OIG uncovers $40 million in illegal CMS payments for Medicare Part D

November 15, 2010

The Office of the Inspector General found that CMS reimbursed plan sponsors $43.3 million for prescription drugs on the market that FDA classifies as less than effective.

Key Points

The Centers for Medicare and Medicaid Services (CMS) is in hot water over illegal Medicare Part D payments. The Office of the Inspector General (OIG) found that the agency reimbursed plan sponsors $43.3 million for prescription drugs on the market that FDA classifies as less than effective. The OIG report covered calendar years 2006 and 2007 and a gross Part D drug expenditure of $115 billion.

"Part D should not have covered these drugs"

"Less-than-effective drugs lack substantial evidence of effectiveness for all intended purposes," the OIG report said. "Although use of less-than-effective drugs may not cause direct physical harm to Part D beneficiaries, reliance on these drugs could be detrimental when they are used instead of drugs whose effectiveness has been verified ... Part D should not have covered these drugs."

OIG explained that CMS did identify and reject the vast majority of claims for less-than-effective products, some 5.3 million claims in all. But $43.3 million slipped through the system.

OIG recommended that CMS investigate possible avenues to recover the illegal payments made by the plan sponsors. The agency said in its response to the report that it was in the process of implementing the recommendation.

Will pharmacies have to pay?

"We don't know what the impact on pharmacy will be," said Marcie Bough, director of federal regulatory affairs for the American Pharmacists Association.

If plan sponsors must repay CMS, it is not clear whether they can pass the financial burden on to pharmacies that filled the scripts. Plan sponsors have recovered dispensing fees and other pharmacy payments in cases where pharmacies made dispensing errors, Bough noted. But in this case, the error was made by CMS, not by plans, pharmacies, or pharmacists.

An incomplete list

OIG found that CMS used an incomplete list of less-than-effective drugs to screen claims. The larger problem is that there is no definitive list of less-than-effective drugs. While FDA determines that a drug is less than effective, the agency does not publish a comprehensive list. CMS relies primarily on First DataBank's National Drug File Data File Plus and Medi-Span's Master Drug Data Base.

The OIG report did not give examples of less-than-effective drugs covered in error. Drug Topics requested examples under the Freedom of Information Act, but the agency had not provided the information by deadline.