More pharmacy audits likely in wake of MMA

January 9, 2006

Your chances of being audited "will likely double with Medicare Part D." This was the opening remark of H. Edward Heckman, R.Ph., president of PAAS National of Stoughton, Wis., a firm that provides consulting on third-party audits to pharmacists. Heckman was speaking at a pharmacy continuing education program sponsored by the Arnold & Marie Schwartz College of Pharmacy & Health Sciences and the New York City Pharmacists Society.

Given that Heckman had estimated the current audit rate for New York City metro pharmacists at about one in three, this represents a significant escalation. According to Heckman, not only will the number of audits double, but "the intensity of audits will increase" and "clever new audit tactics" are "on the horizon."

The reason for this revolves around the perception that the government's planned expenditure of $720 billion for the Medicare Modernization Act (MMA) over the next decade represents, according to Nathan Vardi (writing in Forbes, June 20, 2005), an "Rx for fraud." Vardi contends that "the work of guarding the henhouse has been subcontracted, in large measure, to foxes." The plan, he wrote, "will be run by private middlemen, chiefly HMOs and PBMs, with assists from pharmaceutical companies."

The "donut hole" in the Medicare Part D program is of particular concern. Depending on the insurance plan they choose, Medicare Part D participants will have to pay 100% of costs in the "donut hole" between $2,200 and $5,100. (The Medicare Part D $35/ month premium, or $420 annually, is not included in these costs.) OIG and CMS want to identify and monitor any and all of the various creative schemes that Part D participants will develop or participate in that will provide them with opportunities to get around this donut hole. CMS will look to pharmacists for monitoring assistance. Based on Heckman's auditing projections, R.Ph.s will need to be very vigilant in tempering their altruistic intentions when patients ask for assistance in circumventing out-of-pocket drug costs associated with the donut hole.

Heckman indicated that, aside from the donut hole, CMS has identified 33 types of possible fraud, including phantom prescriptions; billing for brand but filling with generic; billing in total for partial fills; not crediting returned prescriptions; billing for drugs diverted from hospitals; soliciting payment for drug switches; and waiving co-pays.

The waiving of co-pays, Heckman said, is a somewhat gray area. While routinely waiving co-pays is a violation of the False Claims Act and the Anti-Kickback Statute, a waiver of co-pays is allowed under certain conditions. Co-pay waivers cannot be advertised, and they cannot be routine for every Part D patient. However, patients eligible for low-income minimal co-pays may qualify for a routine waiver of their co-pay. Pharmacists can refuse to fill the prescription if the patient refuses to pay the co-pay or cost-sharing amount.

From Heckman's perspective, enrollment will likely lead to the most questions from pharmacists regarding Medicare Part D. The pharmacy can "distribute enrollment applications and identify the plans it accepts. However, it cannot collect completed applications or persuade enrollees into a plan based on a pharmacy's financial interest," he said. Pharmacists should be aware that there are inconsistencies between permissible actions under Medicare Part D and those that were allowed under the Medicare cash-discount card.