On the heels of federal criminal investigations into OTC card usage, payors are now auditing OTC processes and imposing severe sanctions, including network termination, for non-compliance. Pharmacies should be wary of increased enforcement in this area and take steps to proactively reduce audit risk.

Over the past year, Over-the-Counter (OTC) cards have been subject to increased scrutiny and enforcement. We previously highlighted this trend in the context of government investigations. Now, however, payors and PBMs are auditing OTC compliance, with severe penalties at stake.

OTC card

Payors Promote OTC Cards Heavily

OTC cards are prepaid debit cards issued by plan sponsors to beneficiaries that can be used to purchase eligible healthcare products, such as non-prescription medications, vitamins, and first aid supplies.

Plan sponsors actively promote OTC cards to potential beneficiaries as an incentive for individuals to choose their plan over others. As a result of these promotions, patients have certain expectations over the use of these cards.

At the same time, however, these incentives place pharmacists in a difficult position when patients demand ineligible items, as is often the case.

OTC Cards Have Been the Subject of Federal Enforcement

In a prior article, we highlighted how federal prosecutors have used OTC non-compliance as the basis of criminal charges. You can access that article HERE.

Specifically, although OTC cards are not used for items or services that are reimbursed by government payors, prosecutors have alleged that pharmacies have offered "kickbacks" to patients by allowing them to exchange their OTC card value for ineligible items, including supermarket coupons and front-end sundries.

OTC Card Usage is Now Being Audited by PBMs and Payors

More recently, the enforcement environment around OTC cards has shifted to the private sector, with payors and PBMs auditing for non-compliance in this area. OTC audits typically do not arise from data analytics, but rather from customer complaints. In highly competitive areas, those complaints may even be filed by your competitors!

It is therefore critical that pharmacies understand their rights with respect to requests for documents and information relating to OTC cards.

For example, network pharmacies are forced to agree to lopsided terms in provider manuals and enrollment forms with respect to the processing of pharmacy claims. OTC cards, however, are not pharmacy claims and are not adjudicated by a PBM. In other words, different obligations and rights apply to audits in this area than audits of pharmacy claims.

Implement an OTC Audit Protection Plan Now, Not Later

Given increased audit enforcement trends, pharmacies are well-advised to implement an audit protection plan applicable to OTC and other potential PBM audit vulnerabilities, including well-designed polices and procedures, ongoing staff training and education, and internal monitoring or test audits. Such planning is well worth the time and investment.

HLA's Defense Attorneys Have OTC Enforcement Experience

As former federal prosecutors and state regulators, HLA's experienced defense lawyers have extensive experience defending pharmacies against OTC allegations in federal probes and PBM audits. We are available to provide comprehensive legal guidance on OTC card compliance, conduct internal audits and risk assessments, and offer tailored training programs and compliance protocols to enhance staff awareness and adherence to all relevant legal and regulatory requirements related to the proper utilization of OTC cards. Contact us for a complimentary consultation today.

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