HB5987 98TH GENERAL ASSEMBLY

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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.

A BILL FOR

AN ACT concerning regulation.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Audits of Pharmacy Benefits Act.

Section 5. Definitions. As used in this Act:

"Clerical or recordkeeping error" includes a typographical error, scrivener's error, or computer error in a required document or record.

"Extrapolation" means the practice of inferring a frequency or dollar amount of overpayments, underpayments, nonvalid claims, or other errors on any portion of claims submitted, based on the frequency or dollar amount of overpayments, underpayments, nonvalid claims, or other errors actually measured in a sample of claims.

"Health benefit plan" has the same meaning as provided in Section 5 of the Health Carrier External Review Act.

"Health Carrier" has the same meaning as provided in Section 5 of the Health Carrier External Review Act.

"Pharmacy" has the same meaning as provided in Section 3 of the Pharmacy Practice Act.

"Pharmacy audit" means an audit, either onsite or remotely, of any records of a pharmacy conducted by or on behalf of a health carrier or a pharmacy benefits manager, or a representative thereof, for prescription drugs that were dispensed by that pharmacy to beneficiaries of a health benefit plan pursuant to a contract with the health benefit plan or issuer or administrator thereof. "Pharmacy audit" does not include a concurrent review or desk audit that occurs within 3 business days of transmission of a claim or a concurrent review or desk audit where no chargeback or recoupment is demanded.

"Pharmacy benefit manager" means a person, business, or other entity that, pursuant to a contract or under an employment relationship with a health carrier, health benefit plan sponsor, or other third-party payer, either directly or through an intermediary, manages the prescription drug coverage provided by the health carrier, health benefit plan sponsor, or other third-party payer, including, but not limited to, the processing and payment of claims for prescription drugs, the performance of drug utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to prescription drug coverage, contacting with network pharmacies, and controlling the cost of covered prescription drugs.

Section 10. Exemptions.

(a) Nothing in this Act shall apply to:

(1) an audit conducted because a pharmacy benefit manager, health carrier, health benefit plan sponsor, or other third-party payer has indications that support a reasonable suspicion that criminal wrongdoing, willful misrepresentation, fraud, or abuse has occurred; or

(2) an audit conducted by, or at the direction of, the State Board of Pharmacy, the Department of Healthcare and Family Services, the Department of Public Health, or the Medicaid program.

Section 15. Amended or renewed contracts. Notwithstanding any other law, a contract that is issued, amended, or renewed on or after January 1, 2015, between a pharmacy and a health carrier or a pharmacy benefit manager to provide pharmacy services to beneficiaries of a health benefit plan shall comply with the provisions of this Act.

Section 20. Payment to auditing entity; recoupment of pharmacy funds.

(a) An entity conducting a pharmacy audit shall not receive payment or any other consideration on any basis that is tied to the amount claimed or actual amount recovered from the pharmacy that is the subject of the audit. Nothing in this subsection shall be construed to prevent the pharmacy benefit manager or health benefit plan from charging or assessing the health benefit plan sponsor, directly or indirectly, based on amounts recouped if both of the following conditions are met:

(1) the health benefit plan sponsor and the pharmacy benefit manager or health benefit plan have a contract that explicitly states the percentage charge or assessment to the health benefit plan sponsor; and

(2) no commission or financial incentive is paid to an agent or employee of the entity conducting the pharmacy audit based, directly or indirectly, on amounts recouped.

(b) A pharmacy shall not be subject to recoupment of funds for a clerical or recordkeeping error, unless the error resulted in actual financial harm to the pharmacy benefit manager, the health carrier, or the beneficiary of a health benefit plan.

Section 25. Information to be collected; disclosures.

(a) Except as otherwise prohibited by State or federal law, an entity conducting a pharmacy audit shall keep confidential any information collected during the course of the audit and shall not share any information with any person other than the health carrier, pharmacy benefit manager, or third-party payer for which the audit is being performed. An entity conducting a pharmacy audit shall have access to previous audit reports relating to a particular pharmacy conducted by or on behalf of the same entity. Nothing in this subsection shall be construed to authorize access to information that is otherwise prohibited by law. Nothing in this subsection shall be construed to prohibit any employer, trust fund, government agency, or any other entity for which the audit is being performed from disclosing its general opinions or conclusions regarding the business practices of the pharmacy based on the audit.

(b) An entity that is not a health carrier or pharmacy benefit manager and that is conducting a pharmacy audit on behalf of a health carrier or pharmacy benefit manager shall, prior to conducting the audit, notify the pharmacy in writing that the entity and the health carrier or pharmacy benefit manager have executed a business associate agreement or other agreement as required under State and federal privacy laws.

(c) An entity conducting a pharmacy audit shall, prior to leaving a pharmacy at the end of an onsite portion of the audit, provide the pharmacist in charge with a complete list of records reviewed to allow the pharmacy to account for disclosures as required by State and federal privacy laws.

Section 30. Timing and notice of onsite audits.

(a) An entity conducting an onsite pharmacy audit shall not initiate or schedule a pharmacy audit during the first 5 business days of any calender month, unless it is expressly agreed to by the pharmacy being audited.

