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Management Challenge 3:
Ensuring Appropriate Use of Prescription Drugs in Medicare and Medicaid

Why This Is a Challenge

Ensuring the appropriate use of prescription drugs by Medicare and Medicaid beneficiaries is vital for financial reasons as well as patient safety and quality of care. In 2012, Medicare Part D provided prescription drug coverage to more than 37 million beneficiaries at a cost of almost $67 billion. In 2010, Medicaid provided prescription drug coverage to 28 million beneficiaries at a cost of $19 billion. The following are concerns about appropriate prescribing and dispensing of drugs as well as deficiencies in the safeguards intended to protect beneficiaries and the programs from drug overutilization, fraud, and abuse.

Prescription Drug Diversion and Abuse. The Centers for Disease Control and Prevention (CDC) has characterized prescription drug abuse as an epidemic, and in 2010, overdose of prescription painkillers was one of the leading causes of accidental death in the United States. Prescription drug abuse is a serious and growing problem for Medicare Part D and Medicaid - OIG's investigations of abuses in this area have increased dramatically over the past 5 years. Prescription drug diversion is a complex crime that involves many co-conspirators, ranging from simple street traffickers to complex criminal enterprises of health care professionals, pharmacies, and even patients. Fraud schemes bill Medicare and Medicaid for services and drugs that are unnecessary or never provided, resulting in patient harm and financial loss to the program.

Prescription drug fraud and diversion often involve controlled drugs but can also include billing for unnecessary non-controlled prescriptions. For example, an OIG investigation led to the conviction of a pharmacist who owned 26 pharmacies and used an elaborate web of physicians, pharmacists, and patient recruiters to fraudulently bill Part D and Medicaid. This pharmacist paid kickbacks, bribes, and other inducements to physicians to write unnecessary prescriptions for controlled drugs and expensive non-controlled drugs. The physicians directed their patients to fill their prescriptions at 1 of the 26 pharmacies, which then billed Medicare and Medicaid for unnecessary controlled substances it dispensed to the beneficiaries and for expensive non-controlled drugs that it did not dispense.

Prescriber Qualifications. As a basic safeguard, prescription drugs must be prescribed in accordance with State law by an appropriate medical professional to qualify for Part D reimbursement. This safeguard is not operating as effectively as it should; Medicare Part D inappropriately paid $5.4 million in 2009 for 72,552 prescriptions written by unauthorized prescribers, such as massage therapists, veterinarians, and athletic trainers. Medicare should never pay for drugs ordered by unauthorized individuals.

Questionable Prescribing and Billing Patterns. OIG has identified questionable prescribing by hundreds of general-care physicians. Some 736 physicians demonstrated extreme patterns of prescribing relative to their peers with respect to: number of drugs prescribed per beneficiary; number of pharmacies filling their prescriptions; percentages of expensive brand-name drugs; or percentages of Schedule II drugs like morphine and oxycodone, which are more susceptible to abuse. In total, Medicare paid $352 million for Part D drugs ordered by questionable prescribers in 2009.

In addition, OIG uncovered questionable billing patterns by 2,637 retail pharmacies nationwide with billing patterns far outside the norm. These pharmacies billed extremely high numbers of drugs per beneficiary or per prescriber or billed extremely high percentages of Schedule II or III drugs, brand-name drugs, or refills relative to other pharmacies. In 2009, Medicare paid these pharmacies a total of $5.6 billion. It is important to note that while these practices are not necessarily fraudulent they raise flags that warrant further attention.

Schedule II Refills. Federal law requires an original prescription each time a Schedule II drug is dispensed; nonetheless, OIG found that Medicare Part D inappropriately paid $25 million for Schedule II drugs billed as refills in 2009. Part D plan sponsors should not have paid for Schedule II refills. Paying for refills of these addictive drugs raises public health concerns and may contribute to the diverting of controlled substances. Three-quarters of Part D plan sponsors paid for these refills, indicating that many do not have adequate controls in place.

