Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
I M
NAPPROPRIATE  EDICARE 
 
 
P D P  
ART    AYMENTS FOR 
 
 
S II D B
CHEDULE    RUGS  ILLED 
R  
AS  EFILLS
 
Daniel R. Levinson  
Inspector General 
 
September 2012 
OEI-02-09-00605   
   
EXECUTIVE SUMMARY:  INAPPROPRIATE MEDICARE PART D PAYMENTS 
FOR SCHEDULE II DRUGS BILLED AS REFILLS 
OEI-02-09-00605 
 
 
WHY WE DID THIS STUDY  
 
Schedule II drugs have the highest potential for abuse of any prescription drugs legally 
available in the United States.  They include narcotics commonly used to relieve pain and 
stimulants.  Federal law prohibits the refilling of prescriptions for them.  In addition, 
Schedule II drugs cannot be dispensed without a prescription that contains the name, 
address, and signature of the prescriber. 
 
HOW WE DID THIS STUDY 
 
We based this study on an analysis of prescription drug event records.  Sponsors submit 
these records to the Centers for Medicare & Medicaid Services (CMS) for each drug 
dispensed to beneficiaries enrolled in their plans.  Each record contains information about 
the pharmacy, prescriber, and drug.  We analyzed all of the records for refills of Schedule 
II drugs that were billed in 2009. 
 
WHAT WE FOUND 
 
Medicare Part D inappropriately paid $25 million for Schedule II drugs billed as refills in 
2009.  Sponsors should not have paid for any of these drugs because Federal law 
prohibits the refilling of Schedule II controlled substances.  Some of these drugs may 
have been inaccurately billed.  It is possible that some long-term-care pharmacies 
incorrectly billed these drugs as refills when they were partial fills.  Partial fills occur 
when a pharmacist does not dispense all doses of the prescribed medication at one time.  
Several concerns exist, however, if partial fills are inaccurately billed as refills.  
Moreover, over 25,000 Schedule II refills had invalid prescribers.  Lastly, three-quarters 
of Part D sponsors paid for Schedule II drugs billed as refills, indicating that many 
sponsors do not have adequate controls to prevent these refills. 
 
WHAT WE RECOMMEND 
 
We recommend that CMS:  (1) issue guidance to sponsors to prevent billing of  
Schedule II refills and to ensure accurate billing of partial fills; (2) exclude Schedule II 
refills when calculating payments to sponsors; (3) monitor sponsors to ensure that they 
validate prescriber numbers for Schedule II drugs; and (4) follow up on sponsors, 
pharmacies, and prescribers with high numbers of refills.  CMS concurred with our 
recommendation to monitor sponsors to ensure they validate prescriber numbers and 
partially concurred with the other three recommendations.  
 
   
   
   
TABLE OF CONTENTS 
 
Objective ......................................................................................................1 
Background ..................................................................................................1 
Methodology ................................................................................................6 
Findings........................................................................................................9 
Medicare Part D inappropriately paid $25 million for Schedule II 
drugs billed as refills in 2009 ...........................................................9 
Some of these drugs may have been inaccurately billed ...............10 
Over 25,000 of the Schedule II drugs billed as refills had 
invalid prescribers .......................................................................... 11 
Three-quarters of Part D sponsors paid for Schedule II drugs 
billed as refills ................................................................................12 
Conclusion and Recommendations ............................................................13 
Agency Comments and Office of Inspector General Response .....15 
Appendix ....................................................................................................17 
A:  Agency Comments ...................................................................17 
Acknowledgments......................................................................................21 
 
   
   
OBJECTIVE 
To determine the extent to which Medicare Part D paid for Schedule II 
drugs billed as refills in 2009. 
BACKGROUND 
Schedule II drugs have the highest potential for abuse of any prescription 
drugs legally available in the United States.1  They include narcotics 
commonly used to relieve pain and stimulants.  The Drug Enforcement 
Agency (DEA) regulates Schedule II drugs, and the Controlled Substance 
Act prohibits the refilling of prescriptions for them.  In 2009, Medicare 
Part D paid $2.2 billion for Schedule II drugs. 
Abuse of Schedule II and other prescription drugs is a serious problem. 
The Centers for Disease Control and Prevention (CDC) has characterized 
prescription drug abuse as an epidemic.2  In fact, more deaths in 2007 
were caused by prescription painkillers, including several Schedule II 
drugs, than by cocaine and heroin combined.3 
In addition to causing public health concerns, Schedule II drugs have been 
at the center of several schemes to defraud the Medicare Part D program.  
Schemes involving Schedule II drugs include forged prescriptions and 
diversion through unscrupulous pharmacists, doctors, and dentists.4  In a 
recent case, two Los Angeles-based doctors were charged with health care 
fraud for knowingly prescribing Schedule II drugs to individuals who did 
not have a medical need for them.  Over an 18-month period, Medicare 
Part D paid more than $2.7 million for the Schedule II drugs prescribed by 
these doctors.5 
There have also been several recent DEA settlements related to the 
dispensing of Schedule II drugs.  A long-term-care pharmacy recently 
 
