United States: OIG Report Raises Serious Medicare Part D Fraud, Waste And Abuse Concerns

Jenna Bigornia and Melissa Wong are Associates in Holland & Knight's Boston office

HIGHLIGHTS:

  • The OIG raises several concerns about the ability of Medicare Part D sponsors – as well as CMS and its Medicare Drug Integrity Contractor (MEDIC) – to detect and prevent fraud, waste and abuse in Medicare Part D.
  • While acknowledging that certain efforts have strengthened Part D program integrity, the OIG recommends additional safeguards that would help sponsors, CMS and MEDIC better identify potential fraud, waste and abuse.
  • Medicare Part D sponsors and their first-tier and downstream contractors should expect greater scrutiny in specific high-risk areas identified by the OIG.

Last month, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services released a comprehensive report and data brief detailing its concerns about the ability of Medicare Part D sponsors – as well as the Centers for Medicare & Medicaid Services (CMS) and its Medicare Drug Integrity Contractor (MEDIC) – to detect and prevent fraud, waste and abuse in Medicare Part D.1 The OIG identified two key areas for improvement, specifically: (1) the need to more effectively collect and analyze program data to identify and resolve potential fraud, waste and abuse before it occurs; and (2) the need for more robust oversight to ensure proper utilization and payment within the Part D program.

The OIG also raised additional concerns about questionable billing practices and the abuse and diversion of both controlled and non-controlled substances in Medicare Part D.

Lack of Proactive Data Analysis to Detect Fraud, Waste and Abuse

In their annual Medicare Part D reporting, sponsors may voluntarily disclose the number of specific instances of potential fraud, waste and abuse identified in the past contract year. However, only 35 percent of Part D sponsors chose to disclose this information in 2012. As a result, the data available on potential fraud, waste and abuse in the Part D program is spotty and inconsistent, hampering efforts to assess the effectiveness of overall program integrity efforts. Even when such data is made available to CMS or the MEDIC, only a small percentage of investigations and case referrals initiated by the MEDIC is based on the proactive analysis of this fraud, waste and abuse data. Instead, the MEDIC relies primarily on external sources, such as beneficiary complaints made to the MEDIC toll-free hotline, to determine which potential cases of fraud and abuse to investigate.

Questionable Billing Practices Can Indicate Part D Drug Abuse and Diversion

Since the start of the Part D program in 2006, spending on the most commonly abused Schedule II and III opioids – including oxycodone, hydrocodone-acetaminophen, fentanyl and morphine sulfate – increased 156 percent, outpacing both the growth in spending for all Part D drugs (which grew at 136 percent) and the growth in the number of Part D beneficiaries (which grew at 68 percent). The increase in spending for commonly abused opioids appears to be driven by an increase in both the number of beneficiaries receiving prescriptions for these opioids and the average number of prescriptions per beneficiary. For example, while the average number of prescriptions for Part D drugs grew by only 3 percent, the average number of prescriptions for commonly abused opioids grew by 20 percent.

The OIG also identified 1,432 retail pharmacies with questionable billing practices that indicate potentially fraudulent activity. The OIG analyzed certain measures, including the number and types of prescriptions billed, the number of prescribers associated with each beneficiary and the percentage of beneficiaries with an excessive supply of a drug. These suspect pharmacies were more likely to be independently owned and located in the New York, Miami, Los Angeles and Detroit metropolitan areas.

Finally, the OIG named several geographic hot spots where the average Medicare payment per beneficiary for certain drugs was significantly higher than the average payment nationwide. These billing practices raise questions, not only as to whether the drugs were medically necessary or were actually provided to beneficiaries, but also whether the drugs were dispensed in generic form or over the counter while being billed as the higher-priced brand drug. As just one example, the average Medicare payment per beneficiary for Solaraze, a topical ointment used to treat lesions formed as a result of sun damage, was almost nine times higher in New York than the national average – even though a generic version of the drug is available. New York alone accounted for half of all the Medicare Part D payments for Solaraze nationwide.

