Drug Spending
Updated: 11-28-2023
For over 25 years, the HHS Office of Inspector General has conducted work to assess drug spending in HHS programs. This work covers three domains: reimbursement, program compliance, and incentive alignment. This page is a compilation of completed reports, unimplemented recommendations, enforcement actions, and industry guidance.
Recommendations
OIG makes recommendations to HHS that promote efficiency and effectiveness in the administration of HHS programs and operations. These recommendations generally stem from OIG's audits and evaluations. For a list of unimplemented recommendations across HHS programs, see the Top Unimplemented Recommendations.
Below is a list of the unimplemented recommendations in the drug spending area that would most positively affect HHS programs in terms of saving money and/or improving quality and should therefore be prioritized for implementation.
| Unimplemented Recommendation | Report | Work Area |
|---|---|---|
| CMS should encourage Part D plans to increase access to and use of biosimilars. | Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use (OEI-05-20-00480) (Issue Date: 3-29-2022) | Incentive Alignment |
| CMS should monitor Part D plans' submitted formularies to determine whether they discourage beneficiaries from using biosimilars | Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use (OEI-05-20-00480) (Issue Date: 3-29-2022) | Incentive Alignment |
| CMS should encourage Part D plans to increase access to and use of the authorized generic versions of Epclusa and Harvoni, within the authorities granted under statute. | Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher Medicare and Beneficiary Spending (OEI-BL-21-00200) (Issue Date: 08-09-2022) | Incentive Alignment |
| CMS should pursue additional strategies-such as educating providers and pharmacies-to increase access to and use of lower-cost hepatitis C drugs in Medicare Part D. | Part D Plan Preference for Higher-Cost Hepatitis C Drugs Led to Higher Medicare and Beneficiary Spending (OEI-BL-21-00200) (Issue Date: 08-09-2022) | Incentive Alignment |
| CMS should actively review current guidance related to the areas identified in this report and determine whether additional guidance would ensure more accurate and consistent ASP calculations. | Manufacturers May Need Additional Guidance To Ensure Consistent Average Sales Price Calculations (OEI-BL-21-00330) (Issue Date: 12-22-2022) | Reimbursement |
| CMS should build a strategy to strengthen its internal controls for ensuring the accuracy of Part B drug payments. | CMS Should Bolster Its Oversight of Manufacturer-Submitted Average Sales Price Data To Ensure Accurate Part B Drug Payments (OEI-03-21-00390) (Issue Date: 12/22/2022) | Reimbursement |
| CMS should direct Part C and Part D sponsors to recoup any recoverable payments for Medicare services made to the excluded and precluded providers identified in our audit. | CMS Generally Ensured That Medicare Part C and Part D Sponsors Did Not Pay Ineligible Providers for Services to Medicare Beneficiaries (A-02-20-01027) (Issue Date: 10-25-2022) | Program Compliance |
| CMS should determine whether any compliance actions, sanctions, or termination, are appropriate for any sponsors, if applicable. | CMS Generally Ensured That Medicare Part C and Part D Sponsors Did Not Pay Ineligible Providers for Services to Medicare Beneficiaries (A-02-20-01027) (Issue Date: 10-25-2022) | Program Compliance |
| CMS should direct Part C and Part D sponsors to recoup any recoverable payments for Medicare services made outside of our audit period to the excluded and precluded providers identified in our audit. | CMS Generally Ensured That Medicare Part C and Part D Sponsors Did Not Pay Ineligible Providers for Services to Medicare Beneficiaries (A-02-20-01027) (Issue Date: 10-25-2022) | Program Compliance |
| CMS should direct Part C and Part D sponsors to review their lists of contracted providers and take action to ensure that only eligible providers receive payments for Medicare services in accordance with Medicare payment rules. | CMS Generally Ensured That Medicare Part C and Part D Sponsors Did Not Pay Ineligible Providers for Services to Medicare Beneficiaries (A-02-20-01027) (Issue Date: 10-25-2022) | Program Compliance |
| CMS should strengthen its oversight of sponsors and provider NPIs to prevent deactivated NPIs and deceased providers from receiving payments for Medicare services. | CMS Generally Ensured That Medicare Part C and Part D Sponsors Did Not Pay Ineligible Providers for Services to Medicare Beneficiaries (A-02-20-01027) (Issue Date: 10-25-2022) | Program Compliance |
| The Tennessee Department of Finance & Administration should consider revising its payment methodology going forward regarding payments for crossover claims, thereby to allow collection of manufacturers' rebates for associated physician-administered drugs. | Tennessee Did Not Always Invoice Rebates to Manufacturers for Physician-Administered Drugs Dispensed to Enrollees of Medicaid Managed-Care Organizations (A-07-21-06096) (Issue Date: 09-14-2022) | Program Compliance |
| The Tennessee Department of Finance & Administration should work with CMS to determine the portion of the $1,032,002 (Federal share) for other multiple-source physician-administered drugs that were eligible for rebate, invoice the manufacturers for rebates for these drugs, and refund the Federal share. | Tennessee Did Not Always Invoice Rebates to Manufacturers for Physician-Administered Drugs Dispensed to Enrollees of Medicaid Managed-Care Organizations (A-07-21-06096) (Issue Date: 09-14-2022) | Program Compliance |