1 21 U.S.C.  812.  Also see 21 CFR  1308.12 for a listing of drugs identified as Schedule II 
substances. 
2 CDC, Press Release, Prescription Painkiller Overdoses at Epidemic Levels,  
November 1, 2011.  Accessed at 
http://www.cdc.gov/media/releases/2011/p1101_flu_pain_killer_overdose.html on  
February 21, 2012.   
3 CDC, Unintentional Drug Poisoning in the United States, July 2010.  Accessed at 
http://www.cdc.gov/HomeandRecreationalSafety/pdf/poison-issue-brief.pdf on July 12, 2011. 
4 DEA, Drugs and Chemicals of Concern:  Oxycodone.  Accessed at 
http://www.deadiversion.usdoj.gov/drugs_concern/oxycodone/summary.htm on  
September 27, 2011. 
5 Department of Justice (DOJ), Grand Jury Indicts 14 in Los Angeles-Based OxyContin Ring 
That Allegedly Distributed Over 1 Million Pills of the Highly Addictive Painkiller,  
October 13, 2011.  Accessed at www.justice.gov/dea/pubs/states/newsrel/2011/la101311.html 
on February 22, 2012. 
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  1 
   
   
agreed to pay $50 million to resolve Government claims that the pharmacy 
had dispensed controlled substances without written prescriptions and did 
not properly document partial fills of controlled substances.6  DEA also 
reached a settlement with a pharmaceutical distributor for failing to 
maintain adequate controls to prevent the diversion of controlled 
substances, specifically oxycodone.7  In another case, a pharmacy benefits 
manager recently paid almost $3 million to settle claims that it did not 
have practices to prevent diversion of controlled substances and used 
invalid DEA numbers at its mail-order pharmacies.8 
Schedule II Drugs 
The Controlled Substances Act establishes five schedules of drugs that are 
considered controlled.9  These schedules are based on medical use and the 
potential for abuse.  The most restricted is Schedule I, which includes 
drugs that have a high potential for abuse and no currently accepted 
medical use in the United States.  Schedule V is the least restricted. 
Schedule II drugs have a high potential for abuse and may lead to severe 
psychological or physical dependence.10  These drugs include narcotics 
and narcotic substances such as morphine, opium, oxycodone 
(OxyContin), meperidine (Demerol), and fentanyl (Sublimaze or 
Duragesic).  They also include stimulants such as amphetamine 
(Dexedrine, Adderall) and methylphenidate (Ritalin).11  
Schedule II drugs are subject to a number of restrictions under Federal law 
and regulations.  Specifically, Federal law prohibits the refilling of 
prescriptions for Schedule II drugs.12  In addition, Schedule II drugs 
cannot be dispensed without a prescription that contains the name, 
 
6 DEA, Omnicare in $50 Million SettlementLargest Controlled Substance Settlement in 
History, May 11, 2012.  Accessed at 
http://www.justice.gov/dea/pubs/states/newsrel/2012/det051112.html on May 15, 2012. 
7 DEA, DEA Suspends for Two Years Pharmaceutical Wholesale Distributors Ability to Sell 
Controlled Substances from Lakeland, Florida Facility, May 15, 2012.  Accessed at 
http://www.justice.gov/dea/pubs/pressrel/pr051512.html on May 24, 2012. 
8 U.S. Attorneys Office, Eastern District of Pennsylvania, United States Settles With 
Express Scripts Over Diversion Of Controlled Substances And Use Of Improper DEA 
Numbers, May 15, 2012.  Accessed at 
http://www.justice.gov/usao/pae/News/2012/May/esi_release.htm on May 22, 2012. 
9 21 U.S.C.  801 et seq.  
10 21 U.S.C.  812. 
11 DEA, Pharmacists Manual, 2010, p. 5.  Accessed at 
http://www.deadiversion.usdoj.gov/pubs/manuals/pharm2/pharm_manual.pdf on  
November 8, 2011. 
12 21 U.S.C.  829(a).  
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  2 
   
   
address, and signature of the prescriber.13  DEA regulations further require 
that Schedule II drugs be prescribed by individual practitioners who are 
registered with DEA.14  
DEA guidance states that prescribing practitioners and pharmacists are 
responsible for ensuring that Schedule II drugs are dispensed properly.  
The guidance states that the practitioner is responsible for ensuring that 
the prescription conforms to all Federal and State laws and regulations.15  
It further states that a pharmacist who deliberately fills a questionable 
prescription may be prosecuted, along with the issuing practitioner, for 
knowingly and intentionally distributing controlled substances.16 
In addition, Federal regulations limit the circumstances under which 
partial fills of Schedule II drugs are permissable.17  Partial fills occur when 
a pharmacist does not dispense all doses of the prescribed medication at 
one time; instead, the pharmacist dispenses the drug over multiple fills.  
Partial fills of Schedule II drugs must be completed within 72 hours, 
unless the patient is in a long-term-care facility or terminally ill.  Partial 
fills are not considered refills.18 
Medicare Part D 
Medicare Part D provides an optional prescription drug benefit to 
Medicare beneficiaries.  The Centers for Medicare & Medicaid Services 
(CMS) contracts with private insurance companies, known as sponsors, to 
provide drug coverage to beneficiaries who choose to enroll.  These 
sponsors contract with a network of pharmacies to dispense drugs to the 
 
