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PBM LESSONS LEARNEDPBM LESSONS LEARNED

Health Care Compliance AssociationHealth Care Compliance Association

12/11/0712/11/07

Margaret L. HutchinsonMargaret L. Hutchinson

Assistant U.S. Attorney, Eastern District of PennsylvaniaAssistant U.S. Attorney, Eastern District of Pennsylvania

Medicare Part D Lessons Applied

DISCLAIMERSDISCLAIMERS

�� My Own OpinionsMy Own Opinions

�� Not Official Policy of the U.S. Department of Not Official Policy of the U.S. Department of

Justice or the United States AttorneyJustice or the United States Attorney

�� In Settled Cases, No Finding or Admission of In Settled Cases, No Finding or Admission of

WrongdoingWrongdoing

Basic Pharmacy Benefit Basic Pharmacy Benefit

ManagementManagement

�� Basic ModelBasic Model

�� Real time prescription and claims processingReal time prescription and claims processing

�� Accessible treatment and claims historyAccessible treatment and claims history

�� Nationwide networks of pharmaciesNationwide networks of pharmacies

�� Automated Drug Utilization ReviewAutomated Drug Utilization Review

�� FormularyFormulary

�� Mail order service for longMail order service for long--term drugsterm drugs

Pharmacy Benefit Management Pharmacy Benefit Management

EvolvedEvolved

�� The core business had limited profit The core business had limited profit

opportunitiesopportunities

�� Narrow profit marginNarrow profit margin

�� PBMs sought profit opportunitiesPBMs sought profit opportunities

�� ““Partnering: with manufacturersPartnering: with manufacturers

�� Disease/patient managementDisease/patient management

�� Information salesInformation sales

�� High margin items (generics, specialty)High margin items (generics, specialty)

Advanced PCS SettlementAdvanced PCS Settlement

�� $137.5 million recovery$137.5 million recovery

�� Settled claims regarding kickbacks from Settled claims regarding kickbacks from

manufacturers and kickbacks to manufacturers and kickbacks to

customerscustomers

��Consent order of injunctionConsent order of injunction

��Corporate Integrity AgreementCorporate Integrity Agreement

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MEDCO SETTLEMENTMEDCO SETTLEMENT

�� $155 million recovery$155 million recovery

�� Consent order of injunctionConsent order of injunction

�� Corporate Integrity AgreementCorporate Integrity Agreement

MEDCO HEALTH SOLUTIONSMEDCO HEALTH SOLUTIONS

�� Provides prescription services for government Provides prescription services for government

and private beneficiariesand private beneficiaries

�� Federal employees, families, and retirees in Blue Federal employees, families, and retirees in Blue

Cross and Blue Shield and other experienceCross and Blue Shield and other experience--rated rated

insurance plansinsurance plans

�� Federal employees, families, and retirees in Federal employees, families, and retirees in

communitycommunity--rated managed care plansrated managed care plans

�� MedicareMedicare

�� These programs and private plans contract with These programs and private plans contract with

Medco to manage their pharmacy benefitsMedco to manage their pharmacy benefits

WHO ARE THE CUSTOMERS WHO ARE THE CUSTOMERS

OF PBMSOF PBMS

�� Bellybuttons? (Beneficiaries)Bellybuttons? (Beneficiaries)

�� Employers?Employers?

�� Health Care Plans?Health Care Plans?

�� WhoWho’’s paying the bills?s paying the bills?

�� WhoWho’’s negotiating the contracts?s negotiating the contracts?

WHAT DO THE PBMS PROMISE WHAT DO THE PBMS PROMISE

THEIR CUSTOMERS?THEIR CUSTOMERS?

�� CostCost--effective pharmacy benefit effective pharmacy benefit

managementmanagement

�� StateState--ofof--thethe--art mail order prescriptionsart mail order prescriptions

�� IndustryIndustry--leading customer serviceleading customer service

LEGAL FRAMEWORKLEGAL FRAMEWORK

�� False Claims Act, 31 U.S.C. Sections 3729False Claims Act, 31 U.S.C. Sections 3729--37333733

�� Public Contracts AntiPublic Contracts Anti--Kickback Act, 41 U.S.C. Kickback Act, 41 U.S.C. Section 51, et seq.Section 51, et seq.

