Bill Text: IL HB2017 | 2011-2012 | 97th General Assembly | Introduced

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Bill Title: Amends the Illinois Insurance Code. Makes changes in the provision concerning definitions. Provides that when an on-site audit or a desk audit of the records of a pharmacy is conducted by any entity, the audit shall be conducted in accordance with certain criteria. Provides that the auditing entity, administrator, or its representative must provide the pharmacy with a written report of the audit and comply with certain requirements. Sets forth provisions concerning appeals processes, accounting practices, and applicability.

Sponsorship: Partisan Bill (Republican 3)

Status: (Failed) 2013-01-08 - Session Sine Die [HB2017 Detail]

Download: Illinois-2011-HB2017-Introduced.html

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97TH GENERAL ASSEMBLY State of Illinois 2011 and 2012 HB2017 Introduced , by Rep. Franco Coladipietro SYNOPSIS AS INTRODUCED:
215 ILCS 5/512-3 from Ch. 73, par. 1065.59-3
215 ILCS 5/512-7 from Ch. 73, par. 1065.59-7
Amends the Illinois Insurance Code. Makes changes in the provision concerning definitions. Provides that when an on-site audit or a desk audit of the records of a pharmacy is conducted by any entity, the audit shall be conducted in accordance with certain criteria. Provides that the auditing entity, administrator, or its representative must provide the pharmacy with a written report of the audit and comply with certain requirements. Sets forth provisions concerning appeals processes, accounting practices, and applicability.
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A BILL FOR
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AN ACT concerning insurance.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Insurance Code is amended by
changing Sections 512-3 and 512-7 as follows:
(215 ILCS 5/512-3) (from Ch. 73, par. 1065.59-3)
Sec. 512-3. Definitions. For the purposes of this Article,
unless the context otherwise requires, the terms defined in
this Article have the meanings ascribed to them herein:
(a) "Third party prescription program" or "program" means
any system of providing for the reimbursement of pharmaceutical
services and prescription drug products offered or operated in
this State under a contractual arrangement or agreement between
a provider of such services and another party who is not the
consumer of those services and products. Such programs may
include, but need not be limited to, employee benefit plans
whereby a consumer receives prescription drugs or other
pharmaceutical services and those services are paid for by an
agent of the employer or others.
(b) "Third party program administrator" or "administrator"
or "entity" means any pharmacy benefits manager or person,
business, or other entity that performs pharmacy benefits
management. The terms include a person or auditing entity

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acting for a pharmacy benefits manager in a contractual or
employment relationship in the performance of pharmacy
benefits management for a managed care company or nonprofit
hospital or the services of a pharmacy benefits administrator,
medical service organization, insurance company, third-party
payor, person, partnership or corporation who issues or causes
to be issued any payment or reimbursement to a provider for
services rendered pursuant to a third party prescription
program, but does not include the Director of Healthcare and
Family Services or any agent authorized by the Director to
reimburse a provider of services rendered pursuant to a program
of which the Department of Healthcare and Family Services is
the third party.
(Source: P.A. 95-331, eff. 8-21-07.)
(215 ILCS 5/512-7) (from Ch. 73, par. 1065.59-7)
Sec. 512-7. Contractual provisions.
(a) Any agreement or contract entered into in this State
between the administrator of a program and a pharmacy shall
include a statement of the method and amount of reimbursement
to the pharmacy for services rendered to persons enrolled in
the program, the frequency of payment by the program
administrator to the pharmacy for those services, and a method
for the adjudication of complaints and the settlement of
disputes between the contracting parties.
(b)(1) A program shall provide an annual period of at least

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30 days during which any pharmacy licensed under the
Pharmacy Practice Act may elect to participate in the
program under the program terms for at least one year.
(2) If compliance with the requirements of this
subsection (b) would impair any provision of a contract
between a program and any other person, and if the contract
provision was in existence before January 1, 1990, then
immediately after the expiration of those contract
provisions the program shall comply with the requirements
of this subsection (b).
(3) This subsection (b) does not apply if:
(A) the program administrator is a licensed health
maintenance organization that owns or controls a
pharmacy and that enters into an agreement or contract
with that pharmacy in accordance with subsection (a);
or
(B) the program administrator is a licensed health
maintenance organization that is owned or controlled
by another entity that also owns or controls a
pharmacy, and the administrator enters into an
agreement or contract with that pharmacy in accordance
with subsection (a).
(4) This subsection (b) shall be inoperative after
October 31, 1992.
(c) The program administrator shall cause to be issued an
identification card to each person enrolled in the program. The

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identification card shall include:
(1) the name of the individual enrolled in the program;
and
(2) an expiration date if required under the
contractual arrangement or agreement between a provider of
pharmaceutical services and prescription drug products and
the third party prescription program administrator.
(d) Notwithstanding any other law, when an on-site audit or
a desk audit of the records of a pharmacy is conducted by any
entity, the audit shall be conducted in accordance with the
following criteria:
(1) no entity shall conduct an on-site audit or a desk
audit at a particular pharmacy more than once annually;
however, this paragraph (1) shall not apply when an entity
must return to a pharmacy to complete an audit already in
progress, there is suspected or previously identified
history of errors, or inappropriate or illegal activity
that the entity has brought to the attention of the
pharmacy owner or corporate headquarters of the pharmacy;
(2) the entity conducting the on-site audit or desk
audit must give the pharmacy written notice, delivered by
certified mail to the owner of the pharmacy, at least 2
weeks prior to conducting the initial on-site audit for
each audit cycle and must describe in exact detail the
records to be examined;
(3) the entity conducting the on-site audit or desk

