Life Science Compliance Update

June 24, 2015

OIG Continues Fight Against Medicare Part D Fraud and Abuse With Two New Reports


Last week, the Department of Health and Human Services announced the largest ever Medicare Fraud Strike Force sweep, with charges brought against 243 individuals for approximately $712 million in billings. More than 44 of the defendants arrested were charged with fraud related to the Medicare prescription drug benefit program known as Part D. The HHS Office of Inspector General has now released two reports that similarly target Part D fraud. “OIG has seen an increase in Part D fraud complaints,” the agency states. “As such, OIG has made Part D fraud a top priority.”

Their first report, Ensuring the Integrity of Medicare Part D, summarizes OIG’s body of work in the Part D arena and provides an update on the Center of Medicare and Medicaid Services’ efforts to address the weaknesses in Part D program integrity that OIG has identified. Second, Questionable Billing and Geographic Hotspots Point to Potential Fraud and Abuse in Medicare Part D looks at the spike in spending on commonly abused opioids over the last decade, targets pharmacy related fraud schemes related to opioids, and identifies “geographic hotspots” for certain noncontrolled drugs.

Ensuring the Integrity of Medicare Part D

The first report provides a useful summary of numerous OIG investigation, audits, evaluations, and guidances related to Medicare Part D. OIG notes that around 39 million beneficiaries receive Part D benefits through more than 2,000 plans sponsored by private companies. Payments for Part D drugs are approximately $121 billion per year. OIG also outlines the “key players” in protecting Part D: “Part D plan sponsors are responsible for monitoring and paying Part D drug claims,” they state. “CMS is responsible for overseeing the program, and has contracted with the MEDIC [the Medicare Drug Integrity Contractor) to perform program integrity functions.” The MEDIC is required to investigate potential fraud and abuse referred to it through external sources, such as complaints, as well as identify potential fraud and abuse through proactive methods, such as data analysis.

OIG Examples of Part D Fraud(source: OIG: "Ensuring the Integrity of Medicare Part D," June 18, 2015)

“Over the last 9 years, plan sponsors, the MEDIC, and CMS have taken steps to address OIG recommendations in these areas, and progress has been made,” states OIG. However, OIG notes that Part D remains vulnerable to fraud. Particularly, OIG finds that the program’s underlying vulnerabilities “cluster around two issues involving all three levels of program oversight (plan sponsors, the MEDIC, and CMS).” First, is 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 second, is the need to more fully implement robust oversight designed to ensure proper payments, prevent fraud, and protect beneficiaries.

"To fully protect Part D from fraud, waste, and abuse, CMS should take further action and implement OIG's unimplemented recommendations," OIG advised.

Specifically, CMS should:

  • (1) require plan sponsors to report all potential fraud and abuse to CMS and/or the MEDIC;
  • (2) require plan sponsors to report data on the inquiries and corrective actions they take in response to fraud and abuse;
  • (3) expand drug utilization review programs to include additional drugs susceptible to fraud, waste, and abuse;
  • (4) implement an edit to reject prescriptions written by excluded providers;
  • (5) exclude Schedule II drug refills when calculating final payments to plan sponsors at the end of each year;
  • (6) seek authority to restrict certain beneficiaries to a limited number of pharmacies or prescribers;
  • (7) develop and implement a mechanism to recover payments from plan sponsors when law enforcement agencies do not accept case referrals;
  • (8) determine the effectiveness of plan sponsors' fraud and abuse detection programs; and
  • (9) ensure that plan sponsors' compliance plans address all regulatory requirements and CMS guidance.  

Download the complete report.

Questionable Billing and Geographic Hotspots Point to Potential Fraud and Abuse in Medicare Part D

OIG's second report focuses on what the agency deems "questionable billing" related to frequently abused opioids (including OxyContin, hydrocodone-acetaminophen, fentanyl, and morphine sulfate). "Since 2006, Medicare spending for commonly abused opioids has grown faster than spending for all Part D drugs," OIG states. 

"OIG investigations have identified pharmacy-related fraud schemes in Part D," the report states. "These schemes include drug diversion, billing for drugs that are not dispensed, and kickbacks." While pharmacy-related fraud schemes often involve commonly abused opioids, they can also involve noncontrolled drugs. OIG found that more than 1,400 pharmacies had questionable billing for Part D drugs in 2014, as indicated in the following table. Notably, OIG indicated somewhat ominously: "[a]lthough some of this billing may be legitimate, all of these pharmacies warrant further scrutiny. To followup on these pharmacies, OIG will conduct investigations and audits. As appropriate, we will also refer pharmacies to other law enforcement agencies and to CMS."

Pharmacies with Questionable Billing

OIG's report also identifies "geographic hotspots for certain noncontrolled drugs," which they describe as metropolitan areas where average Medicare payments per beneficiary for certain drugs are significantly higher than the average payments nationwide. "Although medical necessity and prescribing patterns may vary across different areas of the country, these patterns raise questions about whether these drugs were medically necessary or were provided to beneficiaries," OIG states. "The diversion of noncontrolled substances is becoming more common, and fraud related to these drugs can present a significant financial loss to Medicare."