�� Medicare AntiMedicare Anti--Kickback Act, 42 U.S.C. Section Kickback Act, 42 U.S.C. Section 1320a1320a--7b(b)7b(b)

�� Stark Law, 42 U.S.C. Section 1395nnStark Law, 42 U.S.C. Section 1395nn

�� Theft or Bribery Concerning Programs Theft or Bribery Concerning Programs Receiving Federal Funds (criminal) 18 U.S.C. Receiving Federal Funds (criminal) 18 U.S.C. Section 666Section 666

WHAT DID WE FIND WHEN WHAT DID WE FIND WHEN

WE LOOKED AT PBMS?WE LOOKED AT PBMS?�� Limited ability for plans or government to measure Limited ability for plans or government to measure

costcost--effectivenesseffectiveness

�� ““averageaverage”” discount off average wholesale price (and discount off average wholesale price (and

selection of highest AWP)selection of highest AWP)

�� No actual reporting of price of each prescription (done No actual reporting of price of each prescription (done

as as ““estimateestimate”” to prevent effective audit)to prevent effective audit)

�� Design of computer and personal interface to prevent Design of computer and personal interface to prevent

effective auditeffective audit

�� Lack of incentive of experienceLack of incentive of experience--rated plans to auditrated plans to audit

�� Side deals for communitySide deals for community--rated plansrated plans

�� Limited authority until 2004 for subcontract auditsLimited authority until 2004 for subcontract audits

WHAT DID WE FIND?WHAT DID WE FIND?

�� 2. Poor financial controls/reporting2. Poor financial controls/reporting

�� Were prescriptions actually received and in usable Were prescriptions actually received and in usable

condition? condition? ““earlyearly”” refill due to loss in mailrefill due to loss in mail””/address /address

changes/thefts/refrigerated goodschanges/thefts/refrigerated goods

�� Were returned prescriptions credited to the Were returned prescriptions credited to the

program?program?

�� Mail order returns not deliveredMail order returns not delivered

�� Managed care prescriptions returnedManaged care prescriptions returned--refusedrefused

�� Did patients receive the number of pills ordered by Did patients receive the number of pills ordered by

their physicians?their physicians?


�� HEALTH CARE PLAN CONSULTANT/CONTRACTING HEALTH CARE PLAN CONSULTANT/CONTRACTING

ISSUESISSUES

�� Conflict of interest for consultantsConflict of interest for consultants

�� Failure to recognize costFailure to recognize cost--driversdrivers

�� Failure to understand or explain rebate processFailure to understand or explain rebate process

�� HEALTH CARE PLAN AUDIT PROCESS PROBLEMSHEALTH CARE PLAN AUDIT PROCESS PROBLEMS

�� Unsophisticated auditorsUnsophisticated auditors

�� Sophisticated auditors bannedSophisticated auditors banned

�� Audit limitations/nonAudit limitations/non--disclosuresdisclosures

�� Relevant contracts withheld from auditorsRelevant contracts withheld from auditors

�� Some provisions of contracts overlookedSome provisions of contracts overlooked


�� PBM techniques to increase costsPBM techniques to increase costs

�� Substantially higher prices for generics at mail order Substantially higher prices for generics at mail order

than at retail than at retail –– if youif you’’re a beneficiary, you can go onre a beneficiary, you can go on--

line and compareline and compare

�� Manipulated MAC (maximum allowable charge) for Manipulated MAC (maximum allowable charge) for

genericsgenerics

�� Switches to more expensive branded drugsSwitches to more expensive branded drugs


�� Mail Order service problemsMail Order service problems

�� Thousands of prescriptions cancelled at one Thousands of prescriptions cancelled at one

pharmacy to meet turnaround requirementspharmacy to meet turnaround requirements

�� False receive dates False receive dates –– tens of thousands of tens of thousands of

prescriptionsprescriptions

�� False error reporting to minimize error calculationFalse error reporting to minimize error calculation


�� Drug Utilization Review problemsDrug Utilization Review problems

�� Reliance on automated system rather than Reliance on automated system rather than

pharmacist judgmentpharmacist judgment

�� Purchased DUR system from First DataBank Purchased DUR system from First DataBank –– but but

edits turned offedits turned off

�� Limited pharmacist access to pharmacy SOPsLimited pharmacist access to pharmacy SOPs

�� No mechanism to alert pharmacists when automated No mechanism to alert pharmacists when automated

DUR stopped workingDUR stopped working


�� CUSTOMER SERVICE PROBLEMSCUSTOMER SERVICE PROBLEMS

�� ““ItIt’’s in the mails in the mail””