(b) An entity conducting an onsite pharmacy audit shall provide the pharmacy at least 2 weeks' prior written notice before conducting an initial audit.

Section 35. Audits involving clinical judgments; pharmacy's compliance with federal law; signature logs.

(a) A pharmacy audit that involves clinical judgment shall be conducted by, or in consultation with, a licensed pharmacist.

(b) An entity conducting a pharmacy audit shall make all determinations regarding the legal validity of a prescription or other record consistent with determinations made pursuant to the Pharmacy Practice Act.

(c) Nothing in this Section shall be construed to prohibit a pharmacy benefits manager from denying a claim, either in whole or in part, for failure to comply with federal Food and Drug Administration or manufacturer requirements, the prescription drug formulary, prior authorization requirements, days' supply requirements, or other coverage or plan design requirement, or for failure to include a National Provider Identification number.

(d) An entity conducting a pharmacy audit shall accept paper or electronic signature logs that document the delivery of pharmacy services to a health plan beneficiary or his or her agent.

Section 40. Length of time allowed for audit. The time period covered by a pharmacy audit shall not exceed 24 months from the date that the claim was submitted to, or adjudicated by, the pharmacy benefits manager, unless a longer period is required under State or federal law or unless the originating prescription is required.

Section 45. Preliminary audit report.

(a) An entity conducting a pharmacy audit shall deliver a preliminary audit report to the pharmacy before issuing a final audit report. This preliminary report shall be issued no later than 60 days after conclusion of the audit.

(b) A pharmacy shall be provided a time period of at least 30 days following receipt of the preliminary audit report under subsection (a) to respond to the findings in the report, including addressing any alleged mistakes or discrepancies and producing documentation to that effect.

(c) To validate the pharmacy record and delivery, the pharmacy may use authentic and verifiable statements or records, including medication administration records of a nursing home, assisted living facility, hospital, physician, surgeon, or other authorized prescriber, or additional documentation parameters located in the provider manual.

(d) Any legal prescription may be used to validate claims in connection with prescriptions, refills, or changes in prescriptions, including medication administration records, facsimiles, electronic prescriptions, electronically stored images of prescriptions, electronically created annotations, or documented telephone calls from the prescriber or the prescriber's agent. Unless specifically addressed in the audit policies and procedures contained in the contract or provider manual, documentation of an oral prescription order that has been verified by the prescriber shall meet the requirements of this Section.

(e) If an entity conducting a pharmacy audit uses extrapolation to calculate penalties or amounts to be recouped, the pharmacy may present evidence to validate orders for dangerous drugs or devices that are subject to invalidation due to extrapolation.

(f) Prior to issuing a final audit report, an entity conducting a pharmacy audit shall take into consideration any response by the pharmacy to the preliminary audit report provided within the timeframes allowed under this Section, unless otherwise agreed to by the entity conducting the audit.

Section 50. Final audit report and appeal process.

(a) An entity conducting a pharmacy audit shall deliver a final audit report to the pharmacy no later than 120 days after receipt of a pharmacy's response to the preliminary audit report.

(b) An entity conducting a pharmacy audit shall establish, in the contract between the pharmacy and the contracting entity, a process for appealing the findings in a final audit report that complies with the following requirements:

(1) A pharmacy shall be provided a time period of at least 30 days following receipt of the final audit report to file an appeal with the entity identified in the appeal process.

(2) An entity conducting a pharmacy audit shall provide the pharmacy with a written determination of appeal issued by the entity identified in the appeal process, which shall be appended to the final audit report, and a copy of the determination shall be sent to the health carrier, health benefit plan sponsor, or other third-party payer.

(3) If, following the appeal, either party is not satisfied with the appeal, the party may seek relief under the terms of the contract.

Section 55. Timing of recoupment from pharmacy. An entity conducting a pharmacy audit, a health carrier, a health benefit plan sponsor, or other third-party payer, or any person acting on behalf of those entities, shall not attempt to make chargebacks or seek recoupment from a pharmacy, or assess or collect penalties from a pharmacy, until the time period for filing an appeal to a final audit report has passed or until the appeal process has been exhausted, whichever is later. If the identified discrepancy for a single audit exceeds $30,000, future payments to the pharmacy in excess of $30,000 may be withheld pending adjudication of an appeal.

Section 60. Interest. Interest shall not accrue during the audit period for either party, beginning with the notice of the audit and ending with the conclusion of the appeal process.

Section 65. Unsubstantiated audit reports. If, following final disposition of a pharmacy audit pursuant to this Section, an entity conducting a pharmacy audit, a health carrier, a health benefit plan sponsor, or other third-party payer, or any person acting on behalf of those entities, finds that an audit report or any portion thereof is unsubstantiated, the entity shall dismiss the audit report or the unsubstantiated portion thereof without the necessity of any further proceedings.

Section 70. Board of Pharmacy jurisdiction. This Act shall not be construed to suggest or imply that the State Board of Pharmacy has any jurisdiction or authority over the provisions of this Act.

Section 99. Effective date. This Act takes effect upon becoming law.