Atypical Antipsychotic Drug Use In Nursing Homes. OIG has raised concerns about overmedication of Medicare nursing home residents, particularly the use of atypical antipsychotic drugs for beneficiaries with dementia. More than 20 percent of claims for atypical antipsychotic drugs for Medicare patients in nursing homes indicated a failure to satisfy Federal standards that protect nursing home residents from unnecessary drug use. OIG also found that nursing homes generally were not meeting all requirements for assessments and care plans for residents receiving antipsychotics.

Ineffective Oversight of Part D Utilization. Part D plan sponsors and CMS's Medicare Drug Integrity Contractor (MEDIC) are key lines of defense in identifying and addressing drug overutilization, fraud, and abuse. However, OIG found evidence that oversight is inconsistent across sponsors and may be lacking overall. Some plan sponsors did not identify any potential fraud, waste, and abuse incidents; most potential fraud, waste, and abuse incidents were associated with only a small number of plan sponsors. In addition, the MEDIC has not fully utilized data analytics to identify potential fraud, waste, and abuse.

Progress in Addressing the Challenge

A bottle of spilled pills

CMS has taken steps to strengthen oversight of appropriate drug utilization in Medicare Part D. For example, CMS responded to a prior OIG recommendation by requiring that all Part D claims submitted to CMS include a valid National Provider Identifier for the prescriber - this safeguard is one step toward ensuring and monitoring appropriate prescribing. Plan sponsors are required to maintain compliance programs to help detect, prevent and correct fraud, waste, and abuse. CMS also provided guidance and educational outreach to sponsors and providers about the overutilization of prescription drugs, including support for State Prescription Drug Monitoring Programs. Moreover, CMS has increased monitoring of prescribers through the Part D Recovery Audit Contractors (RACs), which identify and recover Part D improper payments. CMS has also reported providing information and guidance to sponsors about high risk pharmacies and prescribers to combat prescription drug diversion. In addition, CMS has reported taking steps to redirect the MEDIC to focus more acutely on proactive data analysis.

CMS has also described its efforts to curb overprescribing by developing metrics at the beneficiary level that trigger follow-up actions. If a beneficiary's drug use exceeds certain clinical standards, this triggers a review of the beneficiary's medical management by his/her physician(s). If this review does not substantiate a clinical need for the high utilization, the Part D plan will implement prior authorization reviews for that beneficiary's claims.

In March 2012, CMS launched the National Partnership to Improve Dementia Care (the Partnership), aimed at improving behavioral health and safeguarding nursing home residents from unnecessary antipsychotic drug use. The Partnership set a goal to reduce antipsychotic drug use in nursing homes by 15 percent by the end of 2012, and CMS reported a national drop in antipsychotic use of 11.4 percent by the second quarter of 2013. CMS also provided guidance and training in May 2013 to assist surveyors in determining whether nursing homes are meeting minimum standards of care governing antipsychotic drug use.

What Needs To Be Done

In addition to the steps described above, CMS must take further action to ensure that each claim for a prescription contains both a valid identifier and authorized prescriber. Additionally, CMS should ensure that the MEDIC routinely analyzes billing data to detect pharmacies and providers with extreme billing patterns. CMS should also require that sponsors identify and refer potential fraud, waste, and abuse to CMS for further review. CMS must also better ensure that Part D plans do not pay for prohibited refills of Schedule II drugs. In addition, CMS needs to implement its plans described to OIG to develop predictive models and utilize data analytics that will target aberrant billing patterns in the future.

OIG remains concerned that some instances of atypical antipsychotic drug use by nursing home residents may not represent the best clinical care for the patients; in addition, inappropriate Part D payments for some of these prescriptions may persist. CMS should facilitate access to information, like diagnosis codes, that are necessary to ensure appropriate care and accurate coverage and reimbursement determinations.

Key OIG Resources

Management Challenge 4: Protecting the Integrity of an Expanding Medicaid Program

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