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Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

P D P
RESCRIPTION  RUG  LAN 

S  C P
PONSORS OMPLIANCE  LANS

Daniel R. Levinson

Inspector General 

December 2006

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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 all 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.  Specifically, these evaluations focus on preventing fraud, waste, or 
abuse and promoting economy, efficiency, and effectiveness in departmental programs.  
To promote impact, the reports also present practical recommendations for improving 
program operations.   
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of unjust enrichment by providers.  The investigative efforts of OI lead to criminal 
convictions, administrative sanctions, 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 in OIG's internal operations. OCIG imposes program exclusions and civil 
monetary penalties on health care providers and litigates those actions within HHS. 
OCIG also represents OIG in the global settlement of cases arising under the Civil False 
Claims Act, develops and monitors corporate integrity agreements, develops compliance 
program guidances, renders advisory opinions on OIG sanctions to the health care 
community, and issues fraud alerts and other industry guidance.  Report Template  = 04-30-05_rev.13
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OBJECTIVES 
(1) To determine whether prescription drug plan sponsors have 
developed compliance plans as required by the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003; and 
(2) To determine whether prescription drug plan (PDP) sponsors 
compliance plans, as of January 2006, addressed all of the requirements 
and selected recommendations regarding the eight compliance elements 
presented in Federal regulations. 
BACKGROUND 
As of January 1, 2006, all 43 million Medicare beneficiaries became 
eligible to enroll in the new Part D prescription drug benefit established 
through the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Public Law 108-173). Part D coverage is 
provided through private drug plans offered by plan sponsors.  These 
plans include mainly stand-alone PDPs and Medicare Advantage plans 
that offer integrated coverage for both prescription drugs and other 
health care.  For this report, we limited our review to stand-alone PDP 
sponsors compliance plans. 
Pursuant to 42 CFR  423.504(b)(4)(vi), PDP sponsors approved to 
provide Part D benefits in 2006 are required to have compliance plans 
in place.  These compliance plans must address eight elements, which 
are listed on page 2 of this report.  The Office of Inspector General (OIG) 
has consistently recommended in its Compliance Program Guidances 
that compliance programs be implemented in a manner that addresses 
organizations specific operations and risk areas. A successful 
compliance program helps sponsors protect the integrity of Medicare 
funds and may also improve Part D plans efficiency and effectiveness. 
Beginning in November 2005, we requested copies of PDP sponsors 
compliance plans to determine whether they addressed the eight 
required elements.  We asked sponsors to provide all documents that 
made up their compliance plans. By January 2006, we received   
compliance plans covering all 79 stand-alone PDP contracts. 
To determine whether PDP sponsors compliance plans addressed the 
eight elements in Federal regulations (42 CFR  423.504(b)(4)(vi)), we 
reviewed each plan using information in the Centers for Medicare & 
Medicaid Services (CMS) summary document, issued in June 2005, 
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entitled Review of Sponsors Fraud, Waste, and Abuse 
Responsibilities; and the fraud, waste, and abuse chapter of CMSs 
Prescription Drug Benefit Manual, issued in April 2006. 
In the Prescription Drug Benefit Manual chapter, CMS outlines 
requirements that sponsors compliance plans must address to ensure 
that the eight elements established by regulation are met. While the 
manual chapter outlines CMSs current expectations for sponsors 
compliance plans, the June 2005 summary document was the only CMS 
guidance available to PDP sponsors when we began our review. 
Therefore, we reviewed plans for 17 of the requirements included in the 
initial summary document. These 17 requirements were later included 
in CMSs manual chapter as well. 
The 17 requirements we reviewed were associated with the 8 regulatory 
compliance plan elements. For the eighth element, which involves a 
comprehensive fraud and abuse plan, the summary document and 
manual chapter both include a requirement that PDP sponsors develop 
fraud and abuse plans. Neither the summary document nor the manual 
chapter provides any additional requirements regarding the 
development of fraud and abuse plans. However, the manual chapter 
does provide recommendations to sponsors concerning fraud and abuse 
plans. Comprehensive fraud and abuse plans are important to 
maintaining the integrity of the Part D benefit. Therefore, we also 
selected for review 11 recommendations from the manual chapter that 
are specific to the detection, correction, and prevention of fraud, waste, 
and abuse. This review enabled us to determine how sponsors 
compliance plans addressed the development of fraud and abuse 
programs in the early stages of the Part D benefit. 
We reviewed compliance plans to determine whether they addressed the 
17 requirements and 11 recommendations. Our initial reviews revealed 
that some compliance plans included language that merely restated the 
text of the requirements and recommendations. Therefore, for six 
requirements and six recommendations we assessed whether each plan 
provided specifics on how the sponsor intended to implement the 
requirement or recommendation. When a plan included these specifics, 
we determined that it provided detailed information about the 
requirement or recommendation. 
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FINDINGS 
All PDP sponsors had compliance plans, yet 72 of the 79 plans did 
not address all CMS requirements regarding the eight compliance 
plan elements.  As of January 2006, all sponsors had compliance plans 
covering the 79 PDP contracts.  Federal regulations outline eight 
elements PDP sponsors must include in their compliance plans, and 
CMS guidance documents specify that plans must address    
17 requirements regarding the eight elements.  Seventy-two of   
seventy-nine compliance plans did not address all 17 requirements. 