13 In 2009, Schedule II drugs could not be dispensed without a written prescription except in 
emergency situations and when dispensed directly to the ultimate user by a practitioner other 
than a pharmacist.  A paper prescription could be transmitted to the pharmacy by the 
practitioner or his or her agent via facsimile machine.  21 CFR  1301.11.  Also see DEA, 
Practitioners Manual Section V  Valid Prescription Requirements, 2006.  Accessed at 
http://www.deadiversion.usdoj.gov/pubs/manuals/pract/section5.htm on November 1, 2011.  
Beginning in 2010, practitioners were allowed to sign and transmit electronic prescriptions for 
controlled substances under certain circumstances.  See 21 CFR  1301.08. 
14 Practitioners must be authorized to prescribe controlled substances by the jurisdiction in 
which they are licensed to practice.  DEA maintains a registry of all these practitioners and 
includes their assigned DEA numbers and information about which schedules of drugs each is 
allowed to prescribe.  DEA registration grants practitioners Federal authority to handle 
controlled substances.  See 21 CFR  1301.11. 
15 DEA, Pharmacists Manual, 2010, p. 29.  Accessed at 
http://www.deadiversion.usdoj.gov/pubs/manuals/pharm2/pharm_manual.pdf on  
November 8, 2011. 
16 Ibid., p. 30. 
17 21 CFR  1306.13. 
18 Although Schedule II drugs cannot be refilled, practitioners may issue multiple 
prescriptions at one time, each authorizing a 90-day supply.  21 CFR  1306.12. 
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  3 
   
   
beneficiaries enrolled in their plans.  These pharmacies include, retail, 
long-term-care, specialty, and mail-order pharmacies, among others.19 
Sponsors are required to safeguard Part D from fraud and abuse.  CMS 
recommends that sponsors use claims processing edits to monitor their 
programs and to automatically deny payment, when appropriate.20  
Beginning in January 2012, CMS required sponsors to ensure that the 
prescriber identifiers on Prescription Drug Event (PDE) records are active 
and valid.  They must also confirm that any controlled substances are 
consistent with the schedule of drugs that the provider is allowed to 
prescribe.  To do this, sponsors must validate the DEA numbers on PDE 
records for Schedule II drugs or map the National Provider Identifiers 
(NPI) on the PDE records to the prescribers DEA number and then 
confirm that the controlled substance is consistent with the prescribers 
registration.21  CMS also requires sponsors to have compliance plans that 
contain measures to detect, prevent, and correct fraud, waste, and abuse.22  
As part of these plans, CMS expects that sponsors will monitor their 
contractors and subcontractors, including their pharmacies.23   
CMS contractors are also charged with safeguarding Part D.  CMS 
contracts with two Medicare Drug Integrity Contractors (MEDIC) to help 
identify Part D vulnerabilities.  One MEDICs responsibilities include, 
among other things, detecting, preventing, and investigating potential 
fraud, waste, and abuse, as well as referring potential cases to law 
enforcement.  The other MEDICs responsibilities include performing 
special studies and providing technical assistance to CMS.  Additionally, 
CMS contracts with a Recovery Audit Contractor (RAC) for Part D.  
Beginning in 2012, the RAC will review excluded prescribers, excluded 
pharmacies, and duplicate payments. 
 
19 A specialty pharmacy dispenses high-cost drugs to patients with chronic, complex illnesses.   
20 CMS, Prescription Drug Benefit Manual Chapter 9  Part D Program to Control Fraud, 
Waste, and Abuse,  50.2.6.3.1, April 2006.  Accessed at 
http://www.cms.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_FWA.p
df on January 12, 2012. 
21 CMS, Prescription Drug Manual  Chapter 5:  Benefits and Beneficiary Protections,  
 90.2 and 90.2.4, September 2011.  Accessed at http://www.cms.gov/Medicare/Prescription-
Drug-Coverage/PrescriptionDrugCovContra/Downloads/Memo 
PDBManualChapter5_093011.pdf on May 8, 2012. 
22 42 CFR  423.504(b)(4)(vi). 
23 Part D regulations and CMS guidance refer to these contractors and subcontractors as first-
tier and downstream entities.  See 42 CFR  423.501 and CMS, Prescription Drug Benefit 
Manual Chapter 9  Part D Program to Control Fraud, Waste, and Abuse, Part D Sponsors 
Accountability and Oversight  Section 40, April 2006.  Accessed at 
http://www.cms.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_FWA. 
pdf on July 19, 2011. 
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  4 
   
   
Prescription Drug Event Records 
Sponsors submit a PDE record to CMS for each prescription filled for 
their enrollees.  CMS uses the records to administer the program and to 
calculate its payments to sponsors at the end of each year in a process 
known as reconciliation.   
Each PDE record contains a unique identification number for the 
prescriber.24  Most PDE records contain the prescribers NPI, which CMS 
issues to each health care provider.  CMS maintains a registry of all 
assigned NPIs, along with the name and address of the health care 
providers.  If an NPI does not appear in the registry, it has not been 
assigned to a health care provider.   
PDE records also include a field, called Fill Number, that indicates 
whether a prescription is a refill.  This field is one of several on the PDE 
record that is standard throughout the industry.  Industry standards are set 
by the National Council for Prescription Drug Plans (NCPDP).   NCPDP 
instructs pharmacies to enter 0 for new prescriptions, 1 for a first 
refill, and 2 for a second refill.25   
Sponsors are required to provide certification of the accuracy, completion, 
and truthfulness of PDE data.26  In addition, CMS takes steps to ensure the 
accuracy of the PDE records.  CMS performs edits on the PDE records 
before it accepts them from sponsors.  For example, CMS determines 
whether certain data are missing and whether certain values are within 
acceptable ranges.  CMS considers values between 0 and 99 to be within 
an acceptable range for the Fill Number field.27 
 
