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Management Challenge 5: Ensuring Appropriate Use of Prescription Drugs

Why This Is a Challenge

A bottle of pills spilling out onto money

CMS provides prescription drug coverage for 41 million Medicare Part D (Part D) and 71 million Medicaid beneficiaries. Part D is the fastest growing component of the Medicare program. Since its inception in 2006, spending for Part D has more than doubled to $121 billion in 2014. Medicaid expenditures for prescription drugs are also increasing, influenced by Medicaid expansion and rising specialty drug costs. In 2014, Medicaid expenditures exceeded $44 billion and Medicaid beneficiaries in states that expanded the program filled 25 percent more prescriptions, compared with a 3 percent increase in non-expansion states.7 The Department's oversight of its prescription drug programs faces numerous challenges affecting beneficiary and community safety and the integrity of the benefit itself.

Oversight. Ensuring the integrity of programs as expansive as Part D and Medicaid requires coordinated, constant, and proactive efforts. In Part D, CMS contracts with plan sponsors, which are responsible for paying claims, monitoring billing patterns, and establishing compliance plans. CMS also contracts with the Medicare Drug Integrity Contractor (MEDIC) to detect and prevent fraud, waste, and abuse in Part D. CMS oversees the plan sponsors and the MEDIC, defines their requirements for carrying out program integrity functions, and monitors their performance. Weaknesses continue to exist in the use of data to identify vulnerabilities as well as in the oversight by each of the three key players. For example, CMS does not require plan sponsors to report information on fraud and most have chosen not to voluntarily report. (For more information on Medicaid's oversight challenges, see Management Challenge 1.)

Drug Abuse and Diversion. The abuse and diversion of prescription drugs is an ongoing problem. As of May 2015, OIG has 540 pending complaints and cases involving Medicare and Medicaid prescription drug fraud, a 134 percent increase in the last 5 years. Pharmaceutical manufacturers and pharmacies accounted for more than 60 percent of Medicaid Fraud Control Units' cases that resulted in civil settlements and judgments in 2014. The Centers for Disease Control and Prevention (CDC) characterizes prescription drug abuse as an epidemic, reaching virtually all demographics and geographic locations. Drug diversion is the transfer of legitimate prescription drugs for unlawful purposes. The diversion of controlled substances is of particular concern because of its severe health risk and potential for abuse. In 2012, over 700,000 inpatient hospital stays were related to the overuse of opioids.

The diversion of noncontrolled substances is also a concern because these drugs are becoming more common in schemes that defraud Medicare and Medicaid. Schemes include billing for drugs that are not dispensed, combining prescribed drugs with opioids to create an enhanced euphoria, and illegal dispensing of expired or adulterated drugs. These schemes increasingly involve criminal networks ranging from informally connected street traffickers to complex criminal enterprises comprised of health care professionals, pharmacies, marketing companies, and even program beneficiaries. Criminal networks and others target brand-name, high-cost medications, including respiratory, HIV, and anti-psychotic medications.

Questionable and Inappropriate Utilization. The responsibility of overseeing prescription drugs also involves ensuring that safe and high-quality care is provided to seniors and children. Serious concerns surrounding the overprescribing of drugs exist. For example, Medicare spending for commonly abused opioids has grown faster than spending for all Part D drugs. Additionally, quality-of-care concerns were identified with the prescription drug treatment of children enrolled in Medicaid who have mental health conditions. (For more information on ensuring Medicaid quality of care, see Management Challenge 1.)

Several operating divisions within the Department are responsible for programs related to the safety and efficacy of drugs, drug abuse prevention and treatment, and the safety and quality of health care – including care involving drugs, biologics, and other therapies. Effectively coordinating all Department efforts and prioritizing initiatives are key to combating this complex epidemic. (For more information on challenges for the Food and Drug Administration (FDA) and Medicaid, see Management Challenges 10 and 1.)

Progress in Addressing the Challenge

CMS has taken steps to improve data coordination among the key players tasked with safeguarding Part D. Specifically, CMS has begun sharing plan sponsors' voluntarily reported fraud data with the MEDIC and has increased data sharing between plans. CMS is working to enroll over 400,000 prescribers of Part D drugs, addressing an OIG recommendation that CMS require Part D sponsors to verify prescribers' authority. These prescribers will be subject to risk-based screening requirements, and plan sponsors will be better able to deny Part D claims for drugs ordered by ineligible prescribers.

CMS is also taking steps to prevent pharmacy billing fraud and overutilization of prescription drugs. CMS regularly monitors pharmacy billing patterns and collaborates with Part D sponsors to perform audits or take other appropriate actions on high-risk pharmacies. CMS works with plan sponsors to prevent overutilization of certain prescribed medications and share information about beneficiaries that may over use prescription drugs. In April 2015, CMS launched a Web-based tool to allow CMS, law enforcement, and plan sponsors to share information and coordinate actions against high-risk pharmacies.

The Department has taken actions to restrict the manufacture, possession, or use of potentially dangerous controlled substances. The Food and Drug Administration (FDA) is working to reduce the abuse of opioids by encouraging formulations that make it more difficult to tamper with these products. Additionally, through coordination with the Drug Enforcement Administration (DEA), access to opioids is now better controlled because hydrocodone-combination products have been moved from Schedule III to the more restrictive Schedule II. Many state Medicaid programs have reported savings linked to implementing lock-in programs, which involves restricting certain beneficiaries to a limited number of pharmacies or prescribers. Additional benefits to lock-in programs include more appropriate beneficiary drug utilization and prevention of drug abuse and diversion. Additionally, CDC is developing guidelines to help primary care physicians improve the way they prescribe opioids to treat chronic pain, and CMS has established a new Medicaid initiative to undertake improvements in the delivery of care to beneficiaries with substance use disorder.

What Needs To Be Done

Despite progress in key areas, further actions are needed to achieve effective oversight. CMS needs to do more to monitor plan sponsors' fraud detection and compliance programs. For example, CMS should require plan sponsors to report the number of instances of probable fraud, waste, and abuse that they identify, and the actions they took to address them. Collecting and sharing this data would increase each players' ability to identify and address program vulnerabilities. Additionally, CMS should improve existing safeguards to prevent improper payments in Part D and its ability to recoup those payments when identified. When the MEDIC identifies inappropriate payments there are no established procedures to recommend recoupment other than referrals to law enforcement. While CMS does require plan sponsors to return overpayments that they self-identify, CMS has no mechanism to recover inappropriate payments identified by the MEDIC during its investigations.

The Department should continue to prioritize and coordinate efforts to reduce opioid misuse and abuse. For example, CMS and plan sponsors should monitor beneficiary use of a wider range of drugs susceptible to abuse than they do now. Also, more needs to be done to effectively deal with beneficiaries who may be abusing the program or inflicting harm on themselves by overusing drugs. This could be addressed by implementing a Medicare lock-in policy, which would require a legislative change to CMS's authority.

Key OIG Resources


7 IMS Institute for Healthcare Informatics, Medicine Use and Spending Shifts: A Review of the Use of Medicines in the U.S. in 2014, April 2015.

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