1. Why 30-Day Pharmacy Payment Cycles Lower Costs and Prevent Fraud

2. The Role of PBMs in Pharmacy Payment Cycles: Consumer Access, Cost Savings, and Fraud Prevention
Pharmacy Benefit Managers (PBMs) contract with more than 90 percent of pharmacies throughout the United States to give consumers convenient access to their prescription drug benefits
PBM–pharmacy contracts typically allow pharmacies to collect and keep consumer copayments and give plan sponsors 30 days to reimburse pharmacies for remaining costs through their PBMs
30-day pharmacy payment cycles allow PBMs to efficiently batch and process millions of prescription claims from tens of thousands of pharmacies
Government intervention to accelerate pharmacy payment cycles would increase prescription drug costs for consumers and payors
Accelerated payment cycles would make it more difficult to detect and prevent pharmacy fraud

3. 30-Days: The Medicare and Private-Sector Standard
30-day pharmacy payment cycle is standard for:
Medicare Parts A & B
Federal Employees Health Benefits Program (FEHBP)
State employee health programs
Nearly all private-sector health plans
30-day payments have been the standard for decades
PBM industry has publicly pledged to abide by 30-day payment standard for Medicare Part D

4. PBMs: Meeting the 30-day Standard
Pharmacy Claims Paid In
Study
24 days
Grant Thornton study funded by the independent pharmacy lobby
23 days
PricewaterhouseCoopers
21-25 days
CMS

5. 30-Day Payment Cycles Necessary to Process Millions of Claims for Thousands of Pharmacies Through Multiple Entities
Tens of thousands of independent pharmacies
File millions of prescription claims annually
Claims processed for plan sponsors by Pharmacy Benefit Managers (PBMs)
Claims paid by plan sponsors including large employers, unions, health plans, and government programs
Payments processed for independent pharmacies by Pharmacy Services Administrative Organizations (PSAOs)

6. Independent Pharmacy Claims Payment Requires Numerous Steps in 30 Days
Pharmacy to PBM
Tens of thousands of pharmacies file claims
PBMs adjudicate individual claims
Verify person is covered
Verify drug is covered
Verify copay
PBMs audit individual claims for fraud
PBMs sort and batch claims for payment by thousands of plan sponsors
PBM to Plan
PBMs send batched claims to plan sponsors for payment
PBMs review longitudinal claims data to detect fraud
Plan to PBM
Plan sponsors send claims payment to PBMs
PBMs continue audits and review of claims data to detect fraud
PBM to PSAO
PBMs send payment to PSAO
Reconciliation
PSAO to Pharmacy
PSAO processes payments and credits individual pharmacies 6 6

7. “Prompt Pay” Mandate Doubles Administrative Complexity7

8. Accelerated Pharmacy Payment Cycles Undermine Fraud Detection
Typical Examples of Pharmacy Fraud
Shorting number of pills
Substituting generic for brand
Early refills
Pharmacist offering to buy back prescription drugs
How PBMs Detect and Prevent Pharmacy Fraud
Verify information submitted by pharmacies
Investigate suspect claim patterns from specific pharmacies
Audit paper prescriptions and pharmacy purchases
According to the Coalition Against Insurance Fraud, “prompt pay” laws in California leave insurers little time to investigate suspicious claims
With millions of claims filed each day, it’s impossible to manually review all of them so plans use a combination of high-tech and low- tech tools to help prioritize claims for manual review
PBMs use complex algorithms to analyze information from multiple payment cycles to identify suspect billing patterns
Combining a high-tech and low-tech approach improves the chances of preventing fraud

9. Fraud and Abuse Detection Is A Necessary Step
Pharmacist Arrested in Fraudulent-Billing Case
The owner of a pharmacy was arrested Friday on federal charges of fraudulently billing private insurance companies for more than $11 million worth of medications that were never prescribed nor dispensed…
February 15, 2003
Just one pharmacy:
Submitted $11 million in false claims
Fraudulent prescriptions
Not requested by the patients
Not prescribed by the physician
Not dispensed by the pharmacy
Insurance companies paid $5 million of the false claims before the fraud was identified

10. Pharmacy Fraud Increases Medicaid Costs
In 2006, the New York Attorney General uncovered a Medicaid pharmacy fraud ring in which physicians, patients and pharmacies collaborated to defraud the state of more than $22 million
In 2006, the Texas grand jury indicted a pharmacy owner for felony offenses involving more than $5 million in alleged fraudulent Medicaid reimbursements for excessive prescription refills
A 2007 report by the U.S. Department of Health and Human Services and The U.S. Department of Justice found numerous examples of pharmacy fraud, including a New York pharmacist who pled guilty to submitting $1.875 million in fraudulent claims to Medicaid and private health insurers

11. Medicare “Prompt Pay” Mandates Would Raise Costs
According to a 2008 Study by PricewaterhouseCoopers:
A 14-day “prompt pay” requirement in Part D would increase costs to the Medicare program and its beneficiaries by $3.3 to $7.8 billion
over period
Cost to beneficiaries alone would increase by $1.3 to $3.1 billion
over the period if Part D mandated a 14-day pharmacy payment requirement

12. Lower-Priced Competition—NOT Payment Cycles— the Real Challenge for Independent Pharmacies

13. Conclusion: No Need to Change 30-Day Payments
Pharmacies are being paid on time with great efficiency
“Prompt pay” mandate would increase costs to Medicare and its beneficiaries by $3.3 to $7.8 billion over 10 years
Accelerated payments would make it more difficult to prevent fraud
Doctors and hospitals would also demand faster payments in Medicare A and B
Lower-priced competition—not payment cycles— is the real challenge for independents