Sponsors compliance plans addressed a median of 13 of these 
requirements.  For six of the eight elements, all or almost all plans 
addressed every requirement.  However, many sponsors compliance 
plans did not address requirements relating to two elements:  
designation of a compliance officer and compliance committee, and 
procedures for internal monitoring and auditing.  These elements are 
essential to the implementation of a successful compliance program. 
Compliance officers are focal points for organizations compliance 
activities and compliance committees assist in compliance program 
implementation.  Ongoing monitoring and auditing is a critical process 
that enables organizations to identify and respond to compliance issues 
timely and to review whether compliance plan elements are functioning 
appropriately. 
Over half of the compliance plans that addressed six requirements 
involving compliance processes or programs did not contain detailed 
information about these requirements.  Details about the 
implementation of various compliance plan requirements are essential for 
ensuring that a compliance plan is actually functioning within an 
organization. The six requirements are:  compliance training programs, 
processes for reporting compliance violations, internal monitoring and 
auditing procedures, contractor monitoring and auditing procedures, 
procedures for responding to compliance violations, and procedures for 
implementing corrective actions. These requirements correspond to four 
of the eight compliance plan elements outlined in Federal regulations. 
While all compliance plans addressed the fraud and abuse element 
in some way, only 15 of 79 plans addressed all 11 recommendations 
that we reviewed regarding fraud detection, correction, and 
prevention.  While sponsors compliance plans are required to include 
comprehensive plans to detect, prevent, and correct fraud, waste, and 
abuse, CMSs manual chapter includes only recommendations regarding 
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the design of these antifraud plans. All compliance plans addressed at 
least two of these recommendations, yet only 15 of 79 plans (19 percent) 
addressed all 11 CMS recommendations that we included in our review. 
At the median, plans addressed 7 of the 11 recommendations.  Plans 
most often did not address CMS recommendations relating to sponsors 
fraud detection procedures, fraud awareness training, and efforts to 
coordinate and cooperate with CMS and law enforcement entities 
regarding potential fraud. Effective compliance plans describe sponsors 
plans for monitoring organizational activities for potential fraud; 
educating employees and enrollees about fraud, waste, and abuse; and 
coordinating with Government authorities regarding fraud. 
We determined whether compliance plans included detailed information 
for six recommendations regarding the establishment of fraud detection, 
correction, and prevention procedures.  Even among compliance plans 
that addressed these recommendations, over 40 percent did not include 
detailed information. 
RECOMMENDATION 
This report provides results of our early review of PDP sponsors 
compliance plans.  When implemented successfully, a compliance plan 
that includes a comprehensive fraud, waste, and abuse program helps 
sponsors protect the integrity of Medicare funds and may also improve 
the operating efficiency and effectiveness of sponsors PDPs. 
We found that all PDP sponsors have compliance plans.  However, these 
plans have not fully addressed all of the requirements that CMS specified 
in its guidance documents for the eight required compliance plan 
elements. In addition, our findings suggest that certain PDP sponsors 
compliance plans contain only the broad outlines of a fraud and abuse 
plan. These compliance plans do not include descriptions of specific 
processes to implement and monitor a fraud and abuse plan. Effective 
compliance plans should include detailed and specific policies and 
procedures for how plan elements will be implemented. 
CMS has not specifically audited PDP sponsors compliance plans or 
fraud, waste, and abuse programs to determine whether sponsors have 
addressed the eight elements established by regulation.  
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Therefore, CMS should: 
Ensure that PDP sponsors compliance plans address all requirements. 
The manual chapter issued by CMS in April 2006 includes both 
required and recommended provisions regarding compliance plan 
elements.  CMS should ensure that sponsors compliance plans address 
all requirements presented in its manual chapter regarding the eight 
elements set forth in regulation.  CMS should also encourage sponsors 
to provide sufficient detail in their compliance plans to clearly 
demonstrate how sponsors are actually implementing the compliance 
plan requirements. 
AGENCY COMMENTS 
CMS agreed that effective compliance plans are an important tool for 
monitoring fraud, waste, and abuse in PDP sponsors Part D plans and 
concurred with OIGs recommendation. CMS stated that routine audits 
beginning in 2007 will review the required compliance plan elements 
and that sponsors will be accountable for meeting all requirements.   
CMS provided additional comments and context on some issues in the 
report. CMS suggested changes to language in the report concerning 
CMS oversight of sponsors compliance plans and sponsors voluntary 
reporting of possible fraud or misconduct to Government authorities. 
CMS also noted that it would not be possible for compliance plans to 
have addressed requirements included in the manual chapter in April 
2006 because OIG reviewed compliance plans before the final manual 
chapter was published. 
The full text of the comments are presented in Appendix C. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
CMSs planned audits, as described, address our recommendation.   
We have revised language in the body of the report and in the 
recommendation section to address CMSs concerns about oversight of 
sponsors compliance plans and sponsors reporting procedures. 
We also revised wording in the report to clarify that the  
17 requirements included in our review were contained in the summary 
document issued to PDP sponsors in June 2005.  These requirements 
were later included in CMSs manual chapter as well.  Therefore, the 
PDP sponsors compliance plans should have addressed the 
17 requirements at the time of our review. 
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EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

