S T A T E O F N E W Y O R K
________________________________________________________________________
9424--A
I N A S S E M B L Y
March 3, 2016
___________
Introduced by M. of A. LAVINE, DUPREY -- read once and referred to the
Committee on Health -- committee discharged, bill amended, ordered
reprinted as amended and recommitted to said committee
AN ACT to amend the public health law, in relation to audits of pharma-
cies
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. The public health law is amended by adding a new section
280-b to read as follows:
S 280-B. PHARMACY AUDITS. 1. DEFINITIONS. AS USED IN THIS SECTION,
THE FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS:
(A) "AUDIT" MEANS A REVIEW OF THE RECORDS OF A PHARMACY BY OR ON
BEHALF OF AN ENTITY THAT PAYS FOR OR REIMBURSES THE COST OF PHARMACEU-
TICAL PRODUCTS AND HEALTH CARE SERVICES THAT IS CONDUCTED AT A PHARMACY
OR FROM A REMOTE LOCATION OTHER THAN A PHARMACY.
(B) "ENTITY" MEANS:
(I) A PHARMACY BENEFITS MANAGER;
(II) A HEALTH PLAN;
(III) A STATE AGENCY, EXCEPT THE OFFICE OF THE MEDICAID INSPECTOR
GENERAL;
(IV) AN INSURER;
(V) A THIRD PARTY ADMINISTRATOR;
(VI) A MANAGED CARE ORGANIZATION; OR
(VII) A COMPANY, GROUP OR AGENT THAT REPRESENTS OR IS ENGAGED BY ANY
OF THESE.
(C) "PHARMACY BENEFITS MANAGER" MEANS AN ENTITY THAT CONTRACTS WITH
PHARMACIES OR PHARMACY CONTRACTING AGENTS ON BEHALF OF A HEALTH PLAN,
STATE AGENCY, INSURER, MANAGED CARE ORGANIZATION, OR OTHER THIRD PARTY
PAYER TO PROVIDE PHARMACY BENEFIT SERVICES OR ADMINISTRATION.
(D) "PHARMACY" HAS THE SAME MEANING AS SET FORTH IN SECTION SIX THOU-
SAND EIGHT HUNDRED TWO OF THE EDUCATION LAW.
(E) "FRAUD" MEANS AN INTENTIONAL DECEPTION OR MISREPRESENTATION MADE
BY A PERSON WITH THE KNOWLEDGE THAT THE DECEPTION COULD RESULT IN SOME
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD14134-02-6
A. 9424--A 2
UNAUTHORIZED BENEFIT TO HIMSELF OR SOME OTHER PERSON. IT INCLUDES ANY
ACT THAT CONSTITUTES FRAUD UNDER APPLICABLE FEDERAL OR STATE LAW.
(F) "AUDIT PERIOD" MEANS THE TIME PERIOD THAT BEGINS ON THE DAY ON
WHICH THE AUDITOR ARRIVES AT THE PHARMACY FOR THE ON-SITE AUDIT OR IN
THE CASE OF A REMOTE AUDIT, THE DAY ON WHICH THE PHARMACY SUBMITS THE
CLAIMS REQUESTED IN THE AUDIT. THE AUDIT PERIOD ENDS ON THE DAY ON WHICH
THE FINAL AUDIT REPORT IS RECEIVED BY THE SUPERVISING PHARMACIST, THE
PHARMACY CORPORATE OFFICE OR THE PHARMACY ACCEPTS THE SETTLEMENT OF THE
AUDIT, WHICHEVER IS LATER.
2. A CONTRACT BETWEEN A PHARMACY BENEFIT MANAGER OR ALTERNATIVELY THE
AGENT OF A PHARMACY AND A PHARMACY BENEFIT MANAGER SHALL INCLUDE A PROC-
ESS BY WHICH A PHARMACY MAY APPEAL A FINDING IN A PRELIMINARY AUDIT
REPORT OR A FINAL AUDIT REPORT. THE AUDIT APPEAL PROCESS SHALL BE
PRESENTED TO THE PHARMACY IN WRITING OR ELECTRONICALLY PRIOR TO THE
ISSUING OF ANY AUDIT NOTIFICATION AND SHALL PROVIDE THE NAME AND ELEC-
TRONIC ADDRESS OF THE INDIVIDUAL RESPONSIBLE FOR PROCESSING APPEALS, A
REASONABLE TIMEFRAME FOR FILING AN APPEAL AND FOR NOTICE OF THE RESULT
OF ANY APPEAL. THE APPEAL PROCESS SHALL BE INCLUDED WITH A NOTICE OF
AUDIT. IF THE RESULT OF THE INTERNAL APPEAL PROCESS IS NOT SATISFACTORY
TO EITHER PARTY, THAT PARTY MAY SEEK MEDIATION FROM AN OUTSIDE ENTITY
ACCEPTABLE TO BOTH PARTIES. THE ENTITY CONDUCTING AN AUDIT OF A PHARMACY
OR ITS AGENT MAY NOT RECEIVE PAYMENT BASED ON A PERCENTAGE OF THE AMOUNT
RECOVERED.
