A Pharmacy Benefit Manager, often known as a PBM, is a third-party administrator who handles prescription medication programmes by health plans, companies, unions, and government agencies. A pharmacy benefits manager (PBM) is a financial go-between for pharmacies and insurers/payors.
PBMs are subject to the maxim that “possession is nine-tenths of the law,” a proverb that has been around for a long time. The pharmacy benefit manager (PBM) “possesses the pharmacy’s money” at the end of the day, and the vast majority of PBM contracts, if not all, allow the PBM to cancel its relationship with the Pharmacy with or without reason. Misrepresentations made by the Pharmacy to the PBM, such as answers given in a re-credentialing questionnaire, failure by the Pharmacy to adhere to the requirements imposed by the PBM on its member pharmacies, and a breach by the Pharmacy of terms of the PBM contract are all examples of what can fall under the category of “with cause.” The phrase “without cause” implies just what it says it does. The pharmacy benefit manager (PBM) has the right to cancel the contract if they “do not like what the pharmacy is doing.”
What exactly is a “Carve-Out” in the Pharmacy?
When an employer select a Hospice PBM that is not contracted with the health plan responsible for handling their medical claims, this is known as a carve-out. You can use a fully-insured or self-insured plan when carrying out a carve-out. With carve-outs, a corporation may pay two different fees to both suppliers, but they do so intending to lower their overall costs and increase the number of services they provide their customers.
Corporations operating in an environment characterised by carve-outs often have more significant influence over the contract terms. In addition, they will be granted auditing powers, improved reporting capabilities, and clinical and risk management for the programme. Additionally, the plan sponsor will have direct contact with the PBM, enabling increased communication between the two parties, which in turn may reduce costs and improve clinical results.
PBM Recertification Process
PBMs are responsible for verifying a pharmacy’s credentials to guarantee that it complies with state and federal regulations and satisfies quality performance criteria. They will re-credential pharmacies on an annual or biannual basis to check that they are still in compliance with the PBMs’ conditions for participation.
Recredentialing questionnaires enquire about various topics, such as whether or not the Pharmacy participates in mail order or compounding; whether or not the marketing representatives at the Pharmacy are W2 employees or 1099 independent contractors; and whether or not the Pharmacy collects copayments.
Examples of Questions Found on the Recredentialing Questionnaire, Along with Certification
Questions concerning purchases made via the mail
Is mail order at your Pharmacy responsible for at least 25 per cent of your business?
Please include the proportion of Rx volume for each setting: open door/retail/community, closed door/clinic facility, mail order, nursing home/long-term care facility, internet pharmacy, and others.
Concerning Compounding, Questions and Answers.
Does your Pharmacy provide compounding of more complicated medications?
Is your Pharmacy qualified to compound medications because it is registered or linked with a compounding supplier?
Please provide the proportion of your revenue from Medicaid, Medicare, Workers’ Compensation, 340B, Compounds, and Dispensing Physicians.
Concerning the topic of Copayments: a Question.
Does your Pharmacy ever reduce or waive the copayments members are responsible for paying? If the answer is affirmative, please supply a copy of the written policy concerning reducing or eliminating copayments.
Concerning a marketing question.
Does your Pharmacy directly employ or contract a sales team to serve customers? If the answer is yes, please explain what the sales force does.
Questions Concerning the Pharmacies That Have Been Affiliated
Is there a connection between your Pharmacy and any other pharmacies, directly or indirectly?
Does any one of the owners of the Pharmacy have a stake, either directly or indirectly, in the ownership of another drugstore?
Question Relating to Disciplinary Measures
If so, the State Board of Pharmacy, a government organisation, or any other regulatory authority (such as the State or Federal DEA or the State Medicaid Program) may have reprimanded your Pharmacy or another pharmacy linked with your Pharmacy. If the answer is yes, please explain the action taken, a letter from the Board, and any additional supporting papers from the State Board of Pharmacy, a government agency, or any other regulatory authority.
Questions concerning the observance of legal requirements
Does your Pharmacy use or supply pre-printed prescription forms for any of the chemical medicines you dispense?
Is there a possibility that a prescribing doctor could have a financial stake, directly or indirectly, in your Pharmacy? A “financial interest” includes, but is not limited to, any direct ownership, ownership by an immediate family member (spouse, child, etc.), paid to consult relationship, and a waged or salaried employment relationship. A “financial interest” also includes any employment relationship in which the individual receives a salary.