24 PDE records allow four types of prescriber identification numbers:  NPIs, DEA numbers, 
State license numbers, and Unique [Physician] Identification Numbers (UPIN).  In  
May 2008, CMS issued guidance stating that plans and pharmacies should make all 
reasonable efforts to obtain NPIs in the Prescriber ID field.  See CMS, Prescriber Identifier 
on Part D NCPDP Pharmacy Claims Transactions, May 1, 2008.  Accessed at 
https://www.cms.gov/Medicare/Prescription-Drug-
Coverage/PrescriptionDrugCovContra/Downloads/MemoNPIPrescriberID_050108v2.pdf. on 
June 6, 2012. 
25 Pursuant to the Health Insurance Portability and Accountability Act of 1996, the Secretary 
of Health and Human Services named the NCPDP Telecommunication Standards as the 
electronic transaction standards for retail pharmacies.  These standards define a Fill Number 
of 0 to be the original dispensing.  NCPDPs Universal Claim Form Sample further defines 
Fill Number values of 1 and 2 as refills.  See NCPDP, Universal Claim Form Sample and 
NCPDP, Telecommunication Standard Implementation Guide Version D.0, August 2010. 
26 42 CFR  423.505(k). 
27 CMS, Medicare Part D Prescription Drug Event (PDE) Data Elements, April 8, 2008.  
Accessed at https://www.cms.gov/Medicare/Prescription-Drug-
Coverage/PrescriptionDrugCovGenIn/downloads//PDEDataElements.pdf on April 12, 2012. 
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  5 
   
   
Related Work 
Four recent Office of Inspector General (OIG) audits found that the 
sponsors did not have adequate controls to ensure the accuracy of the PDE 
data they submitted to CMS.28  Three of these audits also found that the 
sponsors did not have adequate controls to prevent Schedule II refills.  
These reports recommended that the sponsors strengthen their controls and 
issue guidance to their pharmacies, clarifying Federal requirements. 
Another OIG report found that approximately 228,000 PDE records for 
Schedule II drugs in 2007 did not contain valid prescriber identifiers.29  
CMS and sponsors performed edits on the prescriber identifier fields; 
however, these edits were insufficient.   
METHODOLOGY 
Data Collection and Analysis 
This report is based on analysis of PDE records for all drugs paid for by 
Part D in 2009.  In total, we identified 1.07 billion PDE records for Part D 
prescriptions filled between January 1 and December 31, 2009.  
To identify the PDE records for Schedule II drugs, we matched the PDE 
records to First DataBank using the National Drug Code on the PDE 
records.  First DataBank contains information about each drug, including 
its name; whether it is a controlled substance; and, if so, the schedule of 
the drug.  We identified 20.1 million PDE records for Schedule II drugs 
billed by 61,472 pharmacies.30  To identify the PDE records that were 
refills for Schedule II drugs, we looked at the Fill Number field on the 
PDE record.  The first time a prescription is filled the Fill Number should 
be 0.  Any value greater than 0 is considered a refill.  
 
28 OIG, Review of Medicare Part D Prescription Drug Event Data for Schedule II Drugs at 
Health Net, Inc., A-09-10-02046, September 2011.  OIG, Review of Medicare Part D 
Prescription Drug Event Data for Schedule II Drugs at CVS Caremark Corporation,  
A-09-11-02074, February 2012.  OIG, Review of Medicare Part D Prescription Drug Event 
Data for Schedule II Drugs at Hawaii Medical Services Association, A-09-11-02028, 
December 2011.  OIG, Review of Medicare Part D Prescription Drug Event Data for 
Schedule II Drugs at United HealthCare Medicare & Retirement, A-09-11-02023, July 2012. 
29 OIG, Oversight of Prescriber Identifier Field in Prescription Drug Event Data for  
Schedule II Drugs, A-14-09-00302, February 2011.  Accessed at 
http://oig.hhs.gov/oas/reports/other/140900302.pdf on November 1, 2011.  Another OIG 
report looked at the prescriber identifiers for PDE records billed in 2007.  It found that 
Medicare Part D paid $1.2 billion for drugs with invalid prescriber identifiers.  See OIG, 
Invalid Prescriber Identifiers on Medicare Part D Claims, OEI-03-09-00140, June 2010. 
30 To determine the total number of pharmacies, we used the NPI.  If we were unable to 
identify the NPI for the pharmacy, we did not include the PDE record in our analysis.  In total, 
we excluded less than 0.1 percent of all PDE records. 
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  6 
   
