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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Report on the Medicare Drug Discount Card Program Sponsor Medco Health Solutions," (A-06-05-00066)

September 25, 2006

PDF File Complete Text of Report is available in PDF format (675 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


The objective of our review were to determine whether Medco Health Solutions (Medco) complied with Federal requirements to (1) ensure that beneficiaries did not exceed their transitional assistance (TA) limits, (2) apply TA funds only to covered drugs, (3) pass on negotiated prices to beneficiaries and offer the lower of the negotiated prices or the usual and customary prices, and (4) support the expenditures and withdrawals it reported to CMS. Medco properly recorded on the Transitional Assistance Monthly Expenses and Reconciliation Report the expenditures it made on behalf of beneficiaries and the withdrawals it made, as reflected on its bank deposit records, to recoup the expenditures. However, Medco did not have proper procedures in place to ensure that it always complied with Federal requirements to ensure that beneficiaries did not exceed their TA fund limits, apply TA funds only to covered drugs, and pass on negotiated prices to beneficiaries. As a result, CMS overpaid Medco $43,103 for beneficiaries who exceeded their TA limits and $125,679 for excluded drugs for the period July 12, 2004, through July 31, 2005. 

We recommended that Medco: reimburse CMS for $43,103; determine whether the amount Medco reimbursed CMS for excluded drugs included any of the $125,679 in TA funds identified in the audit and reimburse the difference; and implement policies and procedures to ensure that it (1) does not pay for statutorily excluded drugs with CMS funds and (2) offers negotiated prices to the beneficiaries. Medco agreed that errors had occurred, but did not agree with the dollar amounts we identified.