98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
HB5987

 

Introduced , by Rep. Brandon W. Phelps

 

SYNOPSIS AS INTRODUCED:
 
New Act

    Creates the Audits of Pharmacy Benefits Act. Imposes a number of requirements on audits of pharmacy services conducted pursuant to a contract entered into by the pharmacy and the auditing entity on behalf of a health carrier or a pharmacy benefits manager. Requires the entity conducting a pharmacy audit to deliver a preliminary audit report to the pharmacy and to give the pharmacy an opportunity to respond to the report prior to issuing a final audit report. Provides that the entity is also required to implement a process for appealing the findings of the final audit report, and further provides that if either party is unsatisfied with the appeal, that party may seek relief under the terms of the contract. Establishes a number of requirements that the auditing entity must follow when calculating the amounts and penalties that are to be recovered from the pharmacy based on the audit report, and prohibits the entity from receiving payment on any basis tied to the amount claimed or recovered from the pharmacy. Effective immediately.


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A BILL FOR

 

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1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 1. Short title. This Act may be cited as the Audits
5of Pharmacy Benefits Act.
 
6    Section 5. Definitions. As used in this Act:
7    "Clerical or recordkeeping error" includes a typographical
8error, scrivener's error, or computer error in a required
9document or record.
10    "Extrapolation" means the practice of inferring a
11frequency or dollar amount of overpayments, underpayments,
12nonvalid claims, or other errors on any portion of claims
13submitted, based on the frequency or dollar amount of
14overpayments, underpayments, nonvalid claims, or other errors
15actually measured in a sample of claims.
16    "Health benefit plan" has the same meaning as provided in
17Section 5 of the Health Carrier External Review Act.
18    "Health Carrier" has the same meaning as provided in
19Section 5 of the Health Carrier External Review Act.
20    "Pharmacy" has the same meaning as provided in Section 3 of
21the Pharmacy Practice Act.
22    "Pharmacy audit" means an audit, either onsite or remotely,
23of any records of a pharmacy conducted by or on behalf of a

 

 

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1health carrier or a pharmacy benefits manager, or a
2representative thereof, for prescription drugs that were
3dispensed by that pharmacy to beneficiaries of a health benefit
4plan pursuant to a contract with the health benefit plan or
5issuer or administrator thereof. "Pharmacy audit" does not
6include a concurrent review or desk audit that occurs within 3
7business days of transmission of a claim or a concurrent review
8or desk audit where no chargeback or recoupment is demanded.
9    "Pharmacy benefit manager" means a person, business, or
10other entity that, pursuant to a contract or under an
11employment relationship with a health carrier, health benefit
12plan sponsor, or other third-party payer, either directly or
13through an intermediary, manages the prescription drug
14coverage provided by the health carrier, health benefit plan
15sponsor, or other third-party payer, including, but not limited
16to, the processing and payment of claims for prescription
17drugs, the performance of drug utilization review, the
18processing of drug prior authorization requests, the
19adjudication of appeals or grievances related to prescription
20drug coverage, contacting with network pharmacies, and
21controlling the cost of covered prescription drugs.
 
22    Section 10. Exemptions.
23    (a) Nothing in this Act shall apply to:
24        (1) an audit conducted because a pharmacy benefit
25    manager, health carrier, health benefit plan sponsor, or

 

 

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1    other third-party payer has indications that support a
2    reasonable suspicion that criminal wrongdoing, willful
3    misrepresentation, fraud, or abuse has occurred; or
4        (2) an audit conducted by, or at the direction of, the
5    State Board of Pharmacy, the Department of Healthcare and
6    Family Services, the Department of Public Health, or the
7    Medicaid program.
 
8    Section 15. Amended or renewed contracts. Notwithstanding
9any other law, a contract that is issued, amended, or renewed
10on or after January 1, 2015, between a pharmacy and a health
11carrier or a pharmacy benefit manager to provide pharmacy
12services to beneficiaries of a health benefit plan shall comply
13with the provisions of this Act.
 