I N T RO DUC T IO N  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

F I N D IN G S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9  

Seventy-two complianceplans did not address all requirements . . 9

While all plans addressed the fraud and abuse element,only

15 plans addressed all 11 recommendations reviewed  . . . . . . . . .  13

R E C O MMEN D A T ION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15

Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15

Office of Inspector General Response. . . . . . . . . . . . . . . . . . . . . . .  16

APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

A: 	Table 1: Number of Compliance Plans That Did Not Address 

17 CMS Requirements for the EightCompliance Plan    

Elements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

B: 	Table 2: Number of Compliance Plans That Did Not Address 

11 SelectedCMS Recommendations Regarding Sponsors   

Fraud and Abuse Plans  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19

C:	  AgencyComments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20

E N D NO T ES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23

A C K NO WL E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
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OBJECTIVES 
(1) To determine whether prescription drug plan sponsors have developed 
compliance plans as required by the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003; and 
(2) To determine whether prescription drug plan (PDP) sponsors 
compliance plans, as of January 2006, addressed all of the requirements 
and selected recommendations regarding the eight compliance elements 
presented in Federal regulations. 
BACKGROUND 
Medicare Coverage of Prescription Drugs 
Section 101 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Public Law 108-173) established Medicare  
Part D to provide outpatient prescription drug benefits under the Medicare 
program. As of January 1, 2006, all 43 million1 Medicare beneficiaries 
became eligible to enroll in the new Part D prescription drug benefit.  It is 
estimated that the Part D benefit will cost $31 billion in 2006 and     
$768 billion over 10 years.2 
Part D coverage is provided through private drug plans offered by plan 
sponsors.  These plans include mainly stand-alone PDPs and Medicare 
Advantage plans that offer integrated coverage both for prescription drugs 
and for other health care.3  For this report, we limited our review to 
stand-alone PDP sponsors compliance plans.  As of June 2006, more than   
22 million Medicare beneficiaries were enrolled in a Part D drug plan;   
16.4 million of these beneficiaries were enrolled in stand-alone PDPs.4 
Prescription Drug Plan Sponsors Compliance Plans 
Entities that sought to become PDP sponsors were required to complete an 
application and bidding process that began in January 2005.5  The Centers 
for Medicare & Medicaid Services (CMS) awarded contracts to successful 
applicants in September 2005.  PDP sponsors are required to implement 
compliance plans that include comprehensive plans to detect, correct, and 
prevent fraud, waste, and abuse.6  A successful compliance program helps 
sponsors protect the integrity of Medicare funds and may also improve 
Part D plans efficiency and effectiveness. 
To qualify to become a PDP sponsor, applicants were required to attest in 
Section 3.12 of the PDP sponsor application that their compliance plans 
addressed the eight elements required in Federal regulations.   
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As listed in 42 CFR  423.504(b)(4)(vi), the eight elements PDP sponsors 
compliance plans must contain are: 
(1) Written policies, procedures, and standards of conduct articulating the 
organizations commitment to comply with all applicable Federal and 
State standards. 
(2) The designation of a compliance officer and compliance committee 
accountable to senior management. 
(3) Effective training and education between the compliance officer and 
organization employees, contractors, agents, and directors. 
(4) Effective lines of communication between the compliance officer and 
the organizations employees, contractors, agents, directors and 
members of the compliance committee. 
(5) Enforcement of standards through well-publicized disciplinary 
guidelines. 
(6) Procedures for effective internal monitoring and auditing. 
(7) Procedures for ensuring prompt response to detected offenses and 
development of corrective action initiatives relating to the 
organizations contract as a Part D plan sponsor. 
(8) A comprehensive fraud and abuse plan to detect, correct, and prevent 
fraud, waste, and abuse.  This fraud and abuse plan should include 
procedures to voluntarily self-report potential fraud or misconduct 
related to the Part D program to the appropriate government 
authority.7 
In addition to attesting that their compliance plans addressed these 
elements, applicants were asked to provide narrative responses describing 
the sections of their compliance plans related to fraud, waste, and abuse as 
