Audit Risks with Schedule II Laddered Prescriptions

Pharmacies receiving laddered Schedule II prescriptions must be aware of the DEA requirements and potential audit risks. Missing these requirements can lead to Federal law violations and PBM audit recoupment.

Laddered prescriptions are multiple prescriptions written on the same date for current and future fills. Since Schedule II prescriptions cannot be refilled, the DEA has allowed prescribers to issue multiple prescriptions totaling up to a 90-day supply if all requirements have been met.

Requirements included in 21 CFR §1306.12:

  • Prescription must be issued for a legitimate medical purpose
  • Other than the initial prescription, the prescriber must include written instructions of the earliest fill date
  • Prescriber must believe that issuing multiple prescriptions is not an increased risk of diversion or abuse
  • Prescriptions must comply with all applicable state laws and regulations

PAAS Tips:

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Billing Tips for Dexcom G6®

Dexcom G6® sensors, transmitters, and receivers continue to be audit targets. Pharmacies have faced recoupment on their Dexcom G6® claims for billing an incorrect days’ supply, refilling the item too soon, and for having vague directions. The proper quantity and days’ supply can be found in the table below, along with suggested instructions. Following these billing guidelines will help decrease the risk of recoupment on the Dexcom G6® continuous glucose monitor and supplies.

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Dexcom G6® Item NDC NCPDP Billing Quantity
(unit of measure)		 Suggested Day Supply Suggested Instructions
Receiver 08627-0091-11 1 each 365 days Use receiver to check blood sugar; replace yearly
Transmitter 08627-0016-01 1 each 90 days Use transmitter to check blood sugar; replace every 90 days
Sensors
(3 sensors/box)		 08627-0053-04 3 each 30 days Use sensors to check blood sugar; replace every 10 days

PAAS Tips:

  • Always double check the directions on each Dexcom G6® item to ensure they are specific enough for an auditor to determine the correct days’ supply
  • If there is an insurance plan limit which prevents the pharmacy from billing the true days’ supply for the transmitter or receiver (i.e., 30-day plan limit), PAAS analysts suggest adding the true days’ supply to the patient instructions to help patients and pharmacy staff recognize how long the item should last which can help prevent future claims from being billed too soon

Off-Label Use Beyond GLP-1

GLP-1 medications being used off-label for weight loss, and the corresponding audit risk, has been a hot topic for awhile now, but there are other medications that PAAS National® frequently sees recoupments for when being used off-label, especially when billed to a Medicare plan.

Other medications recently recouped by Medicare Part D Plan Sponsors and PBMs include:

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  • Diclofenac 3% indicated for actinic keratosis but being used for pain
  • Pennsaid® solution 2% indicated for the treatment of osteoarthritis of the knee but being used on other body parts
  • Prenatal vitamins prescribed for non-child bearing aged women
  • Alcohol swabs not being used for insulin administration
  • Compounds using bulk pharmaceutical powders, off-label, or unapproved uses
  • Ivermectin being used for COVID-19

PBMs seem to selectively enforce these provisions, but the reality is they are pursuing easy targets with high rewards. Audits typically identify claim outliers, and expensive medications with narrow therapeutic indications increase the likelihood of an audit. Prescriptions being used within FDA guidelines are much less likely to be identified as being used off-label.

Section 1860D-2(e)(4) of the Social Security Act defines medically accepted indications for the Medicare Part D program by referencing Section 1927(k)(6). It states that a medically accepted indication is “any use for a covered outpatient drug which is approved under the Federal Food, Drug, and Cosmetic Act, or the use of which is supported by one or more citations include or approved for inclusion in any compendia described in Section 1927(g)(1)(B)(i)”.

When recoupments from off-label uses happen, they can be difficult to appeal. Remember to send PAAS your audit notices as soon as you receive them to have the best chance at success.

PAAS Tips:

Billing Guidance: When to Use DAW 0 vs DAW 9

PAAS National® analysts frequently see PBM audit results where auditors have flagged claims with ‘incorrect DAW code submitted’ – while these are often educational discrepancies, it is important to understand the implications of incorrect DAW code submission and develop a consistent process for pharmacy staff to follow.