�� False reports about waiting times, dropped callsFalse reports about waiting times, dropped calls

�� False reports about identified problemsFalse reports about identified problems

�� False information to beneficiariesFalse information to beneficiaries

�� Holds, transfers, extra coHolds, transfers, extra co--payspays

�� Ineffective contract or regulatory oversightIneffective contract or regulatory oversight

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OTHER KEY OTHER KEY

COMPLIANCE/AUDIT ISSUESCOMPLIANCE/AUDIT ISSUES�� Process to identify claims for drugs prescribed by Process to identify claims for drugs prescribed by

deceased or excluded provider and/or dead patientdeceased or excluded provider and/or dead patient

�� Disciplined or excluded pharmacistsDisciplined or excluded pharmacists

�� Certification and process to remove all excluded Certification and process to remove all excluded

pharmacies, pharmacists, and excluded employees and pharmacies, pharmacists, and excluded employees and

board members board members ““and take appropriate remedial and take appropriate remedial

actionsactions””

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OTHER KEY OTHER KEY

COMPLIANCE/AUDITCOMPLIANCE/AUDIT

ISSUES ISSUES –– contcont’’dd

�� Did the patient actually receive this prescription?Did the patient actually receive this prescription?

�� Is this the right patient?Is this the right patient?

�� Process to identify overpayments and Process to identify overpayments and

underpayments at any level of network, and report underpayments at any level of network, and report

and repay overpaymentsand repay overpayments

�� Process for full disclosure on request of all pricing Process for full disclosure on request of all pricing

decisions, related data and pricing records. This decisions, related data and pricing records. This

includes contract entities.includes contract entities.

WHAT TO LOOK FORWHAT TO LOOK FOR

�� READ ALL THE CONTRACTSREAD ALL THE CONTRACTS

�� They w ill not make it easy; PBMs are becoming They w ill not make it easy; PBMs are becoming

more transparent as a result of litigation and some more transparent as a result of litigation and some

state statutesstate statutes

�� Check for audit rights and information retention Check for audit rights and information retention

policiespolicies

�� Contract between PBM and health care plan or Contract between PBM and health care plan or

insurance companyinsurance company

�� Contract between health care plan or insurance Contract between health care plan or insurance

company and government or employercompany and government or employer


�� READ ALL THE CONTRACTSREAD ALL THE CONTRACTS

�� Contracts between PBM and drug manufacturersContracts between PBM and drug manufacturers

�� Formulary placementFormulary placement

�� Rebates Rebates –– ““Market ShareMarket Share”” ““FormularyFormulary”” ““Book of Book of

BusinessBusiness””

��Disease Management plansDisease Management plans

��Data selling plansData selling plans

�� Implementation allowancesImplementation allowances


�� Look at pharmacy data as well as financial dataLook at pharmacy data as well as financial data

�� Reconcile number of prescriptions mailed and Reconcile number of prescriptions mailed and

number of prescriptions billednumber of prescriptions billed

�� Reconcile number of prescriptions mailed/billed and Reconcile number of prescriptions mailed/billed and

number of orders receivednumber of orders received

�� Reconcile returns, credits, refundsReconcile returns, credits, refunds

�� Error data Error data –– Is it maintained? Is there a mechanism Is it maintained? Is there a mechanism

for reporting? Is PBM complying with state for reporting? Is PBM complying with state

pharmacy law regarding reporting of external errors?pharmacy law regarding reporting of external errors?



�� Can you determine the price paid by the plan and Can you determine the price paid by the plan and

the beneficiary for a specific prescription?the beneficiary for a specific prescription?

�� Does the coDoes the co--pay structure induce beneficiaries to pay structure induce beneficiaries to

select more expensive (to the plan) drugs?select more expensive (to the plan) drugs?

�� Is accurate information on price and coIs accurate information on price and co--pays pays

available to beneficiaries and prescribing available to beneficiaries and prescribing

physicians?physicians?



�� Is there a mechanism in place to refund coIs there a mechanism in place to refund co--pays for pays for

drugs that are not received by beneficiaries or are drugs that are not received by beneficiaries or are

returned by beneficiaries?returned by beneficiaries?

�� Is there a mechanism in place to refund plan Is there a mechanism in place to refund plan

payments when beneficiaries return or do not payments when beneficiaries return or do not

receive drugs?receive drugs?

�� Is there a mechanism in place to determine whether Is there a mechanism in place to determine whether

Drug Utilization Review has been performed on a Drug Utilization Review has been performed on a

given prescription?given prescription?



