Life Science Compliance Update

July 23, 2015

Congress Holds CMS’s “Feet to the Fire” on Medicare Part D Fraud

Feet to Fire

Last week, the House Energy and Commerce Subcommittee on Oversight and Investigations held a hearing on Medicare Part D program integrity, an increasingly hot topic. Members of Congress are especially concerned about, as Energy and Commerce Chairman Fred Upton phrased it, the “startling increase in Medicare Part D spending on commonly abused opioids.” Shantanu Agrawal of the Centers for Medicare and Medicaid Services and Ann Maxwell, Assistant Inspector General, Office of Evaluation and Inspections, Office of Inspector General, U.S. Department of Health and Human Service provided testimony.

Ann Maxwell, speaking on behalf of OIG, stated that her agency has made “stopping Part D fraud a top priority.” In June, the Department of Justice announced an unprecedented nationwide sweep led by the Medicare Fraud Strike Force resulting in charges against 243 individuals for their participation in fraud schemes involving $712 million in false billings. Almost 50 of the defendants were charged with fraud related to Part D. While Maxwell was pleased with the enforcement efforts, she noted that they do not solve the problem of prescription drug fraud.

To this point, she outlined her agency’s recommendations to CMS and Part D plan sponsors that would more proactively identify questionable billings and prevent fraud. While CMS has “made some progress,” Maxwell stated, it must do more to protect the Medicare Part D program. (View Maxwell’s testimony, pages 5-7 for specific recommendations).

Subcommittee Chairman Tim Murphy (R-PA) agreed, noting that CMS has not implemented nine HHS-OIG recommendations to stem Part D fraud. HHS-OIG recently issued two reports, “Ensuring the Integrity of Medicare Part D,” and “Questionable Billing and Geographic Hotspots Point to Potential Fraud and Abuse in Medicare Part D,” that summarize their recommendations over the past several years. “[T]hese are commonsense recommendations,” Murphy said. “For example, requiring plan sponsors to report all potential fraud abuse to CMS or the Medicare Drug Integrity Contractor. This recommendation was issued in five different OIG reports. Another important recommendation: implement an edit to reject prescriptions written by providers who have been excluded from the Medicare program.” Members of the committee also honed in on OIG’s recommendation for a beneficiary “lock-in.” OIG found in one investigation, for example, that a “complicit beneficiary” received unnecessary prescriptions, filled them at various pharmacies, and sold the pills to drug-trafficking groups. “This could be addressed by restricting beneficiaries to a limited number of pharmacists or prescribers when warranted.” CMS has stated that it would require legislative authority to implement lock-in restrictions.

“CMS hasn’t taken action to implement these recommendations,” Murphy stated. “Just six weeks ago, one of today’s witnesses, Dr. Agrawal testified before this Subcommittee and said, “holding our feet to the fire is appropriate,” when asked about fraud occurring under CMS’s watch, and that’s precisely what we are here to do today.”

Indeed, during his testimony, Dr. Agrawal agreed that work needed to be done, and that CMS is “committed to working with OIG to address its recommendations.” But he also outlined some of the strides CMS has made, citing his agency’s increased sharing of data with Part D plan sponsors to enhance the detections and prevention of fraud and overutilization of Part D drugs, including opioids.  

Agrawal explained CMS’s plans to use the authority granted in the Affordable Care Act to require most prescribers of drugs paid for by Part D to enroll in Medicare. “CMS is actively working to enroll over 400,000 prescribers of Part D drugs by January 2016 and to enforce the requirement that plans deny Part D claims that are written by prescribers who do not meet the necessary requirements by June 2016,” he said. “These prescribers will be subject to the same risk-based screening requirements that have already contributed to the removal of nearly 575,000 provider and supplier enrollments from the Medicare program [and will] “make sure that Part D drugs are prescribed by qualified individuals, and will prevent prescriptions from excluded or already revoked prescribers from being filled.”

Agrawal also noted that efforts to combat should balance the need to ensure that all Medicare beneficiaries are receiving the medications they need.

On the same day as the hearing, CMS announced that its Fraud Prevention System had identified or prevented $820 million in inappropriate payments over the past three years through, including more than $454 million identified in 2014 alone. The “FPS” uses predictive analytics to identify questionable billing patterns in real time. It can also review past patterns that may indicate fraud.



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. 


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