Are You Overpaying Your Pharmacy Invoice Bill? - International ...

Are You Overpaying Your
Pharmacy Invoice Bill?
Plan sponsors should be able to
review their prescription claim
bills on a regular basis, rather
than waiting until a year-end
audit to catch billing errors.
by | Kristin Begley
42
benefits magazine june 2012
Benefits Magazine v 49 no 6 Jun 2012 pp 42-45

Every two weeks, $12 billion of pharmacy
benefit claims are paid to pharmacy
benefit managers (PBMs) without
a review to check the charges. It’s
a bit like paying a credit card statement
each month without reviewing it. Imagine
requesting a statement from the credit company
to check the bill, and being told the statement
can be reviewed only during an end-of-year audit.
Even if your bill contains errors, you must
pay the whole bill and wait until the end of the
year to dispute charges or receive a refund.
Such is the case with pharmacy benefits. Plan
sponsors usually receive their prescription claim
bills every other week with only 48 hours to pay
PBMs the amount due. Payers of pharmacy claims
typically do not receive itemized statements of the
claims. Even if an itemized statement is available,
few payers have the resources to review complicated
lengthy statements and confirm accuracy within 48
hours.
Prescription claim billing errors and overcharges
do occur, and current billing methods can create
payment errors that collectively could add up to
enormous preventable overcharges each year.
june 2012 benefits magazine 43

pharmacy benefits
Protecting Against
Invoice Errors
Plan sponsors should consider each
of the following six specifications for
their PBM contract:
1. The invoice review process does
not fall under audit protocols.
2. The PBM will provide unabridged
claims data with an invoice.
3. There are no limitations on the
number of invoices that can be
reviewed each year.
4. All discounts (i.e., maximum allowable
cost (MAC) and specialty
drug lists)—rather than a sample
of these discounts—will be disclosed
to the payer.
5. The PBM will review all disputed
claims.
6. The plan can withhold payment
for disputed claims, or disputed
claims will be reconciled within
one invoice cycle.
An example of bill review language
that will protect a payer from overages
is provided below.
PBM shall allow Client and
Client’s designated representative
to review all invoices and all intakeaways
>>
• Few payers are able to review complicated PBM statements and confirm accuracy within
48 hours.
• $307.4 billion was spent on drugs in the United States in 2010. A margin of error of 2-5%
would mean $6 billion to $15 billion spent annually because of errors.
• Contracts with PBMs should provide specific provisions for reviewing claims.
• Bill review and an audit are not the same thing.
Why Invoice Errors Occur
The drug payment system in the
United States is complex. Inherently,
any large data set is likely to have errors
when there are 200 to 500 columns
of data per prescription in addition to
some degree of human data input. To
add to this, many PBMs process data on
legacy systems where it is very difficult
to capture the specificity of the contracts
as they are negotiated, and it is
rare that two contracts are adjudicated
exactly the same. Additionally, as new
plan designs are forced into legacy systems
not designed for new strategies,
processing errors can be compounded.
Unchecked, the cost of payment errors
can have a significant negative financial
impact on plan sponsors that
struggle to offer meaningful benefits.
According to IMS, a provider of health
care information, services and technology,
about $307.4 billion was spent on
drugs in the United States in 2010. With
just a margin of error of from 2% to 5%,
learn more >>
Education
Specialty Pharmacy and Biotechnology Medication Coverage
For more information, visit www.ifebp.org/elearning.
From the Bookstore
Pharmacy Benefits: Plan Design and Management
by F. Randy Vogenberg. International Foundation. 2011.
For more details, visit www.ifebp.org/books.asp?6962.
plan sponsors and individuals combined
are spending $6 billion to $15
billion annually because of errors.
No laws are in place to enforce
transparency or accountability in drug
spending. According to CMS, prescription
drug costs are projected to grow
at 7% year over year, and expenditures
could double within ten years. 1
Consequences of Not
Being Able to Review Bills
Unlike credit card holders, who generally
are not liable for errors on their
bills, plan sponsors are responsible for errors
on their prescription claim invoices.
The consequences of overpaying a
pharmacy benefits bill may be serious. If a
payer is repeatedly invoiced for amounts
greater than what was really owed and
fails to catch the errors, health care costs
will increase over time. Plan sponsors often
shift costs to members, and these cost
shifts end up hitting the pocketbooks of
individual plan members.
Some may argue that the type of errors
being discussed here are negligible
and simply a “rounding error”—a few
cents here and a few cents there. But
small prescription claims errors are
like a death by a thousand cuts that
collectively add up to a possible painful
death of a prescription drug benefit.
Although the absolute amount of each
mistake may be small, collectively the
potential overcharges can be expensive.
For a midsize plan that pays $10 million
per year for prescription drugs for
6,000 employees, a 3% error rate could
mean $300,000 in overcharges.
44
benefits magazine june 2012

pharmacy benefits
formation pertaining to the Client’s pharmacy claims
underlying such invoice. Such review shall, at Client’s
option, be performed before payment of every invoice.
PBM shall provide to Client and Client’s designated
representative, with every invoice, the complete and
unadulterated information pertaining to the Client’s
pharmacy claims underlying such invoice (“Plan Data”),
which shall include, but not be limited to: i) electronic
files in plain text format, containing unabridged data
records of each claim for which payment is sought by
PBM, in an NCPDP 2 format; ii) a data dictionary describing
the contents of the NCPDP claims data format
provided; iii) electronic files in plain text format,
containing any updates to the full and complete price
lists, including NDCs or GPIs/GCNs 3 as applicable and
price effective dates, each of which is used in pricing
the claims submitted to Client for payment; this shall
include, but not be limited to, maximum allowable cost
(MAC) lists, specialty drug price lists, fixed cost or frozen
cost drug lists, and/or any other price list applicable
to and in force during the invoice period; and iv) electronic
files in plain text format, containing updates, if
any, to the list of drugs excluded from guarantees or
pricing terms (e.g. new to market generics). Beginning
within thirty (30) days of any written request to PBM
by Client, and continuing until Client delivers written
notice changing this directive, PBM shall deliver the requested
Plan Data without fee and contemporaneously
with the delivery of each invoice.
In the event that Client determines that there are errors
or inaccuracies in the invoice or underlying Plan
Data, Client shall pay the full amount of the invoice
less any disputed amount. Client will notify PBM, in
writing, of the source and amounts in dispute, and Client
will submit to PBM sufficient detail, back-up and/
or data to support its dispute. PBM and Client shall
work in good faith to reconcile any disputes. Withholding
disputed amounts shall not constitute default
by Client and shall not entitle the PBM to suspend or
delay its performance of services.
Unfortunately, PBMs often state that bill review and an
audit are the same thing and cite that the contract does, indeed,
allow for review in the form of an audit.
It is important to recognize that reviewing an invoice prepayment
is not the same as performing an audit. An invoice