OIG to CMS: Room for improvement in tracking Medicare Part D fraud

WASHINGTON — The Center for Medicare and Medicaid Services needs to beef up its oversight on Medicare Part D submissions from retail pharmacy, according to an Office of Inspector General report published last week.

The OIG suggested CMS strengthen a MEDIC's ability to track pharmacy billing (MEDICs — Medicare Drug Integrity Contractors — are private organizations who are contracted by CMS to assist in anti-fraud and abuse efforts) and improve compliance plan audits, specifically targeting independent pharmacies and pharmacies in urban locales.

“In responding to the OIG report, policy-makers should proceed carefully to get at the heart of the issue without inadvertently burying pharmacists and patients in unproductive red tape," cautioned Doug Hoey, CEO for the National Community Pharmacists Association, in response to the report. "To bring standards, clarity and consistency to pharmacy audit practices, NCPA supports state and federal reform legislation, including H.R. 4215, the Medicare Pharmacy Transparency and Fair Auditing Act."

According to the report, in 2009, some 4.4% of pharmacies had questionable billing practices around Medicare Part D submissions. Retail pharmacies submitted Medicare Part D claims totaling almost $1 million per store.

All told, 2,637 retail pharmacies were identified as part of an exception report across at least 1-of-8 parameters, the OIG noted. The Miami, Los Angeles and Detroit areas were the most likely to have pharmacies with questionable billing.

"For example, many pharmacies billed extremely high dollar amounts or numbers of prescriptions per beneficiary or per prescriber," the 36-page report read. "This could mean that a pharmacy is billing for drugs that are not medically necessary or were never provided to the beneficiary. Although some of this billing may be legitimate, pharmacies that bill for extremely high amounts warrant further scrutiny."

The eight measures identified in the report include:

  • Average amount billed per beneficiary;

  • Average number of prescriptions per beneficiary;

  • Average amount billed per prescriber;

  • Average number of prescriptions per prescriber;

  • Percentage of prescriptions that were for Schedule II drugs;

  • Percentage of prescriptions that were for Schedule III drugs;

  • Percentage of prescriptions that were for brand-name drugs; and

  • Percentage of prescriptions that were refills.


The report noted that pharmacies identified on the exception report were more likely to be independent. "Almost 11% of independent pharmacies had questionable billing, compared to just over 1% of chain pharmacies," the report noted. "Although independent pharmacies made up 34% of all retail pharmacies that billed Part D, they accounted for 80% of the pharmacies with questionable billing."

However, the OIG stopped short of making any suggestion that the retail pharmacies indicated in the exception report were actually engaging in fraudulent or abusive practices. "Some pharmacies may be billing extremely high amounts for legitimate reasons," the OIG acknowledged. "For example, a pharmacy located in a rural area with few physicians may bill for an extremely high average number of prescriptions per prescriber. Alternatively, a pharmacy located next to a pain clinic may bill for an extremely high percentage of Schedule II or III drugs."

“It is important to note that for approximately 96% of community pharmacies, the OIG report identified no ‘questionable’ billing," Hoey said. Hoey identified several more situations that would help explain the proportion of independents on the exception report.  "Independent pharmacies serve a disproportionately high number of long-term care and other patients who are prescribed more medications than the average Medicare beneficiary," he said. "[And] many independents are in urban areas near large teaching hospitals or cancer clinics where physicians prescribe a disproportionate share of controlled substances."

Hoey also suggested that individuals actively seeking to defraud Medicare have identified themselves as independent pharmacies "when legitimate pharmacists and most consumers would not consider them as such."

OIG tracked Part D submissions across 59,307 retail pharmacies, representing 90% of the retail pharmacy universe according to the OIG. Of those 39,401 represented chain pharmacies and 19,906 represented independents.

The analysis did not include long-term care pharmacies, mail-order pharmacies or home infusion pharmacies, the OIG noted, as the billing patterns associated with those pharmacies differ than that of a typical retail pharmacy.

For the full OIG report, click here.

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