83R2108 PMO-F

By: Van de Putte S.B. No. 591

A BILL TO BE ENTITLED

AN ACT

relating to procedures for certain audits of pharmacists and pharmacies.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Chapter 843, Insurance Code, is amended by adding Subchapter O to read as follows:

SUBCHAPTER O. AUDITS OF PHARMACISTS AND PHARMACIES

Sec. 843.501. DEFINITIONS. In this subchapter:

(1) "Auditor" means a health maintenance organization or a pharmacy benefit manager that provides pharmacy-related services for health maintenance organization enrollees that is performing an on-site audit or a desk audit of a pharmacist or pharmacy or another entity performing an on-site audit or a desk audit of a pharmacist or pharmacy on behalf of the organization or manager.

(2) "Desk audit" means an audit conducted by an auditor at a location other than the location of the pharmacist or pharmacy. The term includes an audit performed at the auditor's offices during which the pharmacist or pharmacy provides requested documents for auditor review by hard copy or by microfiche, disk, or other electronic media.

(3) "On-site audit" means an audit that is conducted at:

(A) the location of the pharmacist or pharmacy; or

(B) another location at which the records under review are stored.

Sec. 843.503. AUDIT REQUIRING PROFESSIONAL JUDGMENT. An on-site audit or a desk audit involving a pharmacist's clinical or professional judgment must be conducted in consultation with a pharmacist licensed by the Texas State Board of Pharmacy.

Sec. 843.504. ACCESS TO PHARMACY AREA. An auditor may not enter the pharmacy area unless escorted by the pharmacist-in-charge as defined by Section 551.003(29), Occupations Code.

Sec. 843.505. VALIDATION USING CERTAIN RECORDS AUTHORIZED. A pharmacist or pharmacy that is being audited may:

(1) validate a prescription, refill, or change in a prescription with a prescription that complies with rules adopted under Section 554.051, Occupations Code; and

(2) validate the delivery of a prescription with a written record of a hospital, physician, or other authorized practitioner of the healing arts.

Sec. 843.506. CALCULATION OF RECOUPMENT; USE OF EXTRAPOLATION PROHIBITED. (a) An auditor may not calculate the amount of a recoupment based on:

(1) an absence of documentation the pharmacist or pharmacy is not required by law to maintain; or

(2) an error that does not result in actual financial harm to the enrollee, health maintenance organization, or pharmacy benefit manager.

(b) A health maintenance organization or pharmacy benefit manager may not require extrapolation audits as a condition of participation in a contract, network, or program for a pharmacist or pharmacy.

(c) An auditor may not use extrapolation to complete an on-site audit or a desk audit of a pharmacist or pharmacy. Notwithstanding Subsection (a)(2), the amount of a recoupment must be based on the actual overpayment or underpayment and may not be based on an extrapolation.

(d) An auditor may not include a dispensing fee amount in the calculation of an overpayment unless:

(1) the fee was a duplicate charge; or

(2) the prescription for which the fee was charged:

(A) was not dispensed; or

(B) was dispensed without the prescriber's authorization.

Sec. 843.507. CLERICAL OR RECORDKEEPING ERROR. An unintentional clerical or recordkeeping error, such as a typographical error, scrivener's error, or computer error, found during an on-site audit or a desk audit:

(1) is not prima facie evidence of fraud; and

(2) may not be the basis of a recoupment from a pharmacist or pharmacy without proof of intent to commit fraud.

Sec. 843.508. UNIFORM STANDARDS REQUIRED. An auditor must conduct an on-site audit or a desk audit of similarly situated pharmacists or pharmacies under the same audit standards.

Sec. 843.509. ACCESS TO PREVIOUS AUDIT REPORTS. An auditor may have access to audit reports of a pharmacist or pharmacy that were prepared only for the health maintenance organization or pharmacy benefit manager for which the auditor is conducting an audit.

Sec. 843.510. COMPENSATION OF AUDITOR. A health maintenance organization, pharmacy benefit manager, or other auditor may not base compensation paid to the individual or entity performing an on-site audit or a desk audit on a percentage of the amount the health maintenance organization, pharmacy benefit manager, or other auditor is entitled to recover as the result of the audit.

Sec. 843.511. CONCLUSION OF AUDIT; SUMMARY; PRELIMINARY AUDIT REPORT. (a) At the conclusion of an on-site audit or a desk audit, the auditor shall:

(1) provide to the pharmacist or pharmacy a summary of the audit findings; and

(2) allow the pharmacist or pharmacy to respond to questions and alleged discrepancies, if any, and comment on and clarify the findings.

