Skip to site navigation Skip to main content Skip to footer content Skip to Site Search page Skip to People Search page

Alerts and Updates

Pennsylvania Auditor General Sets Sights on Medicaid Pharmacy Benefit Manager Contracts

October 23, 2023

Pennsylvania Auditor General Sets Sights on Medicaid Pharmacy Benefit Manager Contracts

October 23, 2023

Read below

It remains unclear to what extent the results of the audit will be public.

On October 11, 2023, Pennsylvania Auditor General Timothy DeFoor announced an upcoming performance audit of all Medicaid managed care organization (MCO) contracts with pharmacy benefit managers (PBMs). The audit is part of a bipartisan initiative to ensure PBMs and MCOs follow these contracts and to identify hidden fees. The audit will likely last 12-18 months, though no start date has been announced.

Performance audits evaluate whether state funds are being used properly by assessing how well government programs meet their stated objectives. The Department of the Auditor General (DAG) has issued few specifics about how it will conduct this audit, but the stated focus will be ensuring that PBMs (who maintain pharmacy networks for MCOs and establish reimbursement rates with their pharmacies) and MCOs follow their contracts.

This announcement follows the passage of Act 98 of 2022, which authorizes DAG to audit PBMs “that provides pharmacy benefits management to a medical assistance managed care organization under contract” with the Department of Human Services (DHS). Act 98 passed with unanimous bipartisan support in the Pennsylvania House and Senate and was signed into law by former Pennsylvania Governor Tom Wolf on October 28, 2022.

It remains unclear to what extent the results of the audit will be public. On one hand, the announcement emphasizes transparency and the need for everyone “from the patient to the pharmacy to DHS, [to] know exactly how much is being charged, who is paying the bill, and that the contracts designed to protect us are being followed.” On the other hand, Act 98 excludes any information obtained by such audits from Pennsylvania’s Right to Know Law, so no statute compels DAG to disclose the results of the audit.

DAG has issued no guidance beyond this announcement, so for the moment, it provides little more than a notice to the industry. However, since Medicaid is the largest health payer in Pennsylvania, an audit of this size could impact virtually every PBM operating in Pennsylvania—along with their MCOs, pharmacies and the patients they serve. Thus, this announcement signals future developments that may be crucial for PBMs and pharmacies to follow.

The DAG’s announcement coincides with numerous other state-level investigations and reviews of PBM conduct, which often help inform actions by the federal government and the U.S. Congress. Currently, the Federal Trade Commission and the U.S. House Oversight Committee are gathering substantial data from PBMs to investigate the financial and competitive impact PBM operations have on competing pharmacies, drug prices and consumers. These investigations are buttressed by numerous bills pending in Congress aimed to increase transparency by PBMs and curb problematic and anti-competitive conduct by PBMs against independent pharmacies.

Duane Morris’ Pharmacy Litigation Group will be monitoring these developments closely.

For More Information

For more information on this Alert, please contact Jonathan L. Swichar, Bradley A. Wasser, Taylor Hertzler, any of the attorneys in our Pharmacy Litigation Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.