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.