(a) When an audit of records of a pharmacist or pharmacy is conducted by a covered entity, a pharmacy benefits manager, the state or its political subdivisions, or any other entity representing the same, it shall be conducted in the following manner:

Terms Used In Tennessee Code 56-7-3103. Audit of records of pharmacist or pharmacy

  • Code: includes the Tennessee Code and all amendments and revisions to the code and all additions and supplements to the code. See Tennessee Code 1-3-105
  • Covered entity: means a health insurance issuer, managed health insurance issuer as defined in §. See
  • Month: means a calendar month. See Tennessee Code 1-3-105
  • Person: means any association, aggregate of individuals, business, company, corporation, individual, joint-stock company, Lloyds-type organization, organization, partnership, receiver, reciprocal or interinsurance exchange, trustee or society. See
  • Pharmacy benefits manager: includes , but is not limited to, a health insurance issuer, managed health insurance issuer as defined in §. See
  • Record: means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in a perceivable form. See Tennessee Code 1-3-105
  • State: when applied to the different parts of the United States, includes the District of Columbia and the several territories of the United States. See Tennessee Code 1-3-105
  • written: includes printing, typewriting, engraving, lithography, and any other mode of representing words and letters. See Tennessee Code 1-3-105

(1) Written notice shall be given to the pharmacist or pharmacy at least two (2) weeks prior to conducting the initial on-site audit for each audit cycle;

(2) Any audit performed under this section that involves clinical or professional judgment shall be conducted in consultation with a pharmacist who has knowledge of the Tennessee Pharmacy Practice Act, compiled in title Code Sec. t63″>63, chapter 10, parts 2-4;

(3) Any clerical or record-keeping error, such as a typographical error, scrivener’s error, or computer error, regarding a required document or record may not, in and of itself, constitute fraud; however, the claims may be subject to recoupment. Notwithstanding any other law to the contrary, no such claim shall be subject to criminal penalties without proof of intent to commit fraud;

(4) A pharmacist or pharmacy may use the records of a hospital, physician, or other authorized practitioner of the healing arts for drugs or medical supplies written or transmitted by any means of communication for purposes of validating pharmacy records with respect to orders or refills of a legend or narcotic drug;

(5) A finding of overpayment or underpayment may 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; however, recoupment of claims must be based on the actual overpayment or underpayment, unless the projection for overpayment or underpayment is part of a settlement as agreed to by the pharmacist or pharmacy;

(6) Each pharmacist or pharmacy shall be audited under the standards and parameters as other similarly situated pharmacists or pharmacies audited by a covered entity, a pharmacy benefits manager, the state or its political subdivisions, or any other entity representing the same;

(7) A pharmacist or pharmacy shall be allowed the length of time described in the pharmacist’s or pharmacy’s contract or provider manual, whichever is applicable, which shall not be less than thirty (30) days, following receipt of the preliminary audit report in which to produce documentation to address any discrepancy found during an audit. If the pharmacist’s or pharmacy’s contract or provider manual does not specify the allowed length of time for the pharmacist or pharmacy to address any discrepancy found in the audit following receipt of the preliminary report, that pharmacist or pharmacy shall be allowed at least thirty (30) days following receipt of the preliminary audit report to respond and produce documentation;

(8) The period covered by an audit may not exceed two (2) years from the date the claim was submitted to or adjudicated by a covered entity, a pharmacy benefits manager, the state or its political subdivisions, or any other entity representing the same, except this subdivision (a)(8) shall not apply where a longer period is required by any federal rule or law;

(9) An audit shall not be initiated or scheduled during the first seven (7) calendar days of any month due to the high volume of prescriptions filled during that time, unless otherwise consented to by the pharmacist or pharmacy;

(10) The preliminary audit report must be delivered to the pharmacist or pharmacy within one hundred twenty (120) days after conclusion of the audit. A final audit report shall be delivered to the pharmacist or pharmacy within six (6) months after receipt of the preliminary audit report or final appeal, whichever is later; and

(11) Notwithstanding any other law to the contrary, any audit of a pharmacist or pharmacy shall not use the accounting practice of extrapolation in calculating recoupments or penalties for audits.

(b) Recoupments of any disputed funds shall only occur after final internal disposition of the audit, including the appeal process as set forth in subsection (c).

(c) Each pharmacy benefits manager, as defined in § 56-7-3102, conducting an audit shall establish an appeals process under which a pharmacist or pharmacy may appeal an unfavorable preliminary audit report to the pharmacy benefits manager on whose behalf the audit was conducted. The pharmacy benefits manager conducting any audit shall provide to the pharmacist or pharmacy, before or at the time of delivery of the preliminary audit report, a written explanation of the appeals process, including the name, address and telephone number of the person to whom an appeal should be addressed. If, following the appeal, it is determined that an unfavorable audit report or any portion of the audit report is unsubstantiated, the audit report or the portion shall be dismissed without the necessity of further proceedings.

[Acts 2007, ch. 224, § 1.]