"New Jersey Pharmacy Audit Bill of Rights;" establishes procedures by which entities are required to conduct audits of pharmacies.

S3535

SENATE, No. 3535

STATE OF NEW JERSEY

222nd LEGISLATURE

�

INTRODUCED FEBRUARY 19, 2026

Sponsored by:

Senator� LINDA R. GREENSTEIN

District 14 (Mercer and Middlesex)

SYNOPSIS

���� �New Jersey Pharmacy Audit Bill of Rights;�
establishes procedures by which entities are required to conduct audits of
pharmacies.

CURRENT VERSION OF TEXT

���� As introduced.

��

An Act

concerning pharmacy audits and supplementing P.L.1971,
c.144 (C.17B:34-1 et seq.).

����
Be It
Enacted
by the Senate and General Assembly of
the State of New Jersey:

���� 1.��� This act shall be known
and may be cited as the �New Jersey Pharmacy Audit Bill of Rights.�

���� 2.��� As used in this act:

���� �Entity� means a hospital
service corporation, medical service corporation, health service corporation,
or other managed care company, or an insurance company, third-party payor,
pharmacy benefits manager, any entity licensed by the Department of Banking and
Insurance, or any entity that represents those companies, groups, or
departments.

���� 3.��� Notwithstanding any
other law, rule, or regulation to the contrary, when an audit of the records of
a pharmacy is conducted by an entity, the audit shall be conducted in
accordance with the following requirements:

���� a.���� An entity conducting an
audit shall give the pharmacy notice at least 14 days prior to the audit and
include in the notice a comprehensive list of claims by prescription number to
be audited, although the final two
digits of each
prescription number
may be omitted. The cost of the claims shall not be
used as a criterion in determining which claims to audit. The audit shall not
include more than 100 prescriptions per audit and an entity shall not audit
more than 200 prescriptions in any 12-month period, provided that a refill
shall not constitute a separate prescription;

���� b.��� Any audit that involves
clinical or professional judgment shall be conducted by or in consultation with
a pharmacist;

���� c.���� Any clerical or
record-keeping error, including but not limited to a typographical error,
scrivener�s error, computer error, or omission error, regarding a prescription,
front or back label, or other document or record shall not in and of itself
constitute fraud. An entity shall not be entitled to recoup the costs of drugs
or medicinal supplies properly dispensed shall be allowed if a clerical or
record-keeping error has occurred; provided, however, that recoupment shall be
allowed to the extent that the error resulted in an overpayment, though
recoupment shall be limited to the amount overpaid;

���� d.��� A pharmacy shall, within
60 days following receipt of the preliminary audit report, correct any error or
address any discrepancy found during an audit which may be subject to
recoupment for overpayment as provided for in subsection c. of this section, including
to secure and remit an appropriate copy of the record from a hospital,
physician, or other authorized health care practitioner for drugs or medicinal
supplies written or transmitted by any means of communication if the lack of a
record or an error in a record is identified in the course of an audit or in
the preliminary audit report;

���� e.���� Notwithstanding the
provisions of any law, rule, or regulation to the contrary, a hospital,
physician, or other practitioner authorized to administer drugs or medicinal
supplies written or transmitted by any means of communication may provide
relevant records to a pharmacy that is under audit pursuant to the provisions
of this act, for the purposes of validating the pharmacy record with respect to
orders or refills of a legend or narcotic drug;

���� f.���� A finding of an
overpayment or underpayment may be a projection based on the number of patients
served with a similar diagnosis or on the number of similar orders or refills
for similar drugs.� The recoupment of claims shall be based on the actual
overpayment or underpayment unless the projection for overpayment or
underpayment is part of a settlement agreed to by the pharmacy;

���� g.��� Each pharmacy shall be
audited by an entity under the same standards and parameters as other similarly
situated pharmacies audited by the entity;

���� h.��� An audit shall not cover
a period exceeding two years from the date the claim was submitted to or
adjudicated by an entity;

���� i.���� An entity shall not
initiate or schedule an audit during the first seven calendar days of any month
due to the high volume of prescriptions filled during that time unless
otherwise consented to by the pharmacy;

���� j.���� The preliminary audit
report shall be delivered to the pharmacy within 30 days after conclusion of
the audit. A final audit report shall be delivered to the pharmacy within 60
days after receipt of the preliminary audit report or final appeal, as provided
for in section 4 of P.L.��� , c.��� (C.������ ) (pending before the Legislature
as this bill), whichever is later;

���� k.��� A pharmacy shall not be
held responsible for any penalty or fee in connection with an audit and there
shall be no recoupment of funds from a pharmacy in connection with claims for
which the pharmacy has already been paid without first complying with the requirements
set forth in P.L.��� , c.��� (C.������� ) (pending before the Legislature as
this bill);

���� (1)�� There shall be no
recoupment from a pharmacy except in cases of:

���� (2)�� fraud;

���� (3)�� error that resulted in
an overpayment provided that recoupment shall be limited to the amount
overpaid; or

���� (4)� a misfill; provided,
however, that when a patient receives the correct drug in the correct dosage
and quantity pursuant to a prescription drug order then no misfill shall be
found to have occurred; and

���� l.���� A pharmacy shall not be
audited by the same entity more than once every six months.

���� m.�� A pharmacy benefits
manager shall not prohibit a pharmacy from dispensing any legal drug in any
quantity.

���� Notwithstanding any other
provisions in this subsection, the entity conducting the audit shall not use
the accounting practice of extrapolation in calculating recoupments or
penalties for audits.