they would apply to the operation of the Medicare Part D benefit.  
According to the PDP sponsor application instructions, CMS expected 
compliance plans containing these elements to be in place by   
September 15, 2005.8 
Compliance Plan Guidance for Prescription Drug Plan Sponsors 
In June 2005, CMS issued an eight-page summary document, Review of 
Sponsors Fraud, Waste, and Abuse Responsibilities, containing 
compliance plan guidance for applicants to use during the bidding process.  
On February 8, 2006, CMS issued more detailed guidance in the form of a 
draft chapter for its Prescription Drug Benefit Manual and solicited PDP 
sponsors comments. In April 2006, CMS finalized the chapter of the 
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Prescription Drug Benefit Manual outlining the requirements and 
recommendations for compliance plans. CMS specified multiple 
requirements for four of the eight compliance plan elements. For each of 
the remaining four elements, CMS specified only one requirement, which is 
essentially the same as the element. 
The manual chapter CMS developed for PDP sponsors is similar to 
Compliance Program Guidances the Office of Inspector General (OIG) has 
been issuing since 1998 for health care entities such as hospitals, home 
health agencies, durable medical equipment companies, and managed care 
organizations. The OIG Compliance Program Guidances contain elements 
that are the same as the first seven compliance plan elements specified in 
the Part D regulations.9 OIG has reiterated in each of its Compliance 
Program Guidances that all of these compliance plan elements are 
essential to developing an effective compliance program that reduces an 
organizations vulnerability to fraud, waste, and abuse. 
Antifraud, Waste, and Abuse Plans (Eighth Element) 
PDP sponsors compliance plans must address eight elements. For the 
eighth element, which involves a comprehensive fraud and abuse plan, 
CMSs manual chapter requires PDP sponsors to develop fraud and abuse 
plans but does not provide any other specific requirements. However, the 
manual chapter does provide recommendations to sponsors concerning 
fraud and abuse plans. The manual chapter explains that these 
recommendations provide sponsors with a road map to develop and 
implement effective fraud, waste, and abuse programs to protect Part D 
plans and the Medicare Trust Fund. The manual chapter also states that 
sponsors may either create a separate fraud, waste, and abuse program or 
integrate fraud, waste, and abuse provisions into the other seven elements 
of their compliance plans. 
Oversight of Prescription Drug Plan Sponsors Compliance Activities 
CMSs Part D Oversight Strategy for Contractors/Industry specifies that 
new Medicare Drug Integrity Contractors (MEDIC) will be responsible for 
many Part D oversight activities. MEDICs responsibilities include 
analyzing claims and other data, investigating potential fraud and abuse, 
referring potential fraud cases to appropriate law enforcement agencies or 
CMS, conducting program integrity audits, and reviewing the fraud and 
abuse components of PDP sponsors compliance plans. CMS has already 
selected several companies as MEDICs, but has not yet assigned any task 
orders to these companies to review PDP sponsors compliance efforts or 
fraud, waste, and abuse programs. As of August 2006, only one MEDIC 
was operating under an approved task order. This MEDICs efforts have 
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focused on processing complaints regarding Part D fraud, waste, and 
abuse, particularly in the areas of enrollment and marketing. 
METHODOLOGY 
Compliance Plan Request 
To determine whether PDP sponsors developed compliance plans as 
required by Federal regulations, we requested copies of compliance plans 
for the 79 stand-alone PDP contracts with CMS. For each contract, we 
mailed a letter to the PDP sponsor asking it to provide all documents that 
made up its compliance plan. 
We collected compliance plans between November 2005 and January 2006. 
We received 60 compliance plans covering all 79 contracts. Several PDP 
sponsors operate multiple prescription drug plans across the country, but 
each of these sponsors has just one compliance plan in place to cover all of 
its PDPs. In our analysis, we counted a compliance plan that covered 
multiple PDP contracts once for every contract it covered. Therefore, the 
total number of compliance plans referred to in this report is 79. 
Compliance Plan Review 
To determine whether PDP sponsors compliance plans addressed CMSs 
requirements and recommendations regarding the eight elements, we 
developed a detailed checklist and used it to review each compliance plan. 
The checklist contained eight sections corresponding to the eight required 
compliance plan elements. We based the checklist on statements included 
in CMSs summary document issued June 2005, entitled Review of 
Sponsors Fraud, Waste, and Abuse Responsibilities and on the fraud, 
waste, and abuse chapter of CMSs Prescription Drug Benefit Manual, 
