Medicare Part D Formularies
CMS Conducts Oversight of Mid-Year Changes; Most Mid-Year Changes Were Enhancements Gao ID: GAO-11-366R June 30, 2011The Medicare voluntary outpatient prescription drug insurance program, known as Medicare Part D, provided prescription drug coverage for about 23 million beneficiaries--eligible individuals 65 years and older and eligible individuals with disabilities--enrolled in the program in 2010. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private companies, known as sponsors, that contract with the Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS), the agency that administers the Medicare program. Sponsors may have multiple contracts with CMS to provide drug coverage, with each contract offering one or more distinct Part D plans. Sponsors compete for beneficiary enrollment on the basis of plan premiums and benefit designs. Sponsors also vary in the content of their formularies--the list of covered drugs and associated utilization management (UM) requirements. UM requirements include (1) step therapy, which requires that a beneficiary try lower-cost drugs before a sponsor will cover a more costly drug; (2) prior authorization, which requires a beneficiary to obtain the sponsor's approval before a drug is covered for that individual; and (3) quantity limits, which restrict the dosage or number of units of a drug provided within a certain period of time. Sponsors may design their plans to use the same or different formularies. Sponsors may use their formulary structures to manage beneficiaries' drug spending and utilization, however, sponsors must adhere to a minimum set of formulary requirements established in statute and regulation. In its administration of Part D, CMS is responsible for implementing program requirements and overseeing sponsors' compliance with these requirements. To do so, CMS issued regulations and program guidance addressing classes of drugs that must be covered on sponsors' plan formularies, classes of drugs that may not be covered by Part D, UM program requirements, and annual formulary submission time lines. Medicare beneficiaries may choose to enroll in plans based, in part, on the formularies that sponsors establish for their plans at the beginning of each year. With few exceptions, once beneficiaries enroll in a sponsor's plan, they may not change plans until the next year. However, sponsors may make certain changes to their plans' formularies during the year, known as mid-year formulary changes, provided that their plans' formularies continue to meet certain minimum Part D formulary requirements including those that apply to mid-year changes. Mid-year formulary changes may enhance Part D formularies by adding drugs or removing or loosening UM requirements for drugs, or may restrict formularies by removing drugs or tightening UM requirements for drugs. Mid-year changes affect sponsors' plan formularies and may disrupt beneficiaries' access to certain prescription drugs or make them responsible for new or unexpected costs. Congress asked us to review mid-year formulary changes in the context of CMS's oversight and the potential effect of mid-year changes on beneficiaries. In this report, we describe (1) the actions CMS has taken to oversee sponsors' compliance with mid-year formulary change requirements; and (2) the mid-year formulary changes sponsors made for their plans in 2008 and 2009 and how many beneficiaries filled a prescription for a drug later affected by a negative mid-year formulary change in 2008.
CMS monitors--directly examines--certain requests for mid-year formulary changes prior to their implementation to ensure that formularies meet requirements including mid-year change requirements. CMS also conducts retrospective oversight activities of sponsors' compliance with mid-year formulary change requirements. Specifically, CMS monitors agency data; conducts discussions with trade groups, advocates, and other patient representatives; and conducts targeted audit activities. Our analysis of mid-year formulary changes in 2008 and 2009 indicated that sponsors implemented multiple mid-year changes for almost all plans in those years. Formulary enhancements, which added a drug to the formulary or removed or loosened restrictions on a drug, accounted for 87.4 percent of changes in 2008 and 88.6 percent in 2009. Negative changes, such as removing a drug from a formulary, accounted for 12.6 percent of changes in 2008 and 11.4 percent in 2009. In addition, we found that in 2008 about 5 percent of beneficiaries (over 1.1 million beneficiaries) filled a prescription for a drug that was later affected by a negative mid-year change.
GAO-11-366R, Medicare Part D Formularies: CMS Conducts Oversight of Mid-Year Changes; Most Mid-Year Changes Were Enhancements
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GAO-11-366R:
United States Government Accountability Office:
Washington, DC 20548:
June 30, 2011:
The Honorable Henry A. Waxman:
Ranking Member:
Committee on Energy and Commerce:
House of Representatives:
The Honorable Frank Pallone, Jr.
Ranking Member:
Subcommittee on Health:
Committee on Energy and Commerce:
House of Representatives:
The Honorable John D. Dingell:
House of Representatives:
Subject: Medicare Part D Formularies: CMS Conducts Oversight of Mid-
Year Changes; Most Mid-Year Changes Were Enhancements:
The Medicare voluntary outpatient prescription drug insurance program,
known as Medicare Part D,[Footnote 1] provided prescription drug
coverage for about 23 million beneficiaries--eligible individuals 65
years and older and eligible individuals with disabilities--enrolled
in the program in 2010.[Footnote 2] Under Part D, Medicare
beneficiaries may enroll in prescription drug plans offered by private
companies, known as sponsors, that contract with the Department of
Health and Human Services (HHS) Centers for Medicare & Medicaid
Services (CMS), the agency that administers the Medicare program.
[Footnote 3] Sponsors may have multiple contracts with CMS to provide
drug coverage, with each contract offering one or more distinct Part D
plans.[Footnote 4] Sponsors compete for beneficiary enrollment on the
basis of plan premiums and benefit designs. Sponsors also vary in the
content of their formularies--the list of covered drugs and associated
utilization management (UM) requirements. UM requirements include (1)
step therapy, which requires that a beneficiary try lower-cost drugs
before a sponsor will cover a more costly drug; (2) prior
authorization, which requires a beneficiary to obtain the sponsor's
approval before a drug is covered for that individual; and (3)
quantity limits, which restrict the dosage or number of units of a
drug provided within a certain period of time. Sponsors may design
their plans to use the same or different formularies. Sponsors may use
their formulary structures to manage beneficiaries' drug spending and
utilization, however, sponsors must adhere to a minimum set of
formulary requirements established in statute and regulation.
In its administration of Part D, CMS is responsible for implementing
program requirements and overseeing sponsors' compliance with these
requirements. To do so, CMS issued regulations and program guidance
addressing classes of drugs that must be covered on sponsors' plan
formularies, classes of drugs that may not be covered by Part D, UM
program requirements, and annual formulary submission time lines.
[Footnote 5],[Footnote 6]
Medicare beneficiaries may choose to enroll in plans based, in part,
on the formularies that sponsors establish for their plans at the
beginning of each year.[Footnote 7] With few exceptions, once
beneficiaries enroll in a sponsor's plan, they may not change plans
until the next year. However, sponsors may make certain changes to
their plans' formularies during the year, known as mid-year formulary
changes, provided that their plans' formularies continue to meet
certain minimum Part D formulary requirements including those that
apply to mid-year changes. Mid-year formulary changes may enhance Part
D formularies by adding drugs or removing or loosening UM requirements
for drugs, or may restrict formularies by removing drugs or tightening
UM requirements for drugs.
Mid-year changes affect sponsors' plan formularies and may disrupt
beneficiaries' access to certain prescription drugs or make them
responsible for new or unexpected costs. You asked us to review mid-
year formulary changes in the context of CMS's oversight and the
potential effect of mid-year changes on beneficiaries. In this report,
we describe (1) the actions CMS has taken to oversee sponsors'
compliance with mid-year formulary change requirements; and (2) the
mid-year formulary changes sponsors made for their plans in 2008 and
2009 and how many beneficiaries filled a prescription for a drug later
affected by a negative mid-year formulary change in 2008.[Footnote 8],
[Footnote 9]
To determine what actions CMS has taken to oversee sponsors'
compliance with mid-year formulary change requirements we reviewed
relevant laws, regulations, and CMS guidance. We also interviewed
relevant CMS officials and examined previous GAO and HHS Office of
Inspector General (OIG) reports related to CMS oversight of Medicare
Part D sponsors.
To examine the mid-year formulary changes that sponsors made for their
plans in 2008 and 2009, we obtained formulary files from CMS for
prescription drug plans (PDP) and Medicare Advantage prescription drug
(MA-PD) plans for years 2008 and 2009.[Footnote 10] To identify mid-
year changes we compared the January and December formulary files for
2008 and 2009 and identified drugs and UM requirements that differed
at the end of each of the two years.[Footnote 11],[Footnote 12]
For the purposes of this report, we categorized mid-year formulary
changes as either enhancements or negative changes. We assigned mid-
year formulary changes to these categories using a different basis
than that used by CMS. CMS categorizes negative changes based on
information sponsors submit when requesting approval to make negative
formulary changes. However, our analysis indicated that some negative
changes were implemented differently than requested.[Footnote 13]
Therefore, we categorized mid-year formulary changes based on the
plan's actual implementation of the change. In general, our
"enhancement" and "negative" change categories correspond to CMS's
"enhancement" and "negative" change categories, respectively.
Specifically, we categorized two types of changes as enhancements to
the formulary:
* when a drug was added to the formulary, which we refer to as "drug
added"; or:
* when any existing UM requirement for a drug on the formulary was
removed or loosened, referred to as "removed UM requirements."
There were four types of changes that we categorized as negative
changes:
* when a drug was removed from the formulary and another drug (known
as an offset) was added,[Footnote 14] referred to as "removed drug,
add offset drug;"
* when a drug was removed from the formulary, referred to as "removed
drug without offset;"
* when any UM requirement was added to a drug and an offset drug was
added, referred to as "tightened UM with offset drug;" and:
* when any UM requirement was added to a drug, referred to as
"tightened UM without offset."
We completed additional analyses to determine the number of
beneficiaries potentially affected by negative mid-year changes in
2008. To estimate the number of potentially affected beneficiaries for
each of these changes, we identified 2008 Prescription Drug Event
(PDE) claims for beneficiaries who filled a prescription for a drug
affected by a negative change at any point from the beginning of the
year up until the approved effective date of the change. To ensure the
reliability of CMS data we reviewed data documentation; tested data
elements for missing data, outliers, and errors; and discussed and
resolved inconsistencies found in data elements with CMS officials
responsible for data management. Based on these activities, we
determined that the data were sufficiently reliable for our purposes.
(See enclosure I for additional information on how we identified mid-
year changes and potentially affected beneficiaries.)
We conducted this performance audit from July 2009 through June 2011
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Results in Brief:
CMS monitors--directly examines--certain requests for mid-year
formulary changes prior to their implementation to ensure that
formularies meet requirements including mid-year change requirements.
CMS also conducts retrospective oversight activities of sponsors'
compliance with mid-year formulary change requirements. Specifically,
CMS monitors agency data; conducts discussions with trade groups,
advocates, and other patient representatives; and conducts targeted
audit activities.
Our analysis of mid-year formulary changes in 2008 and 2009 indicated
that sponsors implemented multiple mid-year changes for almost all
plans in those years. Formulary enhancements, which added a drug to
the formulary or removed or loosened restrictions on a drug, accounted
for 87.4 percent of changes in 2008 and 88.6 percent in 2009. Negative
changes, such as removing a drug from a formulary, accounted for 12.6
percent of changes in 2008 and 11.4 percent in 2009. In addition, we
found that in 2008 about 5 percent of beneficiaries (over 1.1 million
beneficiaries) filled a prescription for a drug that was later
affected by a negative mid-year change.[Footnote 15]
In its comments on a draft of this report, CMS generally agreed with
our findings. CMS asked that we provide additional clarification on
its oversight of sponsors' negative mid-year change requests and on
our methodology for our analysis of mid-year changes. We have provided
these clarifications as appropriate.
Background:
Statute, regulation, and CMS policy established requirements for Part
D formularies including requirements for mid-year changes.
Medicare Part D Formularies:
Federal law requires that Medicare Part D formularies be based on
scientific evidence and standards of practice and be developed and
reviewed by a Pharmacy and Therapeutics Committee.[Footnote 16]
Formularies must also include drug UM programs including incentives to
reduce costs when medically appropriate.[Footnote 17] For drugs
included on their formularies, sponsors may assign drugs to tiers that
correspond to different levels of cost sharing. For example, sponsors
may establish separate tiers for brand-name drugs and generic drugs--
drugs that are therapeutically equivalent to brand-name drugs but cost
less. In general, this type of structure encourages the use of less
costly generic medications by putting them on a cost-sharing tier that
requires the lowest out-of-pocket costs for beneficiaries. Sponsors
submit formularies for their plans to CMS through CMS's Health Plan
Management System (HPMS),[Footnote 18] and CMS reviews and approves
formularies as part of the annual bid process.
Mid-Year Formulary Changes:
Although formularies are reviewed and approved at the beginning of the
year through the annual bid process, sponsors may make formulary
enhancements and negative changes at certain times of the year. CMS
established mid-year formulary change requirements that include
timeframes in which each type of change can be made, as well as
requirements for CMS approval and notification of beneficiaries.
[Footnote 19] Specifically, sponsors may implement changes--that is,
make changes to their plans' formularies in HPMS--that enhance the
formulary at any time during the year, and are not required to seek
CMS approval prior to implementation.[Footnote 20] In contrast,
sponsors must request and receive CMS approval prior to the
implementation of most negative changes that could restrict
beneficiary access to drugs and are not permitted to implement most
negative changes until 60 days after the beginning of the year.
[Footnote 21]
With the exception of certain safety related changes, CMS requires
sponsors to request negative changes through an application in HPMS
and CMS officials reported that they monitor these requests. The type
of approval--implicit or explicit--needed for negative changes is
dependent upon the sponsor's justification for and categorization of
the change. CMS generally implicitly approves changes that remove a
brand name drug with the addition of a generic drug--known as brand to
generic substitutions--that is, sponsors can assume these types of
requests are approved if they do not receive disapproval from CMS
through HPMS within 30 days of submitting the request. However, some
negative changes such as, in some cases, the removal of a drug without
the corresponding addition of an offset drug, require explicit pre-
implementation approval from CMS.[Footnote 22] Also, because of the
potential for these types of changes to adversely affect
beneficiaries' access to medications, CMS officials told us that the
agency approves such changes on the condition that beneficiaries
currently taking the affected drug are exempt from the change for the
remainder of the year.[Footnote 23] That is, for the remainder of the
year the change can only apply to beneficiaries beginning to take that
drug. CMS officials we spoke with referred to this conditional
approval as the grandfathering policy.[Footnote 24]
Regardless of whether the type of change is an enhancement or
negative, CMS requires sponsors to submit updated formularies--
formularies that contain changes--through HPMS during the first 3
business days of any given month up until October of the year.
Sponsors are also required to provide notice of negative formulary
changes to, among others, beneficiaries currently taking the affected
drug. However, because it is CMS policy to approve certain types of
negative changes only when those currently taking the affected drug
are exempted from the change, notice is not required for those
beneficiaries.[Footnote 25] In addition, sponsors must make
information on negative changes available on their plan's Web sites
[Footnote 26] and are responsible for ensuring that their marketed
formularies, including those on their Web sites, are consistent with
their approved formularies in HPMS.[Footnote 27]
CMS Conducts Prospective Reviews of Formularies and Some Retrospective
Activities to Oversee Sponsors' Compliance with Mid-Year Formulary
Change Requirements:
CMS Prospectively Monitors Mid-Year Formulary Change Submissions to
Ensure Formularies Meet Requirements:
CMS officials stated that they monitor--directly examine--certain mid-
year change requests submitted through HPMS and approve mid-year
formulary changes that meet formulary requirements including mid-year
change requirements. Specifically, in 2008 CMS began requiring
sponsors to request approval for negative changes through the HPMS
application.[Footnote 28] Officials told us that they review sponsors'
requests for negative changes in the context of each plan's full
formulary to ensure that, if implemented, the changes would not result
in substantial change to the plan's formulary and that the formulary
would still meet the minimum Part D formulary requirements. For
example, CMS would confirm that, even with the requested change, the
sponsor's formulary would include at least two drugs in that drug
class.[Footnote 29] CMS officials reported that the number of negative
mid-year change requests decreased by over 30 percent in 2008, when
CMS made a number of policy changes including requiring that negative
changes be requested through HPMS.[Footnote 30]
In addition to monitoring negative change requests, CMS also uses HPMS
to ensure that certain mid-year formulary requirements are followed
when sponsors submit requests for negative changes and when sponsors
upload new plan formularies, that is, formularies that contain mid-
year changes, to HPMS. For example, officials told us that HPMS
ensures that all required fields are populated when sponsors submit
requests for negative changes (e.g., required clinical justifications,
offset drug information, etc.). In addition, HPMS only allows sponsors
to submit change requests with permissible implementation dates and
ensures that updated formularies contain only approved negative
changes or changes that do not require pre-approval. CMS monitors HPMS
formulary updates throughout the year and can retroactively deny a
change, specifically a formulary enhancement,[Footnote 31] which does
not meet formulary requirements, including applicable mid-year change
requirements.
CMS's prospective oversight, including monitoring of HPMS, does not
ensure that sponsors correctly implement approved changes and
associated mid-year change policies intended to protect beneficiaries'
access to medications. In order for beneficiaries to benefit from
these protections, sponsors must administer approved changes
accurately, such as by modifying their plans' Web sites to reflect
plans' current formularies. In addition, sponsors must correctly apply
relevant mid-year change requirements, such as providing sufficient
notice of negative formulary changes to beneficiaries and ensuring
that beneficiaries are exempted from changes if they are covered by
the grandfathering policy.
CMS Conducts Some Retrospective Oversight Activities of Sponsors'
Compliance with Mid-Year Formulary Change Requirements:
CMS conducts some retrospective activities to oversee sponsor
compliance with certain formulary requirements, including requirements
specific to mid-year changes. Specifically, CMS officials told us that
the agency monitors data from its complaint tracking module,[Footnote
32] appeals data from beneficiaries, and data from a CMS contractor
(i.e., an independent review entity) to identify areas of
noncompliance. In addition, CMS has discussions with trade groups,
advocates, and other beneficiary representatives to determine if
beneficiaries have been adversely affected by mid-year formulary
changes which may indicate sponsors' noncompliance with mid-year
formulary change requirements. CMS officials reported that these
sources have not identified areas of noncompliance, nor does the
agency have knowledge of any adversely affected beneficiaries.
However, CMS officials acknowledged that the lack of complaints does
not necessarily mean that beneficiaries have not been adversely
affected.
CMS also conducts targeted audit activities to assess sponsors'
compliance with certain formulary requirements, including requirements
specific to mid-year changes. Specifically, in 2008 and 2009, CMS's
program audits evaluated sponsors' compliance with mid-year formulary
change beneficiary notification requirements. In addition, CMS
completed selected reviews of sponsors' websites for their plans'
formulary information in 2009 and 2010. In January 2011, CMS was
preparing to conduct pilot audits to assess the accuracy of plan
formulary information for a sample of sponsors' websites compared to
these sponsors' CMS-approved plan formularies in HPMS. These audits
would therefore determine the extent to which formularies marketed to
beneficiaries match CMS approved formularies, including the
appropriate inclusion of any mid-year formulary changes. Although CMS
officials reported that selected reviews they completed in previous
years had identified instances when a sponsor's posted formulary
information for a plan included formulary enhancements that were not
on the sponsor's approved plan formulary in HPMS, CMS did not view
these discrepancies as a problem because formulary enhancements do not
disadvantage beneficiaries.
Most Mid-Year Formulary Changes Were Enhancements; about 5 Percent of
Beneficiaries Were Potentially Affected by a Negative Change:
Sponsors Implemented Multiple Mid-Year Formulary Changes for Almost
all Plans in 2008 and 2009, the Majority of Which Added Drugs or
Loosened Restrictions on Utilization:
Sponsors implemented multiple mid-year changes for essentially all
plans (see table 1), totaling over 446,000 changes in 2008 and over
475,000 changes in 2009.[Footnote 33] Specifically, all but four of
the 4,238 plans in 2008 had one or more mid-year changes and all 4,207
plans had 5 or more changes in 2009. Forty-seven percent of plans had
more than 100 changes and a small number had more than 1,000 changes
in 2008. Sixty percent of plans had more than 100 changes in 2009.
More plans had a change that enhanced the formulary, such as adding a
drug to the formulary or removing UM requirements from a drug, than
had negative changes, such as removing a drug from the formulary.
[Footnote 34]
Table 1: Percentage of All Plans With At Least One Mid-Year Formulary
Change by Type of Change, 2008 and 2009:
Type of change: Enhancements:
Type of change: Drug Added;
2008[A]: 98.5%;
2009[A]: 100.0%.
Type of change: Removed UM;
2008[A]: 96.%2;
2009[A]: 97.9%.
Type of change: Negative:
Type of change: Removed drug, add offset drug;
2008[A]: 46.4%;
2009[A]: 40.0%.
Type of change: Removed drug without offset;
2008[A]: 16.8%;
2009[A]: 18.4%.
Type of change: Tightened UM with offset drug;
2008[A]: 20.1%;
2009[A]: 26.5%.
Type of change: Tightened UM without offset;
2008[A]: 46.6%;
2009[A]: 30.2%.
Type of change: Plans with at least one mid-year change;
2008[A]: 99.9%;
2009[A]: 100.0%.
Type of change: Plans with more than 100 mid-year changes;
2008[A]: 46.9%;
2009[A]: 59.6%.
Source: GAO analysis of CMS formulary data.
Note: Our analysis included negative mid-year changes for which
sponsors requested approval through CMS's Health Plan Management
System (HPMS) and all enhancements. Sponsors are not required to
obtain such approval to make mid-year formulary changes that remove a
drug that has been deemed unsafe or withdrawn from the market by the
FDA or a product manufacturer. The change types include changes to
utilization management (UM) requirements.
[A] Our analysis included the 4,238 total stand alone prescription
drug plans (PDP) and Medicare Advantage prescription drug (MA-PD)
plans operating as of January 1, 2008 and the 4,207 plans operating as
of January 1, 2009. To focus on plans available to eligible
beneficiaries, we excluded plans with restricted enrollment--employer-
sponsored, Demonstration, Cost, PACE, and religious fraternal benefit
plans--and excluded plans with zero enrollment as of January 1 of each
year.
[End of table]
Formulary enhancements accounted for the majority of total changes in
both years: 87.4 percent in 2008 and 88.6 percent in 2009 (see figure
1). Specifically, the addition of a drug to a plan's formulary
accounted for 56.7 percent of changes in 2008 and 63.5 percent in
2009. Changes that loosened restrictions on utilization by removing UM
requirements from drugs on a plan's formulary comprised 30.7 percent
of changes in 2008 and 25.1 percent of changes in 2009. Negative
changes accounted for 12.6 percent of changes in 2008 and 11.4 percent
in 2009. In both years, the most common negative change (7.8 percent
of mid-year changes in 2008 and 5.9 percent in 2009) was removing a
drug while adding an offset drug to the formulary, including changes
such as substituting a brand name drug with a newly approved generic
drug. Another common negative change was tightening UM requirements to
a drug without adding an offset drug to the formulary, which accounted
for 2.8 percent of mid-year changes in 2008 and increased to 3.4
percent in 2009. (See enclosure II for more information about the
number of mid-year formulary changes implemented in 2008 and 2009.)
Figure 1: Distribution of Mid-Year Formulary Changes by Type of
Change, 2008 and 2009:
[Refer to PDF for image: 2 pie-charts]
Mid-Year Formulary Changes 2008: total 446,525:
Removed drug without offset: 0.4%;
Tightened UM with offset drug: 1.7%;
Tightened UM without offset: 2.8%;
Removed drug, add offset drug: 7.8%;
[Total negative changes: 12.6%]
Removed UM: 30.7%;
Drug added: 56.7%.
Mid-Year Formulary Changes 2009: total 475,697:
Removed drug without offset: 0.5%;
Tightened UM with offset drug: 1.5%;
Tightened UM without offset: 3.4%;
Removed drug, add offset drug: 5.9%;
[Total negative changes: 11.4%]
Removed UM: 25.1%;
Drug added: 63.5%.
Source: GAO analysis of CMS formulary data.
Note: Our analysis included negative mid-year changes for which
sponsors requested approval through CMS's Health Plan Management
System (HPMS) and all enhancements. Sponsors are not required to
obtain such approval to make mid-year formulary changes that remove a
drug that has been deemed unsafe or withdrawn from the market by the
FDA or a product manufacturer. The change types include changes to
utilization management (UM) requirements. Percentages do not add due
to rounding.
[End of figure]
To focus on plans available to eligible beneficiaries, we excluded
plans with restricted enrollment--employer-sponsored, Demonstration,
Cost, PACE, and religious fraternal benefit plans--and excluded plans
with zero enrollment as of January 1 of each year.
Mid-year formulary changes implemented in 2008 and 2009 affected a
majority of Part D drugs, but the percentage of drugs affected by a
mid-year change to any plan's formulary decreased from 88.2 percent in
2008 to 70.5 percent in 2009.[Footnote 35] More drugs were affected by
enhancements than negative changes in both years. For example, the
number of drugs added to any plan's formulary was 1,335 in 2008 and
868 in 2009.[Footnote 36] In contrast, the number of drugs affected by
negative mid-year changes was smaller. For example, 101 drugs in 2008
and 87 drugs in 2009 were removed from any plan's formulary in
conjunction with the addition of an offset drug to the formulary.
About 5 Percent of Beneficiaries (over 1.1 Million) Filled a
Prescription for a Drug in 2008 Later Affected by a Negative Mid-Year
Formulary Change:
In 2008, about 5 percent of beneficiaries (over 1.1 million) filled a
prescription for a drug later affected by a negative mid-year
formulary change (see table 2).[Footnote 37] Sixty-eight percent of
these beneficiaries, more than 755,000 (3.3 percent of all
beneficiaries), had access to an offset drug, such as a generic, added
as part of the formulary change that removed their drug from the
formulary or tightened UM requirements for the drug. There were more
than 375,000 beneficiaries (1.6 percent of all beneficiaries) who
filled a prescription for a drug later affected by a mid-year
formulary change that removed the drug or tightened UM requirements
for the drug without adding an offset drug to the formulary. At least
5 percent of the 1.1 million beneficiaries were potentially affected
by more than one negative mid-year change. However, CMS's
grandfathering policy is designed so that beneficiaries currently
taking prescription drugs affected by certain negative mid-year
formulary changes are ensured continued access to those drugs for the
remainder of the year.
Table 2: Percentage of Beneficiaries Potentially Affected by Negative
Mid-Year Formulary Changes, 2008:
Type of change: Removed drug, add offset drug;
2008: Number of beneficiaries: 500,770;
2008: Percentage of all beneficiaries[A]: 2.2%.
Type of change: Removed drug without offset;
2008: Number of beneficiaries: 23,928;
2008: Percentage of all beneficiaries[A]: 0.1%.
Type of change: Tightened UM with offset drug;
2008: Number of beneficiaries: 256,413;
2008: Percentage of all beneficiaries[A]: 1.1%.
Type of change: Tightened UM without offset;
2008: Number of beneficiaries: 352,652;
2008: Percentage of all beneficiaries[A]: 1.5%.
Type of change: Total beneficiaries that filled a prescription for at
least one drug later affected by a negative mid-year change;
2008: Number of beneficiaries: 1,109,180[B];
2008: Percentage of all beneficiaries[A]: 4.9%.
Source: GAO analysis of CMS formulary and claims data.
Note: To estimate the number of beneficiaries potentially affected by
negative mid-year changes, we counted the number of beneficiaries who
filled a prescription for an affected drug up until the approved
effective date of each mid-year change. CMS's grandfathering policy is
designed so that beneficiaries currently taking prescription drugs
affected by certain negative mid-year formulary changes are ensured
continued access to those drugs for the remainder of the year. Our
analysis included negative mid-year changes for which sponsors
requested approval through CMS's Health Plan Management System (HPMS).
Sponsors are not required to obtain such approval to make mid-year
formulary changes that remove a drug that has been deemed unsafe or
withdrawn from the market by the FDA or a product manufacturer. The
change types include changes to utilization management (UM)
requirements.
[A] As of January 1, 2008, there were 22,823,854 total beneficiaries
enrolled in a stand alone prescription drug plan (PDP) or Medicare
Advantage prescription drug (MA-PD) plan that we reviewed. To focus on
plans available to eligible beneficiaries, we excluded plans with
restricted enrollment--employer-sponsored, Demonstration, Cost, PACE,
and religious fraternal benefit plans--and excluded plans with zero
enrollment as of January 1.
[B] Some beneficiaries filled a prescription for more than one drug
affected by a negative mid-year change; that is, were potentially
affected by more than one change. Therefore the total number of
beneficiaries that filled a prescription for at least one drug
affected by a negative mid-year change is less than the sum of
beneficiaries that filled a prescription for each type of change.
[End of table]
Agency Comments and Our Evaluation:
CMS provided written comments on a draft of this report. CMS generally
agreed with our findings. CMS noted that our characterization of the
agency's implementation of the Negative Change Request module in 2008
may be misleading because we did not clearly state that sponsors were
required to request negative changes prior to 2008. We have modified
the draft to provide this clarification. In addition, CMS commented
that we should add additional qualifications to the results of our
estimate of the number of beneficiaries potentially affected by a
negative mid-year change. Specifically, CMS stated that our
methodology for identifying potentially affected beneficiaries could
have resulted in an overestimate, as some beneficiaries who filled a
single prescription early in the year may not have been taking the
drug at the time the formulary change took effect. We agree that our
methodology estimated the maximum number of beneficiaries that could
have been potentially affected by a negative mid-year change and added
language to note this in our methodology. CMS also asked that we take
additional steps to highlight the agency's policy of approving certain
negative changes on the condition that beneficiaries currently taking
the affected drug should be exempt from the change for the remainder
of the year. We modified the draft by providing additional references
to this policy. Finally, CMS stated that we should clarify that our
analysis included a certain type of mid-year formulary change. We
included all requested negative mid-year changes in our analysis; a
detailed explanation of our methods is provided in appendix I of the
report.
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If you or your staff have any questions about this report please
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the last page of this report. GAO staff who made major contributions
to this report are listed in enclosure III.
Signed by:
Kathleen M. King:
Director, Health Care:
Enclosures - 3:
[End of section]
Enclosure I: Scope and Methodology:
To examine the mid-year formulary changes that Part D sponsors made
for their plans in 2008 and 2009, we obtained Health Plan Management
System (HPMS) data files, including formulary files, from the Centers
for Medicare & Medicaid Services (CMS) for Medicare Advantage
prescription drug (MA-PD) plans and stand-alone prescription drug
(PDP) plans for years 2008 and 2009.[Footnote 38] To identify mid-year
changes for each year we compared the beginning of the year and end of
the year formulary files (January and December, respectively) at the
drug name level[Footnote 39] and identified drugs and utilization
management (UM) requirements that differed at the end of each year.
[Footnote 40] For changes that involved a drug and a corresponding
offset--a drug added to the formulary to offset the change--we counted
a change to both drug names as a single change.[Footnote 41] Although
we have identified all changes implemented as of the end of the year,
we may not have identified formulary changes that were implemented and
reversed through the course of the year.
For the purposes of this report, we categorized mid-year formulary
changes as either enhancements or negative changes. CMS refers to
changes that enhance the formulary as "enhancements" and changes that
restrict the formulary as "negative." CMS further categorizes negative
changes as maintenance or non-maintenance based on information
submitted by sponsors when requesting approval to make negative
formulary changes through the Negative Change Request (NCR) module in
HPMS.[Footnote 42] Therefore most "negative" mid-year changes have an
associated NCR submission and we identified negative changes that
sponsors requested for each year using the NCR file from HPMS.
However, our analysis indicated that some negative changes were
implemented differently than requested in the NCR file. Therefore we
did not categorize implemented negative changes as maintenance or non-
maintenance. Rather, we categorized types of mid-year formulary
changes based on the plan's actual implementation of the change.
[Footnote 43] Specifically, we categorized two types of changes as
enhancements to the formulary:
* when a drug was added to the formulary which we referred to as "drug
added"; or:
* when any existing UM requirement for a drug on the formulary was
removed or loosened, referred to as "removed UM requirements."
There were four types of changes that we categorized as negative
changes, specifically:
* when a drug was removed from the formulary and an offset was added,
referred to as "removed drug, add offset drug";
* when a drug was removed from the formulary, referred to as "removed
drug without offset";
* when any UM requirement was added to a drug and an offset drug was
added, referred to as "tightened UM with offset drug"; and:
* when any UM requirement was added to a drug, referred to as
"tightened UM without offset."[Footnote 44]
Our analysis included implemented negative mid-year changes for which
sponsors requested approval through CMS's HPMS and all enhancements.
We reported the number of implemented mid-year changes by type in each
year. We determined the plans that had mid-year changes using CMS's
plan information files for 2008 and 2009.[Footnote 45]
To estimate the number of Part D beneficiaries who filled a
prescription for a drug later affected by a negative mid-year change,
we examined 2008 Prescription Drug Event (PDE) data.[Footnote 46]
Specifically, for each implemented negative mid-year change with
approval from CMS, we identified PDE claims for beneficiaries who
filled a prescription for the drug affected by the change at any point
from the beginning of the year up until the approved effective date of
the change.[Footnote 47] For the purposes of this report, we used
beneficiaries who filled a prescription for a drug later affected by a
mid-year change up until the approved effective date of the change as
a measure of beneficiaries potentially affected by negative mid-year
changes. This approach includes all beneficiaries who filled a
prescription for a drug prior to the mid-year change, some of whom may
not have continued to require use of the drug at the time the mid-year
change took effect. To calculate the percentage of the Part D
population that filled a prescription for a drug affected by a
negative mid-year change, we divided the number of beneficiaries who
filled a prescription for a drug affected by these changes by the
total number of Part D beneficiaries who were enrolled in a Part D
plan included in our review as of January 1, 2008. We completed these
analyses by mid-year change type and the number of changes by which a
beneficiary was potentially affected.
To assess the reliability of CMS data we reviewed data documentation;
tested data elements for missing data, outliers, and errors; and
discussed and resolved inconsistencies found in data elements with CMS
officials responsible for data management. Based on these activities
we determined that the data were sufficiently reliable for our
purposes.
[End of section]
Enclosure II: Number and Percent of Mid-Year Formulary Changes across
All Plans, 2008 and 2009:
Type of change: Enhancements;
2008[A]:
Number changes[B]: 390,092;
Percentage of category: 100.0%;
Percentage of all changes: 87.4%;
2009[A]:
Number changes[B]: 421,607;
Percentage of category: 100.0%;
Percentage of all changes: 88.6%;
Percentage change 2008 to 2009: 8%.
Type of change: Drug Added;
2008[A]:
Number changes[B]: 252,975;
2008[A]:
Percentage of category: 64.9%;
Percentage of all changes: 56.7%;
2009[A]:
Number changes[B]: 302,103;
Percentage of category: 71.7%;
Percentage of all changes: 63.5%;
Percentage change 2008 to 2009: 19%.
Type of change: Removed UM;
2008[A]:
Number changes[B]: 137,117;
Percentage of category: 35.1%;
Percentage of all changes: 30.7%;
2009[A]:
Number changes[B]: 119,504;
Percentage of category: 28.3%;
Percentage of all changes: 25.1%;
Percentage change 2008 to 2009: -13%.
Type of change: Negative;
2008[A]:
Number changes[B]: 56,433;
2008[A]:
Percentage of category: 100.0%;
Percentage of all changes: 12.6%;
2009[A]:
Number changes[B]: 54,090;
Percentage of category: 100.0%;
Percentage of all changes: 11.4%;
Percentage change 2008 to 2009: -4%.
Type of change: Removed drug, add offset drug;
2008[A]:
Number changes[B]: 34,725;
Percentage of category: 61.5%;
Percentage of all changes: 7.8%;
2009[A]:
Number changes[B]: 28,277;
Percentage of category: 52.3%;
Percentage of all changes: 5.9%;
Percentage change 2008 to 2009: -19%.
Type of change: Removed drug without offset;
2008[A]:
Number changes[B]: 1,641;
Percentage of category: 2.9%;
Percentage of all changes: 0.4%;
2009[A]:
Number changes[B]: 2,578;
Percentage of category: 4.8%;
Percentage of all changes: 0.5%;
Percentage change 2008 to 2009: 57%.
Type of change: Tightened UM with offset drug;
2008[A]:
Number changes[B]: 7,587;
Percentage of category: 13.4%;
Percentage of all changes: 1.7%;
2009[A]:
Number changes[B]: 7,141;
Percentage of category: 13.2%;
Percentage of all changes: 1.5%;
Percentage change 2008 to 2009: -6%.
Type of change: Tightened UM without offset;
2008[A]:
Number changes[B]: 12,480;
Percentage of category: 22.1%;
Percentage of all changes: 2.8%;
2009[A]:
Number changes[B]: 16,094;
Percentage of category: 29.8%;
Percentage of all changes: 3.4%;
Percentage change 2008 to 2009: 29%.
Type of change: Total mid-year changes across all plans;
2008[A]:
Number changes[B]: 446,525;
Percentage of all changes: 100.0%;
2009[A]:
Number changes[B]: 475,697;
Percentage of all changes: 100.0%;
Percentage change 2008 to 2009: 7%.
Source: GAO analysis of CMS formulary data.
Note: Our analysis included negative mid-year changes for which
sponsors requested approval through CMS's Health Plan Management
System (HPMS) and all enhancements. Sponsors are not required to
obtain such approval to make mid-year formulary changes that remove a
drug that has been deemed unsafe or withdrawn from the market by the
FDA or a product manufacturer. The change types include changes to
utilization management (UM) requirements. Percentages do not add due
to rounding.
[A] To focus on plans available to eligible beneficiaries, we excluded
plans with restricted enrollment--employer-sponsored, Demonstration,
Cost, PACE, and religious fraternal benefit plans--and excluded plans
with zero enrollment as of January 1 of each year.
[B] We reported the total number of changes sponsors made across all
plans. To arrive at the total number of changes, we counted the number
of specific mid-year changes to a drug and multiplied each unique
change by the number of plans for which the sponsor implemented the
change. We summed these changes across plans to calculate the total
number of mid-year changes.
[End of table]
[End of section]
Enclosure III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Kathleen M. King at (202) 512-7114 or kingk@gao.gov:
Acknowledgments:
Jennifer Grover, Assistant Director; Rebecca Abela; Alison Binkowski;
Zhi Boon; Jennel Harvey; Julian Klazkin; Laurie Pachter; and Suzanne
Worth were key contributors to this report.
[End of section]
Footnotes:
[1] Pub. L. No. 108-173, § 101, 117 Stat. 2066, 2071-2152 (2003)
(codified, as amended, at 42 U.S.C. §§ 1395w-101--1395w-152).
[2] The number of total Medicare Part D enrollees excludes individuals
enrolled in plans with restricted enrollment, i.e., employer-
sponsored, Demonstration, Cost, PACE, and religious fraternal benefit
plans.
[3] Sponsors offer drug coverage either through stand-alone
prescription drug plans (PDP), or through Medicare Advantage
prescription drug (MA-PD) plans for beneficiaries enrolled in Medicare
Advantage, Medicare's managed care program--Medicare Part C.
[4] As of February 2009, Part D enrollment was concentrated in plans
offered by a small number of sponsors. Medicare Payment Advisory
Commission, A Data Book: Healthcare Spending and the Medicare Program
(Washington, D.C: June 2009).
[5] 42 C.F.R. § 423.120(b)(2010); CMS Medicare Prescription Drug
Benefit Manual (CMS), chapter 6, Part D Drugs and Formulary
Requirements, §§ 20.1, 30.1.5, 30.2.1, 30.2.8 (2008). The Medicare
Prescription Drug Benefit Manual consists of multiple chapters related
to various Part D program areas and outlines Part D requirements and
CMS guidance.
[6] Drugs on formularies are grouped into categories and classes that
treat the same condition or that work in a similar way. Sponsors
generally must include at least two drugs within each therapeutic
category and class of covered Part D drugs. Exceptions are allowed,
for example, when there is only one drug in a particular category or
class. In addition, CMS requires that formularies include "all or
substantially all" drugs within six designated categories of clinical
concern. 42 U.S.C. § 1395w-104(b)(3)(C)(i); 42 C.F.R. §
423.120(b)(2)(2010); CMS, chapter 6, § 30.2.5 (2008).
[7] The Part D program year is from January 1 through December 31. In
June of the preceding year during the annual bid process, sponsors
must submit separate bids for each plan, including any changes to
formularies and plan benefit designs, to CMS. Sponsors must receive
approval from CMS prior to implementing these changes for the next
year. Beneficiaries may choose a drug plan during the Part D annual
coordinated election period. Drug coverage under the elected new plan
is effective on January 1 of the next year.
[8] CMS's prescription drug event data (PDE) data contain a record of
each claim reimbursed under the Part D program. PDE data for 2008 were
the most recent available at the time of our review.
[9] CMS refers to changes that enhance the formulary as "enhancements"
and changes that restrict the formulary as "negative." CMS further
categorizes negative changes as maintenance or non-maintenance
changes. Maintenance changes include those involving generic
substitution or modifying a formulary due to new information on a
drug's safety or effectiveness. Non-maintenance changes include drug
removals or tightening of UM requirements for reasons other than
safety or generic substitution.
[10] To focus on plans available to eligible beneficiaries, we
excluded plans with restricted enrollment--employer-sponsored,
Demonstration, Cost, PACE, and religious fraternal benefit plans--and
excluded plans with zero enrollment as of January 1 of each year.
[11] Sponsors upload formulary files--containing their approved
formularies--to CMS's Health Plan Management System (HPMS). Sponsors
may use the same uploaded formulary file for multiple plans.
[12] We counted the number of specific mid-year changes to a drug and
multiplied each unique change by the number of plans for which the
sponsor implemented the change. We summed these changes across plans
to calculate the total number of mid-year changes.
[13] Sponsors are required to request approval from CMS prior to the
implementation of most negative changes to their plans' formularies.
[14] Hereafter, we refer to the addition of a drug such as a generic
to offset a mid-year formulary change as an offset. According to CMS,
an offset drug can be any FDA-defined therapeutic alternative to the
drug being affected--for example, a lower-cost generic.
[15] According to CMS policy, beneficiaries currently taking
prescription drugs affected by certain negative mid-year formulary
changes are ensured continued access to those drugs for the remainder
of the year.
[16] The Pharmacy and Therapeutics Committee must include at least one
physician and one pharmacist with expertise in the care of elderly or
disabled persons. 42 U.S.C. § 1395w-104(b)(3)(A), (B)(i).
[17] 42 U.S.C. § 1395w-104(c)(1)(A).
[18] HPMS is the electronic information and communication system
between CMS and sponsors participating in Medicare Parts C and D. HPMS
collects data for and manages the following plan enrollment processes:
application process, bid/benefit package submissions, formulary
submissions, marketing material reviews, plan oversight, complaints
tracking, survey data, operational data feeds for enrollment and
payment, and data support for the [hyperlink, http://www.medicare.gov]
Web site.
[19] 42 C.F.R. § 423.120 (b)(4), (5), (6); CMS chapter 6, §§ 30.3 -
30.3.5.
[20] CMS, chapter 6, § 30.3.3.1. CMS officials told us that they would
retroactively deny a formulary enhancement that did not meet formulary
requirements.
[21] CMS, chapter 6, § 30.3.2. Sponsors are not required to obtain pre-
implementation approval from CMS to make mid-year formulary changes
that remove a drug that has been deemed unsafe or withdrawn from the
market by the FDA or a product manufacturer. 42 C.F.R. §
423.120(b)(5)(iii)(2010); CMS chapter 6, §30.3.3.1(2008). Sponsors
must submit all change requests before July 31, and must upload new
formularies containing approved changes to HPMS by October of the year.
[22] CMS categorizes negative changes into two subgroups, called
maintenance changes and non-maintenance changes. Maintenance changes
include those involving generic substitution or modifying a formulary
due to new information on a drug's safety or effectiveness. Non-
maintenance changes include drug removals or tightening of UM
requirements for reasons other than safety or generic substitution.
CMS's implicit and explicit negative change approval policies are
associated with the maintenance and non-maintenance change types,
respectively.
[23] See CMS chapter 6, §§ 30.3.3.1, 30.3.3.3. According to CMS
officials, sponsors are responsible for defining which beneficiaries
they consider "currently taking" the affected drug. For example, a
sponsor could define beneficiaries "currently taking" an affected drug
as any beneficiary who filled a prescription for the drug 2, 3, or 4
months prior to a mid-year change.
[24] The grandfathering policy applies only to negative formulary
changes that CMS categorizes as non-maintenance changes; the policy
does not apply to changes that CMS categorizes as maintenance changes.
[25] 42 U.S.C. §§ 1395w-104(b)(3)(E); 42 C.F.R. § 423.120(b)(5)(2010);
CMS chapter 6, § 30.3.4.1. Sponsors must provide written notice at
least 60 days prior to the date the change becomes effective or
provide a 60 day supply of the drug and written notice at the time an
affected beneficiary requests a refill. Sponsors may immediately
remove drugs deemed unsafe by the FDA or removed from the market by
the manufacturer, but must provide retrospective notice to
beneficiaries and others. 42 C.F.R. § 423.120(b)(5)(iii)(2010). CMS
chapter 6, §§ 30.3.4.1, 30.3.4.3.
[26] 42 U.S.C. § 1395w-104(a)(3)(B).
[27] In addition, sponsors must update the formularies maintained on
their Web sites at least once per month. CMS chapter 3, Medicare
Marketing Guidelines, §§ 60.5, 60.5.4.
[28] Prior to 2008, CMS required Part D sponsors to submit change
requests via a standardized template.
[29] 42 C.F.R. § 423.120(b)(2)(i).
[30] CMS officials stated that they also monitor the number of
negative changes sponsors request for their plans' formularies and
follow up with sponsors that are outliers in the number of requests
they submit.
[31] For example, CMS would retroactively deny the addition of a new
drug to an incorrect formulary tier; however, CMS officials told us
that they have never taken such action.
[32] The complaint tracking module (CTM) is CMS's centralized
complaint system. Beneficiaries can express dissatisfaction with any
aspect of the Part D program, other than coverage determinations, by
filing a complaint with CMS which is logged into CMS's CTM system, or
by filing a grievance directly with their respective sponsors. We have
previously reported that while CMS developed a systematic oversight
process that includes the CTM for tracking and resolving beneficiary
complaints, CMS oversight of the grievance process was not as robust.
GAO, Medicare Part D: Complaint Rates Are Declining, but Operational
and Oversight Challenges Remain, GAO-08-719 (Washington D.C.: June 27,
2008). Since that report, CMS indicated that the agency has
implemented additional measures to improve the reliability and
consistency of its grievance data and is developing plans to target
audits to monitor sponsors' compliance with grievance requirements.
[33] We reported the total number of changes sponsors made across all
plans. To arrive at the total number of changes, we counted the number
of specific mid-year changes to a drug and multiplied each unique
change by the number of plans for which the sponsor implemented the
change. We summed these changes across plans to calculate the total
number of mid-year changes.
[34] For the purposes of this report we categorized types of mid-year
changes based on the plan's actual implementation of the change. Our
analysis included negative mid-year changes for which sponsors
requested approval through CMS's HPMS and all enhancements. Sponsors
are not required to obtain such approval to make mid-year formulary
changes that remove a drug that has been deemed unsafe or withdrawn
from the market by the FDA or a product manufacturer.
[35] There were 2,577 drug names--brand or generic name--in 2008 and
2,495 in 2009 that appeared on either a January or December formulary
file.
[36] To arrive at the number of drugs added to any plan's formulary,
we counted the number of drug names added to each plan's formulary at
the end of the year, irrespective of whether or not another plan's
formulary included these drug names at the beginning of the year. We
then summed the drug name additions across all plans.
[37] To estimate the number of beneficiaries potentially affected by
negative mid-year changes, we counted the number of beneficiaries who
filled a prescription for an affected drug up until the approved
effective date of each mid-year change. Our analysis included negative
mid-year changes for which sponsors requested approval through CMS's
Health Plan Management System (HPMS).
[38] To focus on plans available to eligible beneficiaries, we
excluded plans with restricted enrollment--employer-sponsored,
Demonstration, Cost, PACE, and religious fraternal benefit plans--and
excluded plans with zero enrollment as of January 1 of each year.
Sponsors upload formulary files--containing their approved
formularies--to CMS's HPMS. Sponsors may use the same uploaded
formulary file for multiple plans.
[39] To develop a list of drugs for the 2008 and 2009 formularies we
started with the reference National Drug Codes (NDC) included on the
January and December CMS formulary reference files for each year. This
file includes a set of reference (proxy) NDCs that may be included on
Part D formularies. CMS began using a reference file in 2007. The
codes on the reference file represent multiple forms and strengths of
drugs, but not every manufacturer or package size for a particular
drug. We generally grouped NDCs to identify changes at the drug name
level--the brand or the generic names--because that is the level at
which beneficiaries most likely identify a drug. We merged the
beginning and end of year formulary files with data from RED BOOK™--a
drug pricing compendium published by Thomson Reuters--to obtain the
drug name for each covered drug.
[40] We reported the total number of changes sponsors made across all
plans. To arrive at the total number of changes, we counted the number
of specific mid-year changes to a drug and multiplied each unique
change by the number of plans for which the sponsor implemented the
change. We summed these changes across plans to calculate the total
number of mid-year changes made.
[41] According to CMS, an offset drug can be any Food and Drug
Administration (FDA)-defined therapeutic alternative to the drug being
affected--for example, a generic or multi-source brand name drug.
[42] Sponsors are required to request approval from CMS through HPMS
prior to the implementation of negative changes to their plans'
formularies except for changes that remove a drug that has been deemed
unsafe or withdrawn from the market by the FDA or a product
manufacturer.
[43] In general, our "enhancement" and "negative" change categories
correspond to CMS's "enhancement" and "negative" change categories
respectively.
[44] In addition, less than one percent of mid-year changes in each
year involved the removal and replacement of a UM requirement to a
drug on the formulary with another UM requirement; we excluded these
changes from our analysis.
[45] To determine the number of drugs added to any plan's formulary,
we counted the number of drug names added to each plan's formulary at
the end of the year, irrespective of whether or not another plan's
formulary included these drug names at the beginning of the year. We
then summed the drug name additions across all plans.
[46] CMS's PDE data contain a record of each claim reimbursed under
the Part D program. PDE data for 2008 were the most recent available
at the time of our review.
[47] Our count of beneficiaries who filled a prescription for a drug
later affected by a negative mid-year change is an estimate, given
that we used the approved effective date as a proxy for the mid-year
change implementation date.
[End of section]
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