Veteran Pharmacy Audit Defense Lawyers Work Closely with Pharmacies Subject to a Palmetto PBM Audit

As a pharmacy, working with Palmetto or another PBM is just another part of doing business, albeit not the best part. PBMs, or pharmacy benefit managers, are independent companies that act as the intermediary between the insurance company and the pharmacy. Originally created in the 1960s to help insurance companies deal with the increasing burdens surrounding the processing of claims, PBMs have taken on a much more significant role in recent years. One role PBMs assumed in recent years is conducting audits of participating pharmacies. The focus of a Palmetto audit is to ensure that the pharmacy is properly billing the insurance company for all claims. However, because Palmetto and other PBMs are not subject to significant regulation, these audits are often conducted in a black box, leaving pharmacies wondering what their rights are and what they can do to protect themselves from an arbitrary audit.

If Palmetto is your pharmacy benefit manager and you were informed of an upcoming audit, it is imperative that you reach out to an experienced PBM audit attorney. At Oberheiden, P.C., we have significant experience handling all types of PBM audits, including Palmetto audits. Many of our senior attorneys were formerly employed by the Drug Enforcement Administration and the Health and Human Services Office of Inspector General, giving us in-depth knowledge and experience in the regulatory environment in which pharmacies operate. With our help, you can ensure that your interests are protected throughout the PBM audit process. We also assist pharmacies in challenging sanctions Palmetto proposes after an unfavorable audit.

What Triggers a Palmetto PBM Audit?

Palmetto and other PBMs are compensated by the insurance company to administer the prescription drug portion of an insurance plan. Thus, PBMs are responsible for developing lists of covered medications. To further pad their bottom lines, PBMs also negotiate rebates with drug companies, often by agreeing to include certain medications on a plan’s formulary list. The result is that the loyalty of Palmetto does not lie with the pharmacy but with the insurance company and, to a lesser extent, pharmaceutical manufacturers.

Under the terms of the PBM contract between a pharmacy and Palmetto, the pharmacy consents to undergo an audit at Palmetto’s discretion. Palmetto considers several factors when deciding whether to conduct an audit. Some of the most common reasons why a pharmacy may be subject to a Palmetto audit include:

  • Accepting prescriptions written by excluded providers
  • Billing for unapproved drugs
  • Compound drug issues
  • Failure to create or maintain records
  • Falsification of records
  • Filling illegitimate prescriptions
  • Intentional and unintentional billing and coding errors
  • Invoice shortages
  • Licensing violations
  • PBM contract fraud
  • Telemedicine violations

These are just a few of the issues that can give rise to an audit; there are many others. At Oberheiden, P.C., our dedicated Palmetto audit attorneys routinely work with pharmacies throughout the PBM audit process to ensure their rights are protected and that Palmetto auditors do not overstep their authority under a PBM contract.

Palmetto’s Advantage Over Pharmacies

As a pharmacy benefit manager, Palmetto occupies a position of power over pharmacies, which can make negotiation challenging for pharmacies undergoing an audit. For example, Palmetto has a great deal of authority and no federal oversight. Because of the lack of uniform federal regulation over PBMs, states are left with the responsibility to enact laws governing PBMs. While some states have taken steps to limit the authority of PBMs, any proposed law is almost immediately challenged by what is undoubtedly a powerful and influential industry.

PBMs such as Palmetto also have access to large amounts of capital, which they use to leverage their position over pharmacies. If a pharmacy disagrees with a PBMs position following an audit, the PBM can afford to ignore the pharmacy’s plea, knowing that the threat of legal action from an unrepresented pharmacy is often low.

Finally, due to the contractual relationship between Palmetto, the insurance company and the pharmacy, Palmetto is responsible for distributing funds to pharmacies after a pharmacy fills a prescription. This increases the leverage Palmetto has over a pharmacy, as the company will only release the funds owed to a pharmacy if the company determines the pharmacy is in full compliance. This leaves pharmacies who disagree with the result of a PBM audit little option but to take the PBM to court.

At Oberheiden, P.C., we help pharmacies level the playing field during and after the Palmetto PBM audit process. Our attorneys have centuries of combined experience handling PBM audits. Over this time, we’ve developed a deep understanding of the common mistakes that auditors make and how to effectively protect the interests of pharmacies throughout the audit process.

How a Palmetto PBM Audit Attorney Can Help Audited Pharmacies

Pharmacy benefit manager audits are notorious for their lack of transparency. For example, Palmetto approaches an audit with a “take it or leave it” mentality, giving audited pharmacies the impression that they have no right to challenge any aspect of the audit. However, that is far from the case.

The relationship between Palmetto and your pharmacy is strictly contractual, meaning it is governed entirely by the PBM contract the parties entered into at the beginning of their relationship. While the terms of each individual PBM contract vary based on the PBM company, the individual pharmacy, and applicable state law, typically pharmacies have the following rights during a PBM audit:

  • The right to reasonable notice of the audit;
  • The right to a limited and clearly defined look-back period;
  • The right to reimbursement for improperly denied claims;
  • The right to receive timely notice of the results of the audit; and
  • The right to a clear explanation for any demand for recoupment.