issued in April 2006. 
For nearly all checklist items, we adopted a very broad approach to 
determining whether the text of a plan addressed a compliance plan 
requirement or recommendation. Two requirements regarding the second 
element were exceptions to this approach. These requirements state that 
sponsors must designate a compliance officer and compliance committee. 
We reviewed plans for specific evidence that a sponsor had designated a 
compliance officer and compliance committee to determine if the 
compliance plan had addressed these requirements. 
We did not attempt to assess the quality of the plans, nor the extent to 
which the plans had been implemented as part of PDP sponsors 
operations. Some sponsors provided us with the compliance plan section of 
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the completed PDP application that they submitted to CMS for approval in 
2005. We did not include these documents in our review. 
Requirements for Eight Compliance Plan Elements 
In the manual chapter, CMS outlines requirements that sponsors 
compliance plans must address to ensure that the eight elements 
established by regulation are met. CMSs manual chapter distinguishes 
between statutory or regulatory program requirements that must be 
included in sponsors compliance plans and recommendations that CMS 
suggests sponsors address in their plans. 
While the manual chapter issued in April 2006 outlines CMSs current 
expectations for sponsors compliance plans, the June 2005 summary 
document was the only CMS guidance available to PDP sponsors when we 
began our review.  Therefore, we reviewed plans for 17 of the requirements 
included in the initial summary document.  These 17 requirements were 
later included in CMSs manual chapter as well. 
We used the 17 requirements to determine whether sponsors compliance 
plans addressed the eight compliance plan elements.  For four elements 
(1, 3, 5, and 8), the CMS guidance specifies only one requirement, which is 
essentially the same as the element. Compliance plan elements and the 
requirements related to each element are presented in Table 1 below. 
Table 1. Eight Compliance Plan Elements and Seventeen Related CMS Requirements 
Element 1:  Written policies, procedures, and standards of conduct articulating the organizations commitment to 
comply with all applicable Federal and State standards* 
1. Sponsor has written policies, procedures, and standards of conduct articulating the organizations commitment to 
comply with all applicable Federal and State standards. 
Element 2:  The designation of a compliance officer and compliance committee accountable to senior 
management  
2. Sponsor has a compliance officer in place. 
3. Sponsor has a compliance committee in place. 
4. Sponsor has established a compliance committee that is overseen by the compliance officer, advises the compliance 
officer, and assists in the implementation of the compliance program. 
5. Compliance officer is responsible for developing, operating, and monitoring the fraud, waste, and abuse program. 
Element 3:  Effective training and education between the compliance officer and organization employees, 
contractors, agents, and directors*  
6. Sponsor has a training and education program in place. 
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Element 4:  Effective lines of communication between the compliance officer and the organizations employees, 
contractors, agents, directors, and members of the compliance committee 
7. Sponsor has established lines of communication to provide organization-wide information about how to report 
compliance concerns and suspected or actual misconduct. 
8. Sponsor has mechanisms in place for capturing concerns and risks, such as hotlines, suggestion boxes, or employee 
exit interviews. 
Element 5:  Enforcement of standards through well-publicized disciplinary guidelines* 
9. Sponsor enforces standards through disciplinary guidelines. 
Element 6:  Procedures for effective internal monitoring and auditing  
10. Sponsor has an internal monitoring and auditing program. 
11. Sponsor has a plan in place to monitor and audit contractors responsibilities and activities. 
12. When requested, sponsor is prepared to allow CMS to audit its financial records. 
13. Sponsor allows access to any auditor acting on behalf of the Federal Government or CMS to conduct an onsite audit. 
14. Sponsors contractors provide records to CMS or its designee. 
Element 7:  Procedures for ensuring prompt response to detected offenses and development of corrective action 
initiatives relating to the organizations contract as a Part D plan sponsor  
15. Sponsor has procedures for ensuring prompt responses to detected offenses and development of corrective action 
initiatives. 
16. Sponsor conducts appropriate corrective actions in response to potential violations. 
Element 8: A comprehensive fraud and abuse plan to detect, correct, and prevent fraud, waste, and abuse* 
17.  Sponsor has a comprehensive fraud and abuse plan to detect, correct, and prevent fraud, waste, and abuse. 
*For this element, CMS guidance specifies only one requirement which is essentially the same as the element. 
Our initial reviews revealed that some compliance plans included language 
that merely restated the text of the requirements.  We therefore selected 
six CMS requirements (numbers 6, 7, 10, 11, 15, and 16 in Table 1 above) 
for which we assessed whether each plan provided specifics on how the 
sponsor intended to implement the requirements.  When a plan included 
these specifics, we determined that the plan provided detailed information 
about the requirements. 
Recommendations for Eighth Compliance Plan Element 
For the eighth element, regarding a comprehensive fraud and abuse plan, 
the summary document and manual chapter both include a requirement 
that PDP sponsors develop fraud and abuse plans.  Neither the summary 
document nor the manual chapter provides any other specific requirements 
regarding the development of such plans; however, the manual chapter 
does provide recommendations to sponsors concerning fraud and abuse 
plans. Comprehensive fraud and abuse plans are important to 
maintaining the integrity of the Part D benefit. Therefore, we selected for 
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review 11 recommendations from the manual chapter that are specific to 
the detection, correction, and prevention of fraud, waste, and abuse.  This 
review enabled us to determine how sponsors compliance plans addressed 
the development of fraud and abuse programs in the early stages of the 
Part D benefit. 
We reviewed sponsors compliance plans to determine whether they 
addressed the 11 recommendations.  Compliance plans that addressed at 
least one of these CMS recommendations were considered to have 
addressed the requirement for the eighth element.  The 11 selected 
recommendations related to the eighth element are presented in Table 2. 
We selected six recommendations (numbers 1, 2, 3, 7, 8, and 10 in Table 2) 
for which we assessed whether each plan provided specifics on how the 
sponsor intended to implement the recommendations.  When a plan 
included these specifics, we determined that the plan provided detailed 
information about the recommendations. 
Table 2. Eleven CMS Recommendations Regarding Sponsors Antifraud Plans 
Element 8:  A comprehensive fraud and abuse plan to detect, correct, and prevent fraud, waste, and abuse 
1. Sponsor has procedures for the identification of fraud, waste, and abuse in its network. 
2. Sponsor has a process to identify overpayments at any level within its network and to properly repay such 
overpayments in accordance with CMS policy. 
3. Sponsor has policies and procedures for coordinating and cooperating with MEDICs, CMS, and law enforcement, 
including policies that fully cooperate with any audits conducted by the abovementioned entities or their designees. 
4. Sponsors compliance officers duties include responding to reports of potential and actual instances of Part D fraud, 
waste, or abuse, including the coordination of internal investigations and the development of appropriate corrective or 
disciplinary actions. 
5. Sponsors compliance officers duties include maintaining documentation for each report of potential fraud, waste, or 
abuse received through any of the reporting methods (i.e. hotline, mail, in-person) which summarizes the initial report of 
noncompliance, the investigation, the results of the investigation, and all corrective and/or disciplinary action(s) taken as a 
result of the investigation. 
6. Sponsors compliance training addresses pertinent laws related to fraud and abuse.   
7. Sponsor has various methods to educate enrollees on prescription drug fraud, waste, and abuse. 
8. Sponsor has procedures for internal monitoring and auditing to test and confirm compliance with the Part D benefit 
regulations, subregulatory guidance, contractual agreements, and all applicable State and Federal laws, as well as 
internal policies and procedures to protect against potential fraud, waste, or abuse.  
9. Sponsor receives and reviews at least one of the following data reports:  payment reports, drug utilization reports, 
prescribing patterns by physician reports, geographic ZIP reports. 
10. Sponsor conducts data analysis that includes the comparison of claim information against other data (e.g., provider, 
drug provided, diagnoses, or beneficiaries) to identify potential errors and/or potential fraud. 
11. Sponsor has procedures in place to voluntarily self-report potential fraud or misconduct to Government authorities 
such as OIG (through OIGs Provider Self-Disclosure Protocol) or the Department of Justice. 
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I N T R O D U C T I O N  
Standards 
This inspection was conducted in accordance with the Quality Standards 
for Inspections issued by the Presidents Council on Integrity and 
Efficiency and the Executive Council on Integrity and Efficiency. 
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  F I N D I N G S

