How a Forensic Accountant Can Assist Your Independent Pharmacy

The corner drugstore is an American institution, offering personalized service, neighbor to neighbor, in communities across America. But, like Main Street itself, independently owned and operated pharmacies are struggling to survive in a business environment dominated by, and skewed towards, huge conglomerates. If you own and operate an independent pharmacy, you don’t need us to tell you about low reimbursement rates and narrow margins. You know that to survive, you must control expenses, eliminate waste and prevent unnecessary losses. In this article, we’ll outline the ways a retail pharmacy forensic accountant can provide valuable assistance to fortify your bottom line, so you can continue to serve your community.

Fraud detection and prevention

The healthcare industry is rife with fraud, which threatens pharmacies from within and without. As the owner/operator, you must be on guard against:

• Employee theft and embezzlement — Independent pharmacies handle significant cash and insurance payments, making them vulnerable to internal fraud. They also store inventory which has significant street value, if perchance it grows legs and walks out the door. A forensic accountant can analyze financial records for discrepancies, unauthorized transactions, or inventory shrinkage.
• Prescription fraud — Pharmacies may experience fraudulent prescriptions or inventory losses due to illegal drug diversion. A forensic accountant can help identify patterns indicating theft or fraudulent billing.
• Vendor fraud — These scams are plentiful, so you must have trained eyes review supplier invoices and contracts to uncover overbilling, kickbacks, or other forms of vendor fraud.

It’s discouraging to think that the people you employ or transact business with might be trying to rip you off. But too much trust can be your undoing. Long ago, Thomas Jefferson warned that, “The price of liberty is eternal vigilance.” That’s also the price of small business survival.

Insurance and third-party payer audits

Pharmacies are heavily dependent on reimbursements they receive from private insurance plans and government programs. Neither source is known for pinpoint accuracy. A forensic accountant can scrutinize transactions to discover:

• Insurance reimbursement issues — Independent Pharmacies deal with multiple insurance providers, PBMs (Pharmacy Benefit Managers), and PSAOs (Pharmacy Services Administrative Organizations). A forensic accountant can help detect reimbursement and billing errors, unpaid or duplicate claims, or transaction errors that might trigger audits or legal issues.
• Medicaid and Medicare compliance — We can help ensure that pharmacies comply with federal and state regulations, reducing the risk of fines, penalties, or exclusions.

Even small errors on a frequently recurring basis can produce debilitating losses for your pharmacy business.

Financial stability and risk management

Independent pharmacy owner/operators tend to be appropriately focused more on the health care needs of their customers than the health of their bottom line. A forensic accountant can provide insights into areas where your business is vulnerable and the best practices to reduce risks. Key services include:

• Cash flow analysis — Forensic accountants can help pharmacies optimize their revenue cycle, ensuring profitability while identifying risks like underpayments or excessive chargebacks from insurers.
• Cost controls — We can analyze expenses to find inefficiencies or inflated costs related to purchasing, payroll, or operations.
• Debt management — Businesses must often rely on credit, but poor management can exacerbate the costs, miring you in deeper debt. Forensic accountants help by evaluating and managing loans, leases, and supplier agreements to maintain financial health.

A regular review of business practices can improve efficiency, which can lead to substantial savings.

Litigation support and legal compliance

Any business is subject to disputes, whether with customers or within the organization. Additionally, in a heavily regulated industry, there’s always a risk of compliance questions escalating to enforcement actions. At times like these, a forensic accountant can assist with:

• Dispute resolution — If your pharmacy is embroiled in a financial dispute, such as partnership dissolutions or contract breaches, forensic accountants can perform crucial calculations, such as business valuations or damages. They can also provide expert witness testimony to present financial evidence and defend their findings.
• Legal investigations — In cases alleging financial fraud, improper tax reporting, or regulatory violations, you must conduct an internal investigation to determine whether laws were broken and the true amounts in controversy. A forensic accountant can work with your attorneys in these instances.

Forensic accountants have the investigatory skill to detect unusual activity that signals fraud.

Business sales, mergers, and acquisitions

If an owner wishes to sell or merge a pharmacy with another business, forensic accountants can conduct due diligence to ensure accurate valuation and prevent financial misrepresentation.

Cybersecurity and data protection

Pharmacists regularly handle sensitive personal data covered by state and federal privacy laws. A forensic accountant can help identify financial cybersecurity risks and recommend safeguards against financial fraud. Moreover, we can evaluate your compliance risks to ensure your practices do not violate patient privacy laws including HIPAA, which can trigger severe legal consequences.

In this day and age, where independent pharmacies must compete with big business, a forensic accountant can help level the playing field. By mitigating risks and enhancing efficiency, you can protect your business from preventable losses and increase your profitability. Thus, with our assistance, you can continue to be a trustworthy resource for your community for years to come.