3. AN ENTITY CONDUCTING AN ON-SITE AUDIT OF A PHARMACY SHALL:
(A) PROVIDE AT LEAST FIFTEEN DAYS ADVANCE WRITTEN NOTICE OF AN AUDIT
BY MAIL OR COMMON CARRIER, RETURN RECEIPT REQUESTED, OR ELECTRONICALLY
WITH ELECTRONIC RECEIPT CONFIRMATION, ADDRESSED TO THE SUPERVISING PHAR-
MACIST OF RECORD AND THE PHARMACY CORPORATE OFFICE WHERE APPLICABLE.
(B) ALLOW A PHARMACY SEVEN DAYS AFTER RECEIVING NOTICE OF AN ON-SITE
AUDIT IN WHICH TO REQUEST A CHANGE OF THE AUDIT DATE. THE ENTITY
CONDUCTING THE AUDIT SHALL GRANT REASONABLE REQUESTS.
(C) INCLUDE IN THE WRITTEN ADVANCE NOTICE OF AN ON-SITE AUDIT THE LIST
OF SPECIFIC AND COMPLETE PRESCRIPTION NUMBERS TO BE INCLUDED IN THE
AUDIT.
(D) EXCEPT IN CASES OF FRAUD, LIMIT AUDITS TO NO MORE THAN ONE AUDIT
BY THE SAME ENTITY IN A TWELVE-MONTH PERIOD.
(E) LIMIT THE TOTAL NUMBER OF PRESCRIPTIONS AUDITED TO NO MORE THAN
ONE HUNDRED RANDOMLY SELECTED IN A TWELVE-MONTH PERIOD, EXCEPT IN CASES
OF ALLEGED FRAUD.
(F) LIMIT AUDITS TO CLAIMS ADJUDICATED WITHIN THE PREVIOUS TWENTY-FOUR
MONTHS.
(G) REFRAIN FROM ON-SITE AUDITS DURING THE FIRST FIVE CALENDAR DAYS OF
ANY MONTH OR THE DAY BEFORE OR AFTER A FEDERAL HOLIDAY DUE TO HIGH
ANTICIPATED PRESCRIPTION VOLUME, EXCEPT WITH CONSENT FROM THE SUPERVIS-
ING PHARMACIST.
4. AN ENTITY CONDUCTING A REMOTE OR DESK AUDIT SHALL:
(A) PROVIDE AT LEAST FIVE BUSINESS DAYS ADVANCE WRITTEN NOTICE OF AN
AUDIT BY MAIL OR COMMON CARRIER, RETURN RECEIPT REQUESTED, OR ELECTRON-
ICALLY WITH ELECTRONIC RECEIPT CONFIRMATION, ADDRESSED TO THE SUPERVIS-
ING PHARMACIST OF RECORD AND THE PHARMACY CORPORATE OFFICE WHERE APPLI-
CABLE.
(B) IN THE CASE OF AN ELECTRONIC NOTIFICATION, CONFIRM THAT THE SUPER-
VISING PHARMACIST OF RECORD OR THE PHARMACY CORPORATE OFFICE HAS
ACKNOWLEDGED RECEIPT BEFORE PROCEEDING WITH THE AUDIT.
(C) ALLOW A MINIMUM OF TEN BUSINESS DAYS FOR A PHARMACY TO COMPLY WITH
AN AUDIT REQUEST SENT ELECTRONICALLY, BEGINNING ON THE DAY ON WHICH THE
A. 9424--A 3
SUPERVISING PHARMACIST OF RECORD OR THE PHARMACY CORPORATE OFFICE
ACKNOWLEDGED RECEIPT OF THE AUDIT NOTIFICATION.
(D) LIMIT THE NUMBER OF CLAIMS TO NO MORE THAN TWENTY-FIVE RANDOMLY
SELECTED CLAIMS.
(E) IF A REMOTE OR DESK AUDIT REVEALS THE NECESSITY FOR A REVIEW OF
ADDITIONAL CLAIMS, THE FOLLOW-UP AUDIT SHALL BE CONDUCTED ON-SITE.
5. AN ENTITY CONDUCTING EITHER AN ON-SITE AUDIT OR A DESK AUDIT SHALL:
(A) AUDIT A PHARMACY USING THE SAME STANDARDS AND PARAMETERS USED IN
AUDITING SIMILARLY SITUATED PHARMACIES ON BEHALF OF THE SAME AUDIT
CLIENT. ANY DOCUMENTATION AND RECORDS REQUIRED BY AN AUDITOR DURING AN
AUDIT SHALL BE OF THE SAME TYPE AS DOCUMENTATION AND RECORDS REQUIRED
FOR OTHER SIMILARLY SITUATED PHARMACIES.
