What's happening
This bill sets new rules and protections for how pharmacy benefit managers can audit pharmacies in New York.
Why it matters
Limits on Audit Frequency and Notice. The bill restricts when and how often pharmacy benefit managers (PBMs) can perform on-site audits, requiring at least 15 days’ written notice and prohibiting audits during the first three days of each month. This could help pharmacies avoid operational disruptions during busy periods and provide them with time to prepare.
Protections Against Unfair Audit Practices. The legislation caps the audit period to 24 months after a claim is submitted and limits the number of prescriptions reviewed (max 100 annually, unless fraud is suspected). This prevents PBMs from conducting overly broad or retroactive audits that could create unnecessary administrative burdens for pharmacies.
Due Process and Error Tolerance. Pharmacies are given the opportunity to address audit findings, with a 45-day window to provide documentation, and PBMs must consider reasonable requests for extension. Claims denied due to clerical or minor errors must still be paid if the medication was properly dispensed, unless there’s a pattern or financial harm—protecting pharmacies from punitive recoupments for honest mistakes.
Exceptions for Fraud and Federal Programs. The bill excludes audits involving suspected fraud, audits of federally funded claims, and rapid desk reviews from these rules, balancing pharmacy protections with the need for robust anti-fraud oversight and compliance with federal requirements.
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Who cares
Headline styles
Limit Pharmacy Audit Practices
Plain English, a few words. Used as the page title.
Sponsors
History
- Referred to health
- Returned to senate
- Died in assembly
- Referred to health
- Delivered to assembly
- Passed senateVote 62–0
- Ordered to third reading cal.2182
- Committee discharged and committed to rules
- Print number 2763a
- Amend and recommit to health
- Referred to health
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Set Pharmacy Audit Rules
In Senate Committee · Health · Sponsor Charles Lavine
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
2763--A
2017-2018 Regular Sessions
IN SENATE
January 17, 2017
Introduced by Sen. GOLDEN -- read twice and ordered printed, and when printed to be committed to the Committee on Health -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee
AN ACT to amend the public health law, in relation to audits of pharmacies
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. The public health law is amended by adding a new section 280-c to read as follows:
§ 280-c. Pharmacy audits by pharmacy benefit managers. 1. Definitions. As used in this section, the following terms shall have the following meanings:
(a) "Pharmacy benefit manager" shall have the same meaning as in section two hundred eighty-a of this article.
(b) "Pharmacy" shall mean a pharmacy that has contracted with a pharmacy benefit manager for the provision of pharmacy services.
2. When conducting an audit of a pharmacy's records, a pharmacy benefit manager shall:
(a) not conduct an on-site audit of a pharmacy at any time during the first three calendar days of a month;
(b) notify the pharmacy or its contracting agent no later than fifteen days before the date of initial on-site audit. Such notification to the pharmacy or its contracting agent shall be in writing delivered either (i) by mail or common carrier, return receipt requested, or (ii) electronically with electronic receipt confirmation, addressed to the supervising pharmacist of record and pharmacy corporate office where applicable, at least fifteen days before the date of an initial on-site audit;
(c) limit the audit period to twenty-four months after the date a claim is submitted to or adjudicated by the pharmacy benefit manager;
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06021-03-7
S. 2763--A 2
(d) include in the written advance notice of an on-site audit the list of specific prescription numbers to be included in the audit that may or may not include the final two digits of the prescription numbers;
(e) use the written and verifiable records of a hospital, physician or other authorized practitioner, which are transmitted by any means of communication, to validate the pharmacy records in accordance with state and federal law;
(f) limit the number of prescriptions audited to no more than one hundred randomly selected in a twelve-month period, except in cases of fraud;
(g) provide the pharmacy or its contracting agent with a copy of the preliminary audit report within forty-five days after the conclusion of the audit;
(h) be allowed to conduct a follow-up audit on-site if a remote or desk audit reveals the necessity for a review of additional claims;
(i) in the case of invoice audits, accept as validation invoices from any wholesaler registered with the department of education from which the pharmacy has purchased prescription drugs or, in the case of durable medical equipment or sickroom supplies, invoices from an authorized distributor other than a wholesaler;
(j) provide the pharmacy or its contracting agent with the ability to provide documentation to address a discrepancy or audit finding, provided that such documentation must be received by the pharmacy benefit manager no later than the forty-fifth day after the preliminary audit report was provided to the pharmacy or its contracting agent. The pharmacy benefit manager shall consider a reasonable request from the pharmacy for an extension of time to submit documentation to address or correct any findings in the report; and
(k) provide the pharmacy or its contracting agent with the final audit report no later than sixty days after the initial audit report was provided to the pharmacy or its contracting agent.