A common DAW code issue found during audits (and a common question received by PAAS analysts) is how to handle claims where the plan prefers the brand name due to formulary rebates.

NCPDP explains that DAW 9 should be used when the plan prefers brand and explicitly states that “DAW 0 is not appropriate and may result in a reject”. While this NCPDP guidance is intended to standardize claims adjudication process across the industry, it would seem that real-life adoption of this standard by PBMs varies considerably.

In many cases, the pharmacy will not know if the plan prefers brand or generic until the claim submission process has started – as a result, pharmacy staff will need to be able to recognize dynamic claim reject messages and respond appropriately. PAAS recommends that pharmacies develop a step-by-step process or algorithm to handle appropriate DAW code submission.

Here is a suggested workflow:

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  1. Attempt to bill “generic” product (AB rated generic/authorized generic or interchangeable biosimilar/unbranded biologic) and submit DAW 0, unless the prescriber or patient have indicated a preference for the brand (DAW 1, DAW 2 respectively) and make note of any claim reject messages.
  2. Respond to claim reject message regarding preferred product/DAW code; if no clear information is provided, then attempt to bill for the “brand/reference” product and submit DAW 9 and make note of any claim reject messages.
  3. Only after attempting steps #1 and #2 above should pharmacy attempt to bill the brand/reference product and submit DAW 0

Here are the full NCPDP definitions for DAW 0 and DAW 9 for related context.

Code Description
0 No Product Selection Indicated – This is the field default value that is appropriately used for prescriptions for single source brand, co-branded/co-licensed, or generic products. For a multi-source branded product with available generic(s), DAW 0 is not appropriate, and may result in a reject.
9 Substitution Allowed By Prescriber but Plan Requests Brand – Patient’s Plan Requested Brand Product To Be Dispensed – This value is used when the prescriber has indicated, in a manner specified by prevailing law, that generic substitution is permitted, but the plan’s formulary requests the brand product. This situation can occur when the prescriber writes the prescription using either the brand or generic name and the product is available from multiple sources.

PAAS Tips:

  • We recommend that pharmacies have documentation to support the submission of DAW codes 1-9, consider a brief clinical note with the date, staff initials and reason for DAW code submitted.
  • Review October 2022 Newsline article, Are You Utilizing DAW Codes Correctly? Updated Tool Available! and check out the resource, DAW Codes Explained to help train your team on appropriate DAW code submission.
  • Pharmacies may want to perform internal “self audits” on their DAW claims to check for accuracy and consistency. Run a report and look for any non-zero DAW codes (NCPDP field 408-D8) to ensure you have submitted the correct DAW code AND you have appropriate documentation to support.

Insurance Limits Quantity – Common Scenarios and Pitfalls

When processing prescriptions, insurance companies require pharmacies to bill an accurate days’ supply derived from mathematical calculations obtained from the directions. Pharmacies are not typically permitted to guess on the days’ supply, or simply process as 30 days for everything.

What happens when the calculated days’ supply is larger than the plan maximum?

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In most cases the pharmacy must bill smaller quantities to meet the plan maximum. For an easy example, a prescription comes in for #90 lisinopril 10 mg tablets and directions of 1 tablet daily. The pharmacy bills #90 for a 90-day supply. The plan rejects for a maximum of a 30-day supply. The pharmacy must then rebill the claim for #30 tablets as a 30-day supply and PAAS suggests that pharmacy staff document Insurance Limits Quantity (ILQ) as a reminder for your team of why the quantity was reduced.

Another common scenario with insulin, the pharmacy receives a prescription for 30 mL of Lantus® Solostar® with directions of 90 units at bedtime. The actual days’ supply comes out to just over 33 days. If the insurance maximum is 30 days, the pharmacy should rebill this claim for 15 mL for a 16- or 17-day supply and document the reason for the cut quantity.

What if the actual days’ supply is still greater than the plan maximum when dispensing the smallest package size?

