In light of recent trends, many pharmacies are considering using compliance consultants for PBM and governmental payor audits, often due to perceived cost savings compared to engaging legal counsel. While compliance consultants are valuable for routine compliance needs, using their services in investigations and audits could carry significant, and often unforeseen, risks for pharmacies.

The Critical Distinction: Attorney-Client Privilege

The most fundamental difference lies in attorney-client privilege. Communications with your attorney, and internal reviews conducted under their guidance, are protected. This means that information shared with your lawyer cannot be compelled for disclosure in future hearings or investigations.

In contrast, anything disclosed to a compliance consultant (e.g., emails, reports, or advice) is generally not privileged. If an audit escalates into a formal investigation, a consultant can be subpoenaed and compelled to testify about everything you shared with them, potentially exposing your pharmacy to significant liability.

Key Dangers of Relying Solely on a Consultant During Audits:

When a PBM a governmental payor audit could escalate into a fraud, waste, and abuse (“FWA”) investigation, relying solely on a consultant presents several dangers:

1. Lack of Privilege: As noted, all communications and findings can become discoverable evidence against your pharmacy.

2. Misunderstanding Legal Exposure: Consultants, lacking legal training, may not accurately assess when an audit finding (e.g., documentation errors, billing anomalies) could lead to serious allegations like False Claims Act or Anti-Kickback Statute violations. This can lead to inadvertent admissions or inadequate responses to serious allegations.

3. Improper Audit Response: A consultant’s audit response might focus on operational fixes without addressing underlying legal concerns, potentially waiving defenses, failing to preserve arguments, or triggering further scrutiny.

4. Failure to Spot Escalation Triggers: Audits often serve as fact-finding tools that can quickly transition into civil or criminal investigations. Consultants may miss red flags (e.g., patterns of errors, high-cost drug reimbursements) that signal an audit is escalating, while attorneys are trained to recognize these and prepare for investigative steps like subpoenas.

5. Increased Risk of Self-Incrimination: Consultants may advise full transparency without the strategic legal planning necessary to prevent responses from being misinterpreted as admissions of fraud or noncompliance.

6. No Legal Representation: If an audit escalates into an enforcement action, consultants cannot negotiate with government attorneys, represent you in hearings or settlement conferences, or handle subpoena responses or litigation. This leaves pharmacies unprepared when legal counsel becomes urgently needed.

7. Missed Proactive Legal Strategy: Attorneys can conduct internal investigations under privilege, identify high-risk areas, and craft legally strategic audit responses from the outset, potentially preventing an audit from escalating.

Even during an initial audit, especially if there’s any possibility it could lead to further investigation, early engagement of legal counsel is critical. A healthcare attorney understands the potential pitfalls and how to prevent an audit from escalating into a full-blown investigation. While compliance consultants are invaluable for technical compliance fixes, they should ideally work under the guidance of an attorney when facing audits that carry legal risk.

Our firm is prepared to assist your pharmacy in strategically responding to audits and investigations, ensuring your rights and interests are protected. If your pharmacy is facing an audit or has questions about managing audit risks, please reach out to our experienced healthcare attorneys at (212) 668-0200 or via email at [email protected].