(b) Not later than the 30th day after the date the audit is concluded, the auditor shall send by certified mail, return receipt requested, to the pharmacist or pharmacy a preliminary audit report stating the results of the audit, including explanations for and the amount of recoupment claimed.

(c) The pharmacist or pharmacy may, by providing documentation or otherwise, challenge a result or remedy a discrepancy stated in the preliminary audit report not later than the 30th day after the date the pharmacist or pharmacy receives the report.

Sec. 843.512. FINAL AUDIT REPORT. Not later than the 90th day after the date the pharmacist or pharmacy receives a preliminary audit report under Section 843.511, the auditor shall send by certified mail, return receipt requested, to the pharmacist or pharmacy a final audit report that states:

(1) a summary of the pharmacist's or pharmacy's explanation and documentation, if any, submitted in response to the preliminary audit report; and

(2) the audit results, including a description of all alleged discrepancies and explanations for and the amount of recoupments claimed after consideration of the pharmacist's or pharmacy's response to the preliminary audit report.

Sec. 843.513. APPEAL OF FINAL AUDIT REPORT; AUDIT OUTCOME REPORT. (a) An auditor shall establish a process for a pharmacist or pharmacy to wholly or partly appeal a final audit report.

(b) An auditor shall use the National Council for Prescription Drug Programs' data interchange standards for pharmacy claim submission to evaluate audited claims and appeals under the process established under Subsection (a).

(c) On the date a final audit report is found wholly or partly unsubstantiated after an appeal under the process established under Subsection (a), the auditor shall reject the report, wholly or partly, as applicable.

(d) Not later than the 30th day after the date an appeal under the process established under Subsection (a) is concluded, the auditor shall send by certified mail, return receipt requested, to the pharmacist or pharmacy an audit outcome report that includes:

(1) a summary of the pharmacist's or pharmacy's arguments and documentation, if any, submitted in response to the final audit report; and

(2) the audit results and recoupments claimed after consideration of the pharmacist's or pharmacy's response to the final audit report.

Sec. 843.514. RECOUPMENT AND INTEREST CHARGED AFTER AUDIT. If an audit under this subchapter is conducted, the health maintenance organization or pharmacy benefit manager:

(1) may recoup from the pharmacist or pharmacy an amount based only on a final audit report or, if appealed under the process established under Section 843.513(a), an audit outcome report; and

(2) may not accrue or assess interest on an amount due until the later of the date the pharmacist or pharmacy receives the final audit report or, if appealed under the process established under Section 843.513(a), the date of the audit outcome report.

Sec. 843.515. MEDIATION. (a) A pharmacist or pharmacy aggrieved by an audit outcome report may require an auditor to participate in mediation under Chapter 154, Civil Practice and Remedies Code.

(b) The pharmacist or pharmacy must elect mediation and notify the auditor not later than the 30th day after the date the pharmacist or pharmacy receives the audit outcome report. The mediation must be completed not later than the 90th day after the date the pharmacist or pharmacy receives the audit outcome report.

(c) The mediation must be conducted by a person qualified as an impartial third party under Section 154.052, Civil Practice and Remedies Code.

Sec. 843.516. REMEDIES NOT EXCLUSIVE. This section may not be construed to waive a remedy at law available to a pharmacist or pharmacy.

Sec. 843.517. WAIVER PROHIBITED. The provisions of this subchapter may not be waived, voided, or nullified by contract.

Sec. 843.518. LEGISLATIVE DECLARATION. It is the intent of the legislature that the requirements contained in this subchapter regarding audit of claims to providers who are pharmacists or pharmacies apply to all health maintenance organizations and pharmacy benefit managers unless otherwise prohibited by federal law.

SECTION 2. Section 843.3401, Insurance Code, is transferred to Subchapter O, Chapter 843, Insurance Code, as added by this Act, redesignated as Section 843.502, Insurance Code, and amended to read as follows:

Sec. 843.502 [843.3401]. AUDIT OF PHARMACIST OR PHARMACY; NOTICE; GENERAL PROVISIONS. (a) An auditor [A health maintenance organization or a pharmacy benefit manager that administers pharmacy claims for the health maintenance organization may not use extrapolation to complete the audit of a provider who is a pharmacist or pharmacy. A health maintenance organization may not require extrapolation audits as a condition of participation in the health maintenance organization's contract, network, or program for a provider who is a pharmacist or pharmacy.

