Pharmacists fight bitter pill of audit practices

Alaska pharmacists are pushing back against what they call onerous auditing practices from prescription drug middlemen.


Pharmacists from across the state testified to the House Labor and Commerce Committee on Monday asking the committee to pass a bill to codify procedures and guidelines for how pharmacy benefit managers conduct prescription audits.

While pharmacists agree auditing weeds out the bad seeds in the pharmacy industry, they feel benefit managers are being capricious in their timing and regularity of their audits, what they consider an infraction and the size of reparations they demand for seemingly insignificant infractions.

Pharmacy benefit managers contract with employers and insurance companies to coordinate payments between these entities and the pharmacies. Not only do the benefit managers audit the prescriptions sold by pharmacies, many own their own mail order or brick and mortar pharmacies.

Co-sponsors Rep. Cathy Muñoz, R-Juneau and Rep. Peggy Wilson, R-Wrangell, wrote House Bill 259 to address a number of the grievances pharmacists have with the benefit management industry.

“This bill is about establishing common courtesy guidelines,” Muñoz said.

The bill would require benefit managers to give reasonable notice to pharmacies of an impending audit, and give pharmacists enough time to comply with audit requests. Pharmacists would also be audit-free during the first week of the month, their busiest time.

“Clerical errors, such as transcription errors or missed signatures on mail-order prescriptions, should not be classified as fraud. Typographical errors are not fraud,” Muñoz said.

She said there have been occasions where a single typographical error can result in stiff penalties.

“The entire prescription reimbursement is wiped out,” Muñoz said. “It’s really an unfair process that is currently in place. It shouldn’t be how much money can be extracted.”

The bill would also prevent the practice of extrapolation, Muñoz said. Extrapolation is “a method of projecting the cost of one mistake over several cases, and in some cases, several years,” she said.

“Auditors have shown gross abuse of the power that they have for audits,” Wilson said. “They get paid a percentage of the money that they get back for the insurance company, so they are nit-picking to the extreme and then they are extrapolating the amounts to fill their own pockets. This has got to stop. It is totally unfair … and I would almost say it’s unethical.”

Fifteen U.S. states already have a similar law, said Christopher Clark, a Muñoz staff member.

“It's a good opening start of the discourse on how we can try to come up with a system that is fair to pharmacists, while assuring the public that there will not be any compromise in detecting fraud,” Clark said.

Eric Douglas is director of government affairs for CVS/Caremark for the western U.S. The company manages a network of about 66,000 independent pharmacies and owns thousands of its own pharmacies.

“We’re … the largest chain pharmacy in the United States,” Douglas said.

Douglas admitted there are bad players in the benefit management business, but assured the committee that CVS was not one of them.

“But you’re throwing in (benefit managers) that practice good practices,” Douglas said. CVS/Caremark, he said, does not request remittance for small infractions and it does not extrapolate, he said.

There is no state agency in Alaska that is a benefit manager. However, Douglas said, his industry must follow existing regulations and laws.

“To say we are a wholly unregulated industry, that just isn’t true,” Douglas said.

Barry Christenson, co-chairman of the Alaska Pharmacists Association and an active pharmacist, testified the bill was his group’s No. 1 legislative priority this year. The bill, he said, would “level the playing field.”

Benefit managers often request 20 to 30 prescriptions per audit, Christenson said.

“It’s a matter of fitting it into the workload,” Christenson said, “instead of helping the patients, which is why we got into this profession … not to do paperwork.”

“We’re not talking about making more money, it’s about keeping us whole,” Christenson said.

Matt DiLoreto with the National Community Pharmacists Association in Washington, D.C. testified by phone. His organization supports the bill.

Alaska is home to 39 independent community pharmacies, DiLoreto said. Audit violations are now a big money maker for pharmacies, he said

Tom Hodel of Soldotna Professional Pharmacy said he was recently audited for 100 prescriptions totaling around $100,000. The benefit manager said he’d made four errors, only one of which Hodel agrees too, and totaled the errors to $85. That amount ballooned to $7,300 due to extrapolation, he said.

Gerald Brown is an independent pharmacist from Fairbanks. He supports the bill and sees it as protection against benefit managers. Currently audits can be done at the benefit managers’ whim, he said.

“This bill doesn’t answer all the questions, but at least it makes it so that we’re not facing undue audits and undue penalties because of those audits,” Brown said. Brown said he has typically four to six audits every three months.

• Contact reporter Russell Stigall at 523-2276 or at

Editor's note: this article has been changed to correct the spelling of Rep. Cathy Muñoz' name, and to correctly identify CVS/Caremark.


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