Brad Gallagher, Health Care Controversies Team co-leader, was interviewed for the Pennsylvania Capital-Star article “Pa. Legislators Passed a Law to Regulate Pharmacy Middlemen. But the State Doesn’t Enforce It.” about aggressive pharmacy benefit manager (PBM) auditing practices, which often result in independent pharmacies being charged exorbitant sums for clerical errors.
The case cited in the article highlights the broader issue of these aggressive audits by PBMs. Although Pennsylvania passed a fair audit law in 2016 to prevent PBMs from demanding large sums for clerical errors, enforcement has been weak. Pharmacists report ongoing issues with PBMs continuing to claw back money for minor errors. The Pennsylvania Insurance Department has received numerous complaints about aggressive PBM audits, and lawyers confirm that such practices are common despite the legislation.
“They’ll claim that they are conducting a fraud, waste, and abuse investigation, and basically every law that would apply to a PBM has exceptions for fraud, waste, and abuse,” Brad said. “PBMs consider fraud any time that there’s anything wrong with a claim.”
One reason for the law's ineffectiveness is its lack of enforcement mechanisms. The Pennsylvania Insurance Department has not created rules to ensure compliance, partly due to federal laws that limit state authority over many health insurance plans. This leaves a significant portion of health care plans in Pennsylvania unaffected by the fair audit law. Even for plans under state regulation, PBMs have found ways to circumvent the law by labeling audits as fraud, waste, and abuse investigations, which are not covered by the legislation.
Efforts are underway to reform PBM practices further. Lawmakers, with support from Pennsylvania Governor Josh Shapiro, are working on new legislation to prevent PBMs from demanding full reimbursements for clerical errors and to increase transparency in their financial dealings. The proposed bill aims to set standards for reimbursement rates, limit patient steering to PBM-owned pharmacies, and require PBMs to report more information to the insurance department. However, the success of these reforms will depend on effective enforcement by state authorities.
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