Medicare Drug Plans Need the Tools to Fight Prescription Drug Fraud

Policy Reports | Health

No. 359
Wednesday, October 29, 2014
by Devon M. Herrick

Executive Summary

Abuse of prescription pain relievers is a growing problem for Medicare drug plans, which have a limited ability to deal with this problem; even if they suspect fraud, drug plans are not allowed to restrict the availability of certain drugs — or restrict the drugstores that can supply benefits — to enrollees who abuse or resell them.

For the most part, questionable drug utilization typically involves addictive pain relievers that create a heroin-like euphoria. Some individuals seek drugs for their own recreational use, while others seek to capitalize on their value by selling drugs to others. Substantial numbers of Medicare drugs are diverted to the illicit market where their “street value” far exceeds their pharmacy cost. This is especially true of narcotic pain relievers derived from opioids.Drug diversion costs insurers nearly $75 billion per year — about two-thirds of it from public programs such as Medicare and Medicaid.

Barriers to Combating Fraud. The most common way Medicare fraudsters obtain large numbers of addictive, opioid pain relievers is by “doctor shopping” — seeing multiple doctors every month with bogus complaints about chronic pain. The unnecessary medical care required to fraudulently obtain drugs wastes far more money than the cost of the drugs themselves. For every $1 worth of drugs lost due to fraud, an additional $41 is wasted in unnecessary physician visits, redundant medical tests and unneeded visits to the emergency room to obtain the drugs.

Drug-seekers generally fill their multiple prescriptions at multiple pharmacies to avoid detection — hoping that no one pharmacy will track their behavior and question them. This tactic often fools individual doctors and pharmacies into believing their patients are not abusing prescription pain relievers. However, drug plans can easily detect drug-seeking behavior. Unfortunately, Medicare doesn’t grant them the authority to stop this abuse. Under current law, Medicare drug plans are not allowed to restrict the benefits of enrollees thought to be abusing or reselling prescription drugs. At the very least, beneficiaries with high levels of narcotic pain reliever prescription fills should be “locked in” to a program that assigns them one doctor, one pharmacy and one emergency room for the specific pain relievers being abused. Currently, 46 state Medicaid programs lock selected beneficiaries into specific providers.

Physician Fraud. There are about 894,000 physicians practicing in the United States, and nearly half provide primary care. Most are hurried and have little time to look for the subtle clues of addiction or scrutinize drug-seeking behavior on the part of their patients; they may not realize that the patient who comes in once a month to renew a prescription for oxycodone actually visits a dozen doctors every month for prescription pain relievers. But more worrisome are the doctors who turn a blind eye to likely drug abuse because drug-seeking patients can be lucrative customers.

Pharmacy Fraud. The problem of drug fraud goes beyond individuals seeking drugs. In 2009, the Office of the Inspector General within the U.S. Department of Health and Human Services identified 2,636 retail pharmacies with questionable billing patterns in 2009. Some pharmacies seemed to bill very high dollar amounts per beneficiary, while some billed for a high number of prescriptions per beneficiary. Others billed for a high number of prescriptions per physician prescriber. Such patterns could indicate the drugs were not medically necessary or possibly that they were never actually dispensed.

Significantly, submitting medical bills to insurers, health plans and pharmacy benefit managers requires only a limited amount of supporting documentation. Consequently, fraudulent claims are easy to disguise and submit for payment, as they are hard to detect amidst billions of legitimate claims. Companies that process electronic payments, however, have learned how to detect transaction patterns that deviate from the norm. If Medicare operated a lock-in program, drug plans could use this information to halt fraud.

It Is Not Just Painkillers. Although drug diversion is most closely associated with opioid pain relievers, there is tremendous potential for diversion to spill over into other lucrative drug classes. Increasingly, rare diseases are being treated with highly advanced specialty drugs and biological agents. The cost of specialty drug therapies ranges from tens of thousands of dollars to hundreds of thousands annually. As prescriptions worth thousands of dollars become increasingly common, so too will the number of people who attempt to divert these drugs for profit.

Fixing the Problem. In August 2014, the Office of the Inspector General within the U.S. Department of Health and Human Services issued recommendations to reduce the questionable usage of narcotic pain relievers by Medicare beneficiaries. One of its recommendations was to establish a lock-in program, which would allow drug plans to restrict Medicare enrollees’ ability to access drugs through multiple pharmacies or physicians. In August 2014, the Chairman of the House Ways and Means Subcommittee on Health, Kevin Brady (R-Texas), circulated a draft of a bill designed to help Medicare drug plans reduce fraud. The “Protecting Integrity in Medicare Act of 2014” would give drug plans within Medicare Part D the authority to restrict certain beneficiaries to the use of a single doctor and pharmacy with respect to specific opioids and other high-risk drugs. Drug plans are currently hamstrung by regulations that prevent them from tackling drug abuse, and they need this type of flexibility in order to effectively combat fraud.

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