It is enacted by the General Assembly as follows:
SECTION 1. Section 5-19.1-35 of the General Laws in Chapter 5-19.1 entitled "Pharmacies" is hereby amended to read as follows: 5-19.1-35. Audits.
(a) For the purposes of this section:
(1) “Audit” means a systematic review of provider claims, documentation, and billing practices, whether conducted remotely or on site, for the purported purpose of ensuring payments are made for covered, reasonable, and necessary services, or to detect fraud, waste, and abuse, or to recover overpayments.
(2) “Auditor” means a person or entity who conducts an audit as defined in subsection (a)(1) of this section.
(b) When an on-site audit of the records of a pharmacy is conducted by a carrier or its intermediary, the audit must be conducted in accordance with the following criteria:
(1) A finding of overpayment or underpayment must be based on the actual overpayment or underpayment, and not a projection based on the number of patients served having a similar diagnosis, or on the number of similar orders or refills for similar drugs, unless the projected overpayment or denial is a part of a settlement agreed to by the pharmacy or pharmacist;
(2) The auditor may not use extrapolation in calculating recoupments or penalties unless required by state or federal laws or regulations;
(3) Any audit that involves clinical judgment must be conducted by, or in consultation with, a pharmacist; and
(4) Each entity conducting an audit shall establish an appeal process under which a pharmacy may appeal an unfavorable preliminary audit report to the entity.
(b) This section does not apply to any audit, review, or investigation that is initiated based on or involving suspected or alleged fraud, willful misrepresentation, or abuse.
(c) Prior to an audit, the entity conducting an audit shall give the pharmacy fourteen (14) days advance written notice of the audit and the range of prescription numbers involved in the audit. The carrier or its intermediary may mask the last two digits of the numbers. Additionally, the number of prescriptions shall not exceed one hundred fifty (150) prescription claims and their applicable refills. The time allotted must be adequate to collect all samples. The examination of signature logs shall not exceed twenty-five (25) signature logs in number.
(d) A pharmacy has the right to execute the dispute resolution contained in their contract. (e)(1) A preliminary audit report must be delivered to the pharmacy or its corporate office within sixty (60) days after the conclusion of the audit. A pharmacy must be allowed at least thirty
(30) days following receipt of the preliminary audit report to provide documentation to address any discrepancy found in the audit. A final audit report must be delivered to the pharmacy or its corporate office within ninety (90) days after receipt of the preliminary audit report or final appeal, whichever is later. A charge-back recoupment or other penalty may not be assessed until the appeal process provided by the pharmacy benefits manager has been exhausted and the final report issued. If the identified discrepancy for a single audit exceeds twenty-five thousand dollars ($25,000), future payments in excess of that amount may be withheld pending the adjudication of an appeal. Auditors shall only have access to previous audit reports on a particular pharmacy conducted for the same entity.
(2) Auditors may initiate a desk audit prior to an on-site audit unless otherwise specified in the law. (3)(2) Contracted auditors cannot be paid based on the findings within an audit. (4)(3) Scanned images of all prescriptions including all scheduled controlled substances are allowed to be used by the pharmacist for an audit. Verbally received prescriptions must be accepted upon validation by the auditing entity and applicable for the initial desk or on-site audit. (5)(4) The period covered by an audit may not exceed two (2) years. (6)(5) Within five (5) business days of receiving the audit notification, pharmacies are allowed, at a minimum, one opportunity to reschedule with the auditor if the scheduled audit presents a scheduling conflict for the pharmacist.
(f) Any clerical error, typographical error, scrivener’s error, or computer error regarding a document or record does not constitute a willful violation and is not subject to criminal penalties without proof of intent to commit fraud.
(g) Limitations.
(1) Exceptions. The Subject to subsection (g)(2) of this section, the provisions of this chapter do not apply to an investigative audit of pharmacy records when:
(i) Fraud, waste, abuse, or other intentional misconduct is indicated by physical review or review of claims data or statements; or
(ii) Other investigative methods indicate a pharmacy is or has been engaged in criminal wrongdoing, fraud, or other intentional or willful misrepresentation.
(2) Scope of exceptions.
(i) An audit for which an exception is applicable shall be strictly limited in scope to the issue(s) directly giving rise to the suspicions, allegations, or conduct indicated by other investigative methods. Before conducting an audit for which an exception is applicable, the auditor shall memorialize in writing the basis for any exception hereunder, which shall include a description of the specific issue(s) under review and facts giving rise to the audit, and shall make such writing available to the attorney general upon request.
(ii) The auditor may not rely solely on a finding of common control or common ownership as a basis for conducting an audit to which an exception applies with respect to a pharmacy, unless the auditor first confirms the presence of an identified systemic error, fraud, abuse, willful misrepresentation, or criminal wrongdoing with respect to a pharmacy under common control or common ownership. (2)(3) Frequency of audits. A pharmacy shall not be subject to more than one on-site audit in connection with a carrier every twelve (12) months, unless there is an identified problem or substantial evidence of fraud, abuse, or misrepresentation is suspected, or other criminal wrongdoing. (3)(4) Federal law. This chapter does not supersede any audit requirements established by federal law.
(5) Notice to the attorney general. Prior to initiating an audit pursuant to an exception under subsection (g)(1) of this section, the auditor shall provide written notice to the attorney general of their intent to conduct an audit pursuant to an applicable exception. Such notice shall be provided at least three (3) business days prior to the initiation of the audit.
(h) Enforcement. The Rhode Island attorney general shall have the authority to enforce and ensure compliance with this section.
(1) The attorney general may institute proceedings to prevent and restrain violations of this section. The superior court shall have jurisdiction to prevent and restrain violations of this section.
(2) In addition to injunctive relief, any person or entity in violation of this section shall be liable for a civil penalty, in an action brought by the attorney general, of not more than ten thousand dollars ($10,000) for each violation.
(3) The attorney general may promulgate rules and regulations to implement the provisions of this section.
SECTION 2. This act shall take effect upon passage.
