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March 27, 2024

Government Relations 101: Pharmacy Audits and Investigations: What Can Providers Expect From Regulators in 2024?

This blog is the seventh in a series about interacting with government regulators and is intended to help our clients understand and manage contact and outreach from government regulators, law enforcement, or both.

The Setup    

In spring 2023,1 the New York State Department of Health (DOH) “carved-out” pharmacy benefits for Medicaid recipients into fee-for-service. In 2011, the DOH had “carved-in” pharmacy benefits, making it a requirement for state-funded managed care plans to provide (and fund) pharmaceutical benefits for Medicaid recipients. For various reasons, the state changed its mind, and after some delays, New York State is again directly reviewing and processing pharmaceutical claims.2

What does the switch indicate for pharmacy owners in 2024 and beyond? In particular, will there be an uptick in criminal prosecutions, audits, or government investigations? In this blog post and the two that follow, we will attempt to expand upon the limited guidance provided by the Office of the Medicaid Inspector General (OMIG) and identify some key considerations that impact a regulator’s decision to audit or investigate a provider or to refer a matter to an outside agency for criminal prosecution.

The Short Answer 

OMIG’s work plan for 2024 makes it clear that pharmacies will remain a focus of the agency’s audit and investigative efforts, including as it relates to the “appropriate authorization of payment for controlled substances.”3 While OMIG did not specify the precise form of its forthcoming oversight of controlled substances prescriptions, pharmacy owners can reasonably expect to see audits focused on a pharmacy’s possession of compliant orders to dispense, including ensuring that each order contains the prescriber’s DEA number and signature, as well as the pharmacist’s endorsement. These requirements, among others, are set forth in OMIG’s audit protocols for fee-for-service pharmacies and are worth reviewing.4 Additionally, most pharmacy audits are also likely to encompass adequate documentation of inventory purchases to verify the pharmacy is not engaged in diversion. In the several months since the carve-out became effective, attorneys at Barclay Damon have seen in uptick in audits of the firm’s pharmacy clients. We have also seen an uptick in pharmacies being the target of criminal investigations by the Department of Justice.

The Takeaway 

Broadly speaking, we anticipate OMIG and other regulators and prosecution agencies to focus on violations of the program rules that underlie pharmacy claims with, as noted, a particular emphasis on controlled substances. We also anticipate an uptick in audits related to prior authorizations, particularly documentation of tried-and-failed, given an increased interest over the past couple of years by the Department of Justice in prior authorizations. To the extent those violations are considered “material,” they will likely be the focus of criminal investigations, prosecutions, civil lawsuits, or all three by the Medicaid Fraud Control Unit within the NYS Attorney General’s Office and other prosecution agencies. To the extent those violations are not material but are more than administrative errors, they will the subject of recoupments efforts, largely by OMIG and third-party payors. 

The next blog will answer the question, “What’s a Material Violation of Medicaid Rules and Regulations?”

If you have any questions regarding the content of this blog, please contact Chris Shaw, partner, at, or another member of the firm’s Health Care Controversies or Health & Human Services Providers Teams or White Collar & Government Investigations Practice Area.

1The effective date of the pharmacy carve-out was April 1, 2023.
2While New York State never fully carved-out all pharmaceutical benefits, for the most part, between 2011 and 2023, the state stopped processing pharmaceutical claims.
3OMIG’s 2024 work plan can be found at
4See OMIG Audit Protocols for Fee-For-Service Pharmacy Services, revised May 24, 2022. This, and other OMIG audit protocols, can be found at 

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