14    Section 20. Payment to auditing entity; recoupment of
15pharmacy funds.
16    (a) An entity conducting a pharmacy audit shall not receive
17payment or any other consideration on any basis that is tied to
18the amount claimed or actual amount recovered from the pharmacy
19that is the subject of the audit. Nothing in this subsection
20shall be construed to prevent the pharmacy benefit manager or
21health benefit plan from charging or assessing the health
22benefit plan sponsor, directly or indirectly, based on amounts
23recouped if both of the following conditions are met:
24        (1) the health benefit plan sponsor and the pharmacy

 

 

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1    benefit manager or health benefit plan have a contract that
2    explicitly states the percentage charge or assessment to
3    the health benefit plan sponsor; and
4        (2) no commission or financial incentive is paid to an
5    agent or employee of the entity conducting the pharmacy
6    audit based, directly or indirectly, on amounts recouped.
7    (b) A pharmacy shall not be subject to recoupment of funds
8for a clerical or recordkeeping error, unless the error
9resulted in actual financial harm to the pharmacy benefit
10manager, the health carrier, or the beneficiary of a health
11benefit plan.
 
12    Section 25. Information to be collected; disclosures.
13    (a) Except as otherwise prohibited by State or federal law,
14an entity conducting a pharmacy audit shall keep confidential
15any information collected during the course of the audit and
16shall not share any information with any person other than the
17health carrier, pharmacy benefit manager, or third-party payer
18for which the audit is being performed. An entity conducting a
19pharmacy audit shall have access to previous audit reports
20relating to a particular pharmacy conducted by or on behalf of
21the same entity. Nothing in this subsection shall be construed
22to authorize access to information that is otherwise prohibited
23by law. Nothing in this subsection shall be construed to
24prohibit any employer, trust fund, government agency, or any
25other entity for which the audit is being performed from

 

 

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1disclosing its general opinions or conclusions regarding the
2business practices of the pharmacy based on the audit.
3    (b) An entity that is not a health carrier or pharmacy
4benefit manager and that is conducting a pharmacy audit on
5behalf of a health carrier or pharmacy benefit manager shall,
6prior to conducting the audit, notify the pharmacy in writing
7that the entity and the health carrier or pharmacy benefit
8manager have executed a business associate agreement or other
9agreement as required under State and federal privacy laws.
10    (c) An entity conducting a pharmacy audit shall, prior to
11leaving a pharmacy at the end of an onsite portion of the
12audit, provide the pharmacist in charge with a complete list of
13records reviewed to allow the pharmacy to account for
14disclosures as required by State and federal privacy laws.
 
15    Section 30. Timing and notice of onsite audits.
16    (a) An entity conducting an onsite pharmacy audit shall not
17initiate or schedule a pharmacy audit during the first 5
18business days of any calender month, unless it is expressly
19agreed to by the pharmacy being audited.
20    (b) An entity conducting an onsite pharmacy audit shall
21provide the pharmacy at least 2 weeks' prior written notice
22before conducting an initial audit.
 
23    Section 35. Audits involving clinical judgments;
24pharmacy's compliance with federal law; signature logs.

 

 

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1    (a) A pharmacy audit that involves clinical judgment shall
2be conducted by, or in consultation with, a licensed
3pharmacist.
4    (b) An entity conducting a pharmacy audit shall make all
5determinations regarding the legal validity of a prescription
6or other record consistent with determinations made pursuant to
7the Pharmacy Practice Act.
8    (c) Nothing in this Section shall be construed to prohibit
9a pharmacy benefits manager from denying a claim, either in
10whole or in part, for failure to comply with federal Food and
11Drug Administration or manufacturer requirements, the
12prescription drug formulary, prior authorization requirements,
13days' supply requirements, or other coverage or plan design
14requirement, or for failure to include a National Provider
15Identification number.
16    (d) An entity conducting a pharmacy audit shall accept
17paper or electronic signature logs that document the delivery
18of pharmacy services to a health plan beneficiary or his or her
19agent.
 
20    Section 40. Length of time allowed for audit. The time
21period covered by a pharmacy audit shall not exceed 24 months
22from the date that the claim was submitted to, or adjudicated
23by, the pharmacy benefits manager, unless a longer period is
24required under State or federal law or unless the originating
25prescription is required.
 