I acknowledge that if any of the information I have supplied subsequently undergoes any modification that might render any portion of the Questionnaire either incorrect or inaccurate, I promise to promptly notify [Name of PBM] in writing of any such change.
I provide [Name of PBM] permission to contact any person, corporation, organization, etc., including state and federal licensing organizations, as may be required to verify the information above. I understand that this authority may be revoked at any time.
I confirm that training that satisfies the CMS requirement for fraud, waste, and compliance training has been completed within the first 90 days of employment and will continue to be completed yearly after that.
PBMs conduct audits of pharmacies to discover any improper payments made by the PBM on behalf of the plan; verify that the patient received the correct medication in the appropriate dose, and verify that contract adherence. In addition, PBMs do this to discover whether or not the plan is adhering to the PBM’s terms and conditions. Implementing the PBM’s policy manuals into the Pharmacy contracts presents a hurdle for the Pharmacy. The manuals may wind up being just as important as the contracts.
PBMs can carry out field audits or audits on-site at pharmacies. Audits conducted over the phone are often used to make billing adjustments for a limited number of claims. Desk-and-mail audits examine pharmacy claims and data that the PBM has obtained via automated methods.
Some Illustrations of the PBM’s Justifications for Canceling the Contract
Mail-Order Business Is Done By the Pharmacy:
A significant number of PBMs operate their own mail-order pharmacies. PBMs do not want the retail pharmacies under their contracts to compete with the mail-order pharmacies they operate. The majority of re-credentialing surveys enquire about the magnitude of the mail-order business conducted by the Pharmacy. Suppose the pharmacy benefits manager (PBM) discovers that the Pharmacy is engaging in mail-order beyond a specific level. In that case, the PBM may cancel the Pharmacy’s contract.
Compounding is something that the Pharmacy is involved with.
Some compounding pharmacies have ‘burned’ the pharmacy benefit managers (PBMs). Over many years, some pharmacies that compounded medications entered into partnerships with various marketing firms to increase the number of patients seeking compounded pain and scar creams. Compounding pharmacies would supply the creams and then charge the pharmacy benefit managers (PBMs) an excessive sum each month and per patient for the creams. PBMs came under fire from commercial insurers, who took swift action. PBMs do not want the compounding activities of their retail contract pharmacies to be meaningfully involved for various reasons, including the ones listed above.
Copayments Will Frequently Not Be Required, According to the Pharmacy.
The Pharmacy must “take reasonable measures” to collect copayments to comply with federal law, the majority of state legislation, and the majority of PBM contracts. It is against the law for pharmacies to waive copayments regularly. A pharmacy may, at its discretion, waive copayments on an individual patient’s behalf, provided that the patient provides financial evidence to support the waiver.
Through the Use of 1099 Independent Contractors in the Pharmacy Markets
According to the federal anti-kickback statute, also known as the “AKS,” a pharmacy is prohibited from “giving anything of value” to a person or entity in exchange for the person or entity referring (or arranging for the referral of) patients to the Pharmacy who are covered by a federal government health care programme. This prohibition applies to patients receiving care through Medicare, Medicaid, or any other federally funded health care programme.
The AKS may be violated if a pharmacy pays a portion of income to a 1099 independent contractor (individual salesperson or marketing corporation). That contractor is responsible for arranging the referral of patients participating in government health care programmes to the Pharmacy. On the other hand, it is permissible for the Pharmacy to pay commissions to an employee eligible for a W2 form.
Patients Are Transferred From One Affiliated Pharmacy to Another by the Pharmacy.
Take, for example, a pharmacy on the verge of having its contract with a PBM cut short. The drugstore may transfer its customers to one of its linked pharmacies to “keep one step ahead of the posse.” This will take place more than once in the future. This procedure will be terminated due to the PBM’s decision to include questions on the recredentialing form about affiliations.
The following is our response to the PBM Termination Letter:
The first thing that the Pharmacy has to consider is that the PBM is in a stronger position to negotiate than they are. The pharmacy benefit manager (PBM) “possesses the money of the pharmacy” and has an infinite power to litigate with the Pharmacy. The Pharmacy is recommended to contact the PBM to “work the issue.” The termination letter will probably include an explanation of the cause of the termination. The strategy that has the highest probability of being successful is contacting the PBM. If the Pharmacy is unsuccessful in addressing the termination “at the lower level,” the Pharmacy’s attorney should reach out to one of the PBM’s in-house lawyers. The Pharmacy should make an effort to collaborate with the PBM to address and resolve that “cause.”