Insufficient Oversight by CMS and Part D Sponsors

Medicare Part D program integrity depends on several layers of oversight, where the Part D sponsor serves as the first line of defense against fraud, waste and abuse, while CMS provides oversight of plan sponsors to prevent improper payments. The OIG highlights several areas where it found insufficient oversight and monitoring on the part of both Part D sponsors and CMS. These areas include:

  • Invalid prescriber identifiers. Procedures to identify claims with invalid prescriber identifiers were inadequate and resulted in payments for drugs ordered by massage therapists, athletic trainers and other individuals who clearly did not have the ability to prescribe.
  • Drugs prescribed by excluded providers. Program controls failed to prevent payment for drugs prescribed by excluded providers.
  • Payments for Schedule II refills. Sponsors lacked sufficient controls to prevent Schedule II drug refills, which are prohibited by federal law.
  • Payments after death of beneficiary. Even though CMS implemented an automated process to prevent Part D payments after the death of a beneficiary in 2011, CMS still allowed Part D payments on behalf of 5,101 deceased beneficiaries.
  • Oversight mechanisms. When sponsors voluntarily reported instances of potential fraud and abuse, CMS did not follow up with sponsors about their monitoring and oversight capabilities. In instances where law enforcement agencies declined to take action on cases referred by the MEDIC, CMS did not have a mechanism to recover inappropriate payments on its own. Finally, despite sponsor audits and self-assessments, CMS failed to detect weaknesses in Part D sponsors' compliance plans.

OIG Recommendations for Part D Program Integrity and What to Expect

Although the OIG acknowledges several measures already implemented by CMS and Part D sponsors to help enhance program integrity within Medicare Part D, the OIG cites several recommendations that remain unimplemented. Medicare Part D sponsors and their first-tier and downstream contractors may expect further action from CMS in the following areas:

  • Mandatory reporting of potential fraud and abuse. The OIG suggests mandatory reporting of all instances of potential fraud and abuse, as well as the corrective actions sponsors take in response to these incidents. However, it is worth noting that CMS' Part D Reporting Requirements for 2015 suspends even the voluntary reporting of potential fraud and misconduct for this most recent plan year. Continued monitoring for future guidance from CMS on the reporting of potential fraud, waste and abuse and corrective actions is suggested.
  • Expansion of drug utilization review. Drug utilization reviews may be expanded to include additional drugs that are highly susceptible to fraud, waste and abuse.
  • Controls to prevent payment for Schedule II refills and prescriptions written by excluded providers. The OIG recommends a claims processing edit to automatically reject prescriptions written by excluded providers, as well as a method to exclude claims associated within improper Schedule II refills from end-of-year payment reconciliation.
  • "Lock-In" restrictions for certain beneficiaries. Similar to current practices in some state Medicaid programs, the OIG suggests restricting certain beneficiaries to a limited number of pharmacies or prescribers when warranted by excessive or questionable billing practices.
  • Payment recovery mechanisms. CMS may establish a mechanism to recover inappropriate payments on its own when law enforcement agencies decline to accept a case referral from the MEDIC.
  • Increased OIG investigation and audit activity. The OIG intends to conduct audits and investigations for at least the 1,400-plus pharmacies with questionable billing practices, and will refer those pharmacies to CMS and law enforcement agencies as appropriate.  
  • Closer evaluation of sponsor compliance programs. We may expect greater scrutiny by CMS of sponsor's compliance plans to ensure that all regulatory requirements and CMS guidance are sufficiently addressed, and that the compliance program is implemented in a way that helps sponsors protect Part D program integrity.

We will continue to monitor OIG and CMS guidance on the detection and prevention of fraud, waste and abuse in Medicare Part D.

Footnote

1. OIG Portfolio Report, "Ensuring the Integrity of Medicare Part D," OEI-03-15-00180 (June 2015), and OIG Data Brief, "Questionable Billing and Geographic Hotspots Point to Potential Fraud and Abuse in Medicare Part D," OEI-02-15-00190 (June 2015).

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.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
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.

    Disclaimer

    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.

    Registration

    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.

    Cookies

    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.

    Links

    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.

    Mail-A-Friend

    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.

    Emails

    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 .

    Security

    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