As of January 2006, all sponsors had 
 All PDP sponsors had compliance plans, yet 
compliance plans covering the 
72 of the 79 plans did not address 
79 PDPs. Some sponsors submitted 
all CMS requirements regarding the eight    
compliance documents that had been 
compliance plan elements 
prepared by their pharmacy benefit 
managers or parent organizations.  
Compliance plans ranged in length from a nine-page document to two large 
binders full of compliance information.  Some compliance plans were a 
collection of policy and procedure documents, while other plans were 
individual documents divided into chapters for different compliance issues. 
Federal regulations concerning PDPs outline eight elements that sponsors 
must include in their compliance plans.10  CMSs guidance documents 
specify 17 requirements relating to the eight compliance plan elements.  
Sponsors compliance plans addressed between 6 and 17 of these 
requirements.  Seventy-two of the seventy-nine compliance plans did not 
address all 17 requirements.  Sponsors plans addressed a median of 
13 requirements.  Table 1 in the Appendix provides information on the 
number of plans that did not address each of the 17 requirements. 
All or almost all of the compliance plans addressed every requirement 
relating to six of the eight elements.  Many sponsors compliance plans did 
not address requirements relating to two elements:  designation of a 
compliance officer and compliance committee, and procedures for internal 
monitoring and auditing.  
Compliance officer and compliance committee.  Twenty-one compliance 
plans did not address all requirements regarding the compliance officer 
and compliance committee element. Four of these twenty-one plans did not 
address the compliance officer and compliance committee element in any 
way. 
Twelve compliance plans did not indicate that sponsors designated a 
compliance officer.  Eleven compliance plans did not indicate that sponsors 
designated a compliance committee. Federal regulations state that all 
PDP sponsors must have a compliance officer and compliance committee in 
place.11  PDP sponsors compliance officers are responsible for developing, 
operating, and monitoring the organizations fraud, waste, and abuse 
program, yet 63 plans did not state that the compliance officer or another 
individual or group is specifically responsible for maintaining the sponsors 
antifraud program, as required.  An organizations compliance officer 
serves as the focal point for compliance activities and an organizations 
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compliance committee typically advises the compliance officer and assists 
in the implementation of the compliance program. 
Internal monitoring and auditing.  Seventy-one compliance plans did not 
address all requirements for the internal monitoring and auditing element.  
Fifty-two of these seventy-one plans addressed only one or two of the five 
requirements for the internal monitoring and auditing element. 
PDP sponsors are required to monitor and audit their contractors 
activities regarding the administration and delivery of the Part D benefit 
and to ensure that contractors records are available for Government 
review. (We use the term contractors to indicate organizations that CMSs 
manual chapter refers to as first-tier entities or downstream entities.)  
Forty-four compliance plans did not indicate that sponsors have procedures 
in place to monitor and audit their contractors activities.  In addition,  
64 plans did not indicate that sponsors contractors would provide their 
records to CMS or its designee. CMS is required to conduct audits to 
confirm sponsors compliance with Part D contracts; however, 48 plans did 
not indicate that sponsors would allow CMS or other Government 
authorities to audit their records.  While these results do not suggest that 
sponsors or their contractors would not provide requested records, the 
compliance plans contained no information relating to these requirements. 
An ongoing monitoring and auditing process is critical to a successful 
compliance program because it enables an organization to identify and 
respond to compliance issues timely and to assess whether compliance plan 
