Are PBM Audits Enough? Examining the Effectiveness of Health Plan Pharmacy Benefit Audits
July 24, 2023
Pharmacy Benefit Managers (PBMs) play a critical role helping payers administer and operate their pharmacy benefit. Beyond designing formularies and ensuring pharmacy claims adjudicate at the point of sale, PBMs also have a responsibility to help health plans control costs. Over the last ten years, the pharmacy benefit industry has become one of the most complex and opaque markets in US healthcare making it difficult for many payers to easily understand how they are performing.
One of the mechanisms used by payers to ensure accountability in their pharmacy benefit is PBM auditing. These audits generally aim to verify contractual compliance, pricing and rebate guarantees, adjudication issues or instances of fraud, waste, or abuse (FWA), and promote quality assurance. However, as the pharmacy industry continues to increase in complexity, it has become even more critical for payers to evaluate whether PBM audits alone are sufficient to meet the demands of today’s healthcare environment.
In this article, HealthPlan Data Solutions’ (HDS) claims analysts will review the purpose and limitations of traditional PBM audits, offer insights to help health plans establish robust pharmacy payment integrity programs, and provide suggestions to enhance accountability in the pharmacy benefit.
The Purpose of PBM Audits
PBM audits are intended to serve four main purposes:
- Help payers verify that their PBMs are adhering to contractual obligations and industry regulations
- Identify instances of non-compliance, such as overpayments, incorrect billing, or inaccurate claims processing
- Provide an evaluation of the PBM’s ability to impact cost containment and patient outcomes
- Enhance transparency, trust, and accountability between the health plan and the PBM, ensuring that the interests of all stakeholders are upheld
Limitations of Traditional PBM Audits
While PBM audits serve an important function, they have many limitations that raise serious concerns about their effectiveness as the only form of pharmacy payment integrity.
1. PBM Audits are Retrospective
Audits are often initiated at least six months following the close of the plan year and generally take several additional months to complete. This means claim errors have already affected payer costs and potentially impacted patient care.
2. Reliance on Claim Sampling
It’s common for traditional audits to use a statistically significant sample of claims to extrapolate the full impact of claim error. While sampling helps streamline the audit process, it does not provide a comprehensive review of all the health plan’s pharmacy claims. Sampling limits the visibility of the analysis, and therefore limits a health plan’s ability to fully quantify PBM performance.
3. Limitations in Operational Scope
Traditional audits are often limited to specific areas of the PBM’s operations with the health plan. For example, areas like claim adjudication accuracy, formulary compliance, or rebate management may be included, while other areas like plan design implementation and market competitive pricing may be excluded. This limited scope results in shielding underperformance and making it impossible for payers to fully optimize their pharmacy benefit performance.
4. Lack of Standardized Audit Practices
Despite becoming an integral part of a health plan’s relationship with their PBM, there is no standardized or universally accepted framework for conducting a PBM audit across the pharmacy industry. Today, most PBMs have created their own audit processes and file templates, but each PBM’s standards differ slightly. In fact, some PBMs may dictate that the health plan can only contract with a PBM approved auditor. This lack of standardization can result in varied audit methodologies, report formatting, and data inclusion criteria. Without standardized guidelines it can be challenging to compare audit results across PBMs or even year-over-year results with the same PBM. As a result, it can be nearly impossible to benchmark performance.
HDS Claims Analysts’ Suggestions to Improve Payment Integrity Process
1. Implement Continuous Monitoring Systems
HDS claims analysts recommend implementing real-time monitoring systems and proactive auditing strategies to identify, address, and correct issues as they arise. By continuously monitoring and addressing issues, health plans can reduce the potential for financial loss, prevent suboptimal patient outcomes before they occur, and avoid placing unnecessary strain on their relationship with the PBM.
2. Analyze 100% of Pharmacy Claims
Based on past work with health plan pharmacy teams, HDS experts consistently find that the vast majority of pharmacy claims are processed correctly by the PBM. Despite a high clean-claim rate, a small gap in accuracy can result in millions of recoverable dollars. Without a system in place to review 100% of claims, health plans could be left with gaps in visibility. HDS experts recommend implementing solutions that can analyze 100% of pharmacy claims throughout the plan year and ensure all claims are processed correctly.
3. Add Plan Design and Market Competitiveness Review to PBM Audit Scope
It is important to implement comprehensive processes that analyze and address all aspects of PBM performance including:
- Plan Design
- PBM Contract Adherence (e.g., formularies, guarantees, discounts)
- Market Competitiveness
- Treatment Protocols
- Regulatory Compliance
4. Standardize PBM Audit Process and Metrics
HDS experts recommend implementing standardized processes that allow for PBM performance trending QoQ and YoY. By standardizing the auditing process, health plans can set the foundation for benchmarking performance and determining how efficiently their pharmacy benefit is operating.
How to Enhance PBM Accountability
To ensure greater accountability and transparency, additional measures can complement PBM audits. One approach is the establishment of stronger contractual agreements between healthcare payers and PBMs, explicitly outlining audit/review expectations and performance metrics, including data sharing rights. These agreements could also incorporate financial penalties or incentives tied to specific performance indicators, encouraging PBMs to meet or exceed predefined targets.
In addition, use of advanced data analytics and technology can enhance the effectiveness of audits. By leveraging real-time data and AI-powered analytics, payers can proactively identify areas of concern, potential fraud or abuse, and implement corrective measures promptly. Automation and digitization can also streamline audit processes, enabling more comprehensive and efficient evaluations.
Collaboration and information sharing among payers and regulatory bodies can also strengthen PBM oversight. Sharing best practices, audit findings, and industry benchmarks can help establish a unified approach to auditing, promoting consistency and the identification of systemic issues.
PBM audits are an important tool in ensuring accountability and compliance within the complex pharmacy landscape. However, they should not be viewed as a panacea. The limitations of audits necessitate complementary measures to enhance transparency, address quality concerns, and promote better patient outcomes during the plan year. Strengthening contractual agreements, adopting continuous monitoring systems, leveraging advanced analytics, and fostering collaboration can contribute to a more comprehensive and effective approach to pharmacy benefit accountability. By continually evaluating and augmenting audit practices, payers can strive for a more transparent and efficient pharmacy payment integrity program that maximizes the financial and strategic value of their pharmacy benefit plans.
To learn more about continuous pharmacy benefit monitoring, click here to explore HDS’s industry leading pharmacy payment integrity product, Claim Scan.
Click here to schedule a meeting and learn how Claim Scan could help you maximize the value of your pharmacy benefit.