The Pharmacy Audit: What Is It and Are You Prepared?

Abstract

IHS, Inc., is a health care consulting and medical informatics company specializing in the pharmacy benefit area. The mere mention of the word "audit" invokes uneasiness among managers , but with billions of dollars expended annually on pharmaceuticals , eventually your department will be the subject of a pharmacy audit. This article presents an overview of the audit process and guidelines that every professional should know. Pharmaceutical expenditures in the United States, estimated to be in the billions, increased by 14.2% in 1997. I This growth, largely attributed to increased pharmaceutical utilization and newly patented pharmaceuticals that lack generic competition, will more than likely continue. This trend, coupled with the fact that 70% of all prescriptions are covered partially or fully by a third-party payor, I has resulted in increased scrutiny of pharmaceutical dispensing and reimbursement processes. The audit process is one means of reviewing pharmacy programs; it ensures that procedures and reimbursement mechanisms are consistent with contractual and regulatory requirements. This article presents an overview of the audit process, programmatic issues most likely to be audited, data frequently collected, and guidelines that managers and staff should follow during an audit. TYPES OF AUDITS During an Internal Revenue Service (IRS) audit, the IRS reviews tax returns to verify that a tax obligation was computed according to the tax code. In many respects, a pharmacy audit is similar. The pharmacy program is reviewed to ensure that it is operating according to established guidelines. Pharmacy programs are most likely to be the subject of a financial , compliance, or operational audit. A financial audit reviews the accuracy of a company's financial statements. Using standardized accounting techniques , a financial auditor seeks to evaluate a company's fiscal solvency, including the accuracy of its statements of assets and liabilities. Many pharmaceutical companies are publicly traded and have a fiduciary responsibility to their stockholders that must be met through routine financial audits. A compliance audit seeks to assess a company's level of compliance with operating procedures as stipulated by regulatory or contractual arrangements. For example, every pharmacy that is a contract provider of prescription services is subject to a clause in its provider agreement that allows an audit of the phar-macy's records, including hardcopy prescriptions , signature logs, computerized records of refills, and invoice records. Pharmacies also are subject to any number of audits conducted by state or fed-erallicensing agencies. An operational audit, also referred to as a performance or management audit, evaluates the effectiveness of a business' operating activities in relation to specific objectives. For example, a Pharmacy Benefits Manager (PBM) acts as a third-party administrator to various plans. These plans customarily require the PBM to maintain member eligibility and to accurately adjudicate members' benefits under the plan. In addition, the PBM may supply rebates and administer a formulary for the payor, or share discounts with the payor. These relationships are very complex and require Vo1.5, No.2