   
Next, we calculated the total number of Schedule II drugs billed to 
Medicare Part D in 2009.  To calculate the cost of these refills, we 
summed the three fields that indicate the gross drug coststhe ingredient 
cost, dispensing fee, and sales tax.  These fields include the amount paid 
by Part D sponsors, the Government, and by or on behalf of beneficiaries.  
In addition, we determined the most common Schedule II drugs that were 
refilled.  For the purpose of this report, we considered drugs with the same 
name as the same drug, regardless of dosage or strength. 
We then determined the total number of pharmacies that billed for refills 
of Schedule II drugs and the type of pharmacy, i.e., retail, long-term-care, 
or other type, that billed for each refill.31  We used the NPI for each 
pharmacy and matched it to the NCPDP database to identify the type of 
pharmacy.  We calculated the percentage and the average number of refills 
of Schedule II drugs that were billed by each type of pharmacy.  
Next, we determined the total number of prescribers who were associated 
with Schedule II refills and whether the prescriber identifiers were valid.32  
To do this, we checked the NPI or DEA identification number on the PDE 
records against CMS and DEA files.33  In October 2010, we obtained 
CMSs registry of active NPI numbers through its National Plan and 
Provider Enumeration System and accessed a file of active DEA 
registrants.  We also obtained lists of inactive NPI numbers and retired 
DEA registration numbers.  We compared the NPI and DEA prescriber 
identifiers on the PDE records to these registries.  We considered a 
prescriber identifier to be invalid if it had never been assigned or if it had 
been deactivated or retired before January 1, 2009.  We also considered a 
prescriber identifier to be invalid if it was assigned to a pharmacy, i.e., the 
pharmacys NPI was listed as the prescriber.  
Lastly, to identify the sponsors that paid for Schedule II refills, we 
matched the contract number on the PDE records with data from CMSs 
Health Plan Management System.  We used this information to calculate 
the total number of Schedule II refills paid for by each sponsor.34   
 
31 We could not identify the pharmacy type for 2,585 refills.  
32 Prescribers can use multiple identifiers to prescribe drugs, such as a DEA number or an 
NPI.  This analysis is based on the identifier on the PDE record.  We did not aggregate all 
identification numbers for each individual prescriber. 
33 Less than 1 percent (0.92 percent) of refills were billed using other types of prescriber 
identifiers, such as UPINs and State license numbers.  In these cases, we assumed the 
prescriber identifiers were valid. 
34 We identified two invalid sponsor identification numbers.  We did not include these invalid 
numbers in our analysis of sponsors.  In total, these two numbers accounted for 477 refills. 
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  7 
   
   
Limitations 
This review is based on an analysis of PDE data; we did not review 
documentation from the pharmacies or prescribers to verify the data.  We 
also did not independently verify the accuracy of the data from First 
DataBank or NCPDP.   
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency. 
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FINDINGS 
Medicare Part D inappropriately paid $25 million for 
Schedule II drugs billed as refills in 2009 
In 2009, Medicare Part D inappropriately paid for 397,203 Schedule II 
drugs billed as refills.  These drugs amounted to $24.6 million and 
accounted for 2 percent of all Schedule II drugs dispensed in 2009. 35  
Sponsors should not have paid for any of these drugs because Federal law 
prohibits the refilling of Schedule II drugs.  Schedule II drugs can be 
highly addictive and are commonly abused.  Also, they are often diverted 
and resold for profit.  CMS relies on sponsors to ensure that Part D does 
not pay for Schedule II refills. 
Fentanyl and oxycodone-acetaminophen were the Schedule II drugs most 
commonly billed as refills.  These two drugs accounted for more than half 
of all Schedule II refills.  See Table 1.  Fentanyl is a painkiller with effects 
similar to those of heroin, but hundreds of times more potent.36  
Oxycodone with acetaminophen is a commonly abused painkiller that 
provides a euphoric high.37  According to DOJ, a 100-tablet bottle of  
40-milligram OxyContin (the brand-name version of oxycodone) sells for 
approximately $2,000 to $4,000 on the street.38  
 
 
 
 
 
 
 
 
 
 
 
 
 
35 The total includes the amounts paid by Part D sponsors, the Government, and by or on 
behalf of beneficiaries.   
36 DEA, Briefs and Backgrounds:  Fentanyl.  Accessed at 
http://www.justice.gov/dea/concern/fentanyl.html#fentanyl on September 27, 2011. 
37 DEA, Oxycodone.  Accessed at 
http://www.deadiversion.usdoj.gov/drugs_concern/oxycodone/oxycodone.pdf on  
June 6, 2012. 
38 DOJ, National Drug Intelligence Center, OxyContin Diversion and Abuse, January 2001.  
Accessed at http://www.justice.gov/ndic/pubs/651/abuse.htm on November 10, 2011. 
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  9 
   
   
 
Table 1:  Refills of Schedule II Drugs Paid by Medicare Part D, 2009 
Percentage of All 
Drug Name  Number of Refills  Total Amount Paid 
Schedule II Refills  
Fentanyl  123,102  31%  $11,624,163 
Oxycodone-acetaminophen  80,202  20%  $852,634 
Morphine sulphate  45,580  11%  $1,565,523 
Oxycodone HCl  42,063  11%  $2,121,718 
OxyContin  20,522  5%  $4,432,056 
Methadone HCl  19,592  5%  $254,755 
Oxycodone HCl-acetaminophen  14,034  4%  $698,090 
Methadone insensol  14,020  4%  $230,683 
Hydromorphine HCl  10,134  3%  $353,840 
Endocet  6,911  2%  $339,387 
Other drugs  21,043  5%  $2,098,310 
     Total  397,203  100%*  $24,571,159  
*Total does not equal 100 percent because of rounding. 
Source:  OIG analysis of Part D data, 2012. 
 