3. Any claim that was retroactively denied for a clerical error, typographical error, scrivener's error or computer error shall be paid if the prescription was properly and correctly dispensed, unless a pattern of such errors exists, fraudulent billing is alleged or the error results in actual financial loss to the entity. A clerical error is an error that does not result in actual financial harm to the covered entity or consumer and does not include the dispensing of an incorrect dose, amount or type of medication or dispensing a prescription drug to the wrong person.
4. This section shall not apply to:
(a) audits in which suspected fraudulent activity or other intentional or willful misrepresentation is evidenced by a physical review, review of claims data or statements, or other investigative methods; or
(b) audits of claims paid for by federally funded programs; or
(c) concurrent reviews or desk audits that occur within three business days of transmission of a claim and where no chargeback or recoupment is demanded.
§ 2. This act shall take effect on the sixtieth day after it shall have become a law.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the public health law, in relation to audits of pharmacies
Purpose or general idea of bill
To establish statutory guidelines regarding the audit of pharmacy records conducted on the behest of or ordered by a pharmacy benefit manager, and to provide guidance to a pharmacy benefit manager regarding the denial or payment of claims.
Summary of specific provisions
Section one of this bill adds a new section 280-c to the Public Health Law. This new section would require pharmacy benefit managers, when conducting an audit of that looks to audit pharmacy records to:
*Schedule on-site audit of a pharmacy at any time other than during the first three calendar days of any month.
*Notify the pharmacy that an audit is pending at least seven days before the on-site audit begins. Notice is required to be written and if sent by common carrier, return receipt must be requested. If the notice is sent electronically,
*Limit audit periods to 24 months after the date a claim is submitted.
*Provide written advance notice of the specific prescription numbers that as included in the audit. The prescription numbers may exclude the last 2 digits.
*Accept written and verifiable records to validate pharmacy records.
*Limit audits to 100 randomly selected prescriptions within a 12-month period, unless there is fraud.
*Provide the affected pharmacy with a copy of a preliminary audit report within 45 days of the audit completion.
*If a remote or desk audit reveals the necessity to review additional claims, the follow-up audit may be conducted on-site.
*Provide the pharmacy a way to provide documentation to contest audit findings and allow for the consideration of an extension of time to submit the documentation or contest the accuracy of the report.
*Provide the pharmacy with the final audit report within 60 days of receipt of the initial report.
The bill also would also require a pharmacy benefit manager to pay a claim submitted by a pharmacy if the initial reason for denial is tied to a clerical or other non-intentional error if the relevant prescription was still effectively filled.
The audit requirements would not apply to an audit initiated on the reasonable suspicion of deliberate fraud, or audits of claims paid by federal programs such as Medicaid or Medicare, or timely routine desk audits where no chargeback or recoupment are demanded.
Section two of this bill provides that this act shall take effect on the sixtieth day after it shall have become a law.
Justification
The bill is designed to limit the ability of pharmacy benefit managers to use of audit procedures or payment denials to inhibit normal business activities of pharmacies of whatever size and nature, and to provide a more level competitive playing field for all pharmacies.
Prior legislative history
2016: S.7150 - Passed the Senate
Fiscal implications
Undetermined
Effective date
This act shall take effect on the sixtieth day after it shall have become a law.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.