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.
For the most part, the MEDICs relied on external sources, such as complaints, rather than proactive research or analysis of prescription sales data.
In fiscal 2008, 87% of the 4,194 incidents of potential fraud and abuse identified came from external sources, such as complaints from plan sponsors, rather than through proactive methods, the OIG said. That's 15 incidents for every 100,000 beneficiaries.
Another impediment is that Medicare Part D plan sponsors, who may have been aware of abuse or fraud, are encouraged to refer cases to the MEDICs, but they are not required to do so.
"MEDICs may not have been aware of some potential fraud and abuse incidents because plan sponsors are not required to refer them," the OIG report said.
While some of the access problems have been or are being fixed, the system continues to prevent MEDICs from using the data to its fullest capacity.
MEDICs are supposed to have access to Medicare Part B, Part D, and other data, such as Medicaid and Medicare Part A, through an integrated system, the OIG said. "However, the full transition to this system is not expected to be complete until 2011. Until then, MEDICs must access data through individual systems," the OIG report said.
During FY 2008, of the 4,194 incidents of possible fraud and abuse identified, only 1,320 were investigated, 99 were referred to the OIG, and 39 were referred to the CMS for administrative action.
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