Some of these drugs may have been inaccurately 
billed 
A total of 12,356 pharmacies billed for refills of Schedule II drugs in 
2009.39  Six percent of these pharmacies were long-term-care pharmacies.  
These pharmacies billed for 75 percent of the Schedule II refills.  In 
comparison, retail pharmacies billed for 17 percent of the Schedule II 
refills.40  Long-term-care pharmacies billed for more refills on average 
than other types of pharmacies.  On average, long-term-care pharmacies 
billed for 423 refills each, while retail pharmacies billed for 6 each. 
It is possible that some long-term-care pharmacies incorrectly billed these 
drugs as refills when the drugs were actually dispensed as partial fills.  
Partial fills for Schedule II drugs are allowed for beneficiaries in long-
term-care facilities when certain conditions are met.  For example, if a 
physician prescribes a 28-day supply of a Schedule II drug, the pharmacy 
 
39 These pharmacies represent 20 percent of all pharmacies and 44 percent of long-term-care 
pharmacies that billed for Schedule II drugs in 2009. 
40 The remaining refills were billed by other types of pharmacies, which included mail-order, 
institutional, and home-infusion pharmacies. 
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  10 
   
   
does not have to dispense all 28 days at one time.  Instead, it can dispense 
four 7-day supplies or two 14-day supplies.   
The data from long-term-care pharmacies provide further evidence that 
these refills may have actually been partial fills.  Notably, the Schedule II 
drugs billed as refills were often for shorter supplies than nonrefills of 
Schedule II drugs.  For example, 82 percent of Schedule II drugs billed as 
refills were for less than a months supply, while 42 percent of nonrefills 
were for less than a months supply. 
CMS officials noted that, according to their industry contacts, long-term-
care pharmacies do not have a consistent approach to billing partial fills.  
They further explained that long-term-care pharmacies may bill partial 
fills differently depending upon the sponsor they are billing and the 
software they use. 
Inaccurate billing of partial fills as refills raises several concerns.  First, 
beneficiaries may be paying multiple copayments instead of one for these 
drugs.  If the beneficiary receives the low-income cost-sharing subsidy, the 
Government pays these additional costs.41  Second, incorrect billing 
affects the accuracy of PDE data.  As noted earlier, four recent OIG audits 
found problems with the accuracy of PDE data.42  These audits found that 
the sponsors did not have adequate controls to ensure the accuracy of the 
PDE data they submitted to CMS.  Data accuracy is important because it is 
the basis on which sponsors are paid.  Also, sponsors, CMS, and OIG use 
PDE data to detect and prevent fraud, waste, and abuse.  Poor data can 
hinder these efforts.   
Over 25,000 of the Schedule II drugs billed as refills 
had invalid prescribers 
Medicare paid for 25,836 refills of Schedule II drugs that did not have 
valid prescriber information.  As noted earlier, Schedule II drugs cannot be 
dispensed without a prescription that contains the name, address, and 
signature of the prescriber.  These refills accounted for 7 percent of 
 
41 Most beneficiaries are responsible for paying certain costs, such as coinsurance, under  
Part D.  However, certain low-income beneficiaries are eligible to receive assistance to pay 
some or all of these costs.  The low-income cost-sharing subsidy refers to the Governments 
portion of cost-sharing payments for these beneficiaries. 
42 OIG, Review of Medicare Part D Prescription Drug Event Data for Schedule II Drugs at 
Health Net, Inc., A-09-10-02046, September 2011.  OIG, Review of Medicare Part D 
Prescription Drug Event Data for Schedule II Drugs at CVS Caremark Corporation,  
A-09-11-02074, February 2012.  OIG, Review of Medicare Part D Prescription Drug Event 
Data for Schedule II Drugs at Hawaii Medical Services Association, A-09-11-02028, 
December 2011. 
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  11 
   
   
Schedule II refills billed.  Medicare Part D paid a total of $1.4 million for 
these refills. 
Specifically, 2,360 of the Schedule II refills billed had no prescriber 
number.  Another 11,491 had numbers that had not been assigned to a 
provider, such as AB0000000.  The remaining 11,985 listed the 
identification numbers of pharmacies, not the numbers of individual 
prescribers. 
Being able to identify the prescriber helps ensure that Schedule II drugs 
are prescribed and dispensed properly.  When the prescriber number is 
unknown or invalid, it creates significant vulnerabilities and hinders 
efforts by sponsors, CMS, and OIG to safeguard the program.  CMS has 
recently made several changes to ensure that prescriber numbers are valid.  
As of January 2012, CMS required sponsors to ensure that the prescriber 
identifiers on the PDE records are active and valid. 
Overall, in 2009, 38,979 prescribers were associated with Schedule II 
drugs billed as refills.  Most of these prescribers were associated with one 
or two refills each; however, a number were associated with hundreds of 
refills. 
Three-quarters of Part D sponsors paid for Schedule II 
drugs billed as refills 
In total, 270 Part D sponsors paid for at least one Schedule II drug in 
2009.  Of these, 194 paid for Schedule II drugs billed as refills.  Each of 
these sponsors paid for between 1 and 81,576 refills.  Twenty-four 
sponsors paid for more than 1,000 Schedule II refills each; three of these 
sponsors were responsible for almost half of all Schedule II refills billed. 
These findings indicate that many sponsors do not have adequate controls 
to prevent refills of Schedule II drugs.  As noted earlier, recent audits of 
three sponsors found that these sponsors did not have controls to prevent 
these refills. 
 
