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


  • 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.


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.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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