| The Tennessee Department of Finance & Administration should strengthen internal controls for non-crossover claims to ensure that all eligible physician-administered drugs are invoiced for rebate in a timely manner. | Tennessee Did Not Always Invoice Rebates to Manufacturers for Physician-Administered Drugs Dispensed to Enrollees of Medicaid Managed-Care Organizations (A-07-21-06096) (Issue Date: 09-14-2022) | Program Compliance |
| The Tennessee Department of Finance & Administration invoice for and collect manufacturers' rebates totaling $16,805,782 ($10,996,932 Federal share) for single-source and top-20 multiple-source physician-administered drugs and refund the Federal share of rebates collected. | Tennessee Did Not Always Invoice Rebates to Manufacturers for Physician-Administered Drugs Dispensed to Enrollees of Medicaid Managed-Care Organizations (A-07-21-06096) (Issue Date: 09-14-2022) | Program Compliance |
| Continue to review and strengthen its internal controls to ensure that all physician-administered drugs eligible for rebates are invoiced. | South Carolina Did Not Always Invoice Rebates to Manufacturers for Physician-Administered Drugs (A-07-21-07003) (Issue Date: 08-10-2022) | Program Compliance |
| Work with CMS to determine and refund the unallowable portion of Federal reimbursement for physician-administered drugs that were not invoiced for rebates after December 31, 2019. | South Carolina Did Not Always Invoice Rebates to Manufacturers for Physician-Administered Drugs (A-07-21-07003) (Issue Date: 08-10-2022) | Program Compliance |
| Work with CMS to determine the unallowable portion of $1,328,195 (Federal share) for other claims for multiple-source physician-administered drugs that may have been ineligible for Federal reimbursement, refund that amount, and consider invoicing drug manufacturers for rebates for these drugs if CMS determines that the drug claims are allowable. | South Carolina Did Not Always Invoice Rebates to Manufacturers for Physician-Administered Drugs (A-07-21-07003) (Issue Date: 08-10-2022) | Program Compliance |
| Refund to the Federal Government $241,533 (Federal share) for claims for top-20 multiple-source physician-administered drugs that were ineligible for Federal reimbursement. | South Carolina Did Not Always Invoice Rebates to Manufacturers for Physician-Administered Drugs (A-07-21-07003) (Issue Date: 08-10-2022) | Program Compliance |
| Refund to the Federal Government $14,281,626 (Federal share) for claims for single-source physician-administered drugs that were ineligible for Federal reimbursement. | South Carolina Did Not Always Invoice Rebates to Manufacturers for Physician-Administered Drugs (A-07-21-07003) (Issue Date: 08-10-2022) | Program Compliance |
| CMS should update its PDE guidance to address margin under sponsor delivery models in which a sponsor owns a pharmacy. | CMS Should Strengthen Its Prescription Drug Event Guidance To Clarify Reporting of Sponsor Margin for Medicare Part D Bids (A-03-17-00001) (Issue Date: 11-22-2021) | Program Compliance |
| CMS should provide States with acquisition cost data for a wider range of specialty drugs. | States Could Do More to Oversee Spending and Contain Medicaid Costs for Specialty Drugs (OEI-03-17-00430) (Issue Date: 12-23-2020) | Program Compliance |
| CMS should work with the manufacturers associated with errors to correct and resubmit accurate product data. | Some Manufacturers Reported Inaccurate Drug Product Data to CMS (OEI-03-19-00200) (Issue Date: 09-11-2020) | Program Compliance |
| CMS should develop and execute a strategy to ensure Part D does not pay for drugs that should be covered by the Part A hospice benefit. | Medicare Part D Is Still Paying Millions for Drugs Already Paid for Under the Part A Hospice Benefit (A-06-17-08004) (Issue Date: 08-01-2019) | Program Compliance |
| CMS should require the use of claim-level methods to identify 340B drugs. | State Efforts to Exclude 340B Drugs from Medicaid Managed Care Rebates (OEI-05-14-00430) (Issue Date: 06-06-2016) | Program Compliance |
| CMS should amend current regulations to decrease the Part B payment rates for dispensing and supplying fees to rates similar to those of other payers, such as Part D and Medicaid. | Medicare Part B Prescription Drug Dispensing and Supplying Fee Payment Rates Are Considerably Higher Than the Rates Paid by Other Government Programs (A-06-12-00038) (Issue Date: 09-15-2014) | Reimbursement |
| CMS should examine the potential impacts of establishing a prescription drug rebate program under Medicare Part B and, if appropriate, seek legislative change. | Medicare Could Collect Billions If Manufacturers Were Required To Pay Rebates for Part B Drugs (OEI-12-12-00260) (Issue Date: 09-09-2013) | Reimbursement |
| CMS should consider seeking legislative authority to implement least costly alternative policies for Part B drugs under appropriate circumstances. | Least Costly Alternative Policies: Impact on Prostate Cancer Drugs Covered Under Part B (OEI-12-12-00210) (Issue Date: 11-21-2012) | Reimbursement |
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OIG's portfolio on drug spending focuses on the following areas:
Reimbursement
OIG work examining the financial impact of drug reimbursement and rebate policies on Federal spending.
Program Compliance
OIG work examining whether drug manufacturers, State Medicaid agencies, and other entities are complying with statutory and program requirements.
Incentive Alignment
OIG work exploring situations in which entities involved with HHS programs may have incentives not aligned with HHS program goals, adversely affecting those programs and their beneficiaries.