Review of Less-Than-Effective Drugs in the Medicare Part D Program

Of approximately $115 billion in gross drug costs included in Medicare Part D sponsors' prescription drug event (PDE) data for calendar years 2006 and 2007, CMS accepted PDE data totaling $43.3 million associated with less-than-effective drugs. Pursuant to Federal requirements, Medicare Part D should not have covered these drugs. Less-than-effective drugs are drugs that the Food and Drug Administration (FDA) approved before 1962 and that FDA subsequently found to be less than effective.

CMS's Drug Data Processing System subjects sponsors' PDE data to an edit designed to reject less-than-effective drugs. Although the edit identified and rejected the vast majority of PDE data associated with less-than-effective drugs, the edit did not identify and reject PDE data for some less-than-effective drugs because the Part D program used an incomplete list of less-than-effective drugs as the basis for the edit. There is no definitive list of less-than-effective drugs.

We recommended that CMS determine whether it can impose financial adjustments on sponsors that were paid for furnishing less-than-effective drugs and help ensure that drugs covered by Medicare Part D comply with Federal requirements by (1) collaborating with FDA to create and maintain a comprehensive list of less-than-effective drugs, (2) regularly disseminating this list to all sponsors, and (3) using this list to reject PDE data for less-than-effective drugs. CMS agreed with our first recommendation and partially disagreed with our second recommendation, stating that FDA should be responsible for maintaining and disseminating the list of less-than-effective drugs. We modified our second recommendation to reflect FDA's role in identifying less-than-effective drugs.