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System to Detect Medicare Part D Fraud is Badly Flawed

Cheryl Clark, for HealthLeaders Media, November 3, 2009

The federal system designed to sniff out fraud and abuse within Medicare's Part D prescription drug benefit has been largely thwarted because it lacked authority to obtain and analyze prescription order data, according to a new report from the Office of Inspector General.

Medicare awarded three companies, called Medicare Drug Integrity Contractors or MEDICs, one in each of three regions of the country, at the start of fiscal 2007. A large part of their task was to use proactive methods—such as matching Part B physician claims for patient care with appropriate prescriptions—to detect abuse in the $49.5 billion Part D program.

"However MEDICs reported that barriers hindered their ability to consistently conduct comprehensive data analysis to detect and prevent potential fraud and abuse," the OIG wrote. Specifically, the MEDICs lacked authority "to directly obtain information from pharmacies, pharmacy benefit managers, and physicians" to investigate fraud and abuse.

"This information can be used to determine whether a prescription has a corresponding office visit and whether a drug was prescribed appropriately," the report said.

The OIG report listed 18 examples of Part D prescription mischief that the MEDICs were supposed to find. They included:

  • Fraud by beneficiaries, in which a patient consults numerous doctors to obtain multiple prescriptions or perhaps forges or alters a prescription or sells the drugs on the black market.
  • Fraud by pharmacies or pharmacists who bill for drugs not provided, bill for brand-name drugs when generics are dispensed, or split prescriptions to receive additional fees.
  • Fraud by physicians who write prescriptions for drugs that aren't necessary or misrepresent the dates and descriptions of the medications.
  • Fraud by insurance plans or agents that engage in fraudulent practices by enrolling beneficiaries without their permission or offering them cash payments to enroll.
  • Fraud by those who obtain beneficiaries' banking information or steal identification and use it to obtain drugs.

Detection of such practices was further hampered because "MEDICs did not receive access to PDE (prescription drug data) until August 2007, nearly a year after their contracts began," the OIG said. In addition, "two MEDICs were not given access to Part B data until the fall of 2008, two years after their contracts began. A third MEDIC did not receive access to Part B data before its contract ended," the report said.

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