Bill Text: MI HB5981 | 2013-2014 | 97th Legislature | Introduced
Bill Title: Health; pharmaceuticals; standards for pharmacy auditing practices; provide for. Amends 1978 PA 368 (MCL 333.1101 - 333.25211) by adding sec. 17771.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2014-12-03 - Printed Bill Filed 12/03/2014 [HB5981 Detail]
Download: Michigan-2013-HB5981-Introduced.html
HOUSE BILL No. 5981
December 2, 2014, Introduced by Rep. Cavanagh and referred to the Committee on Insurance.
A bill to amend 1978 PA 368, entitled
"Public health code,"
(MCL 333.1101 to 333.25211) by adding section 17771.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 17771. (1) Subject to this section, a health benefit
payer may conduct an audit of a pharmacy in this state. A health
benefit payer that conducts an audit of a pharmacy in this state
shall do all of the following:
(a) In its pharmacy contract, identify and describe in detail
the audit procedures. A health benefit payer shall update its
pharmacy contract and communicate any changes to the pharmacy as
changes to the contract occur.
(b) Provide written notice to the pharmacy at least 14
calendar days before initiating and scheduling the initial on-site
audit for each audit cycle. A health benefit payer shall not
initiate or schedule an on-site audit during the first 5 calendar
days of a month unless otherwise consented to by the pharmacist.
(c) Conduct an audit that involves clinical or professional
judgment by or in consultation with a pharmacist.
(d) Subject to the requirements of this article, for the
purpose of validating a pharmacy record with respect to orders,
refills, or changes in prescriptions, allow the use of either of
the following:
(i) Hospital or physician records that are written or that are
transmitted or stored electronically, including file annotations,
document images, and other supporting documentation that are date-
and time-stamped.
(ii) A prescription that complies with board requirements and
state and federal law.
(e) Base a finding of an overpayment or underpayment on the
actual overpayment or underpayment of a claim.
(f) Base a recoupment or payment adjustment of a claim on a
calculation that is reasonable and proportional in relation to the
type of error detected.
(g) If there is a finding of an underpayment, reimburse the
pharmacy within 30 business days after the final written audit
report is delivered to the pharmacy under subsection (2)(c).
(h) Audit only claims submitted or adjudicated within the 2-
year period immediately preceding the initiation of the audit
unless a longer period is permitted under federal or state law.
(2) Upon completion of an audit of a pharmacy, the health
benefit payer shall do all of the following:
(a) Deliver a preliminary written audit report to the pharmacy
before the expiration of 120 calendar days after the completion of
the audit, with reasonable extensions allowed. The preliminary
written audit report must include contact information for the
auditing entity.
(b) Allow the pharmacy at least 30 business days after its
receipt of the preliminary report under subdivision (a) to produce
documentation to address any discrepancy found during the audit.
(c) If an appeal is not filed, deliver a final written audit
report to the pharmacy within 6 months after the time described in
subdivision (b) has elapsed. If an appeal is filed, deliver a final
written audit report to the pharmacy within 30 calendar days after
the conclusion of the appeal.
(d) Except as otherwise provided in this section, only recoup
disputed funds or overpayments or restore underpayments at least 30
business days after the final written audit report is delivered to
the pharmacy under subdivision (c). If the preliminary written
audit report under subdivision (a) discloses a discrepancy that
exceeds $20,000.00 in overpayment, a health benefit payer may
withhold future payments to the pharmacy during the period
beginning on the date the preliminary audit report is delivered to
the pharmacy under subdivision (a) through the date the audit is
finalized under subdivision (c).
(e) Upon request, provide to the sponsor of the health care
payment or benefits program a copy of the final written audit
report delivered to the pharmacy under subdivision (c).
(3) A health benefit payer shall not conduct an extrapolation
audit in calculating recoupments, restoration, or penalties for an
audit under this section. For the purposes of this subsection, an
extrapolation audit is an audit of a sample of prescription drug
benefit claims submitted by a pharmacy to the health benefit payer
that is then used to estimate audit results for a larger batch or
group of claims not reviewed during the audit.
(4) This section does not apply to any of the following:
(a) A health benefit payer pharmacy audit or investigative
audit conducted by or on behalf of a state agency that involves
fraud, willful misrepresentation, or abuse, including, but not
limited to, investigative audits or audits conducted under any
other statutory provision that authorizes investigation relating to
insurance fraud.
(b) An audit based on a criminal investigation.
(5) This section does not impair or supersede a provision
regarding health benefit payer pharmacy audits in the insurance
code of 1956, 1956 PA 218, MCL 500.100 to 500.8302. If any
provision of this section conflicts with a provision of the
insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302, with
regard to health benefit payer pharmacy audits, the provision in
the insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302,
controls.
(6) As used in this section:
(a) "Claim" means any attempt to cause an entity to make a
payment to cover a health care benefit under a health care payment
or benefits program.
(b) "Health benefit payer" means a public or private entity
that offers, provides, administers, or manages a health care
payment or benefits program, including, but not limited to, all of
the following:
(i) A health insurer or an insurance company authorized to
provide health insurance in this state.
(ii) A health maintenance organization.
(iii) A preferred provider organization.
(iv) A nonprofit dental care corporation.
(v) The medical services administration in the department of
community health.
(vi) A pharmacy benefit manager.
(vii) A legal entity that is self-insured and providing health
care benefits to its employees.
(viii) A responsible party.
(ix) A person acting for an entity described in subparagraphs
(i) to (viii) in a contractual relationship in the performance of any
activity on behalf of the entity described in subparagraphs (i) to
(viii).
(c) "Health care benefit" means the right under a health care
payment or benefits program to have a payment made by a health
benefit payer for a specified health care service.
(d) "Health care payment or benefits program" means an
expense-incurred hospital, medical, or surgical policy or
certificate, health maintenance organization contract, and any
other plan or program of health care benefits that provides
coverage for or administers coverage for prescription drugs or
devices.
(e) "Pharmacy benefit manager" means an entity that contracts
with a pharmacy on behalf of a health care payment or benefits
program for the pharmacy to provide pharmacy services to
individuals covered by the health care payment or benefits program
and that determines reimbursement to the pharmacy for the pharmacy
services provided to individuals covered by the health care payment
or benefits program. An entity that engages in, or subcontracts
for, 3 or more of the following activities is considered a pharmacy
benefit manager under this section:
(i) Claims processing.
(ii) Pharmacy network management.
(iii) Pharmacy discount card management.
(iv) The payment of claims to pharmacies for prescription drugs
dispensed to individuals covered by the health care payment or
benefits program.
(v) Clinical formulary development and management services
including, but not limited to, utilization management and quality
assurance programs.
(vi) Rebate contracting and administration.
(vii) The conducting of audits of network pharmacies.
(viii) The setting of pharmacy reimbursement pricing and
methodologies, including maximum allowable cost price, and
determining single source drugs or multiple source drugs.
(ix) The retention of any spread or differential between what
is received from health care payment or benefits programs as
reimbursement for prescription drugs and what is paid to pharmacies
by the pharmacy benefit manager for the drugs.
(f) "Responsible party" means an entity that is responsible
for the payment of claims for health care benefits under a health
care payment or benefits program.