(B) ACCEPT THAT THE FINAL ADJUDICATION OF A CLAIM MEANS THAT THE DRUG,
PRESCRIBER AND PATIENT ELIGIBILITY HAS BEEN APPROVED.
(C) ACCEPT INFORMATION PERTAINING TO THE RECORDS OF A HOSPITAL, PHYSI-
CIAN OR OTHER AUTHORIZED HEALTHCARE PROVIDER WRITTEN OR TRANSMITTED BY
ANY MEANS OF COMMUNICATION AS VALIDATION OF THE PHARMACY RECORD WITH
RESPECT TO ORDERS OR REFILLS OF ANY LEGEND OR NARCOTIC DRUG.
(D) ACCEPT AS VALIDATION THE ELECTRONIC OR PHYSICAL COPY OF A
PRESCRIPTION THAT COMPLIES WITH STATE LAW.
(E) ACCEPT AS VALIDATION ANY REASONABLY CLEAR AND ACCURATE ELECTRONIC
DOCUMENTATION SUCH AS A SIGNATURE LOG OR SCANNED PATIENT RECORDS INDI-
CATING THAT THE PRESCRIPTION WAS PICKED UP, DELIVERED BY THE PHARMACY OR
SENT TO THE PATIENT BY COMMON CARRIER. IF SUCH RECORDS ARE NOT AVAIL-
ABLE, ACCEPT WRITTEN VERIFICATION FROM THE PATIENT THAT THE PRESCRIPTION
WAS RECEIVED.
(F) VALIDATION OF APPROPRIATE DAYS' SUPPLY AND DRUG DOSING MUST BE
BASED ON MANUFACTURER GUIDELINES AND DEFINITIONS, OR IN THE CASE OF
TOPICAL PRODUCTS OR TITRATED PRODUCTS, THE PROFESSIONAL JUDGMENT OF THE
PHARMACIST BASED ON COMMUNICATION WITH THE PATIENT OR PRESCRIBER.
(G) AN AUDIT THAT INVOLVES CLINICAL OR PROFESSIONAL JUDGMENT MUST BE
CONDUCTED BY OR IN CONSULTATION WITH A PHARMACIST WITH A VALID NEW YORK
STATE LICENSE.
(H) IN THE CASE OF INVOICE AUDITS, AN ENTITY SHALL:
(I) ACCEPT AS VALIDATION INVOICES FROM ANY WHOLESALER REGISTERED WITH
THE DEPARTMENT OF EDUCATION FROM WHICH THE PHARMACY HAS PURCHASED
PRESCRIPTION DRUGS;
(II) ACCEPT AS VALIDATION A RECEIPT FROM ANOTHER PHARMACY FOR TRANS-
ACTIONS AUTHORIZED UNDER STATE LAW;
(III) ACCEPT INVOICES THAT SUPPORT INVENTORY ON HAND; AND
(IV) REQUEST DOCUMENTATION PERTAINING ONLY TO THE CLAIMS UNDER AUDIT.
6. AN ENTITY CONDUCTING AN AUDIT OF A PHARMACY SHALL PROVIDE THE PHAR-
MACY AND THE PHARMACY CORPORATE OFFICE WHERE APPLICABLE WITH A PRELIMI-
NARY AUDIT REPORT NO LATER THAN FORTY-FIVE DAYS AFTER THE DATE ON WHICH
THE AUDIT WAS COMPLETED AND SHALL CONTAIN CLAIM LEVEL INFORMATION FOR
ANY DISCREPANCY FOUND. THE PRELIMINARY AUDIT REPORT SHALL BE SENT BY
MAIL OR COMMON CARRIER WITH RETURN RECEIPT REQUESTED OR ELECTRONICALLY
WITH ELECTRONIC RECEIPT CONFIRMATION.
7. THE PHARMACY RECEIVING THE PRELIMINARY AUDIT REPORT SHALL HAVE NO
FEWER THAT FORTY-FIVE DAYS IN WHICH TO PRODUCE DOCUMENTATION TO ADDRESS
ANY FINDINGS OR CONTEST ANY FINDINGS IN THE REPORT IN ACCORDANCE WITH
THE AUDIT PROCEDURE. THE ENTITY SHALL CONSIDER A REASONABLE REQUEST FROM
THE PHARMACY FOR AN EXTENSION OF TIME TO SUBMIT DOCUMENTATION TO ADDRESS
OR CORRECT ANY FINDINGS IN THE REPORT.
