United States: Part D Woes, According To The OIG

On June 23, 2015, the OIG issued two reports focusing on fraud, waste, and abuse in the Part D program, the first "Ensuring the Integrity of Medicare Part D" and the second "Questionable Billing Practices and Geographic Hotspots Point to Potential Fraud and Abuse in  Medicare Part D."  The OIG reports that incidents and investigations relating to Part D are increasing, and as of May 2015, the OIG had over 500 pending complaints and cases involving Part D, which demonstrates an increase of over 130% in the last 5 years.

The OIG highlights that after conducting multiple investigations, it believes that the Part D program continues to suffer from two shortcomings that result in fraud and abuse not being detected or avoided as effectively as possible.  The OIG assigns fault for these two shortcomings to all three parties that are directly involved in Part D oversight, CMS, the Part D plan sponsors, and the Medicare Drug Integrity Contractor ("MEDIC"). These two categories of shortcomings are: "(1) the need to more effectively collect and analyze program data to proactively identify and resolve program vulnerabilities and prevent fraud, waste, and abuse before it occurs; and (2) the need to more fully implement robust oversight designed to ensure proper payments, prevent fraud, and protect beneficiaries."

The OIG drew the following conclusions relating to a need for increased data analysis to help prevent fraud and abuse:

  • CMS does not require plan sponsors to report potential fraud and abuse or the steps taken by the plan sponsor to detect or stop it.  The OIG appears to believe that if CMS had this data, additional steps could be taken to help identify fraud and abuse and perhaps plan sponsor best practices could be identified.  Although CMS encourages plan sponsors to voluntarily disclose this information, less than 50% of plan sponsors submit such reports.  Information collected by the OIG early on in the Part D program suggested that some plan sponsors did not have adequate programs in place to identify and stop fraud and abuse and some plan sponsor with programs that identified fraud and abuse did not take steps to address their findings, for example they did not initiative investigations or corrective action plans.
  • The MEDIC does not use data analysis to the extent that it should to detect fraud and abuse.  In support of this conclusion, the OIG explained that it had conducted claims reviews and identified questionable billing that was demonstrated by pharmacies filling an abnormally large number of high cost drugs, a very high number of prescriptions from a small number of providers, or filling a large number of prescriptions per beneficiary.  The OIG's findings demonstrate that fraud and abuse can be started at any level from patient, to prescribers, to pharmacy.

The OIG determined that the following inadequacies relating to Part D oversight have resulted in fraud and abuse and continue to allow opportunities for fraud and abuse to exist:

  • Plan sponsors are not using adequate processes and controls to prevent fraud and abuse and CMS is not providing enough oversight of the Part D program in its entirety.   As examples of what has occurred as a result of inadequate oversight, the OIG cited that:
    • Over $1 billion has been paid by Part D for drug claims that included invalid prescriber identifiers, a relatively easy data point to monitor for potential fraud.
    • Part D continues to pay for claims generated by prescriptions written by providers who are excluded from Medicare.
    • Prescriptions submitted as refills for Schedule II control substances have been paid for even though prescriptions for Schedule II control substances cannot be refilled (a new prescription must be issued).
    • Payments for drugs dispensed to deceased Part D beneficiaries continue, although at a lower rate than earlier in the program.
  • CMS has not fully utilized the oversight tools available to it.  To demonstrate this, the OIG explains that CMS has not or does not:
    • Conduct thorough assessments of plan sponsor's compliance plans.
    • Request enough information from the MEDIC to determine if the MEDIC is being proactive enough.
    • Have the ability to collect funds that the MEDIC determines to be improperly paid if other enforcement agencies do not take the MEDIC's recommendations.
    • Use data reported by plan sponsors regarding fraud and abuse to monitor plan sponsors or determine why variation in reporting of fraud and abuse existed.

The OIG further explains that fraud under Part D often involves criminal conduct and lately has included increased involvement of organized criminal networks which can include health care programs, pharmacies, and patients.

In conjunction with the report discussed above, the OIG released a data brief highlighting issues related to fraud and abuse that continue to exist in the Part D program. The data brief notes the following key takeaways:

  • Since 2006, Medicare spending for commonly abused opioids (e.g., OxyContin) has grown faster than spending for all Part D drugs – 156% as compared to 136% between 2006 and 2014. Part D spending per beneficiary for commonly abused opioids was highest in Alaska, Oklahoma, and Tennessee.
  • Pharmacies with questionable billing practices raise concerns about pharmacy-related fraud schemes. These schemes include drug diversion (the redirection of prescription drugs for an illegal purpose), billing for drugs that are not dispensed, and kickbacks. The OIG noted that more than 1,400 pharmacies had questionable billing for Part D drugs based on the following five measures:
    • Average number of prescriptions per beneficiary.
    • Percentage of prescriptions that were for commonly abused opioids.
    • Average number of prescribers for commonly abused opioids per beneficiary who received opioids.
    • Average number of types of drugs per beneficiary.
    • The percentage of beneficiaries with an excessive supply of a drug.
  • Geographic hotspots for specific drugs point to possible fraud and abuse and warrant further scrutiny. The OIG defines hotspots as metropolitan areas where average Medicare payments per beneficiary for certain drugs are significantly higher than the average payments nationwide. The billing patterns identified by the OIG in these hotspots raise questions about whether the drugs were medically necessary or were actually provided to beneficiaries as well as whether pharmacies are billing for a higher priced brand-name drug but providing a less expensive drug. Hotspots identified by the OIG include Los Angeles, McAllen, San Juan, New York, and Miami.
  • The patterns identified by the OIG demonstrate that more action should be taken to address Part D fraud and abuse. The OIG indicates that it will continue to pressure CMS to take stronger action and fully implement the OIG's previous recommendations.

The OIG concludes by acknowledging that CMS has taken steps to implement certain OIG recommendations and lists past recommendations that it still would like CMS to implement. The yet-to-be implemented recommendations include:

  • Requiring plan sponsors to report all potential fraud and abuse to CMS and/or the MEDIC.
  • Require plan sponsors to report data on the inquiries and corrective actions they take in response to incidents of fraud and abuse.
  • Expand drug utilization review programs to include additional drugs susceptible to fraud, waste, and abuse.
  • Implement an edit to reject prescriptions written by excluded providers.
  • Exclude Schedule II refills when calculating final payments to plan sponsors at the end of the year.
  • Restrict certain beneficiaries to a limited number of pharmacies or prescribers.
  • Develop and implement a mechanism to recover payments from plan sponsors when law enforcement agencies do not accept cases.
  • Determine the effectiveness of plan sponsors' fraud and abuse detection programs.
  • Ensure that plan sponsors' compliance plans address all regulatory requirements and CMS guidance.

In the short term, Part D sponsors, PBMs, and pharmacies should closely monitor any OIG actions relating to Part D.  The OIG's discussion of the enormous volume of Part D related complaints suggests that it may be investigating a large number of entities in the Part D industry. In the long term, Part D sponsors, PBMs, and pharmacies should expect to see additional oversight by CMS and increased requests for information and data. Pharmacies should carefully review their practices and billings to ensure that they are not engaging in questionable billing of Part D drugs as identified by the OIG. Additionally, Part D sponsors, PBMs, and pharmacies and should implement robust policies and procedures designed to identify and stop potential Part D fraud and abuse.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Carrie A. Roll
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions