Medicare
CMS's Implementation and Oversight of the Medicare Prescription Drug Discount Card and Transitional Assistance Program Gao ID: GAO-06-78R October 31, 2005The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) added a prescription drug benefit to the Medicare program, to become effective January 1, 2006. To assist Medicare beneficiaries with their prescription drug costs until the new benefit becomes available, the MMA also required the establishment of a temporary program, the Medicare Prescription Drug Discount Card and Transitional Assistance Program, which began in June 2004. The drug card program is designed to offer Medicare beneficiaries access to discounts off the retail price of prescription drugs. All Medicare beneficiaries, except those receiving Medicaid drug coverage, are eligible to enroll in the drug card program. Certain low-income beneficiaries without other drug coverage qualify for an additional benefit, a transitional assistance (TA) subsidy, that can be applied toward the cost of drugs covered under the drug card program. The Centers for Medicare & Medicaid Services (CMS)--the agency within the Department of Health and Human Services that administers the Medicare and Medicaid programs--administers and oversees the drug card program. The drug cards themselves are offered and managed by private organizations, known as drug card sponsors. There are different types of drug cards. General drug cards are available to all eligible beneficiaries living in a card's service area; there are both national and regional general cards. Exclusive and special endorsement drug cards are available to specific beneficiary groups. Some drug card sponsors offer more than one drug card. Congress asked us to examine CMS's implementation and oversight of the temporary drug card program. Specifically, we reviewed (1) the processes that CMS used to solicit, evaluate, and approve drug card sponsors; and (2) the processes that CMS uses to oversee drug card sponsors and the problems identified as a result of CMS oversight.
The processes CMS used to solicit, evaluate, and approve general drug card applications were geared to the 6-month time frame between the enactment of the MMA and the mandated start date for the drug card program. This included the type of solicitation CMS used, the design of the application, and the application evaluation and approval process. CMS used a noncompetitive solicitation process in which all qualified organizations could participate in the program. CMS officials told us they took this approach to encourage participation in the program, facilitate communication with and among potential drug card sponsors, and avoid the need to develop weighted criteria to evaluate the applications--which CMS officials said would have been required if a competitive solicitation was used. CMS developed the application for drug card sponsors before all of the program's operational guidelines had been completed. As a result, CMS officials said that open-ended questions were used to learn more about and evaluate potential sponsors' capabilities and for other reasons. Based on its initial review of applicants, CMS approved only those that provided all of the information requested in the application. Initially denied applicants whose applications were missing minor information were allowed to provide the missing information through a redetermination process; those whose applications were missing significant information were allowed to appeal the denial through a reconsideration process. CMS announced its initial list of approved general drug card sponsors on March 25, 2004; that list did not include sponsors that had not completed the redetermination and reconsideration processes. The last sponsor was approved on May 7, 2004. CMS's oversight of drug card sponsors has identified and corrected some problems, but has had some limitations with respect to the timeliness of oversight activities and the guidance provided to sponsors. CMS uses multiple methods to monitor drug card sponsors. CMS investigates the complaints it receives directly from 1-800-MEDICARE and other sources, and collects information about the complaints reported to sponsors, known as "grievances." CMS has collected other data from drug card sponsors regularly, including drug price and pharmacy information that it published on its Price Compare Web site, as well as information on manufacturer and pharmacy price concessions. CMS also uses contractors to assist with oversight activities, including conducting financial audits of drug card sponsors and analyzing sponsor-reported price data. With respect to CMS's oversight, we reviewed five key program areas: drug prices, sponsors' pharmacy networks, sponsor-provided beneficiary information, TA, and beneficiary complaints and grievances.
GAO-06-78R, Medicare: CMS's Implementation and Oversight of the Medicare Prescription Drug Discount Card and Transitional Assistance Program
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October 28, 2005:
The Honorable Henry A. Waxman:
Ranking Minority Member:
Committee on Government Reform:
House of Representatives:
Subject: Medicare: CMS's Implementation and Oversight of the Medicare
Prescription Drug Discount Card and Transitional Assistance Program:
Dear Mr. Waxman:
The Medicare Prescription Drug, Improvement and Modernization Act of
2003 (MMA) added a prescription drug benefit to the Medicare program,
to become effective January 1, 2006.[Footnote 1] To assist Medicare
beneficiaries with their prescription drug costs until the new benefit
becomes available, the MMA also required the establishment of a
temporary program, the Medicare Prescription Drug Discount Card and
Transitional Assistance Program, which began in June 2004.[Footnote 2]
The drug card program is designed to offer Medicare beneficiaries
access to discounts off the retail price of prescription drugs. All
Medicare beneficiaries, except those receiving Medicaid drug coverage,
are eligible to enroll in the drug card program. Certain low-income
beneficiaries without other drug coverage qualify for an additional
benefit, a transitional assistance (TA) subsidy,[Footnote 3] that can
be applied toward the cost of drugs covered under the drug card
program.
The Centers for Medicare & Medicaid Services (CMS)--the agency within
the Department of Health and Human Services that administers the
Medicare and Medicaid programs--administers and oversees the drug card
program. The drug cards themselves are offered and managed by private
organizations, known as drug card sponsors. There are different types
of drug cards. General drug cards are available to all eligible
beneficiaries living in a card's service area; there are both national
and regional general cards.[Footnote 4] Exclusive and special
endorsement drug cards are available to specific beneficiary
groups.[Footnote 5] Some drug card sponsors offer more than one drug
card.
You asked us to examine CMS's implementation and oversight of the
temporary drug card program. Specifically, we reviewed (1) the
processes that CMS used to solicit, evaluate, and approve drug card
sponsors; and (2) the processes that CMS uses to oversee drug card
sponsors and the problems identified as a result of CMS
oversight.[Footnote 6]
To address these objectives, we focused our work on general drug cards;
our work did not include exclusive or special endorsement cards. We
interviewed CMS officials, staff from 6 CMS contractors that assist
with key program oversight activities, and staff from 8 of 32 general
drug card sponsors.[Footnote 7] The drug card sponsors we interviewed
represented a mix of national and regional cards; varied in terms of
total enrollment size, TA enrollment size, and number of beneficiary
complaints received by CMS; reflected different organization types (for
example, pharmacy benefit managers,[Footnote 8] managed care
organizations, and health insurers); and included drug card sponsors
whose applications were approved by CMS and those whose applications to
offer drug cards were initially denied, but later approved. We also
reviewed relevant CMS, CMS contractor, and drug card sponsor documents,
such as CMS guidance, CMS contractor reports, and drug card sponsor
applications. We targeted CMS's oversight of elements of five key
program areas for more focused review--drug prices, sponsors' pharmacy
networks, sponsor-provided beneficiary information, TA, and beneficiary
complaints and grievances. We selected these areas based on their
likelihood to influence beneficiaries' enrollment decisions and access
to drugs, as well as their potential to pose problems or weaknesses for
the program. When feasible, we validated the information CMS officials
told us by reviewing program documents and interviewing officials from
CMS contractors and drug card sponsors. We conducted our work from
April 2005 through October 2005 in accordance with generally accepted
government auditing standards.
We briefed your staff on the information contained in this report on
September 23, 2005. As discussed with your staff at that time, we
agreed to issue this report, which officially transmits the briefing
slides (see enc. I) and expands on the information provided at the
briefing.
Background:
CMS implemented the drug card program within a 6-month time frame. The
MMA was enacted on December 8, 2003. The following week, CMS published
an interim final rule that outlined the drug card program, including
the requirements that organizations had to meet to become drug card
sponsors.[Footnote 9] Interested organizations had to submit
applications to CMS by January 30, 2004. Organizations that CMS
approved as drug card sponsors could begin enrolling beneficiaries on
May 3, 2004. The drug card program took effect on June 1, 2004.
Organizations had to meet certain requirements in order to be approved
by CMS as drug card sponsors. For example, a drug card sponsor had to
be a nongovernmental organization doing business in the United States,
be financially stable and reputable, have at least 3 years of private-
sector experience in pharmacy benefit management, and serve at least 1
million covered lives under a similar pharmacy benefit program. Drug
card sponsors also had to agree to manage the enrollment and TA
processes for their cards, offer customer service and beneficiary
grievance programs, provide program information to beneficiaries,
operate a toll-free customer call center, and report data about their
drug cards--such as drug price and utilization data--to CMS.
Drug card sponsors also had to demonstrate their ability to meet
requirements regarding drug prices and beneficiaries' access to
pharmacies. One requirement of the program is that drug card sponsors
must offer a negotiated price[Footnote 10] for at least one drug in
each of over 200 drug classes that CMS identified as being commonly
used by Medicare beneficiaries.[Footnote 11] According to CMS, nearly
all prescription drugs that can be purchased at retail pharmacies are
eligible to be covered by sponsors' drug cards.[Footnote 12] The MMA
refers to 9 classes of drugs that drug card sponsors are not allowed to
cover through their drug cards; the excluded classes include
barbiturates and benzodiazepines, among others. While drug card
sponsors may change the prices charged to beneficiaries, they must
report all price increases to CMS and explain the rationale for price
increases not attributable to published sources of information such as
the Average Wholesale Price (AWP) of the drug.[Footnote 13] They must
also contract with a sufficient number of pharmacies to ensure that
their pharmacy networks meet the program's network access
requirements.[Footnote 14]
After reviewing applications from interested organizations, CMS
approved all but 1 general drug card.[Footnote 15] Two potential drug
card sponsors withdrew their applications to offer a general drug card.
The 71 approved general drug cards included 39 national drug cards and
32 regional drug cards. Because 5 approved national drug cards were
never marketed, 66 general drug cards enrolled beneficiaries. These 66
active general drug cards are sponsored by 32 different organizations.
Many general drug cards are sponsored by pharmacy benefit managers,
managed care organizations, or health insurers. As of August 2005,
there were nearly 3.8 million general drug card enrollees; about 44
percent were enrolled in both a drug card and TA, while about 56
percent were enrolled in a drug card only. About 87 percent of general
drug card enrollees were enrolled in national drug cards, and about 13
percent were enrolled in regional drug cards.[Footnote 16]
CMS has provided guidance to drug card sponsors through several means.
The agency has conducted periodic conference calls available to all
sponsors and has shared guidance through e-mail bulletins and
"Questions and Answers" posted on the CMS Web site. It also has
provided written guidance on topics such as sponsors' outreach
activities and the drug card data that sponsors must report to CMS. In
addition, CMS assigned staff to serve as the point of contact for each
drug card sponsor to provide individual guidance and assistance.
Results in Brief:
The processes CMS used to solicit, evaluate, and approve general drug
card applications were geared to the 6-month time frame between the
enactment of the MMA and the mandated start date for the drug card
program. This included the type of solicitation CMS used, the design of
the application, and the application evaluation and approval process.
* CMS used a noncompetitive solicitation process in which all qualified
organizations could participate in the program. CMS officials told us
they took this approach to encourage participation in the program,
facilitate communication with and among potential drug card sponsors,
and avoid the need to develop weighted criteria to evaluate the
applications--which CMS officials said would have been required if a
competitive solicitation was used.
* CMS developed the application for drug card sponsors before all of
the program's operational guidelines had been completed. As a result,
CMS officials said that open-ended questions were used to learn more
about and evaluate potential sponsors' capabilities and for other
reasons.
* Based on its initial review of applicants, CMS approved only those
that provided all of the information requested in the application.
Initially denied applicants whose applications were missing minor
information were allowed to provide the missing information through a
redetermination process; those whose applications were missing
significant information were allowed to appeal the denial through a
reconsideration process. CMS announced its initial list of approved
general drug card sponsors on March 25, 2004; that list did not include
sponsors that had not completed the redetermination and reconsideration
processes. The last sponsor was approved on May 7, 2004.
CMS's oversight of drug card sponsors has identified and corrected some
problems, but has had some limitations with respect to the timeliness
of oversight activities and the guidance provided to sponsors. CMS uses
multiple methods to monitor drug card sponsors. CMS investigates the
complaints it receives directly from 1-800-MEDICARE[Footnote 17] and
other sources, and collects information about the complaints reported
to sponsors, known as "grievances." CMS has collected other data from
drug card sponsors regularly, including drug price and pharmacy
information that it published on its Price Compare Web site,[Footnote
18] as well as information on manufacturer and pharmacy price
concessions. CMS also uses contractors to assist with oversight
activities, including conducting financial audits of drug card sponsors
and analyzing sponsor-reported price data. With respect to CMS's
oversight, we reviewed five key program areas: drug prices, sponsors'
pharmacy networks, sponsor-provided beneficiary information, TA, and
beneficiary complaints and grievances.
Drug Prices:
* Early in the program, CMS identified problems such as inconsistencies
in sponsors' reported unit prices for non-pill prescriptions--such as
creams, powders, and sprays--and delays in drug card sponsors'
reporting of data. CMS officials told us that, as a result, they worked
with sponsors to standardize the reporting of non-pill prices, did not
post some sponsors' data on the Price Compare Web site, and took
compliance actions against sponsors with reporting delays.
* Work to determine if non-TA enrollees have been inappropriately
charged more than the maximum drug price reported on the Price Compare
Web site began in June 2005; results are expected in November 2005.
* CMS finalized guidance on how drug card sponsors should report data
on price concessions from manufacturers and pharmacies in November
2004, about 5 months after the program began. According to CMS, as of
August 2005, the overall quality of that data remained questionable,
with problems such as outliers and missing data.
Sponsors' Pharmacy Networks:
* CMS officials told us that they have followed up on complaints
received from beneficiaries and pharmacists about the accuracy of the
pharmacy participation information displayed on the Price Compare Web
site. In reviewing reported problems, CMS found that most of the
problems were due to pharmacies being unaware that they were
participating in a drug card sponsor's network; sometimes pharmacies
were not actually participating in a sponsor's network even though they
were listed on the Price Compare Web site. CMS officials told us that
they worked with drug card sponsors to improve pharmacy awareness about
program participation. When warranted, CMS corrected the pharmacy
participation information on the Price Compare Web site.
* A CMS contractor also surveyed a sample of pharmacies in February
2005 to determine if they were participating in sponsors' pharmacy
networks, in accordance with what was shown on the Price Compare Web
site. According to CMS officials, preliminary survey results as of
August 2005 showed some disagreement between pharmacies' responses and
the Price Compare Web site information, with the rate of disagreement
higher for some drug card sponsors and in three states (North Dakota,
Iowa, and Missouri). Although this survey did not assess the reason for
the disagreement, in its comments on a draft of this report, CMS stated
that the disagreement was likely due to problems with pharmacies'
knowledge about program participation, rather than errors on the Web
site. CMS officials said they began following up with sponsors
identified as problematic in summer 2005. In its comments, CMS reported
that it had conducted compliance conference calls with those sponsors
and had encouraged them to re-educate their network pharmacies.
Sponsor-provided Beneficiary Information:
* A CMS contractor conducted a limited retrospective review of drug
card sponsors' marketing materials in March 2005. Two pre-enrollment
packets were requested by phone from each of six general drug card
sponsors. All the packets were noncompliant with program requirements.
Most packets were missing materials required by CMS and some materials
had not been previously approved for distribution by the CMS
contractor. The contractor never received several requested packets.
CMS officials said that they worked with the drug card sponsors
reviewed to resolve these problems.
* CMS's primary method for monitoring information provided by drug card
sponsor call centers was a contractor-conducted study in which callers
posing as beneficiary caregivers used different scenarios to test
customer service representatives' responses to questions. CMS officials
told us about several problems, including the unavailability of
representatives for non-English speaking callers, the unavailability of
representatives able to respond to callers using telecommunications for
the deaf, inappropriate handling of beneficiary complaints about
pharmacies (in which callers were told to contact the pharmacies
themselves rather than file a grievance with the sponsor), and customer
service representatives' confusion about enrollment fees if their call
centers were handling calls about multiple drug cards. Most of the
contractors' calls were conducted from June through December 2004. CMS
officials said that sponsors were contacted during this period if there
were problems such as a wrong call center telephone number or a call
center that was closed during the hours it claimed to be open. CMS
officials told us that their follow-up with sponsors for the other
identified call center issues began in summer 2005.
Transitional Assistance:
* Financial audits of sponsors conducted by a CMS contractor revealed
that $1.3 million in TA funds were inappropriately used by drug card
sponsors to pay for excluded drugs, which sponsors are required to
repay. While CMS had provided general guidance on excluded drug classes
on several previous occasions, it did not issue a comprehensive list of
excluded drugs until November 2004.
* Financial audits also revealed that several sponsors had allowed
beneficiaries to receive subsidies that exceeded the subsidy of up to
$600 per year. CMS officials attributed this to issues such as problems
when beneficiaries transferred among cards. Drug card sponsors are
required to repay excess payments.
Beneficiary Complaints and Grievances:
* Most complaints reported to CMS and grievances reported to sponsors
related to enrollment and disenrollment issues. For example, some
beneficiaries complained to CMS about delays in receiving drug cards
from drug card sponsors. CMS staff told us they worked with
beneficiaries and drug card sponsors to resolve complaints.
As a result of its oversight efforts, as of August 2005, CMS had taken
23 compliance actions against 15 drug card sponsors, most often in the
form of warning letters or corrective action plans.
Agency Comments:
We provided a draft of this report for comment to the Administrator of
CMS, and we received written comments. (See enc. II.)
CMS commented that the draft report did not paint a full picture of the
depth and breadth of the agency's monitoring and oversight activities
conducted relative to the Medicare drug card program. As our draft
report discussed, we examined CMS's oversight of elements of five key
program areas: drug prices, sponsors' pharmacy networks, drug card
sponsor-provided beneficiary information, TA, and beneficiary
complaints and grievances. We targeted these specific program areas
based on their likelihood to influence beneficiaries' enrollment
decisions and access to drugs. Furthermore, because these targeted
areas represented fundamental components of the drug card program, any
problems or weaknesses posed a threat to the overall integrity of the
program.
In commenting on our finding that there was a lack of reliable data on
price concessions, CMS agreed that there were significant data quality
issues relative to the information submitted by drug card sponsors. CMS
noted, however, that despite these concerns, the initial data, as well
as information from other sources, including some external to CMS,
suggested that drug card sponsors are passing through to beneficiaries
a substantial portion of their negotiated rebates, discounts, and other
price concessions. CMS also stated that it has worked to resolve the
data quality issues and that most price concession data submissions are
now accurate. Our work focused on CMS's oversight of the price
concession data reported by sponsors, not on the magnitude of price
concessions passed on to beneficiaries. As noted in the draft report,
the overall quality of that data as of August 2005 was questionable; we
have not assessed or verified changes in the data's quality since that
time. However, both CMS's comments and our findings in this area
highlight the importance of CMS oversight of sponsor-reported data.
In response to our finding that CMS's oversight of drug card sponsors
has had some limitations with respect to the timeliness of oversight
activities and the guidance provided to sponsors, CMS noted that it
implemented the drug card program and instituted a wide range of
oversight activities for the program, which is temporary, within a
short period of time. In the draft report, we acknowledged the limited
time between the December 2003 enactment of the MMA (which established
the drug card program) and the June 2004 implementation of the program,
as well as the temporary nature of the program. We also acknowledged
various oversight activities that CMS noted were conducted. However, as
discussed in the draft report, we identified some limitations of CMS's
oversight of sponsors. For example, we noted that in February 2005, a
CMS contractor surveyed a sample of pharmacies to determine if they
were participating in sponsors' pharmacy networks in accordance with
what was shown on the Price Compare Web site. For some sponsors, there
were high levels of disagreement between pharmacies and the Web site.
As noted in the draft report, CMS officials said they began working
with those sponsors in summer 2005. In commenting specifically on our
findings about the pharmacy network issue, CMS provided further detail
about the oversight activities that it has conducted.
In response to our finding that TA funds were used to pay for excluded
drugs on some occasions and that some beneficiaries received subsidies
that exceeded the subsidy of up to $600 per year, CMS commented that
the inappropriate payments were small in relation to the total services
delivered over the duration of the program. CMS further stated that it
was the responsibility of drug card sponsors to identify the drugs in
the excluded classes and to ensure that these drugs were not covered
under the program. CMS added that in July 2004 it had provided sponsors
with a list of drugs for two of the excluded drug classes. As noted in
the draft report, financial audits conducted by a CMS contractor for 15
drug cards revealed that the sponsors of all 15 cards had incorrectly
used TA funds to cover excluded drugs. It was not until November 2004
that a comprehensive list of drugs covering all of the excluded classes
was provided by CMS. CMS is responsible for ensuring that no program
monies are inappropriately spent.
With regard to our statements about problems related to information
provided by drug card sponsors' call centers, in its comments, CMS
provided some additional details on related oversight activities that
it has conducted. CMS noted, for example, that the CMS contractor-
conducted study using test calls to call centers found that for Spanish
language callers, there were problems obtaining information in Spanish
20 percent of the time; 80 percent of the time, information was
provided in Spanish. The findings from CMS's oversight of sponsors'
call centers highlight the need for monitoring of sponsor-provided
beneficiary information and, when needed, corrective action.
In its comments, CMS also noted that the agency has learned many
valuable lessons as a result of its experience with the drug card
program, and that those lessons will inform its future efforts as it
moves forward with the implementation of the Medicare prescription drug
benefit that is to become effective in 2006.
CMS also provided technical comments, which we incorporated as
appropriate.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution of it until 30
days from the date of this report. At that time, we will send copies to
the Administrator of CMS and interested congressional committees. The
report will also be available on GAO's home page at http://www.gao.gov.
If you or your staff have any questions or need additional information,
please contact me at (202) 512-7114 or kanofm@gao.gov. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. Key contributors are listed in
enclosure III.
Sincerely yours,
Signed by:
Marjorie Kanof:
Managing Director, Health Care:
Enclosures - 3:
Enclosure I: GAO Briefing:
[See PDF for image]
[End of slide presentation]
[End of section]
Enclosure II: Comments from the Centers for Medicare & Medicaid
Services:
DEPARTMENT OF HEALTH & HUMAN SERVICES:
Centers for Medicare & Medicaid Services:
Administrator:
Washington, DC 20201:
DATE: OCT 11 2005:
TO: Majorie Kanof:
Managing Director, Health Care:
U.S. Government Accountability Office:
FROM: Mark B. McClellan, M.D., Ph.D.:
Administrator:
SUBJECT: Government Accountability Office's (GAO) Draft Report:
Medicare: CMS's Implementation and Oversight of the Medicare
Prescription Drug Discount Card and Transitional Assistance Program
(GAO-06-78R):
We appreciate having the opportunity to review and comment on the GAO
draft report entitled, Medicare: CMS's Implementation and Oversight of
the Medicare Prescription Drug Discount Card and Transitional
Assistance Program. While the report explored the findings that the
Centers for Medicare & Medicaid Services' (CMS) oversight and
monitoring produced, it did not paint a full picture of the depth and
breadth of the actual monitoring and oversight activities, which was
the intention of the study.
The most important aspect of the Drug Discount Card is whether the
program provides discounts and access to prescription drugs. The answer
is yes, immediately. Beneficiaries began using their discount cards on
June 1, 2004, and millions of prescriptions have been filled, with only
a tiny fraction of complaints or compliance issues. Another significant
and successful undertaking of CMS was providing to the public an online
Web tool so individuals could compare the costs of their drugs across
all of our contracted sponsors-beneficiaries could find out and compare
prices for every single covered drug, in every dosage available,
located at any contracted brick and mortar or mail order pharmacy. This
state-of-the-art approach publicly displayed drug prices for the first
time and put choice in the hands of the beneficiaries. This online
comparison tool will be carried through for the Drug Benefit.
The CMS has worked hard to help Medicare beneficiaries to obtain their
prescription drugs at lower costs through the Medicare drug discount
card program. The Drug Discount Card was our initial effort at
implementing such a program. We have learned many valuable lessons that
will inform our future efforts as we plan for the Drug Benefit in 2006.
The new program required us to form new working relationships with drug
card sponsors and other industry stakeholders in order to ensure that
enrollment and payment systems ran smoothly. As part of that process,
each sponsor has personalized access to CMS via a card manager, for
both troubleshooting help and for larger policy issues. CMS has been
working with these new partners on a consistent basis, via conferences,
regular teleconferences, and daily card manager contact. We will
implement similar communication structure for organizations offering
the Medicare Drug Benefit, for example the recent Compliance Conference
CMS held. CMS and our contractors have learned a tremendous amount
about providing drug coverage through this program, and these lessons
continue to help us with all of the up front work to prepare for 2006.
In spite of the short startup timeframe for the Drug Card and
Transitional Assistance program, and the simultaneous development of
and implementation of a functioning real-time monitoring system, there
was much successful CMS action in a short period of time, including
monitoring program integrity from the perspective of provider,
consumers, and contractors, and enacting actions where necessary.
Since the inception of the Drug Card Program, which was implemented
according to a statutorily established timeframe, CMS has conducted a
wide range of oversight activities that were unprecedented for a
program of limited duration. Moreover, all of our oversight activities
were initiated in the first year of the program, another remarkable
accomplishment. The GAO report primarily focuses on a snapshot that CMS
conducted as part of its overall oversight activities, rather than the
process. The report does not present the context of the larger
oversight effort on the part of CMS, and thus presents only a small
piece of the picture. We suggest that GAO include a comprehensive
listing of our overall oversight activities, so that an accurate and
full picture is presented.
As of August 2005, GAO reports that CMS had taken 23 compliance actions
against 15 drug card sponsors, usually in the form of warning letters
or corrective action plans. The 23 compliance actions were assessed for
a variety of reasons such as: transitional assistance administration
and system failures related to enrollment. Less than 25 percent of
general card sponsors required compliance actions. It was our extensive
compliance and oversight activities and diligence in our investigation
of problems that led to the identification of these problems and the
subsequent compliance actions.
We appreciate your willingness to incorporate information about CMS'
implementation, monitoring, and compliance efforts into your final
report, thereby giving readers and users of the report a complete
picture and understanding of CMS' implementation of Part D in these
areas.
Our specific and technical comments on the report are attached.
Attachment:
Centers for Medicare & Medicaid Services' Comments to the Government
Accountability Office's Draft Report: Medicare. CMS's Implementation
and Oversight of the Medicare Prescription Drug Discount Card and
Transitional Assistance Program (GAO-06-78R):
1. GAO Finding: There was a lack of reliable drug card sponsor data on
price concessions.
Card sponsors regularly report data to CMS on rebates, discounts, and
other price concessions obtained from drug manufacturers and
pharmacies, and the percentage passed through to beneficiaries.
There were significant data quality issues (including incomplete
submissions and many obvious reporting errors), which CMS has worked to
resolve. Most submissions are now accurate, although a few remain
outstanding.
Despite these concerns, CMS is pleased that the initial data suggest
that general card sponsors have been passing through a substantial
portion of their negotiated rebates, discounts, and other price
concessions to beneficiaries. These "pass-throughs" appear to be due to
both negotiated manufacturer contracts and negotiated pharmacy
contracts.
The CMS has done its own analysis of prices submitted by sponsors. An
analysis of prices posted on the Price Compare Web site shows
beneficiaries can obtain discounted prices that are about 12 to 21
percent less than the national average prices actually paid by
Americans for commonly used brand-name drugs at retail pharmacies.
Additionally, The Lewin Group, American Enterprise Institute, and
Kaiser Family Foundation have conducted independent studies confirming
savings in the same range.
The CMS fords these multiple analyses of the drug card data to validate
sponsor prices.
II. GAO Finding: CMS has issues regarding timeliness of oversight
activities and program guidance provided to sponsors.
Since the inception of the Drug Card Program, which was implemented
according to a statutorily established timeframe, CMS has put into
practice a wide range of oversight activities in a short period of
time, which is unprecedented for a program of limited duration.
Moreover, the expansive array of formal and systematized oversight and
compliance activities were all initiated in the first year, which is a
remarkable accomplishment considering the duration of the entire
program, and the amount of time CMS had to implement it.
With only 6 months to implement the drug card program, CMS established
several layers of oversight in order to ensure that sponsors met
certain requirements, beneficiaries received meaningful discounts on
connnonly prescribed drugs, and specific customer service and grievance
procedures were in place.
While planned oversight of the drug card program began well before May
2004, actual oversight of the Drug Card Program began on June 1, 2004,
as soon as a beneficiary was unable to reach a sponsor phone number and
called 1-800-MEDICARE, or called one of CMS' caseworkers because they
had not received their drug card in the mail after applying weeks
before. Prior to obtaining measurable data about these incidents, they
were resolved and tracked, and dealt with at a sponsor/beneficiary
level. If these problems occurred more than a few times, CMS would
share the issue and resolution with sponsors on an all-sponsor
teleconference. CMS acted swiftly and thoroughly to resolve potential
problems through close oversight, even if it were at a beneficiary-per-
beneficiary level.
Much of the information CMS utilizes to oversee the Drug Card program
is gathered through beneficiary complaints that are generated either
through 1-800-MEDICARE or the CMS Regional Office caseworkers. The
receipt, tracking, and resolution of Medicare beneficiary complaints
related to the Medicare-Approved Prescription Drug Card is a vital part
of CMS' compliance process. These complaints are logged into a Web-
based tracking tool, the Complaints Tracking Module (CTM). Complaints
have been logged into the CTM since May 1, 2004. Since early May 2004,
CMS has received 13,156 complaints related to various parts of the Drug
Discount Program. CMS has resolved 12,688 (or 96 percent) of these
complaints. Of these 7,331 (or 58 percent) have been validated and
corrective actions have been taken. CMS determined that 4,221 (or 33
percent) were invalid. One thousand forty-seven (or 8 percent) of the
complaints were withdrawn. Finally, 92 of the complaints, (or less than
one percent) were forwarded to the MAXIMUS contractor, which handles
eligibility reconsiderations, for action.
Taken into context, the overall number of valid complaints was quite
small compared to the millions of prescriptions filled through this
program and the more than one billion dollars of transitional
assistance expended.
The Drug Card compliance program was intentionally structured to rely
primarily on data and not on-site audits, given the short-term nature
of the program. In addition, the compliance and oversight process was
defined in detail in the Regulations, the Marketing and Outreach
Guidelines, and the Office of the Inspector General (OIG) Guidance.
Each of these documents was made available to sponsors well in advance
of the start of the program. CMS issued an interim final rule on
December 15, 2003, at 42 CFR Part 403 Section 101 "Medicare Program:
Medicare Prescription Drug Discount Card." Section 403.820 of that
regulation describes the sanctions, penalties, and termination actions
that CMS may take in order to ensure compliance with the program
requirements. Marketing and Outreach Guidelines were issued shortly
after the regulations. CMS provided a regular forum for sponsors to
receive guidance about certain operational or policy issues, and would
allow sponsors to utilize the forum to raise concerns.
Specific CMS oversight activities have included:
* Initiating a series of recurring conference calls for sponsors - Most
of the conference calls in the early stages of the program were held at
least weekly, but most of the calls have now been cut back to about
twice a month;
* Sponsor training on the drug card processes;
* CMS guidance for and review of sponsors' marketing materials;
* Retrospective audits of marketing materials;
* Independent evaluations of savings/satisfaction/compliance;
* Financial audits by contractors;
* Pharmacy survey;
* Pharmacy claims review;
* Mystery shopping;
* Weekly analysis of drug prices; and:
* Analysis of reporting requirements.
In addition, the oversight program has included a Medicare program
safeguard contractor (PSC-IntegriGuard).
The CMS' response to specific program violations has included:
educational calls with sponsors, warning letters, imposition of
corrective action plans, levying of civil money penalties, and
imposition of intermediate sanctions.
III. GAO Finding: Transitional Assistance funds were used to pay for
excluded drugs on some occasions and some beneficiaries were given more
than $600 per year.
The findings by GAO of inappropriate payments represent only a tiny
fraction of the services delivered over the duration of the program.
Categories of excluded drugs are defined by statute and repeated in the
drug card regulation and solicitation. From the very beginning of the
program, CMS made it abundantly clear to sponsors that sponsors
themselves - not CMS - were to identify drugs falling into excluded
categories and ensure that they wouldn't be covered under the program.
CMS repeatedly reminded sponsors of this obligation on sponsor
conference calls beginning in January 2004. Written examples providing
these reminders included a memo released on July 12, 2004 and other
documents provided on August 30, 2004, November 4, 2004, and most
recently on August 5, 2005 and August 30, 2005. CMS developed its own
list of specific excluded drugs (i.e., those falling into the statutory
categories) for oversight purposes, and provided this list to sponsors
in November 2004. We believe that sponsors are well aware of their
responsibility not to pay for these drugs. Therefore, we disagree with
GAO's finding that guidance to sponsors was not provided in a timely
manner (Finding II above).
On December 23, 2004, CMS sent out an "Overview of CMS' Drug Cans
Monitoring Activities" to all sponsors requesting each sponsor conduct
a review of payments made for barbiturates and benzodiazepines using
transitional assistance (TA) funds and repay improperly drawn fiends
through the payment management system. On August 30, 2005, CMS issued a
memo to all drug card sponsors directing that sponsors conduct an
internal review of their Medicare prescription drug discount card
program data, books and records to identify all excluded drugs at the
national drug code (NDC) level that have been paid for with Federal
(TA) funds. Sponsors were directed to send a copy of their self-audit
to their card managers by September 30, 2005, and to repay improperly
drawn funds through the payment management system.
If a sponsor disagrees with a medication on the CMS-issued excluded
drug list, a CMS pharmacist will conduct a preliminary review of the
sponsor's response and IntegriGuard will provide clinical and research
support as needed. After IntegriGuard researches the issues and makes a
recommendation to CMS a committee will review IntegriGuard's
recommendation and make a recommendation to management. This committee
will be staffed by CMS and will include clinicians and compliance,
policy, and financial staff.
The CMS is requiring card sponsors to repay funds used to pay for
excluded drugs.
Most inappropriate payments for transitional assistance in excess of
the statutorily allotted $600 per beneficiary occurred in instances
where beneficiaries changed drug cards during the program. In February
2005, we instituted new transitional assistance systems processing
riles in an attempt to reduce the time taken by sponsors to update
beneficiary balances in CMS systems. This reduces the likelihood that a
beneficiary would be allowed to overspend if they change drug cards
because a more accurate balance would be passed from the CMS system to
the new sponsor.
IV. GAO Finding: There is some disagreement between card sponsors and
pharmacy networks in terms of participation in the drug card program.
Some beneficiaries complained to CMS that pharmacies listed on the
Price Compare Web site were not accepting their drug cards and some
pharmacies complained of being incorrectly listed as participating in a
sponsor's network.
The CMS found that most of the problems were due to pharmacies being
unaware that they were participating in a sponsor's network. CMS worked
with sponsors to improve pharmacies' awareness about their
participation in the program and Web site information was corrected as
required. At our encouragement, sponsors conducted targeted outreach to
their networks through blast faxes and conference calls with chain and
independent pharmacy associations and calls with individual pharmacies.
If there were targeted areas or pharmacies are found to be problematic,
CMS would work individually with that sponsor.
A CMS contractor surveyed a sample of pharmacies listed on the Price
Compare Web site to confirm participation in drug card programs as
listed. Nationally, there was about 80 percent agreement between
pharmacies and the sponsor network information on the Price Compare Web
site. Many of the low congruence rates were for independent pharmacies.
Findings were shared with CMS staff responsible for outreach to
pharmacists and the Part D staff to determine how to best reach out to
the independent pharmacies participating in the Part D program. CMS
conducted compliance conference calls with sponsors exhibiting an
exceptionally low agreement percentage, and encouraged these sponsors
to undertake a re-education effort with their network pharmacies.
In February 2005, in a dialogue with the National Council of
Prescription Drug Program (NCPDP), which creates and promotes standards
for the transfer of data to and from the pharmacy services sector of
the healthcare industry, we began work to assist them with updating
inaccurate pharmacy addresses in their database. It was the inaccuracy
of addresses we received from NCPDP that caused many of the problems
with pharmacy listings in our price comparison system. A CMS contractor
ran the NCPDP data file containing all pharmacies in the United States
against address scrubbing software. The cleaned addresses were then
sent to NCPDP for updating their database. We repeated this process
again in April with NCPDP and achieved 98 percent accuracy in the NCPDP
database. CMS will continue this process for future display of pharmacy
information on www.medicare.gov, using NCPDP data.
V. GAO Finding: Beneficiaries occasionally received inaccurate
information from drug card sponsors.
The CMS' mystery shopping contract, which randomly samples sponsor
customer service lines, was a very informative source of information
for CMS, and spurred actions early on in the program. CMS found that
Customer Service Representative (CSR) training, education, and
experience were all factors in beneficiary receipt of inaccurate
information. Several sponsors included CSR trainings as part of the
compliance plan.
For more oversight, a CMS contractor conducted a beneficiary call
center study. This study found that for Spanish language calls the CSR
had a difficult time obtaining information from card sponsors
approximately 20 percent of the time. This means that 80 percent of the
time a CSR was able to provide the requested information in Spanish. In
addition, this study found that card sponsors abandoned or dropped very
few calls and were able to answer most calls within the required 30
seconds. Most sponsors also successfully addressed the general aspects
of transitional assistance and 80 percent of the general sponsor's CSRs
mentioned the $600 credit during the call. This study also found that
sponsors who utilized third party translation services for language
calls and relay services for TTY calls had better results. A briefing
of the findings was conducted for the Part D implementation and
marketing staff to describe the results and recommendations for Part D.
CMS is contacting sponsors whose composite scores for the five
scenarios shopped were exceptionally low.
Another significant and successful undertaking of sponsor information
provided to beneficiaries was providing to every beneficiary free
access to the cost of their drugs comparatively across all of our
contracted sponsors-beneficiaries could find out and compare at the
counter prices for every single covered drug, in every dosage
available, located at any contracted brick and mortar or mail order
pharmacy. This state-of-the-art approach put choice in the hands of the
beneficiaries, and will be carried through for the Dmg Benefit. This
information was reviewed prior to it being loaded onto CMS' Web site,
especially initially. The prices that were loaded and displayed via the
CMS's "Prescription Drug Assistance and other Programs" Web page were
honored by sponsors as the price that beneficiaries would find at the
pharmacy, so the integrity of the prices was accurate and important.
The CMS developed a communications plan in order to provide accurate
and reliable information about drug cards. The strategy included:
conducting market research activities and paid advertising; providing
information on 1-800-MEDICARE and www.Medicare.gov; providing uniform
presentation and print materials; and promoting beneficiary awareness
through both national and local outreach partners.
[End of section]
Enclosure III: GAO Contact and Staff Acknowledgments:
GAO Contact: Marjorie Kanof (202) 512-7114 or kanofm@gao.gov:
Acknowledgments: In addition to the person named above, key
contributors to this report were Debra Draper, Assistant Director; Lori
Achman; Jennie Apter; Robin Burke; Meredith Kimball; Patricia Roy; and
Syeda Uddin.
(290449):
FOOTNOTES
[1] Pub. L. No. 108-173, §101, 117 Stat. 2066, 2071, 2072.
[2] Pub. L. No. 108-173, §101, 117 Stat. 2066, 2071, 2131. Throughout
this report, we refer to the Medicare Drug Discount Card and
Transitional Assistance Program as the drug card program. Beneficiaries
can enroll in the drug card program through December 2005.
Beneficiaries can use their drug cards until the effective date of
their enrollment in a Medicare prescription drug plan or until May 15,
2006, whichever comes first.
[3] For beneficiaries who qualify for TA, the program offers a subsidy
of up to $600 per year toward the cost of covered drugs. To qualify for
TA, a beneficiary must have (1) an income at or below 135 percent of
the federal poverty level and (2) with certain exceptions, not have
other prescription drug coverage through Medicaid, an employer-
sponsored group health insurance program, an individual health
insurance policy, TRICARE (the Department of Defense health care
program for active-duty personnel, retirees, and their dependents), or
the Federal Employees Health Benefits Program. TA funds available to
beneficiaries in 2004 and 2005 can be used until the effective date of
their enrollment in a Medicare prescription drug plan or until May 15,
2006, whichever comes first.
[4] National cards provide beneficiaries access to discounts at
pharmacies nationwide, while regional cards offer discounts at
pharmacies within a smaller geographic area--an entire state at a
minimum.
[5] Exclusive cards are cards that Medicare managed care plans offer
only to their plan enrollees. (Some managed care plans offer general
cards open to all eligible beneficiaries, not just those enrolled in
their plan.) Special endorsement cards serve residents of long-term
care facilities such as skilled nursing facilities; U.S. territory
residents; and American Indians and Alaskan Natives who use Indian
Health Service, Indian Tribe and Tribal Organization, and Urban Indian
Organization pharmacies.
[6] We are conducting other work related to this topic. See Medicare:
CMS's Beneficiary Education and Outreach Efforts for the Medicare
Prescription Drug Discount Card and Transitional Assistance Program,
GAO-06-139R (Washington, D.C.: forthcoming). We also plan to issue a
report in 2005 on sponsors' processes related to the drug card program.
[7] Included in the 32 sponsoring organizations are affiliated
organizations, such as 11 individual Blue Cross and Blue Shield
entities that are counted as one organization.
[8] Pharmacy benefit managers manage prescription drug benefits for
third-party payers, such as employer-sponsored health plans and other
health insurers.
[9] Medicare Program; Medicare Prescription Drug Discount Card; Interim
Rule and Notice, 68 Fed. Reg. 69840 (2003).
[10] The MMA specified that drug card sponsors shall provide access to
"negotiated prices" on the drugs they cover. CMS regulations define
negotiated price as the discounted price that takes into account
negotiated price concessions such as discounts, rebates, and direct or
indirect subsidies or remunerations. Drug card sponsors are required to
obtain rebates, discounts, or other price concessions from drug
manufacturers and to pass on a share of these concessions to card
enrollees; neither the MMA nor CMS's regulations specify any minimum
amount that must be passed on to enrollees.
[11] Drugs that possess similar chemical structures and similar
therapeutic effects are grouped into classes. Most drugs within a class
produce similar benefits, side effects, adverse reactions, and
interactions with other drugs and substances.
[12] Covered drugs include prescription drugs, certain vaccines,
insulin, and some medical supplies associated with the injection of
insulin.
[13] AWP is a list price that a manufacturer suggests wholesalers
charge pharmacies.
[14] By regulation, in urban areas, at least 90 percent of a card's
enrollees must live within 2 miles of a contracted network pharmacy; in
suburban areas, at least 90 percent must live within 5 miles of a
contracted network pharmacy; and in rural areas, at least 70 percent
must live within 15 miles of a contracted network pharmacy. These
access standards are based on those used in the TRICARE Retail Pharmacy
program, which provides prescription services for Department of Defense
beneficiaries through a network of retail pharmacies.
[15] CMS denied one applicant due to what it considered a failure to
respond substantively to the application requirements.
[16] As of August 2005, CMS reported 6.4 million enrollees across all
types of drug cards.
[17] 1-800-MEDICARE is a CMS-administered nationwide toll-free
telephone help line that beneficiaries, their families, and other
members of the public can call to ask questions about program
eligibility, enrollment, and benefits.
[18] This Web site, with information for beneficiaries on available
drug cards, was part of the "Prescription Drug and Other Assistance
Programs" tool located at www.medicare.gov--a tool to help
beneficiaries determine their eligibility for the drug card program,
decide whether to enroll in the program, and select a drug card. CMS
deactivated the component of the Web site with information about drug
prices on September 30, 2005.
