by Ben Vernia | November 10th, 2010
In an audit report released on November 1, the Office of Inspector General of HHS reported that of approximately $115 billion in Medicare Part D “Prescription Drug Events” reported to CMS by Medicare Part D carriers, approximately $112 million related to “terminated” drugs. As the audit report describes:
Terminated drugs are discontinued drugs that have passed their shelf life or drugs that have been pulled from the market for health or safety reasons. Such medications could be weak, ineffective, or detrimental to beneficiaries’ health. However, Federal regulations do not specifically prohibit coverage of terminated drugs under the Medicare Part D program.
The OIG-HHS recommended that CMS issue regulations prohibiting Part D coverage of terminated drugs and publish lists of them on its web site.
In written comments to the draft audit report, CMS disagreed, writing that it believed that the apparent dispensing of terminated drugs instead reflected errors in the data available to the OIG-HHS and to pharmacies:
The OIG report uses a finding ofpharmacies billing for outdated II-digit NDC as a proxy for actually outdated drug products being dispensed at the pharmacy counter. In actuality, in the constantly changing world ofNDCs, real-time electronic phannacy billing with II-digit NDCs does not always precisely correlate with the actual product being dispensed. For example, it is not uncommon for a pharmacy to bill using an NDC for the correct drug product but the incorrect package size. The Cozaar example offered by the OIG represents a classic situation where the manufacturer discontinued one package size (100 tablet) and created a new NOC for the new package size (90 tablet). Only the last 2 digits on the 11digit Cozaar NDC differ. In this example, the billing ofthe terminated NDC most likely represented the pharmacies failure to update the precise NDC in their billing systems to reflect the new package size and not that the pharmacy dispensed outdated drugs. Although ideally, with timely access to updated data, pharmacies would always use the exact NDC to match the product dispensed to the patient, it is important to recognize that such discrepancies do not support afinding that outdated drugs were dispensed.
The OIG-HHS report did not describe what, if any, fiscal impact prohibiting dispensing such drugs under Part D would have. Part D carriers are paid a pre-determined amount for each covered beneficiary, and their overall payment is only adjusted if their preliminary estimates deviate from their actual performance by a substantial margin.