 

 

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1    Section 45. Preliminary audit report.
2    (a) An entity conducting a pharmacy audit shall deliver a
3preliminary audit report to the pharmacy before issuing a final
4audit report. This preliminary report shall be issued no later
5than 60 days after conclusion of the audit.
6    (b) A pharmacy shall be provided a time period of at least
730 days following receipt of the preliminary audit report under
8subsection (a) to respond to the findings in the report,
9including addressing any alleged mistakes or discrepancies and
10producing documentation to that effect.
11    (c) To validate the pharmacy record and delivery, the
12pharmacy may use authentic and verifiable statements or
13records, including medication administration records of a
14nursing home, assisted living facility, hospital, physician,
15surgeon, or other authorized prescriber, or additional
16documentation parameters located in the provider manual.
17    (d) Any legal prescription may be used to validate claims
18in connection with prescriptions, refills, or changes in
19prescriptions, including medication administration records,
20facsimiles, electronic prescriptions, electronically stored
21images of prescriptions, electronically created annotations,
22or documented telephone calls from the prescriber or the
23prescriber's agent. Unless specifically addressed in the audit
24policies and procedures contained in the contract or provider
25manual, documentation of an oral prescription order that has

 

 

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1been verified by the prescriber shall meet the requirements of
2this Section.
3    (e) If an entity conducting a pharmacy audit uses
4extrapolation to calculate penalties or amounts to be recouped,
5the pharmacy may present evidence to validate orders for
6dangerous drugs or devices that are subject to invalidation due
7to extrapolation.
8    (f) Prior to issuing a final audit report, an entity
9conducting a pharmacy audit shall take into consideration any
10response by the pharmacy to the preliminary audit report
11provided within the timeframes allowed under this Section,
12unless otherwise agreed to by the entity conducting the audit.
 
13    Section 50. Final audit report and appeal process.
14    (a) An entity conducting a pharmacy audit shall deliver a
15final audit report to the pharmacy no later than 120 days after
16receipt of a pharmacy's response to the preliminary audit
17report.
18    (b) An entity conducting a pharmacy audit shall establish,
19in the contract between the pharmacy and the contracting
20entity, a process for appealing the findings in a final audit
21report that complies with the following requirements:
22        (1) A pharmacy shall be provided a time period of at
23    least 30 days following receipt of the final audit report
24    to file an appeal with the entity identified in the appeal
25    process.

 

 

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1        (2) An entity conducting a pharmacy audit shall provide
2    the pharmacy with a written determination of appeal issued
3    by the entity identified in the appeal process, which shall
4    be appended to the final audit report, and a copy of the
5    determination shall be sent to the health carrier, health
6    benefit plan sponsor, or other third-party payer.
7        (3) If, following the appeal, either party is not
8    satisfied with the appeal, the party may seek relief under
9    the terms of the contract.     
 
10    Section 55. Timing of recoupment from pharmacy. An entity
11conducting a pharmacy audit, a health carrier, a health benefit
12plan sponsor, or other third-party payer, or any person acting
13on behalf of those entities, shall not attempt to make
14chargebacks or seek recoupment from a pharmacy, or assess or
15collect penalties from a pharmacy, until the time period for
16filing an appeal to a final audit report has passed or until
17the appeal process has been exhausted, whichever is later. If
18the identified discrepancy for a single audit exceeds $30,000,
19future payments to the pharmacy in excess of $30,000 may be
20withheld pending adjudication of an appeal.
 
21    Section 60. Interest. Interest shall not accrue during the
22audit period for either party, beginning with the notice of the
23audit and ending with the conclusion of the appeal process.
 

 

 

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1    Section 65. Unsubstantiated audit reports. If, following
2final disposition of a pharmacy audit pursuant to this Section,
3an entity conducting a pharmacy audit, a health carrier, a
4health benefit plan sponsor, or other third-party payer, or any
5person acting on behalf of those entities, finds that an audit
6report or any portion thereof is unsubstantiated, the entity
7shall dismiss the audit report or the unsubstantiated portion
8thereof without the necessity of any further proceedings.
 
9    Section 70. Board of Pharmacy jurisdiction. This Act shall
10not be construed to suggest or imply that the State Board of
11Pharmacy has any jurisdiction or authority over the provisions
12of this Act.
 
13    Section 99. Effective date. This Act takes effect upon
14becoming law.