At Oberheiden, P.C., our PBM audit lawyers are frequently called upon by small and independent pharmacies to get involved early in the audit process. Some of the pharmacy audit defense services we provide to our clients include:

A Pre-Audit Assessment of Pharmacy Practices

From the moment we get involved in a PBM audit, we immediately schedule a time to meet with pharmacy management to go over all areas of potential compliance risk. Typically, this involves reviewing the pharmacy’s existing compliance program and its billing procedures. We also review the other records Palmetto auditors will ask for. This will give you a better idea of what to expect during the audit. Additionally, we will reach out to Palmetto to inform the company that you are represented by counsel. Often, conveying this knowledge give auditors pause, as they know someone will be watching over their shoulder during the audit.

On-Site Support During a PBM Audit

Many pharmacies have never been through a PBM audit. Thus, without the assistance of a PBM audit attorney, pharmacy management is often left wondering what their rights are during the process, how to ensure a fair audit, and what can be done in the event auditors exceed the scope of their authority. Palmetto auditors will show up as though they are federal agents, making demands and determinations without any input from the pharmacy. However, Palmetto’s auditors are limited in what they can ask for. At Oberheiden, P.C., we will have a physical presence during the audit to ensure that auditors follow the appropriate methodology and do not make any incorrect assumptions. We will also be there to challenge any unreasonable demands made by Palmetto auditors.

Post-Audit Representation

Given the incentive Palmetto has to find violations during a PBM audit, many audits often uncover violations—regardless of whether they are based in fact. At the end of an audit, Palmetto auditors may demand a recoupment or, in cases involving more serious violations, announce the termination of the pharmacy’s contract. While auditors state their findings as fact, Palmetto’s determinations do not carry the force of law without judicial intervention. This gives our PBM audit attorneys an opportunity to negotiate with Palmetto, potentially resulting in the reduction or removal of sanctions.

Challenging Auditors’ Determinations in Court

Most issues that arise during a Palmetto PBM audit can be effectively resolved out of court through negotiation. However, occasionally, litigation is necessary, especially in the event of an unfavorable audit. As a team of experienced pharmacy defense litigation attorneys, Oberheiden, P.C., is ready to challenge the results of any unfavorable audit in court. Given the expense of litigation, PBM companies prefer to avoid litigation, and when they realize that a lawsuit is on the table, they will often reconsider their position.

Compliance Consultations

While much of our pharmacy defense practice is focused on guiding pharmacies through the PBM audit process, Oberheiden, P.C. pharmacy compliance attorneys also work hand-in-hand with pharmacies to develop comprehensive compliance programs that can decrease the likelihood of a PBM audit or federal investigation in the first instance.

Frequently Asked Questions:

Why don’t we call ourselves the “best Palmetto pharmacy audit” lawyers?


At Oberheiden, P.C., we truly believe that our staff contains some of the best pharmacy audit lawyers in the country. However, as a firm, we decided not to label ourselves as such for a few reasons. First, we recognize that we deal with sophisticated clients who are unlikely to be persuaded by a claim that cannot be substantiated. Second, we believe that the term “best” is subjective. A trait that makes an attorney the best in one client’s eyes may not be as important to another client. In this way, using phrases like the “best pharmacy audit lawyer” is potentially misleading. And, because we stand behind the ethical obligation that lawyers have to their clients, we want to avoid the risk of making any potentially misleading statements. Those who are interested in securing the assistance of the best Palmettos audit lawyer can review our track record and come to their own conclusion.

What is at stake in a Palmetto Audit?


Palmettos PBM audits are high-risk scenarios for pharmacies. While the stated purpose of a Palmetto audit is to ensure that pharmacies have not improperly billed the insurance company, in reality, audits are also a profit-generating tool for PBMs. This is because any alleged violation may justify Palmetto withholding funds that would otherwise need to be distributed to the pharmacy. If Palmettos determines that the uncovered violations were severe enough, it may even seek contract termination. Additionally, Palmetto may refer violations to state or federal law enforcement agencies in the event they discover evidence of what they believe to be healthcare fraud. Given the high stake involved, any pharmacy subject to a Palmetto audit should not delay in protecting their interests by reaching out to a knowledgeable PBM audit attorney at Oberheiden, P.C.

What should I look for in a Palmetto pharmacy audit attorney?


PBM audits are not matters that all lawyers handle. Even pharmacy healthcare fraud defense lawyers who represent pharmacies in other compliance and regulation issues may not provide the level of comprehensive representation necessary to successfully navigate a PBM audit. When it comes to selecting an attorney to help you through a PBM audit, the most important thing to look for is whether a lawyer has hands-on experience handling audits for similarly situated pharmacies. You want an attorney who has not only handled Palmetto audits, but has done so successfully. When interviewing lawyers to help you navigate a PBM audit, ask the attorney about their level of experience and track record of success.

Contact the Palmetto PBM Audit Lawyers at Oberheiden, P.C. Today

If you recently learned that Palmetto is planning a PBM audit of your pharmacy, the knowledgeable pharmacy audit defense lawyers at Oberheiden, P.C., are here to help you through the process. We have senior attorneys standing by, ready to discuss your situation and offer our reasoned advice. If you decide to bring us onto your audit defense team, we will immediately get to work developing a strategic and comprehensive plan to effectively and efficiently resolve the audit. You can reach Oberheiden, P.C. by calling 888-680-1745 to schedule an appointment. You can also complete our online contact form, and one of our lawyers will reach out to you shortly.