OIG hotspots

"The billing patterns in hotspots raise questions about whether these drugs were medically necessary or were actually provided to beneficiaries," OIG concludes. "Also, because some of these drugs are available as generics or over the counter, there are questions about whether pharmacies are billing for the higher priced brand-name drug but providing a less expensive drug."


As OIG explicitly states, Medicare Part D fraud is a top priority for the agency. The two reports, along with the extensive Part D-related enforcement actions last week, shows that the government has already put a lot of time into analyzing Part D prescription trends and what they deem to be abnormalities. OIG's latest recommendations to CMS to step up its oversight could foretell even greater enforcement. 

June 17, 2015

Over 100 Physician Organizations Back H.R. 293 To Exempt from Sunshine Reporting Education Materials and Independent CME

H.R. 293

Over 100 physician organizations have written to Rep. Michael Burgess (R-TX) and Rep. Peter DeFazio (D-OR) expressing their “strong support” for H.R. 293, a bill that would clarify that certain applicable manufacturer transfers of value to support independent medical educational programs and materials are exempt from reporting under the Physician Payments Sunshine Act.

Download the letter to Rep. Burgess here

“Passage of this bill is urgently needed to remedy onerous and burdensome reporting obligations imposed by the Centers for Medicare and Medicaid Services (CMS) that have already chilled the dissemination of medical textbooks, peer-reviewed medical reprints and journals, and to avert a similar negative impact on access to independent certified and/or accredited continuing medical education (CME),” the letter states. “H.R. 293 would ensure that efforts to promote transparency do not undermine efforts to provide the most up-to-date independent medical knowledge, which improves the quality of care patients receive through timely dissemination of medical knowledge.”

Congressmen Burgess, Chairman of the House Energy and Commerce Subcommittee on Commerce, Manufacturing and Trade, and Peter DeFazio (D-OR) introduced the Protect Continuing Physician Education and Patient Care Act, H.R. 293, earlier this year. The bill is in response to the Physician Payment Sunshine Act’s “unintended consequence of over-burdensome reporting requirements that made access to educational materials for physicians difficult to obtain,” according to the accompanying Press Release. This bipartisan legislation "would allow physicians full access to the most up-to-date educational materials like textbooks and journals so they may deliver the best care.”

Rep. DeFazio actually introduced the Physician Payments Sunshine Act way back on March 13, 2008, which became a provision in the Affordable Care Act in 2010. Upon release of the Open Payments data in October 2014, DeFazio stated: “Every year, pharmaceutical companies and medical device manufacturers spend billions of dollars promoting their products…However, there’s a difference between educating doctors on the uses and effects of new drugs and devices, versus enticing healthcare professionals with lavish gifts.”

In his statement supporting this amendment to the Sunshine Act, Rep. Defrazio reiterates this difference: 

While the Sunshine Act that Congress passed in 2010 is an absolutely essential tool to shine the light on the relationship between the pharmaceutical companies and physicians, our bill ensures the Sunshine Act won’t restrict a physician’s access to the latest medical research and training. This common sense fix is a win for America’s doctors and continuing medical education, but most importantly, for patients.

H.R. 293 (View the language here) would make the Sunshine Act consistent with these goals. Currently there are 12 exclusions from Sunshine reporting, including de minimis payments (under $10) and product samples. Congress also excluded “[e]ducational materials that directly benefit patients or are intended for patient use.” In its interpretation of the statute, however, CMS concluded that medical textbooks, reprints of peer reviewed scientific clinical journal articles, and abstracts of these articles are not directly beneficial to patients, nor are they intended for patient use. “This conclusion is inconsistent with the statutory language on its face, congressional intent, and the reality of clinical practice where patients benefit directly from improved physician medical knowledge,” the letter to Rep. Burgess states. 

The societies write:

The importance of up-to-date, peer reviewed scientific medical information as the foundation for good medical care is well documented. Scientific peer-reviewed journal reprints, supplements, and medical text books have long been considered essential tools for clinicians to remain informed about the latest in medical practice and patient care. Independent, peer reviewed medical textbooks and journal article supplements and reprints represent the gold standard in evidence-based medical knowledge and provide a direct benefit to patients because better informed clinicians render better care to their patients.

The Coalition for Healthcare Communication issued a statement on the letter, which acknowledges the broad physician-support H.R. 293 has received. “In stating that peer-reviewed educational materials ‘represent the gold standard in evidence-based medical knowledge,’ these well-known medical organizations, including the American Medical Association, focus on the fact that better informed physicians lead to better treatment for patients,” said CHC Executive Director John Kamp. “Doctors know that access to evidence-based medicine is the key to ensuring that patients have access to the best care. H.R. 293 will restore the intent of Congress,” he said.


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