HHS OIG: CMS Enhanced Controls for Terminated Drug Utilization for Medicare Part D, Not Always Useful

According to a recent report by the Department of Health and Human Services Office of Inspector General (HHS OIG), steps taken by the Centers for Medicare & Medicaid Services (CMS) to address terminated drug utilization in Medicare Part D were not entirely effective. As a result, CMS continued to accept some prescription drug event (PDE) data for terminated drugs in calendar years (CYs) 2014 and 2015.

This report stems from a 2010 OIG audit that reported that in calendar years (CYs) 2006 and 2007, the CMS accepted PDE data totaling $112.1 million for 2,967 terminated drugs. That audit reported that, even though terminated drugs could be weak, ineffective, or detrimental to beneficiaries’ health, Federal regulations did not prohibit coverage of terminated drugs under Medicare Part D. At that time, HHS OIG recommended that CMS issue regulations to prohibit Part D coverage of terminated drugs.

CMS has taken steps since our previous audit to address this issue. One such step was enhancing its controls to rely on the Food and Drug Administration’s (FDA) Comprehensive National Drug Code (NDC) Structured Product Labeling Data Elements file (NSDE file) to identify and reject coverage of terminated drugs.

However, although CMS has made improvements to prevent terminated drug utilization in Part D, it accepted PDE data totaling $31.9 million in gross drug costs for 3,705 terminated drugs in CYs 2014 and 2015. According to the HHS OIG report, CMS did not compare the information on termination dates in its quarterly Medicaid drug rebate files with the FDA’s file, did not investigate the discrepancies that existed between these two data sources, and did not update its system edits in a timely manner.

In response, therefore, HHS OIG recommended that CMS continue to strengthen its internal controls to ensure that all PDE data for terminated drugs are rejected by working with FDA to verify the accuracy of drug termination dates, to include comparing the information on termination dates in its two data sources, investigating discrepancies between the data sources, and verifying termination dates with the manufacturers; and by updating its system edits with a new version of FDA’s file on a more timely basis.

CMS concurred with the second recommendation but not with the first, stating that while it remains committed to strengthening its internal controls to ensure that PDE data for terminated drugs are rejected, it considers the FDA to be the expert authority and source for national drug code listing information. HHS OIG maintains that the findings and recommendations remain valid, and continue to assert that it is the responsibility of CMS to use the information in the drug rebate files to identify differences between the two data sources.