Report on the Medicare Drug Discount Card Program Sponsor Public Sector Partners

The objectives of our review were to determine whether Public Sector Partners (PSP) 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 offerthe lower of the negotiated prices or the usual and customary prices, and (4) support the expenditures and withdrawals it reported to CMS. PSP properly supported the expenditures it made on behalf of beneficiaries and the withdrawals from the Payment Management System. However, PSP 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 and charge the lower of the negotiated prices or the usual and customary prices. As a result, CMS overpaid PSP $420,875 for beneficiaries who exceeded their TA limits and $231,260 for excluded drugs for the period July 12, 2004, through May 31, 2005. In its written comments on our draft report, PSP agreed that errors had occurred, but it did not agree with all of the causes we identified. PSP stated that it had worked with CMS to correct its procedures and had reimbursed CMS for the errors we identified.

We recommended that PSP: (1) reimburse CMS for the $420,870; (2) determine whether the amount PSP reimbursed CMS for excluded drugs included any of the $231,620 identified in the audit and reimburse the difference; and (3) implement policies and procedures, if it continues as a prescription drug plan sponsor to ensure that it (a) does not pay for statutorily excluded drugs with CMS funds and (b) offers negotiated prices to beneficiaries.