PAAS National® frequently sees this problem with HFA inhalers such as Flovent HFA. The inhaler contains 120 puffs. If a prescription received has directions of 1 puff twice daily, the actual days’ supply is 60. If the plan limit is 30 days, the pharmacy should first call the help desk for a days’ supply override. If one is not able to be given, the pharmacy can then bill a 30-day supply, document the ILQ, but MUST NOT refill earlier than the actual 60-day supply or risk recoupment from a PBM during an audit.

This last scenario causes the most problems for pharmacies. Many systems are not set up to flag these prescriptions as early and rely on notes in the patient’s profile or in the label directions to remind pharmacy staff. Be aware of the recoupment possibilities and proactively take steps to ensure that the correct days’ supply is being billed.

PAAS Tips:

  • Insulin, inhalers, topical medications, and eye drops are frequently flagged for refill too soon or overbilled quantity
  • Always submit claims with an accurate days’ supply first; many PBMs now have built-in overrides in place for smallest package sizes
  • Include a notation on the patient label to help notify patient and pharmacy staff of the true days’ supply
  • Check with your software vendor to see if additional days’ supply fields are available for internal tracking
  • Avoid med sync or cycle fill programs for products whose correct days’ supply cannot be submitted for the smallest single package size
  • Self-audit prescriptions with multiple pack sizes available for days’ supply and refill accuracy; see our Self-Audit Series of articles in our archive on the PAAS Member Portal
  • Review our Can You Bill It As 30 Days? document under Proactive Tips on the PAAS Member Portal

Carry Clinical Notes Forward for Audit Coverage

Seasoned pharmacy staff can often list off the patients who prefer brand drug or whose insurance requires the brand name for certain medications. Some pharmacy staff know their customers so well that they know exactly how to adjudicate a claim without receiving any rejects. In fact, that is one of the many benefits of independent pharmacy – the high-level of personalized experience customers receive. However, issues arise when an auditor, who has no prior knowledge about your patients, reviews hardcopies as part of an audit and does not see supporting documentation to substantiate how the claim was adjudicated. That is why it is of the utmost importance that…

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proper clinical notes are included on every hardcopy.

For example, pharmacies may opt to forego billing for generic attention-deficit/hyperactivity disorder (ADHD) medication knowing that a longtime pharmacy customer’s insurance requires brand. A clinical note stating “insurance requires brand” or producing proof of the generic being rejected on a prior adjudication would still be needed to substantiate billing the DAW 9. For the instances where a DAW 2 is used (“Substitution Allowed – Patient Requests Product Dispensed”), those clinical notes need to be included on each prescription as well, or else there is risk that the PBM will look to recoup the claim.

When DUR rejects occur, especially for Express Scripts, showing what steps were taken to give due diligence to the reject is required, such as contacting the prescriber to ensure they were aware of a potentially harmful drug-drug interaction. Pharmacies may opt to not call every month on the same DUR reject and therefore notation of the last time the DUR was addressed is necessary. This brings up the question of how often to rechallenge billing the generic medication or to reconfirm the clinical note with the prescriber. There is not a steadfast rule; however, it is our guidance that pharmacies rechallenge with each new prescription, apart from C-II medications, medication dosage changes, and the beginning of each plan year.

PAAS Tips:

  • Proper Clinical Notes include the following information:
    • Date
    • Name and title of individual providing information
    • Specific information provided
    • Pharmacy staff initials
  • DAW codes are also applicable with biologic products. Refer to DAW Codes Explained and Billing Guidance: When to Use DAW 0 vs. DAW 9 to ensure proper DAW billing practices.

Medication Error Reporting Through PAAS’ FWA/HIPAA Compliance Program

The importance of having an internal process to record and monitor medication errors cannot be overstated. Being able to identify how medication errors occur can help pharmacy owners avoid repeat issues and pinpoint an area for operational improvement. Medication error reports can also help mitigate legal action if brought against the pharmacy.