 
   
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  12 
   
   
CONCLUSION AND RECOMMENDATIONS 
Federal law prohibits the refilling of Schedule II drugs.  Despite this, 
Medicare Part D inappropriately paid $25 million for Schedule II drugs 
billed as refills in 2009.  Some of these drugs may have been incorrectly 
billed.  In addition, we found that numerous refills of Schedule II drugs 
had invalid prescribers, despite requirements that Schedule II drugs cannot 
be dispensed without a prescription that contains the name, address, and 
signature of the prescriber.  Further, three-quarters of all sponsors paid for 
Schedule II drugs billed as refills, indicating that many sponsors do not 
have adequate controls to prevent these refills.  
These findings raise a number of concerns.  Under no circumstances 
should Medicare pay for refills of Schedule II drugs.  Paying for such 
drugs raises public health concerns and may contribute to the diverting of 
controlled substances and their being resold on the street.  The findings 
also raise questions about the accuracy of Part D data.  Data accuracy is 
important because it is the basis on which sponsors are paid and CMS, 
OIG, and others use the data to detect and prevent fraud, waste, and abuse 
in Part D.  Also, if some of these refills are actually partial fills and are not 
accurately billed as such, beneficiaries and the Government may be 
overpaying for copayments. 
We recommend that CMS: 
Issue Guidance to Sponsors To Prevent Billing of Schedule II 
Refills and To Ensure Accurate Billing of Partial Fills 
CMS should work with sponsors and pharmacies to determine why many 
sponsors do not have controls to prevent refills and why certain 
pharmacies, particularly long-term-care pharmacies, are billing for 
Schedule II refills. 
CMS should use this information to develop guidance to sponsors to 
prevent Schedule II refills and to ensure accurate billing of partial fills.  
The guidance should clarify what controls sponsors need to have and how 
to bill for partial fills, including how to bill for copayments so that 
beneficiaries are not overcharged and the Government does not overpay 
for these drugs. 
Exclude Schedule II Refills When Calculating Payments to 
Sponsors 
CMS should put edits in place to identify refills of Schedule II drugs 
submitted by sponsors.  CMS should exclude these PDE records when 
calculating its final payments to sponsors at the end of each year.   
 
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  13 
   
   
Monitor Sponsors To Ensure That They Validate Prescriber 
Numbers for Schedule II Drugs 
CMS has made a number of recent changes to ensure that prescriber 
identification numbers are valid.  Beginning in 2012, sponsors must 
validate the prescriber number on the claim and confirm that the 
controlled substance is consistent with the schedule of drugs that the 
provider is allowed to prescribe.  CMS should monitor sponsors closely to 
ensure that they are complying with the new requirements. 
Follow Up on Sponsors and Pharmacies With High Numbers of 
Refills 
In a separate memorandum, we will refer the sponsors and pharmacies 
with high numbers of Schedule II refills to CMS for appropriate action.   
 
   
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  14 
   
   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with one of our recommendations and partially concurred 
with the other three.  In addition, CMS stated that it is highly likely that 
OIG is misinterpreting partial fills dispensed to patients in long-term-care 
facilities as refills of Schedule II drugs.  In response, we note that this is 
not an issue of misinterpretation of the data; the data clearly show that 
these Schedule II drugs were billed as refills.  We cannot assume that all 
drugs billed as refills by long-term-care pharmacies are partial fills, 
especially when the claims data offer no evidence to that effect.  We 
further note that not all long-term-care pharmacies bill for Schedule II 
refills.  As a result, we acknowledge in the report that some long-term-care 
pharmacies may be incorrectly billing these drugs as refills; however, 
under no circumstances should CMS pay for Schedule II drugs that are 
billed as refills.   
CMS concurred with our recommendation to monitor sponsors to ensure 
that they validate prescriber numbers for Schedule II drugs.  CMS stated 
that it began validating the format of the prescriber identifiers that are 
coded as NPIs and will exclude from payment reconciliation PDEs with 
invalid NPIs. 
CMS partially concurred with our recommendation to issue guidance to 
sponsors to prevent billing of Schedule II refills and to ensure accurate 
billing of partial fills.  CMS stated that it has already provided guidance 
regarding partial fills and will consider releasing further guidance with 
respect to copayments on partial fills, if it is determined to be necessary.  
CMS did not agree to work with individual sponsors and pharmacies to 
determine why sponsors do not have controls to prevent such refills; it will 
instead explore the use of PDE edits to prevent such billing practices.   
CMS partially concurred with our recommendation to exclude Schedule II 
refills when calculating payments to sponsors.  It agreed that edits should 
be in place to prevent billing of Schedule II drugs as refills and that it will 
explore modifying PDE edits to alert Part D sponsors to inappropriate 
refills of Schedule II drugs.  CMS did not agree with excluding  
Schedule II drugs billed as refills when calculating payments to sponsors.  
It stated that it will cite the results of this report in guidance to plans and, 
as indicated above, will examine placing PDE edits to alert sponsors to 
inappropriate refills, which should eliminate any future reconciliation 
issues associated with the billing of Schedule II drugs as refills.  
Lastly, CMS partially concurred with our recommendation to follow up 
with sponsors and pharmacies with high numbers of refills.  CMS agreed 
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  15 
   
   
that it should follow up with industry through NCPDP to determine 
whether there is another acceptable use of the standard that could be used 
to distinguish legally dispensed partial fills of Schedule II drugs in long-
term care from illegally dispensed refills.  If there is, CMS will explore 
options for either encouraging or requiring the use of that alternative 
process to improve controls over fraud, waste, and abuse.  
We support CMSs efforts to address these issues.  For the full text of 
CMSs comments, see Appendix A. 
 
