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For those of you who are more involved in the fraud, waste, abuse and compliance side of Part D and pharmacy billing, you no doubt have heard about CVS/Caremark’s new contract determination. The organization added language to their contracts calling for provider termination that extends to pharmacies in networks that are directly or indirectly connected to other pharmacies that receive transferred patients from the terminated pharmacy.  This exact scenario was recently played out in the criminal charges against individuals that owned and operated Prime-Aid Pharmacy in New Jersey.  Prime-Aid was terminated from a Pharmacy Benefit Manager (PBM), and merely transferred the patient base to another affiliated pharmacy, where the fraud continued.  Without going into the details of that case, or necessarily taking a position on the CVS/Caremark move, it does present an interesting discussion.

Unscrupulous pharmacies, when terminated from a plan, experience a lost income stream.  This is particularly the case if that pharmacy had a heavy reliance on the submission of claims to that PBM. Often, the transferring of patients from one pharmacy to another (ping-ponging), allows the pharmacies in the network to continue to submit claims to the PBM, with the PBM having to take individual audit action against the new pharmacy and justify the termination as it relates to the contractual obligations set forth in the contract.  This is obviously time consuming, costly and affords the pharmacy the ability to continue to operate and receive payments for what are potentially fraudulent pharmacy claims.

As an investigator, I saw this first hand, and it is frustrating to see the patients being moved from one pharmacy to another, knowing that the PBM will have to initiate an entirely new audit to justify the termination.  When working cases of this nature, I had no reason to think that the behavior that was considered fraudulent in the first place was going to become an honest practice with the new pharmacy.  The ability to terminate for cause, based on the ping-ponging of patients, has the potential to roadblock those fraudulent claims much more quickly.  Interestingly, CMS has written guidance relating to the transferring of patients; most notably, the pharmacy is not allowed to initiate that transfer. I would go an additional step by stating that moving the patients to a pharmacy that is not the subject of an audit or termination, could be considered an Obstruction of a Governmental Audit, since the PBMs work as quasi-governmental agencies when conducting Part D business.

I am sure that the CVS/Caremark network agreement change will ruffle quite a lot of feathers.  Anything that a PBM or an insurer does will always have an impact on the communities they interact with, as to the receipt of payment.  Since this is a new contractual rule, only time will demonstrate where it will land, should it be legally tested.  I will say, however, that if a PBM terminates a pharmacy for fraud, waste or abuse, and that pharmacy merely transfers the patient from the terminated pharmacy to another pharmacy owned or operated by the owners of the terminated pharmacy, I can foresee a challenge to the second pharmacy to demonstrate that there was no bad faith in receiving the patient.

It would also be interesting to see how the documentation demonstrates that the patient was not steered to the second pharmacy, particularly if the two suspect pharmacies are not in close proximity to each other, the patient did not otherwise use the second (or sometimes even the first pharmacy) in question, and likely would not have chosen the second pharmacy, but for the fact that the patient was told their prescription was transferred.

Again, without taking a position, this is a bold move by CVS/Caremark, and one that will surely be challenged at some point when a pharmacy is terminated as a result of the direct or indirect relationship of the first pharmacy.

Advize Health LLC is a healthcare advisory and consulting company that provides a breadth of healthcare industry services in the payer, provider, and legal communities. Contact Eric Rubenstein for more information on our Fraud Spotlight series.