2023 South Carolina Code of Laws › Title 38 - Insurance › Chapter 71 - Accident And Health Insurance › Section 38-71-1810. Pharmacy audit rights.

Section effective January 1, 2024. See, also, Section 38-71-1810 effective until January 1, 2024.
(A) For the purposes of this article:
(1) "Insurer" means an entity that provides health insurance coverage in this State as defined in Section 38-71-670(7) and Section 38-71-840(16).
(2) "Responsible party" means the entity responsible for payment of claims for health care services other than:
(a) the individual to whom the health care services were rendered; or
(b) that individual's guardian or legal representative.
(3) "Audit" means an evaluation, investigation, or review of claims paid to a pharmacy that takes place at the pharmacy location and does not include review of claims or claims payments that an insurer conducts as a normal course of business. Nothing in this definition limits the review of claims or claims payments through an electronic or algorithmic system designed to reduce fraud, waste, or abuse, provided that recoupments may not be calculated based on extrapolation pursuant to Section 38-71-1810(21).
(4) "Abuse" means any practice that:
(a)(i) is inconsistent with sound fiscal or business practices; or
(ii) fails to meet professionally recognized standards for pharmacy services; and
(b) directly or indirectly causes financial loss to a responsible party.
(B) If a managed care organization, insurer, third-party payor, or any entity that represents a responsible party conducts an audit of the records of a pharmacy, then, with respect to this audit, the pharmacy has a right to:
(1) not have an audit initiated or scheduled during the first five days of any month without the express consent of the pharmacy, which shall cooperate with the auditor to establish an alternate date if the audit would fall within the excluded days, and no audit may be performed during a state of emergency declared by the Governor that applies to the pharmacy location unless the state of emergency extends beyond ninety days or is agreed to by the pharmacy location;
(2) have an audit that involves clinical judgment be conducted with a pharmacist who is licensed and employed by or working under contract with the auditing entity;
(3) not have clerical or recordkeeping errors, including typographical errors, scrivener's errors, and computer errors, on a required document or record considered fraudulent in the absence of any other evidence or serve as the sole basis of rejection of a claim; however, the provisions of this item do not prohibit recoupment of fraudulent payments;
(4) have the auditing entity to provide the pharmacy, upon request, all records related to the audit in an electronic format or contained in digital media;
(5) have at least thirty days to respond to an audit notice and to submit records requested by the auditing entity related to the audit in electronic format or by certified mail. If a pharmacy requests an extension during this thirty-day period, it must be granted an additional thirty days to respond. The auditing entity must confirm receipt of all materials and documentation provided by the pharmacy to the auditing entity;
(6) have the properly documented records of a hospital or of a person authorized to prescribe controlled substances for the purpose of providing medical or pharmaceutical care for their patients transmitted by any means of communication approved by the auditing entity in order to validate a pharmacy record with respect to a prescription or refill for a controlled substance or narcotic drug pursuant to federal and state regulations;
(7) have a projection of an overpayment or underpayment based on either the number of patients served with a similar diagnosis or the number of similar prescription orders or refills for similar drugs; however, the provisions of this item do not prohibit recoupments of actual overpayments unless the projection for overpayment or underpayment is part of a settlement by the pharmacy;
(8) prior to the initiation of an audit, if the audit is conducted for an identified problem, have the audit limited to claims that are identified by prescription number or by range of prescription numbers;
(9) if an audit is conducted for a reason other than described in item (8), have the audit limited to one hundred selected prescriptions per pharmacy benefits manager;
(10) if an audit reveals the necessity for a review of additional claims, the audit may be conducted on-site;
(11) except for audits initiated for the reason described in items (8) or (10), be subject to no more than one audit in one calendar year, unless fraud or misrepresentation is reasonably suspected;
(12) be free of recoupments based on either of the following subitems unless defined within the billing, submission, or audit requirements set forth in the pharmacy provider manual not inconsistent with current State Board of Pharmacy Regulations, except for cases of Food and Drug Administration regulation or drug manufacturer safety programs in accordance with federal or state regulations:
(a) documentation requirements in addition to, or exceeding requirements for, creating or maintaining documentation prescribed by the State Board of Pharmacy;
(b) a requirement that a pharmacy or pharmacist perform a professional duty in addition to, or exceeding, professional duties prescribed by the State Board of Pharmacy unless otherwise agreed to by contract with the auditing entity;
(13) be subject, so long as a claim is made within the contractual claim submission time period, to recoupment only following the correction of a claim and to have recoupment limited to amounts paid in excess of amounts payable under the corrected claim unless a prescription error occurs. For purposes of this subsection, a prescription error includes, but is not limited to, wrong drug, wrong strength, wrong dose, or wrong patient;
(14) be subject to reversals of approval, except for Medicare claims, for drug, prescriber, or patient eligibility upon adjudication of a claim only in cases in which the pharmacy obtained the adjudication by fraud or misrepresentation of claim elements;
(15) be audited under the same standards and parameters as other similarly situated pharmacies audited by the same entity;
(16) have at least thirty days following receipt of the preliminary audit report to produce documentation to address any discrepancy found during an audit;
(17) have the option of providing documentation in electronic format or by certified mail;
(18) have the period covered by an audit limited to twenty-four months from the date a claim was submitted to, or adjudicated by, a managed care organization, an insurer, a third-party payor, or an entity that represents responsible parties, unless a longer period is permitted by or under federal law;
(19) have the preliminary audit report delivered to the pharmacy within one hundred twenty days after conclusion of the audit;
(20) have a final audit report delivered to the pharmacy within ninety days after the end of the appeals period;
(21) not have the accounting practice of extrapolation used in calculating recoupments or penalties for audits, unless otherwise required by federal requirements or federal plans; and
(22) have the right to an external review pursuant to Section 38-71-2240 for any denied appeals of recoupment if the pharmacy believes the recoupment amounts were calculated in violation of this article.
(C) Notwithstanding Section 38-71-1840, the auditing entity shall provide the pharmacy, if requested, a masked list that provides a prescription number range the auditing entity is seeking to audit.
HISTORY: 2012 Act No. 250, Section 1, eff January 1, 2013; 2019 Act No. 48 (S.359), Section 3.A, eff May 16, 2019; 2023 Act No. 30 (S.520), Section 1, eff January 1, 2024.
Editor's Note
2019 Act No. 48, Section 3.B, provides as follows:
"B. The provisions of this section are effective upon approval by the Governor [May 16, 2019]."
2023 Act No. 30, Section 7, provides as follows:
"SECTION 7. This act takes effect January 1, 2024, but the recurring examinations by the Department of Insurance provided for in Sections 38-71-2250(B)(1) and 38-71-2340(B)(1) must not begin before January 1, 2025."
Effect of Amendment
2019 Act No. 48, Section 3.A, in (B), in (3), inserted "or serve as the sole basis of rejection of a claim" and made a nonsubstantive changed, in (4), deleted ", if required under the terms of the contract with the auditing entity," following "have", inserted (5) and redesignated (5) to (11) as (6) to (12), and inserted (13) and redesignated (12) to (15) as (14) to (17).
2023 Act No. 30, Section 1, in (A)(3), added the second sentence; and rewrote (B).