[(b) A health maintenance organization or a pharmacy benefit manager that administers pharmacy claims for the health maintenance organization] that performs an on-site audit or a desk audit under this chapter of a provider who is a pharmacist or pharmacy shall provide the provider reasonable notice of the audit and accommodate the provider's schedule to the greatest extent possible. The notice required under this subsection must be in writing and must be sent by certified mail to the provider not later than the 15th day before the date on which the on-site audit is scheduled to occur.

(b) Not later than the seventh day after the date a pharmacist or pharmacy receives notice under Subsection (a), the pharmacist or pharmacy may reschedule an on-site audit or a desk audit to a date not later than the 14th day after the date the audit is initially scheduled. On agreement of the pharmacist or pharmacy and the auditor, the audit may be rescheduled to a date after the 14th day after the date the audit is initially scheduled.

(c) Unless the pharmacist or pharmacy consents in writing, an auditor may not schedule or have an on-site audit or a desk audit conducted:

(1) before the 30th day after the date the pharmacist or pharmacy receives notice under Subsection (a);

(2) more than once annually; or

(3) during the first seven calendar days of a month.

(d) A pharmacist or pharmacy may be required to submit documents in response to a desk audit not earlier than the 30th day after the date the auditor requests the documents.

(e) A contract between a pharmacist or pharmacy and a health maintenance organization or a pharmacy benefit manager must state detailed audit procedures. If a health maintenance organization or pharmacy benefit manager proposes a change to the audit procedures for an on-site audit or a desk audit, the organization or manager must notify the pharmacist or pharmacy in writing of a change in an audit procedure not later than the 60th day before the effective date of the change.

(f) The list of the claims subject to audit must be provided in the notice under Subsection (a) to the pharmacist or pharmacy and may identify the claims only by the prescription numbers or a date range for prescriptions subject to the audit.

(g) If the auditor:

(1) in an on-site audit or a desk audit applies random sampling procedures to select claims for audit, the sample size may not be greater than 50 individual prescription claims; or

(2) conducts an on-site audit or a desk audit related to a specific issue, the number of individual prescription claims subject to the audit may not be greater than 50 and, notwithstanding Subsection (f), may be identified only by prescription number.

(h) After an audit is initiated, a pharmacist or pharmacy may electronically resubmit a disputed claim if the deadline for submission of a claim under Section 843.337 has not expired.

SECTION 3. Chapter 1301, Insurance Code, is amended by adding Subchapter F to read as follows:

SUBCHAPTER F. AUDITS OF PHARMACISTS AND PHARMACIES

Sec. 1301.251. DEFINITIONS. In this subchapter:

(1) "Auditor" means an insurer or a pharmacy benefit manager that provides pharmacy-related services for the insurer's insureds that is performing an on-site audit or a desk audit of a preferred provider that is a pharmacist or pharmacy or another entity performing an on-site audit or a desk audit of a preferred provider that is a pharmacist or pharmacy on behalf of the insurer or manager.

(2) "Desk audit" means an audit conducted by an auditor at a location other than the location of the pharmacist or pharmacy. The term includes an audit performed at the auditor's offices during which the pharmacist or pharmacy provides requested documents for auditor review by hard copy or by microfiche, disk, or other electronic media.

(3) "On-site audit" means an audit that is conducted at:

(A) the location of the pharmacist or pharmacy; or

(B) another location at which the records under review are stored.

Sec. 1301.253. AUDIT REQUIRING PROFESSIONAL JUDGMENT. An on-site audit or a desk audit involving a pharmacist's clinical or professional judgment must be conducted in consultation with a pharmacist licensed by the Texas State Board of Pharmacy.

Sec. 1301.254. ACCESS TO PHARMACY AREA. An auditor may not enter the pharmacy area unless escorted by the pharmacist-in-charge as defined by Section 551.003(29), Occupations Code.

Sec. 1301.255. VALIDATION USING CERTAIN RECORDS AUTHORIZED. A pharmacist or pharmacy that is being audited may:

(1) validate a prescription, refill, or change in a prescription with a prescription that complies with rules adopted under Section 554.051, Occupations Code; and

(2) validate the delivery of a prescription with a written record of a hospital, physician, or other authorized practitioner of the healing arts.

Sec. 1301.256. CALCULATION OF RECOUPMENT; EXTRAPOLATION PROHIBITED. (a) An auditor may not calculate the amount of a recoupment based on:

(1) an absence of documentation the pharmacist or pharmacy is not required by law to maintain; or

(2) an error that does not result in actual financial harm to the insured, insurer, or pharmacy benefit manager.

(b) An insurer or pharmacy benefit manager may not require extrapolation audits as a condition of participation in a contract, network, or program for a pharmacist or pharmacy.