PBMs require pharmacies to have a medication error reporting tool as part of credentialing, resulting in pharmacies commonly asking if PAAS offers a medication error reporting tool. The answer is yes! The PAAS Fraud, Waste, and Abuse & HIPAA Compliance Program offers a robust section pertaining to quality assurance incident reporting, including medication error reporting and close call reporting. Section 4.4 “Quality Assurance” speaks to the pharmacy’s dedication to ensuring medication errors and drug interactions are caught and corrected expeditiously in addition to what procedures are implemented to minimize the likelihood of errors occurring. The actionable parts of your medication error reporting can be found in Appendix B in the section entitled Quality Assurance Incident Reporting system (QuAIR). QuAIR meets the federal requirements for pharmacies to have a medication error reporting system in place. For pharmacies looking to develop more robust policies, the Policy & Procedure Manual now allows for custom content in a new section.

If you are not yet an FWA/HIPAA compliance member and would like to schedule a time for a virtual service overview, you can sign up for a time by visiting PAASNational.com/contact. Current FWA/HIPAA member admins and officers can review their compliance tasks in the Member Portal to confirm that your compliance program is up-to-date for 2023. If you would like a PAAS team member to walk-thru the program with you, schedule a virtual meeting here or call us at (608) 873-1342.

LifeScan Extortion – Diabetic Test Strip “Authorized Distributors”

For the second time in the last three years, numerous pharmacies have received, what PAAS National® would consider extortionary, letters from LifeScan. These letters state the pharmacy has a discrepancy between purchases (from their authorized distributor) and rebates paid to PBMs for the pharmacy’s claims of diabetic test strips, specifically OneTouch® Verio® and Ultra®. The letters threaten the pharmacy to pay LifeScan to resolve the shortage or else LifeScan will notify PBMs and withhold rebates to incentivize the PBMs to come after the pharmacies.

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The manufacturer of OneTouch® Ultra® and OneTouch® Verio® branded test strips has collected data from PBMs regarding pharmacy dispensing (via rebate claims) and from authorized distributors regarding pharmacy purchasing information to conclude where they have paid inappropriate rebates to PBMs.

Since diabetic test strips are OTC medical devices, they fall outside of the FDA’s Drug Supply Chain Security Act (DSCSA) and have been a long-time concern for manufacturers and regulators due to counterfeit and gray market products. Because of this regulatory blind spot, manufacturers have created, and publicly posted, lists of “authorized distributors”. These supply chain partners have agreed to manufacturer terms and conditions, including provisions that they will not purchase or sell counterfeit or diverted goods or sell any authorized product to non-authorized distributors.

Listed below are the major diabetic test strip manufacturer websites (not all inclusive) where you can validate that your suppliers are authorized. If your wholesaler is not on the list, then you should question where they received their product from.

  1. Abbott https://www.diabetescare.abbott/support/distributors.html
  2. Ascensia https://www.ascensiadiabetes.com/ (click on “distributors” at the bottom of the page)
  3. LifeScan genuineonetouch.com
  4. Roche https://rxvp.accu-chek.com/welcome/adr_list
  5. Trividia HealthTM https://www.trividiahealth.com/where-to-buy/

Test strips purchased from non-authorized distributors may be offered at a lower sticker price, but these front-end savings may disappear on the back-end if you are subject to a PBM audit. Additionally, your patients may be at risk if the products are counterfeit and the measurements are not reliable.

Caremark and Express Scripts revised their Pharmacy Provider Manuals in 2016 in response to a large Abbott lawsuit against 57 wholesalers for reimporting foreign product in 2015 and they aggressively targeted pharmacies with invoice audits to recoup lost rebate payments from Abbott. OptumRx does not explicitly require pharmacies to use authorized distributors for diabetic test strips; however, they require pharmacies to be purchasing from an NABP Accredited Drug Distributor and a wholesaler who is licensed in your state (i.e., not OTC distributors).

Lastly, two state boards of pharmacy (CA, NJ) have explicit rules for pharmacies that require purchases of diabetic test strips directly from the manufacturer or their authorized distributors. The California Board of Pharmacy even has a website where pharmacies can find most of the manufacturer authorized lists in one place.

