Performance Audit Report: Pharmacy Benefit Manager Services for the Physical HealthChoices Medicaid Program in Pennsylvania

Determine whether DHS effectively monitored the PBMs’ pharmacy claims, including, but not limited to, the accuracy of the pharmacy information used to prepare the capitation rates for the HealthChoices Medicaid program.

Determine whether DHS effectively monitored the PBMs’ contracts to ensure compliance and transparency for the HealthChoices Medicaid program.

Determine if the PBM PerformRx is compliant with 62 P.S. § 449(h)(3) and (4) regarding charges and fees paid to the PBM by the pharmacies, or pharmacy service organizations, as compared to the corresponding amounts billed to the applicable HealthChoices managed care organizations (MCOs) to ensure transparency, compliance, and accountability for the HealthChoices Medicaid Program.

Finding 1 – DHS did not effectively monitor pharmacy drug claims which resulted in undisclosed spread pricing, overstated pharmacy data, and a lack of transparency.

Finding 2 – DHS did not effectively monitor contracts between the Physical HealthChoices managed care organizations and pharmacy benefit managers.

Finding 3 – PerformRx, LLC was transparent and accountable to the pharmacies for transmission fees but was not transparent to the MCOs and DHS regarding the fees which resulted in undisclosed spread pricing.

Findings 1 DHS: Design a system of review to audit pharmacy encounter data, on a sample basis, by tracing the encounter data to pharmacy remittance advices for adjudicated claims. Additionally, DHS should audit, on a sample basis, claims from pharmacies and payment remittances to pharmacies, including any adjusted claims, to ensure the final disposition on PROMISeTM is accurate.

Findings 1 DHS: Reconsider the importance of the Transparency Reports for rate setting, MLR reporting, and Act 120 of 2020 compliance. If DHS believes the transmission fees are not an administrative cost that should be considered for rate setting and MLR reporting, then DHS should contact CMS for further guidance.

Findings 1 DHS: Re-evaluate the network of PBMs contracted with MCOs to determine if pharmacy claims processing and monitoring of PBM practices could be achieved more effectively, such as contracting with one PBM for use by all the MCOs.

Findings 1 DHS: Work with its actuary team to ensure that the transmission fees were adequately accounted for in the encounter data, MLR calculations, and capitation rates.

Findings 2 DHS: Utilize its statutory authority to monitor PBMs’ practices to ensure compliance with the HealthChoices agreement.

Findings 2 DHS: Implement written policies and procedures for its monitoring of PBM contracts to ensure monitoring efforts are documented for the HealthChoices program.

Findings 2 DHS: Monitor the contract language between MCOs and PBMs, document the review; and put into place enforcement mechanisms to address any non-compliance.

Findings 2 DHS: Require MCOs to update the PBM contracts for compliance with the HealthChoices agreement and current laws, such as the Code, as amended by Act 120 of 2020.

Findings 2 DHS: Ensure the current HealthChoices provisions are within the subcontractors’ contracts by requiring the MCOs to complete the DHS checklist (Appendix D) for each new or updated HealthChoices agreement, and for each new or updated PBM contract.

Finding 3 PerformRx: Three recommendations to PerformRx for transparency and monitoring of its pharmacy adjustments, like reversals.

Findings 1 DHS: Develop written policy and procedures for its monitoring of pharmacy encounter data to ensure encounter data submitted to CMS is a complete and accurate representation of the services provided to the Medicaid members.

Findings 1 DHS: Not only focus on the aggregate performance of accuracy and timeliness benchmarks, but also on whether individual claims processed by each MCO’s PBM are accurate based on prescription, pharmacy remittance advices, and any related adjustment documentation.

Findings 1 DHS: Add pharmacy encounter validation to supporting documentation in the scope of the triennial audit that is currently underway.