(c) An auditor may not use extrapolation to complete an on-site audit or a desk audit of a pharmacist or pharmacy. Notwithstanding Subsection (a)(2), the amount of a recoupment must be based on the actual overpayment or underpayment and may not be based on an extrapolation.

(d) An auditor may not include a dispensing fee amount in the calculation of an overpayment unless:

(1) the fee was a duplicate charge; or

(2) the prescription for which the fee was charged:

(A) was not dispensed; or

(B) was dispensed without the prescriber's authorization.

Sec. 1301.257. CLERICAL OR RECORDKEEPING ERROR. An unintentional clerical or recordkeeping error, such as a typographical error, scrivener's error, or computer error, found during an on-site audit or a desk audit:

(1) is not prima facie evidence of fraud; and

(2) may not be the basis of a recoupment from a pharmacist or pharmacy without proof of intent to commit fraud.

Sec. 1301.258. UNIFORM STANDARDS REQUIRED. An auditor must conduct an on-site audit or a desk audit of similarly situated pharmacists or pharmacies under the same audit standards.

Sec. 1301.259. ACCESS TO PREVIOUS AUDIT REPORTS. An auditor may have access to audit reports of a pharmacist or pharmacy that were prepared only for the insurer or pharmacy benefit manager for which the auditor is conducting an audit.

Sec. 1301.260. COMPENSATION OF AUDITOR. An insurer, pharmacy benefit manager, or other auditor may not base compensation paid to the individual or entity performing an on-site audit or a desk audit on a percentage of the amount the insurer, pharmacy benefit manager, or other auditor is entitled to recover as the result of the audit.

Sec. 1301.261. CONCLUSION OF AUDIT; SUMMARY; PRELIMINARY AUDIT REPORT. (a) At the conclusion of an on-site audit or a desk audit, the auditor shall:

(1) provide to the pharmacist or pharmacy a summary of the audit findings; and

(2) allow the pharmacist or pharmacy to respond to questions and alleged discrepancies, if any, and comment on and clarify the findings.

(b) Not later than the 30th day after the date the audit is concluded, the auditor shall send by certified mail, return receipt requested, to the pharmacist or pharmacy a preliminary audit report stating the results of the audit, including explanations for and the amount of recoupment claimed.

(c) The pharmacist or pharmacy may, by providing documentation or otherwise, challenge a result or remedy a discrepancy stated in the preliminary audit report not later than the 30th day after the date the pharmacist or pharmacy receives the report.

Sec. 1301.262. FINAL AUDIT REPORT. Not later than the 90th day after the date the pharmacist or pharmacy receives a preliminary audit report under Section 1301.261, the auditor shall send by certified mail, return receipt requested, to the pharmacist or pharmacy a final audit report that states:

(1) a summary of the pharmacist's or pharmacy's explanation and documentation, if any, submitted in response to the preliminary audit report; and

(2) the audit results, including a description of all alleged discrepancies and explanations for and the amount of recoupments claimed after consideration of the pharmacist's or pharmacy's response to the preliminary audit report.

Sec. 1301.263. APPEAL OF FINAL AUDIT REPORT; AUDIT OUTCOME REPORT. (a) An auditor shall establish a process for a pharmacist or pharmacy to wholly or partly appeal a final audit report.

(b) An auditor shall use the National Council for Prescription Drug Programs' data interchange standards for pharmacy claim submission to evaluate audited claims and appeals under the process established under Subsection (a).

(c) On the date a final audit report is found wholly or partly unsubstantiated after an appeal under the process established under Subsection (a), the auditor shall reject the report, wholly or partly, as applicable.

(d) Not later than the 30th day after the date an appeal under the process established under Subsection (a) is concluded, the auditor shall send by certified mail, return receipt requested, to the pharmacist or pharmacy an audit outcome report that includes:

(1) a summary of the pharmacist's or pharmacy's arguments and documentation, if any, submitted in response to the final audit report; and

(2) the audit results and recoupments claimed after consideration of the pharmacist's or pharmacy's response to the final audit report.

Sec. 1301.264. RECOUPMENT AND INTEREST CHARGED AFTER AUDIT. If an audit under this subchapter is conducted, the insurer or pharmacy benefit manager:

(1) may recoup from the pharmacist or pharmacy an amount based only on a final audit report or, if appealed under the process established under Section 1301.263(a), an audit outcome report; and

(2) may not accrue or assess interest on an amount due until the later of the date the pharmacist or pharmacy receives the final audit report or, if appealed under the process established under Section 1301.263(a), the date of the audit outcome report.