PAAS Tips:

  • Contact PAAS (608) 873-1342 or info@paasnational.com if you are in receipt of a LifeScan letter regarding purchase discrepancies or a PBM audit showing an invoice shortage for considerations on how to respond
  • To mitigate risk, PAAS suggests that pharmacies consider purchasing all diabetic test strips from wholesalers that meet the following criteria:
    1. On the manufacturer’s authorized distributor list
    2. Have NABP Drug Distributor Accreditation
    3. Licensed in your state as a drug wholesaler

Audit Target – Pre-Filled Injectable Pens and Syringes

Audit Target – Pre-Filled Injectable Pens and Syringes

Pre-filled injectable medication such as insulin, Invega®, Humira®, Enbrel® and Ozempic® remain a big target for audit risk due to their high cost and potential billing pitfalls. One claim error can cost you thousands of dollars. PAAS National® often sees prescriptions for pre-filled injectable medications flagged for recoupment due to one or more of the following reasons:

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  1. Missing a unit of measure (UOM) or written for a UOM that does not make sense
  2. Missing dosage or quantity to inject
  3. Missing the route of administration (ROA)
  4. Missing calculable instructions/frequency

PAAS Tips:

  • Here is a Humira prescription example:
    • The quantity of #1 could be interpreted as 1 pen when the box comes as a kit and contains 2 pens
    • There is no UOM, so does the prescriber want 1 box, 1 mL, 1 pen, 1 kit?
    • The SIG does not contain calculable instructions = how much to inject, where to inject (ROA) or how often to inject
  • If the pharmacy received this prescription and did not clarify any elements, it would be marked discrepant upon audit.
  • Upon receiving this prescription, ideally, the pharmacy would clarify the following elements with the prescriber’s office and make a clinical notation
    • Quantity of 1 = 1 kit or 2 pens
    • SIG – Inject 40 mg subcutaneously once a week – this clarifies how much to inject, the ROA and how often to inject
  • Utilize the PAAS National® Self-Audit Mindset tool when reviewing prescription
  • Pay special attention to pre-filled injectable pens and syringes to avoid thousands of dollars of chargebacks upon an audit

Post-PHE Claim Submission Requirements for Continuous Glucose Monitors

Centers for Medicare and Medicaid Services (CMS ) did not enforce clinical indications for specific product categories during the Public Health Emergency (PHE), including Continuous Glucose Monitors (CGMs). During this time, the provider only needed to indicate the CGM and related supplies were reasonable and necessary. Pharmacies had to identify that these claims were excluded from enforcement by submitting a Catastrophe/Disaster Related (CR) modifier and a COVID-19 narrative on those claims.

Now that the PHE has ended and CMS is enforcing clinical indications for CGMs and supplies, pharmacies are left wondering what will happen with continued or refilled claims for CGM related supply items initially provided during the PHE under the waiver/non-enforcement.

PAAS Tips:

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  • For continued CGM supplies and accessories initially provided during the PHE under the waiver/non-enforcement:
    • Suppliers need to continue to use the CR modifier and COVID-19 narrative for dates of service after May 12, 2023. These actions allow the DME MACs to use new edits on the PHE dispensed items and be able to identify these claims for future review
    • Suppliers should continue to bill the KX, and/or CG modifiers as applicable
    • During the PHE, CMS stated there must be an order and documentation to confirm medical need for items under waiver/non-enforcement
      • Medical need for supplies is typically established and documented when the item is initially provided; Medicare plans to primarily focus medical reviews on claims with initial dates of service after the PHE
      • Potential medical reviews for CGMs would likely occur at least 6 months after the end of the PHE to ensure the treating practitioner has an in-person or approved telehealth visit with the beneficiary to meet the face-to face requirement
    • For a CGM and/or related supplies with initial dates of service on and after May 12, 2023, clinical indications for coverage will be enforced
      • Resources for this coverage criteria:
        • See the April 2023 Newsline article, A Documentation Checklist for Continuous Glucose Monitor Claims for Medicare coverage requirements, updated as of 4/16/2023
        • Glucose Monitor/CGM LCD
        • Glucose Monitor/CGM Policy Article
      • Suppliers must be diligent in recognizing when the initial CGM dispensing took place
        • If on or after May 12, 2023, then suppliers need to follow the new LCD coverage requirements for CGMs and related supplies
        • If during the PHE, continue to affix the CR modifier and COVID-19 narrative (where appropriate) and be sure the item continues to be reasonable and necessary to prevent recoupment