�� Is there a mechanism in place to determine whether Is there a mechanism in place to determine whether

patients actually received their drugs?patients actually received their drugs?

�� Patient complaint recordsPatient complaint records

�� System of retention of complaintsSystem of retention of complaints

�� Records of customer service responsesRecords of customer service responses

�� Pattern of complaints Pattern of complaints –– for example: shorting, for example: shorting,

switchingswitching

�� Complaints alleging injuryComplaints alleging injury


�� Electronic DataElectronic Data

�� Does software catch:Does software catch:

��Double billingDouble billing

�� Failure to refund both plan and beneficiaryFailure to refund both plan and beneficiary

�� Pricing mistakesPricing mistakes

�� Failure to perform DURFailure to perform DUR

��Deletion or disappearance of mailed prescriptionsDeletion or disappearance of mailed prescriptions

�� Secondary payor mistakesSecondary payor mistakes


�� Failure to certifyFailure to certify

�� Lack of effective compliance planLack of effective compliance plan

�� Compliance program in legal departmentCompliance program in legal department

�� Incentives to cheatIncentives to cheat

�� Rewarding employees for meeting unrealistic Rewarding employees for meeting unrealistic

productivity goalsproductivity goals

�� Punishing employees for spending too much time on Punishing employees for spending too much time on

prescriptions, record keeping, complianceprescriptions, record keeping, compliance

�� Quotas/goalsQuotas/goals

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MANUFACTURER MANUFACTURER

DOLLARS to PBM DOLLARS to PBM

�� Rebates Rebates

�� Access rebatesAccess rebates

�� Market share rebatesMarket share rebates

�� Administrative feesAdministrative fees

�� Money for incentive and Money for incentive and

intervention programsintervention programs

�� Data feesData fees

�� Disease/patient Disease/patient

management programsmanagement programs

$Fees$ $Programs$

$Rebates$

PBM

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PLAN DOLLARS to PBMPLAN DOLLARS to PBM

�� Dispensing fees Dispensing fees

�� Per claim Per claim

administrative feesadministrative fees

�� Money for incentive Money for incentive

and intervention and intervention

programsprograms

�� Disease/patient Disease/patient

management programsmanagement programs

$Programs$ $Admin fees$

$Dispensing fees$

PBM

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PBM DOLLARS to PLANPBM DOLLARS to PLAN

�� Lower costsLower costs

�� Percentage of rebates Percentage of rebates

(which ones?)(which ones?)PBM product

$Plan Dollars to PBM$

$Manufacturer Dollars to PBM$

MEDICARE PART D:MEDICARE PART D:

SOMETHING TO LOOK SOMETHING TO LOOK

FORWARD TOFORWARD TO

�� Medicare Advantage Prescription Plans for Medicare Advantage Prescription Plans for

Medicare Managed Care patients (20%)Medicare Managed Care patients (20%)

�� Prescription Drug Plans for traditional Prescription Drug Plans for traditional

Medicare beneficiaries (80%)Medicare beneficiaries (80%)

MEDICARE PART DMEDICARE PART D

�� Major PlayersMajor Players

�� Aetna, Independence Blue Cross, AARP, United, Aetna, Independence Blue Cross, AARP, United,

Humana, HighmarkHumana, Highmark

�� Medco, CaremarkMedco, Caremark

�� Drug manufacturersDrug manufacturers

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WHERE ARE THE WHERE ARE THE

STANDARDS?STANDARDS?

�� CMS PRESCRIPTION DRUG BENEFIT MANUALCMS PRESCRIPTION DRUG BENEFIT MANUAL--CHAPTER 9CHAPTER 9--PART D PROGRAM TO CONTROL PART D PROGRAM TO CONTROL FRAUD, WASTE, AND ABUSE issued 4/25/06FRAUD, WASTE, AND ABUSE issued 4/25/06

�� CMS FRAUD MANUALCMS FRAUD MANUAL--http://www.cms.hhs.gov/PrescriptionDrugCovContra/Dhttp://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_FWA.pdfownloads/PDBManual_Chapter9_FWA.pdf

�� 71 pages of Implementing 42 CFR 423.504(b)(4)(vi)(H)71 pages of Implementing 42 CFR 423.504(b)(4)(vi)(H)

�� http://www.cms.hhs.gov/MCRAdvPartDEnrolData/http://www.cms.hhs.gov/MCRAdvPartDEnrolData/