Sec. 1301.265. MEDIATION. (a) A pharmacist or pharmacy aggrieved by an audit outcome report may require an auditor to participate in mediation under Chapter 154, Civil Practice and Remedies Code.

(b) The pharmacist or pharmacy must elect mediation and notify the auditor not later than the 30th day after the date the pharmacist or pharmacy receives the audit outcome report. The mediation must be completed not later than the 90th day after the date the pharmacist or pharmacy receives the audit outcome report.

(c) The mediation must be conducted by a person qualified as an impartial third party under Section 154.052, Civil Practice and Remedies Code.

Sec. 1301.266. REMEDIES NOT EXCLUSIVE. This section may not be construed to waive a remedy at law available to a pharmacist or pharmacy.

Sec. 1301.267. WAIVER PROHIBITED. The provisions of this subchapter may not be waived, voided, or nullified by contract.

Sec. 1301.268. LEGISLATIVE DECLARATION. It is the intent of the legislature that the requirements contained in this subchapter regarding audit of claims to preferred providers who are pharmacists or pharmacies apply to all insurers and pharmacy benefit managers unless otherwise prohibited by federal law.

SECTION 4. Section 1301.1041, Insurance Code, is transferred to Subchapter F, Chapter 1301, Insurance Code, as added by this Act, redesignated as Section 1301.252, Insurance Code, and amended to read as follows:

Sec. 1301.252 [1301.1041]. AUDIT OF PHARMACIST OR PHARMACY; NOTICE; GENERAL PROVISIONS. (a) An auditor [insurer or a pharmacy benefit manager that administers pharmacy claims for the insurer may not use extrapolation to complete the audit of a preferred provider that is a pharmacist or pharmacy. An insurer may not require extrapolation audits as a condition of participation in the insurer's contract, network, or program for a preferred provider that is a pharmacist or pharmacy.

[(b) An insurer or a pharmacy benefit manager that administers pharmacy claims for the insurer] that performs an on-site audit or a desk audit of a preferred provider who is a pharmacist or pharmacy shall provide the provider reasonable notice of the audit and accommodate the provider's schedule to the greatest extent possible. The notice required under this subsection must be in writing and must be sent by certified mail to the preferred provider not later than the 15th day before the date on which the on-site audit is scheduled to occur.

(b) Not later than the seventh day after the date a pharmacist or pharmacy receives notice under Subsection (a), the pharmacist or pharmacy may reschedule an on-site audit or a desk audit to a date not later than the 14th day after the date the audit is initially scheduled. On agreement of the pharmacist or pharmacy and the auditor, the audit may be rescheduled to a date after the 14th day after the date the audit is initially scheduled.

(c) Unless the pharmacist or pharmacy consents in writing, an auditor may not schedule or have an on-site audit or a desk audit conducted:

(1) before the 30th day after the date the pharmacist or pharmacy receives notice under Subsection (a);

(2) more than once annually; or

(3) during the first seven calendar days of a month.

(d) A pharmacist or pharmacy may be required to submit documents in response to a desk audit not earlier than the 30th day after the date the auditor requests the documents.

(e) A contract between a pharmacist or pharmacy and an insurer or a pharmacy benefit manager must state detailed audit procedures. If an insurer or pharmacy benefit manager proposes a change to the audit procedures for an on-site audit or a desk audit, the insurer or pharmacy benefit manager must notify the pharmacist or pharmacy in writing of a change in an audit procedure not later than the 60th day before the effective date of the change.

(f) The list of the claims subject to audit must be provided in the notice under Subsection (a) to the pharmacist or pharmacy and may identify the claims only by the prescription numbers or a date range for prescriptions subject to the audit.

(g) If the auditor:

(1) in an on-site audit or a desk audit applies random sampling procedures to select claims for audit, the sample size may not be greater than 50 individual prescription claims; or

(2) conducts an on-site audit or a desk audit related to a specific issue, the number of individual prescription claims subject to the audit may not be greater than 50 and, notwithstanding Subsection (f), may be identified only by prescription number.

(h) After an audit is initiated, a pharmacist or pharmacy may electronically resubmit a disputed claim if the deadline for submission of a claim under Section 1301.102 has not expired.

SECTION 5. The changes in law made by this Act apply only to contracts between a pharmacist or pharmacy and a health maintenance organization, an insurer, or a pharmacy benefit manager executed or renewed, and audits conducted under those contracts, on or after the effective date of this Act. A contract entered into or renewed, and audits conducted under those contracts, before the effective date of this Act are governed by the law in effect immediately before the effective date of this Act, and that law is continued in effect for that purpose.

SECTION 6. This Act takes effect September 1, 2013.