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?
WHAT DID WE FIND?WHAT DID WE FIND?
�� 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
WHAT DID WE FIND?WHAT DID WE FIND?
�� 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
WHAT DID WE FIND?WHAT DID WE FIND?
�� 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
WHAT DID WE FIND?WHAT DID WE FIND?
�� 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
WHAT DID WE FIND?WHAT DID WE FIND?
�� 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
WHAT TO LOOK FORWHAT TO LOOK FOR
�� 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
WHAT TO LOOK FORWHAT TO LOOK FOR
�� 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?
WHAT TO LOOK FORWHAT TO LOOK FOR
�� Look at pharmacy data as well as financial dataLook at pharmacy data as well as financial data
�� 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?
WHAT TO LOOK FORWHAT TO LOOK FOR
�� Look at pharmacy data as well as financial dataLook at pharmacy data as well as financial data
�� 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?
WHAT TO LOOK FORWHAT TO LOOK FOR
�� Look at pharmacy data as well as financial dataLook at pharmacy data as well as financial data
�� 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
WHAT TO LOOK FORWHAT TO LOOK FOR
�� 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
WHAT TO LOOK FORWHAT TO LOOK FOR
�� 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