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REQUIRED BY LAWREQUIRED BY LAW--

COMPREHENSIVE PLAN TO COMPREHENSIVE PLAN TO

DETECT, PREVENT AND DETECT, PREVENT AND

CONTROL PART D FRAUDCONTROL PART D FRAUD

�� Medicare Advantage Compliance Plan Medicare Advantage Compliance Plan

required by MA regsrequired by MA regs

�� Medicare Part D required 1/1/07 by Part D Medicare Part D required 1/1/07 by Part D

regsregs

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QUESTIONS FOR PART D QUESTIONS FOR PART D

PLANS AND PBMSPLANS AND PBMS�� DO YOU HAVE A DEDICATED AUDIT UNIT? DO YOU HAVE A DEDICATED AUDIT UNIT? ANNUAL AUDIT PLAN? VULNERABILITY ANNUAL AUDIT PLAN? VULNERABILITY ASSESSMENT?ASSESSMENT?

�� DO YOU DO FIELD AUDITS? WHAT HAPPENS DO YOU DO FIELD AUDITS? WHAT HAPPENS TO THE PROCEEDS?TO THE PROCEEDS?

�� DO YOU HAVE A CLAIM SAMPLING PROCESS?DO YOU HAVE A CLAIM SAMPLING PROCESS?

�� DO YOU OBTAIN REFUNDS OF ALL CLAIMS DO YOU OBTAIN REFUNDS OF ALL CLAIMS IMPROPERLY PAID? IMPROPERLY PAID?

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MORE PART D PLANS AND MORE PART D PLANS AND

PBM QUESTIONSPBM QUESTIONS�� HOW MANY PHARMACIES/PHARMACISTS WERE NOT HOW MANY PHARMACIES/PHARMACISTS WERE NOT ADMITTED/EXCLUDED FROM YOUR NETWORK LAST ADMITTED/EXCLUDED FROM YOUR NETWORK LAST YEAR? WHY?YEAR? WHY?

�� DO YOU CAPTURE ATTEMPTS (NEAR MISSES)?DO YOU CAPTURE ATTEMPTS (NEAR MISSES)?

�� WHAT DO YOU DO WITH BILLING FOR RETURNED WHAT DO YOU DO WITH BILLING FOR RETURNED GOODS? GOODS?

�� DO YOU TAKE MONEY FROM DRUG COMPANIES? DO YOU TAKE MONEY FROM DRUG COMPANIES? WHAT FOR?WHAT FOR?

�� DO YOU HAVE A FRAUD CONTROL SYSTEM FOR DO YOU HAVE A FRAUD CONTROL SYSTEM FOR BENEFICIARIES?BENEFICIARIES?

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WEBSITES YOUR AUDITORS WEBSITES YOUR AUDITORS

SHOULD KNOW ABOUTSHOULD KNOW ABOUT

�� NABP (National Association of Boards of NABP (National Association of Boards of

Pharmacy) Pharmacy) -- www.nabp.netwww.nabp.net

�� FDA counterfeit drug initiative FDA counterfeit drug initiative ––

www.fda.gov/oc/initiativeswww.fda.gov/oc/initiatives

�� CMSCMS-- www.cms.hhs.gov/pdpswww.cms.hhs.gov/pdps

�� OIG exclusions listOIG exclusions list--

http://oig.hhs.gov/fraud/exclusions/listofexcluhttp://oig.hhs.gov/fraud/exclusions/listofexclu

ded.htmlded.html

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WEBSITES YOUR AUDITORS WEBSITES YOUR AUDITORS

SHOULD KNOW ABOUT contSHOULD KNOW ABOUT cont’’dd

�� YOUR STATE BOARD OF PHARMACY websiteYOUR STATE BOARD OF PHARMACY website

�� StatuteStatute

�� RegulationsRegulations

�� License Suspensions/revocations/discipline/License Suspensions/revocations/discipline/

�� Inspections (both pharmacist and pharmacies)Inspections (both pharmacist and pharmacies)

�� NewslettersNewsletters

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DISCLAIMERDISCLAIMER

�� My own opinions and impressions My own opinions and impressions –– not DOJ or not DOJ or U.S. Attorney policyU.S. Attorney policy

�� Thank YouThank You

PBM LESSONS LEARNED - HCCA Official Site › Portals › 0 › PDFs...MEDCO HEALTH SOLUTIONS Provides prescription services for government and private beneficiaries Federal employees,

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