to ensure you can access accurate and complete records in a timely manner in the event of an audit.
If you are acquiring a pharmacy (or their records), you must also be aware of potential audit pitfalls with these newly acquired records. Origin codes, overlapping prescription numbers, state transfer requirements and clear links to original prescriptions must be considered during the acquisition process. State Boards of Pharmacy can also be an excellent source for guidance during this process.
PAAS Tips:
Announcing Premier Cultural Competency Training by PAAS National
Beyond PBM requirements and NCPDP attestations, pharmacies need to provide services to all patients in a culturally competent manner – free of discrimination. The PAAS Cultural Competency Training uses real-life, pragmatic examples to serve as a launching pad for enhancing patient experiences at your pharmacy. PAAS’ unique approach to training ensures its content resonates with all pharmacy staff, making the goal of cultural competence achievable, across the board.
Developed by community pharmacists for community pharmacies, discover the PAAS CARE model difference:
If done correctly, pharmacies also have the opportunity to elevate their business. Become the more competitive pharmacy in your town and get the PAAS Cultural Competency Training Program today! Learn more at paasnational.com/culturalcompetency or contact PAAS at (608) 873-1342 or info@paasnational.com.
LIVE WEBINAR JUNE 15th: Caremark’s Bulk Purchasing Requirements and the Importance of Cultural Competency
Join President of PAAS National®, Trenton Thiede for a LIVE webinar “Caremark’s Bulk Purchasing Requirements and the Importance of Cultural Competency”
Hope to See You In-Person at an Upcoming Event!
PAAS National® will be at the following upcoming events and we hope to see you in-person. Visit the PAAS team at:
PAAS will be presenting an audit prevention seminar at each of these events. Be sure to attend and stop by the PAAS National® booth in the convention exhibit hall to connect with us. We appreciate the opportunity to hear live feedback from our members.
For more details on these events, visit: https://paasnational.com/news-and-events/.