The Next Step in Health Care Cost Control: Eliminating Prescription Drug Fraud, Waste and Abuse

The recent expansion of prescription drug coverage through Medicare Part D and private insurance plans has increased the number of claims and dollar amounts flowing through the health care system. Historically, such increases in claim volume and payment are often accompanied by an uptick in fraud, abuse and waste. Prescription drugs are vulnerable to following this pattern.

“Complexities in the prescription drug system can make it difficult to correctly process claims,” said Cheryl Duva, principal, Ingenix Pharmacy Analytics Solutions group. “These complications also create opportunities for fraudulent and abusive activity.”

There are multiple drivers of prescription drug overpayment and fraud, Duva explained. For example, some people have attempted to exploit systems integration difficulties between mail-service pharmacies and retail pharmacies. A recent Ingenix analysis of the drugs dispensed at retail pharmacies and via mail order identified instances of consumers getting the same prescription filled at both venues simultaneously, which resulted in duplicate claims totaling hundreds of thousands of dollars.

In addition, eligibility issues – such as when an individual leaves a health plan or dies – can result in unnecessary payments. “We analyzed a database of more than 9 million health plan members’ prescription drug claims over a three-year period from 2005 to 2007, and found potentially $40 million in claims submitted for people who are believed to be dead,” Duva said.

Medicare Part D broadens scope, loss exposure

Further complicating the pharmacy benefit picture is the Medicare Part D prescription drug benefits program, which debuted in 2006. Because beneficiaries are covered for more drugs under Part D, there is greater financial exposure for payers in addition to new administrative duties that affect reimbursement. Plans that have contracts with the federal government to deliver Part D benefits have to send prescription drug event (PDE) reports with up to 37 data elements to the Centers for Medicare & Medicaid Services (CMS).

“Part D plans need to summarize the drug activity for the drugs they cover by taking all of the Medicare claims and converting them into PDEs, which can be a nightmare,” Duva explained. “CMS kicks back claims with errors, while plans don’t get paid until these reports are accurate. So matching claims with events correctly will save payers both time and money.”

CMS also looks for inappropriately paid claims, such as when drugs or supplies covered under Medicare Part B are submitted as Part D expenses. For example, methotrexate, used to treat cancer and arthritis, will only be paid for under Part B for cancer; for arthritis, that drug must be paid for under Part D. Another potential problem area is eligibility, because employers can end up paying for drugs for retirees that should be covered by CMS as the primary payer.

“These issues can lead to overpayments, duplicate claims and a lot of financial leakage,” Duva said. “There is a tremendous need for data detective work and rigorous audits.”

Technology tools make identifying problems easier

As payers and employers look for ways to contain health care costs, better manage resources and remain in compliance with Medicare Part D reporting rules, they should be checking to ensure that they have effective tools in place to detect prescription drug overpayments, fraud, waste and abuse. Importantly, these may not be the same as the tools being applied to a payer’s medical plan.

According to Duva, proper audits should evaluate copays, coinsurance and deductibles, as well as discounts, dispensing fees, rebates, overpayments and non-eligible claims. Duva also recommends scrutinizing clinical considerations (such as prior authorization), mandatory generic requirements, mandatory mail order requirements, specialty vendors, PDE reconciliation analysis, Part B/Part D checks and coordination of benefits.

Companies seeking a partner to help them develop and implement audit programs and provide data analytics can look to the Ingenix Pharmacy Analytics Solutions (PAS) group, Duva said. PAS works with payers, employers and pharmacy benefit managers to optimize the accuracy of pharmacy management processes. The team helps clients identify problem areas, boost overall performance and manage contract terms and revenues using health economics, outcomes and market informatics capabilities.

“We uncover unwarranted reimbursement resulting from errors, plan design flaws and formulary issues, and help payers track claims to PDEs so they can meet Medicare Part D requirements,” Duva said. Because PAS has a comprehensive data warehouse and in-depth expertise, clients do not have to build data warehouses or maintain the IT and analytics staff necessary for operations and analysis.

PAS also offers a proprietary product – the Aberrancy Tracking Tool – that utilizes a complex algorithm or rule set to look for deviant patterns in claims. The Aberrancy Tracking Tool easily identifies outliers, such as a provider who has been writing 60 percent more prescriptions than his peers. The PAS team – which includes analysts, economists, statisticians, Pharm Ds and Ph.D.s – also uses a PDE audit tool to detect discrepancies with Part D payment and reporting.

“All we need to get started are a client’s claim information and eligibility file,” Duva explained. “We load the data into our system and run it through the rules engine. The Aberrancy Tracking Tool starts looking for outlier behaviors, and then we analyze those to determine if the spikes represent something to be concerned about.”

Working with PAS allows payers to quickly identify and minimize deliberate fraud and to determine where systems weaknesses can be fixed to reduce errors and overpayments. “We have world-class analytic intelligence ready to apply on behalf of companies,” Duva remarked. “And since we quantify the dollars in jeopardy and take a percentage of recovery, there is no risk to the client.”

Duva predicted that rising medical expenses would soon motivate payers and employers to rectify this area of potential cost control. “While everyone is focused on medical benefits losses, companies need to understand that pharmacy benefit losses create a new set of difficulties and challenges,” she concluded. “Companies that are not effectively monitoring pharmacy claims are leaving money on the table.”

Be sure to sign up for future issues of Ingenix Innovations, and visit the archive for recent issues.