8. IF THE AUDIT RESULTS IN A DISPUTE OR DENIAL OF A CLAIM, THE ENTITY
CONDUCTING THE AUDIT SHALL ALLOW THE PHARMACY TO RESUBMIT A CORRECTED
A. 9424--A 4
CLAIM USING ANY COMMERCIALLY REASONABLE METHOD INCLUDING FACSIMILE, MAIL
OR ELECTRONIC MAIL.
9. AN ENTITY CONDUCTING AN AUDIT MUST PROVIDE THE PHARMACY THAT IT THE
SUBJECT OF AN AUDIT AND THE PHARMACY CORPORATE OFFICE WHERE APPLICABLE
WITH A FINAL AUDIT REPORT CONTAINING CLAIM LEVEL INFORMATION FOR ANY
DISCREPANCY FOUND NO LATER THAN SIXTY DAYS AFTER THE PRELIMINARY AUDIT
REPORT WAS RECEIVED BY THE PHARMACY OR SIXTY DAYS FOLLOWING THE DAY ON
WHICH THE PHARMACY CONTESTED THE PRELIMINARY REPORT, WHICHEVER IS LATER.
10. WITH REGARD TO FINANCIAL RECOUPMENTS OR RECOVERIES:
(A) AN ENTITY CONDUCTING AN AUDIT OF A PHARMACY MAY NOT ASSESS A
RECOUPMENT ASSOCIATED WITH A TYPOGRAPHICAL, SCRIVNER'S OR CLERICAL
ERROR. A CLERICAL ERROR IS AN ERROR THAT DOES NOT RESULT IN ACTUAL
FINANCIAL HARM TO THE COVERED ENTITY OR CONSUMER AND DOES NOT INCLUDE
THE DISPENSING OF AN INCORRECT DOSE, AMOUNT OR TYPE OF MEDICATION OR
DISPENSING A PRESCRIPTION DRUG TO THE WRONG PERSON.
(B) EXCEPT IN CASES IN WHICH FRAUD IS EVIDENCED, AN ENTITY'S FINDING
THAT A CLAIM WAS INCORRECTLY PRESENTED OR PAID MUST BE BASED ON IDENTI-
FIED TRANSACTIONS AND NOT BASED ON PROBABILITY SAMPLING, EXTRAPOLATION
OR OTHER MEANS THAT PROJECT AN ERROR USING THE NUMBER OF PATENTS SERVED
WHO HAVE A SIMILAR DIAGNOSIS OR THE NUMBER OF SIMILAR PRESCRIPTIONS OR
REFILLS FOR SIMILAR DRUGS.
(C) AN ENTITY MAY NOT CHARGE INTEREST DURING THE AUDIT PERIOD.
(D) EXCEPT FOR ADDITIONAL SAFETY REQUIREMENTS FOR AN INDIVIDUAL DRUG
REQUIRED BY THE MANUFACTURER OR BY THE FEDERAL FOOD AND DRUG ADMINIS-
TRATION, A RECOUPMENT MAY NOT BE BASED ON DOCUMENTATION REQUIREMENTS
THAT EXCEED REQUIREMENTS OF THE NEW YORK STATE BOARD OF PHARMACY OR THE
PERFORMANCE OF A PROFESSIONAL DUTY THAT EXCEEDS REQUIREMENTS OF THE NEW
YORK STATE BOARD OF PHARMACY.
(E) AMOUNTS RECOVERED PURSUANT TO AUDIT RESULTS SHALL BE IDENTIFIED IN
REMITTANCE STATEMENTS AND REFLECTED IN THE 835 EDI REMITTANCE BY CLAIM
OR PRESCRIPTION NUMBERS LEVEL AND SHALL NOT APPEAR AS A LUMP SUM ADJUST-
MENT.
(F) RECOUPMENTS OF ANY DISPUTED FUNDS SHALL OCCUR AFTER THE FINAL
INTERNAL DISPOSITION OF THE AUDIT, INCLUDING THE APPEALS PROCESS SET
FORTH IN THIS SECTION.
(G) AN ENTITY MAY RECOUP THE DISPENSING FEE ONLY IF:
(I) THE PRESCRIPTION WAS NOT ACTUALLY DISPENSED;
(II) THE PRESCRIBER DENIED AUTHORIZATION;
(III) THE PRESCRIPTION WAS A DISPENSING ERROR BY THE PHARMACY;
(IV) THE AMOUNT OF THE DISPENSING FEE PAID WAS INCORRECT; OR
(V) THE IDENTIFIED ERROR IS BASED SOLELY ON AN EXTRA PAID DISPENSING
FEE.
(H) IN THE CASE OF ERRORS THAT HAVE NO FINANCIAL HARM TO THE PATIENT
OR TO THE PLAN, THE AUDITING ENTITY MAY NOT ASSESS ANY CHARGEBACKS.
S 2. This act shall take effect on the ninetieth day after it shall
have become law.