Skip Navigation Change Font Size

Challenge 2: Ensuring Appropriate Use of Prescription Drugs in Medicare and Medicaid

Why This Is a Challenge

An open bottle of pills

CMS provides prescription drug coverage for 37.4 million Medicare beneficiaries through Part D and 59.4 million Medicaid beneficiaries. In 2012, combined Part D and Medicaid prescription drug expenditures totaled over $93 billion. Medicare Part D alone accounted for $66.9 billion of those expenditures. Maintaining the integrity of these two programs is critical to ensuring patient safety; safeguarding the quality of care; protecting the programs from fraud, waste, and abuse; and protecting taxpayer dollars.

OIG has extensively examined ongoing monitoring and oversight of the programs and the effectiveness of controls designed to ensure appropriate payment and patient safety. In both the Medicare Part D and Medicaid programs, OIG has uncovered improper and potentially harmful prescribing practices, pharmacies billing for drugs not dispensed, and diversion of prescription drugs.

Questionable Utilization and Billing Patterns. A 2014 OIG report examining questionable utilization patterns for HIV drugs by beneficiaries revealed claims on behalf of many beneficiaries with no indication of HIV in their Medicare histories, claims for excessive doses or supplies of HIV drugs, claims for HIV drugs from a high number of pharmacies or prescribers, or claims for contraindicated drugs. These patterns may indicate that beneficiaries are receiving inappropriate prescription drugs and selling them illegally, pharmacies are billing for drugs that beneficiaries never received, or that beneficiaries' Medicare identification numbers were stolen. Medicare paid $32 million for HIV drugs for beneficiaries with questionable utilization patterns in 2012.

Additional health care fraud schemes have involved providers submitting fraudulent claims to Medicare for deceased beneficiaries. A 2013 report revealed that, in 2011, Part D inappropriately paid more than $1 million for prescription drugs for 5,101 deceased beneficiaries, including some beneficiaries who had died in 2009.

Drug Diversion and Abuse of Controlled Substances. The diversion and abuse of prescription drugs is an ongoing problem. Drug diversion is the transfer of legitimate prescription drugs for unlawful purposes. Controlled substances, such as opiate pain relievers, are potentially so dangerous that they require restrictions on their manufacture, possession, or use. The Centers for Disease Control and Prevention (CDC) characterizes prescription drug abuse as an epidemic, reaching virtually all demographics and geographic locations. As abuses of these drugs have increased over the past five years, OIG has also increased its investigations of abuses in this area, many of which involve harm to individual beneficiaries. Diversion of these drugs may also result in profound public harm. In one noteworthy example, an OIG investigation found that a health care worker infected with Hepatitis C diverted a controlled prescription drug from a hospital for his own personal use. In an attempt to remain undetected, the worker inserted saline solution into the vials to replace the diverted drugs. Because the worker used his contaminated syringes to switch the fluids, several patients treated from these vials contracted the infectious disease.

Drug Diversion and Abuse of Non-Controlled Substances. A rapidly growing trend is the illegal billing and diversion of non-controlled medications (e.g., anti-psychotics), which presents a substantial financial vulnerability to federal health care programs. Many cases involve pharmacies billing federal programs for expensive brand-name medications that were never dispensed. Other common cases involve Medicare or Medicaid beneficiaries combining prescribed drugs with opioids to create an enhanced euphoria; such drugs are called "potentiators." Some HIV drugs are examples of non-controlled substances that can be used as potentiators.

Progress in Addressing the Challenge

CMS has taken steps to strengthen oversight of appropriate drug utilization in Medicare Part D. For example, CMS responded to an OIG recommendation that it strengthen the Medicare Drug Integrity Contractor's (MEDIC) monitoring of pharmacies and its ability to identify pharmacies with questionable billing patterns and develop pharmacy risk scores. In June 2013, CMS and the MEDIC developed pharmacy risk scores and released a list of "high risk" pharmacies to Part D plans. CMS instructed Part D plans to use the risk score information in conjunction with their own data analysis to combat fraud, waste, and abuse. CMS suggested that plans use the list of high risk pharmacies to target pharmacies for audits and further review.

Moreover, OIG recommended that CMS require Part D sponsors to verify that prescribers have the authority to prescribe drugs. Beginning June 1, 2015, physicians and eligible professionals must be enrolled in Medicare to prescribe Part D drugs. In addition, to identify the prescribing physician or eligible professional, CMS will require that a pharmacy claim for a Part D drug contain the National Provider Identifier. This will enable CMS, Part D plans, and the MEDIC to verify that prescribers have the authority to prescribe Part D drugs before the claims are paid.

What Needs To Be Done

In addition to taking the steps described above, CMS must increase Part D plan sponsors' abilities to limit questionable utilization of drugs, particularly drugs that are vulnerable to diversion and recreational abuse. For example, CMS should expand sponsors' drug utilization review programs and use of beneficiary-specific controls. CMS should also restrict certain beneficiaries with questionable utilization patterns to a limited number of pharmacies or prescribers.

Additionally, CMS should improve existing safeguards to prevent improper payments in Part D. CMS needs to ensure that the MEDIC routinely analyzes billing data to detect pharmacies and providers with questionable billing patterns, including billing for deceased beneficiaries.

Key OIG Resources

Challenge 3: Protecting an Expanding Medicaid Program From Fraud, Waste, and Abuse

Office of Inspector General, U.S. Department of Health and Human Services | 330 Independence Avenue, SW, Washington, DC 20201