���� 4.��� Recoupments of any
disputed funds shall only occur after final internal disposition of the audit,
including the appeals process as set forth in section 4 of P.L.��� , c.���
(C.������� ) (pending before the Legislature as this bill).

���� 5.��� Each entity conducting
an audit shall establish an internal appeals process under which a pharmacy
shall have at least 30 days from the delivery of the preliminary audit report
to appeal an unfavorable preliminary audit report to the entity. If, following
the appeal, the entity finds that an unfavorable audit report or any portion
thereof is unsubstantiated, the entity shall dismiss the audit report or�
portion thereof without any further proceedings.

���� 6.��� A plan sponsor may
request, and an entity conducting an audit shall provide, a copy of the final
audit report, after completion of any review process, to the plan sponsor at
its request.

���� 7.���
The
provisions of P.L.��� , c.��� (C.������� ) (pending before the Legislature as
this bill)
shall not apply to:

���� a. any investigative audit
commenced based upon an articulable suspicion of fraud, willful
misrepresentation, or abuse, including investigative audits pursuant to section
7 of P.L.1968, c.413 (C.30:4D-7), section 8 of P.L.1983, c.320 (C.17:33A-8),
section 71 of P.L.2003, c.89 (C.2C:21-4.4), or any other statutory provision
providing for an investigation relating to insurance fraud; or

���� b. audits conducted by the Department
of Human Services pursuant to section 7 of P.L.1968, c.413 (C.30:4D-7),
provided, however, that the provisions of chapter 49 under Title 10 of the New
Jersey Administrative Code shall apply to audits conducted by the Department of
Health under section 7 of P.L.1968, c.413 (C.30:4D-7).

���� 8.��� An entity conducting an
audit pursuant to the provisions of P.L.��� , c.��� (C.������� ) (pending
before the Legislature as this bill) shall not compensate the agent or employee
conducting the audit based on percentage of the amount recovered by the audit.

���� 9.��� The Commissioner of
Banking and Insurance shall adopt, pursuant to the �Administrative Procedure
Act,� P.L.1968, c.410 (C.52:14B-1 et seq.) rules and regulations to effectuate
the provisions of P.L.��� , c.��� (C.������� ) (pending before the Legislature
as this bill). The Commissioner shall investigate complaints of alleged
violations of this section; to prohibit recoupment; to order reimbursement of
any wrongful recoupment; to institute fines for violations of the law, rules,
or regulations; and to take any other actions pursuant to any authority granted
pursuant to P.L.2015, c.179 (C.17B:27F-1 et seq.), relating to the regulation
and licensure of pharmacy benefit managers.

���� 10.� This act shall take
effect on the first day of the sixth month next following enactment.

STATEMENT

���� This bill establishes the �New
Jersey Pharmacy Audit Bill of Rights� including certain procedures and
processes by which entities auditing a pharmacy are to follow. The bill defines
�entity� as a hospital service corporation, medical service corporation, or
other managed care company, or an insurance company, third-party payor,
pharmacy benefits manager, any entity licensed by the Department of Banking and
Insurance, or any entity that represents such companies, groups, or
departments.

���� Under the bill, the audits are
to be conducted in accordance with certain requirements concerning the scope of
an audit, procedures to properly perform an audit, record-keeping, and
recoupment. Additionally, the entity conducting an audit shall not use the
accounting practice of extrapolation in calculating recoupments or penalties
for audits.

���� Under the bill, recoupments of
any disputed funds are to only occur after final internal disposition of the
audit, including the appeals process as set forth in the bill. Each entity
conducting an audit shall establish an internal appeals process under which a
pharmacy shall have at least 30 days from the delivery of the preliminary audit
report to appeal an unfavorable preliminary audit report to the entity. If,
following the appeal, the entity finds that an unfavorable audit report or any
portion thereof is unsubstantiated, the entity is to dismiss the audit report
or portion thereof without the necessity of any further proceedings. Each
entity conducting an audit is to provide a copy of the final audit report,
after completion of any review process, to the plan sponsor at its request or
in an alternate format.

���� The provisions of the bill do
not apply to any investigative audit commenced based upon an articulable
suspicion of fraud, willful misrepresentation, or abuse, including without
limitation investigative audits under the �New Jersey Medical Assistance and
Health Services Act;� the �New Jersey Insurance Fraud Prevention Act;� the New
Jersey criminal statute establishing insurance fraud as a crime; or any other
statutory provision which authorizes investigations relating to insurance
fraud.

���� Additionally the Department of
Human Services is exempt from the bill�s provisions when conducting audits
under the �New Jersey Medical Assistance and Health Services Act,� so long as
the regulations establishing an appeals process for Medicaid providers apply to
the parties under audit by the Department of Human Services pursuant to the
�New Jersey Medical Assistance and Health Services Act.�

���� Under the bill, an entity
conducting the audit may not pay the agent or employee who is conducting the
audit based on percentage of the amount recovered. Lastly, the Commissioner of
Banking and Insurance is assigned the enforcement of the bill�s provisions and
is to promulgate rules and regulations to effectuate its provisions. The
Commissioner has the authority to investigate complaints of alleged violations
of this section; to prohibit recoupment; to order reimbursement of any wrongful
recoupment; to institute fines for violations of the law, rules, or
regulations; and to take any other actions pursuant to any authority granted pursuant
to current law relating to the regulation and licensure of pharmacy benefit
managers.