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  16 
  APPENDIX A 
Agency Comments 
,.!>f:ll\'10~ 
.~ 	
Centers for Medicare & Med1caid Services 
(''  DEPARTMENT OF HEALTH & HUMAN SERVICeS  OffiCe of Strategsc Operations and Regulatory Alfa1rs 
'~::-z~ 
200 Independence Avenue SW 
Washington, DC 20201 
o
AUG  2 2012
DATE: 
TO: 	 Daniel R. Levinson 

Inspec.nu General 

FROM: 	 M\mlyn 't'!Wcnner 

Actin~ 1'-;dm\nistrator 

SUBJECT: 	 Office of Inspector General (OIG) Draft Report: ''Inappropriate Medicare Part D 
Payments for Schedule II Drugs Billed as Refills" (OEI-02-09-00605) 
Thank you for the opportunity to review and comment on this OIG draft report to determine the 
extent to which Medicare Part D paid for Schedule II drugs billed as refills in 2009. The Centers 
for Medicare & Medicaid Services (CMS) appreciates the OIG's concern for the potential fraud 
and abuse associated with Schedule II drugs. Nevertheless, CMS is concerned that the OIG's 
interpretation of prescription drug event (PDE) data does not support its finding that Medicare 
inappropriately paid for Schedule II drugs billed as refills. Given the known limitation of the 
National Council of Prescription Drug Program (NCPDP) electronic pharmacy billing standard 
(the HIPAA standard) for billing partial fills of Schedule II drugs appropriately dispensed to 
patients in long-term care facilities, it is highly likely that OIG is misinterpreting partial fills 
dispensed to long-term care facility residents as refills of Schedule II drugs. 
In long-term care facilities, 21 C.F.R. 1306.13(b) allows for the partial filling of prescription 
Schedule II drugs in order to reduce the quantity of drugs on hand.  However, the dispensing 
status field on the NCPDP electronic phannacy billing standard may not be used to indicate this 
type of partial fill for Schedule II drugs. The standard limits the use of this field to situations 
where inventory shortages do not allow the full quantity to be dispensed. Use of this field in 
contravention of the standard would be a Health Insurance Portability and Accountability Act 
(HIPAA) violation. Consequently, phannacics u~e the fill number field to distinguish multiple 
partial fills of Schedule II controlled substances in long-term care tor billing purposes (to avoid 
rejection as a duplicate claim) and, therefore, the fill number cannot be relied upon to identify 
illegal refills. 
The OIG reports that "refills" of Schedule II drugs were identified using the fill number field on 
the PDE record. The PDE data show that 75 percent of these claims in question were billed by 
long-term care pharmacies. A~ discussed above, we believe these claims more likely represent 
legally dispensed partial fills as opposed to illegal refills. The OIG also reports that retail 
phannacies billed for 17 percent ol the claims in question. Yet, we point out that these could still 
represent partial fills for patients in long-term care facilities. Although a national provider 
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  17   
   
 
   
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  18 
   
   
 
   
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  19 
   
   
 
   
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  20 
   
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of Jodi Nudelman, Regional 
Inspector General for Evaluation and Inspections in the New York regional 
office, and Nancy Harrison and Meridith Seife, Deputy Regional 
Inspectors General. 
Miriam Anderson served as the team leader for this study.  Other principal 
Office of Evaluation and Inspections staff from the New York regional 
office who contributed to the report include Jenell Clarke and Jason 
Kwong; central office staff who contributed include Eddie Baker, Jr., 
Kevin Farber, Meghan Kearns, Debra Roush, and Rita Wurm.  
 
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605)  21 
   
   
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as amended, is 
to protect the integrity of the Department of Health and Human Services (HHS) programs, as well as the 
health and welfare of beneficiaries served by those programs.  This statutory mission is carried out through 
a nationwide network of audits, investigations, and inspections conducted by the following operating 
components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting audits with 
its own audit resources or by overseeing audit work done by others.  Audits examine the performance of 
HHS programs and/or its grantees and contractors in carrying out their respective responsibilities and are 
intended to provide independent assessments of HHS programs and operations.  These assessments help 
reduce waste, abuse, and mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide HHS, Congress, 
and the public with timely, useful, and reliable information on significant issues.  These evaluations focus 
on preventing fraud, waste, or abuse and promoting economy, efficiency, and effectiveness of 
departmental programs.  To promote impact, OEI reports also present practical recommendations for 
improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations of fraud and 
misconduct related to HHS programs, operations, and beneficiaries.  With investigators working in all 
50 States and the District of Columbia, OI utilizes its resources by actively coordinating with the 
Department of Justice and other Federal, State, and local law enforcement authorities.  The investigative 
efforts of OI often lead to criminal convictions, administrative sanctions, and/or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to OIG, rendering 
advice and opinions on HHS programs and operations and providing all legal support for OIGs internal 
operations.  OCIG represents OIG in all civil and administrative fraud and abuse cases involving HHS 
programs, including False Claims Act, program exclusion, and civil monetary penalty cases.  In 
connection with these cases, OCIG also negotiates and monitors corporate integrity agreements.  OCIG 
renders advisory opinions, issues compliance program guidance, publishes fraud alerts, and provides other 
guidance to the health care industry concerning the anti-kickback statute and other OIG enforcement 
authorities.