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audit shall not exceed 4 hours in duration and shall not
interfere with the delivery of pharmacist services to any
patient, and shall utilize every effort to minimize
inconvenience and disruption to pharmacy operations during
the audit process; on-site audits shall review no more than
100 unique prescription numbers during an initial audit;
(4) any audit that involves clinical or professional
judgment must be conducted by or in consultation with a
pharmacist licensed in this State;
(5) any clerical or record-keeping error, such as a
typographical error, scrivener's error, or computer error,
regarding a required document or record does not constitute
fraud; however, such claims may be subject to recoupment;
(6) a pharmacy may use the records of a hospital,
physician, or other authorized practitioner of the healing
arts for drugs or medicinal supplies written or transmitted
by any means of communication for purposes of validating
the pharmacy record with respect to orders or refills of a
legend or narcotic drug;
(7) a finding of an overpayment or underpayment must be
based on the actual overpayment or underpayment and may not
be 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;
(8) a finding of overpayment to the pharmacy shall
invoke a recoupment of dispensing fees only, such as the

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medications were legally dispensed and received by a valid
patient under order of a valid prescription and previously
authorized for payment by the entity;
(9) each pharmacy shall be audited under the same
standards, parameters, and frequency as other similarly
situated pharmacies audited by the entity;
(10) the period covered by an audit may not exceed one
year from the date the claim was submitted to or
adjudicated by a managed care company, nonprofit hospital
or medical service organization, insurance company,
third-party payor, pharmacy benefit manager, health
program administered by a department of the State, or any
entity that represents such companies, groups, or
departments;
(11) no audit may be initiated or scheduled during the
first 7 calendar days of any month, or during peak holiday
seasons, due to the high volume of prescriptions filled in
the pharmacy during that time unless otherwise consented to
by the pharmacy;
(12) the firm or entity conducting the on-site audit or
desk audit on behalf of the plan provider or pharmacy
benefits manager may not receive compensation payments
based on a formula calculated on the amount recovered;
(13) any necessary or legally required information may
appear on the front or back or affixed to the prescription
to be deemed legally valid, along with any accepted

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electronic records to the extent permitted by law; and
(14) when a valid prescription is in force, auditors
may not seek recoupment for claims that exceeded face value
of prescription or similar claims when a duly authorized
prescription is in force and permitted under law.
(e) The auditing entity, administrator, or its
representative described in subsection (d) of this Section must
provide the pharmacy with a written report of the audit and
comply with the following requirements:
(1) the preliminary audit report must be delivered to
the pharmacy within 90 days after conclusion of the audit
along with a written copy of the formal appeals process to
each pharmacy that is being audited;
(2) a pharmacy shall be allowed at least 60 days
following receipt of the preliminary audit report in which
to produce documentation to address any discrepancy found
during the audit;
(3) a final audit report shall be delivered to the
pharmacy within 120 days after receipt of the preliminary
audit report or final appeal, as provided for in Section 6
of this Code, whichever is later;
(4) the audit report must be signed and shall include
the signature of any pharmacist participating in the audit;
(5) any recoupments of disputed funds shall only occur
after final internal disposition of the audit, including
the appeals process as set forth in Section 6 of this Code;

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(6) interest shall not accrue during the audit period;
(7) each administrator or its representative
conducting an audit shall provide a copy of the final audit
report, after completion of any review process, to the both
the pharmacy and the plan sponsor; and
(8) the auditing entity shall conduct an exit interview
at the close of the audit, at a time agreed to by the
pharmacy, which shall provide the following: (i) response
to questions from the auditing entity; (ii) review and
comment on the initial finding of the auditing entity; and
(iii) additional documentation to clarify the initial
findings of the auditing entity.
(f) Appeal processes pursuant to this Section shall comport
with the following provisions:
(1) The National Council for Prescription Drug
Programs or any other recognized national industry
standard shall be used to evaluate claims submission or
product size disputes.
(2) Each administrator or its representative
conducting an audit shall establish a written appeals
process under which a pharmacy may appeal an unfavorable
preliminary audit report to the administrator.
(3) If, following the appeal, the administrator finds
that an unfavorable audit report or any portion thereof is
unsubstantiated, then the administrator shall dismiss the
audit report or said portion without the necessity of any

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further action.
(g) Notwithstanding any other provision in this Code, the
administrator conducting the audit pursuant to subsections (d)
and (e) of this Section shall not use the accounting practice
of extrapolation in calculating recoupments or penalties for
audits.
As used in this Section, "accounting practice of
extrapolation" means an audit of a sample of prescription drug
benefit claims submitted by a pharmacy to the administrator
conducting the audit that is then used to estimate audit
results for a larger batch or group of claims not reviewed by
the auditor.
(h) The audit criteria set forth in this Section shall
apply only to audits of claims for services provided and claims
submitted for payment after the effective date of this
amendatory Act of the 97th General Assembly and all criteria of
the audit standards must be set forth in law and criteria more
restrictive than Illinois law shall not be permitted nor used
as principles of audit.
(i) This Section shall not apply to any investigative audit
conducted by or on behalf of a State agency that involves
fraud, willful misrepresentation, or abuse, including, without
limitation, investigative audits or any other statutory
provision that authorizes investigations relating to insurance
fraud.
(Source: P.A. 95-689, eff. 10-29-07.)