OIG: Feds Paid $43.3 Million for Possibly Ineffective Drugs

Cheryl Clark, August 23, 2010

The Centers for Medicare & Medicaid Services paid $43.3 million in 2006 and 2007 for possibly ineffective prescription drugs that it shouldn't have covered because a faulty computer database did not reject payment, according to a report issued Friday by the Office of Inspector General.

These drugs, approved by the U.S. Food and Drug Administration before 1962 have subsequently been found to be less than effective. 

"Less-than-effective drugs lack substantial evidence of effectiveness for all intended purposes," the OIG report said. "Although the 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."

The report added, "Pursuant to federal requirements, Part D should not have covered these drugs."

How the error occurred links back to the CMS' processing system, which routes Advantage Plans' prescriptions to through an "edit" program that is designed to reject the less-than-effective drugs. The program did identify and reject the vast majority of less-than-effective drugs, some 5.3 million prescriptions, but it did not identify and reject this batch valued at $43.3 million "because the Part D program used an incomplete list" of those excluded drugs and there is no definitive list of less-than-effective drugs, the OIG said.

The OIG did not give a list or name any examples of what drugs are now regarded as less-than-effective that CMS inadvertently paid for.

However, it did make two recommendations:

  1. CMS should determine whether it can impose financial adjustments on sponsors that were paid for furnishing less than effective drugs.
  1. CMS should strengthen internal controls to help ensure that drugs covered by Medicare Part D comply with federal requirements by collaborating with the FDA to create and maintain a comprehensive list of such drugs, regularly disseminate this list to all sponsors and use the list to reject payment for these drugs.
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