elements are functioning appropriately (e.g., whether employees are 
completing compliance training, whether compliance policies have been 
distributed or made available).  
Over half of compliance plans did not contain detailed information for each of 
six requirements involving compliance processes or programs 
While sponsors compliance plans in some way addressed certain CMS 
compliance plan requirements, the majority of plans did not contain details 
about how sponsors would implement these requirements.  Details about 
the implementation of various compliance plan requirements are essential 
for ensuring that a compliance plan is actually functioning within an 
organization. 
More than half of compliance plans that addressed each of six 
requirements we reviewed involving compliance processes or programs did 
not contain detailed information for these requirements.  These 
requirements correspond to four of the eight compliance plan elements. 
The six requirements are:  compliance training programs, processes for 
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reporting compliance violations, internal monitoring and auditing 
procedures, contractor monitoring and auditing procedures, procedures for 
responding to compliance violations, and procedures for implementing 
corrective actions. The number of plans that did not address each 
requirement in detail is presented in Table 1 of Appendix A. 
Compliance training programs. All but one compliance plan (78 of 79) 
addressed compliance training and education programs, but more than half 
of these plans (41 of 78) did not include any details regarding these 
programs. One compliance plan only indicated that the sponsor was 
currently working on a training plan. Another plan stated that the sponsor 
will update its compliance training program based on legal and regulatory 
requirements; however, the plan provided no detailed information about 
the content of the sponsors training program. Compliance training 
programs are critical to ensuring that appropriate information regarding 
compliance plans and specific risk areas is communicated to individuals 
throughout an organization. Effective compliance plans include the 
following types of information regarding sponsors compliance training 
programs: the topics to be covered, the format of the training, and the 
consequences to employees of their failure to participate in compliance 
training. 
Processes for reporting compliance violations. Seventy-five of seventy-nine 
compliance plans indicated that sponsors have systems to communicate 
information throughout their organizations about reporting compliance 
concerns and misconduct. However, 44 of these 75 plans did not provide 
substantive descriptions of sponsors reporting systems. For example, one 
plan simply stated that the compliance officer would be available to 
employees and contractors to clarify compliance policies and procedures, 
but did not provide detailed information regarding the sponsors reporting 
systems. Organizations should have mechanisms in place for the reporting 
of improper conduct so that such allegations may be reviewed and 
addressed as appropriate. It is essential that reporting systems be clearly 
communicated to employees and contractors so that they can make 
effective use of these systems when necessary. 
Internal and contractor monitoring and auditing procedures. All but one 
compliance plan addressed sponsors internal monitoring and auditing 
procedures in some way, but more than half of these plans (44 of 78) did 
not describe monitoring and auditing procedures in detail. For example, 
one plan only noted that the sponsor uses audits to monitor compliance and 
prepares an annual compliance work plan with audit schedules. The plan 
did not include the audit schedule or any additional information about the 
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the sponsors monitoring and auditing program.  Of the 35 compliance 
plans that mentioned sponsors efforts to monitor contractors activities, 
26 plans did not describe sponsors procedures for monitoring and auditing 
contractors performance in detail.  An ongoing evaluation process is 
critical to a successful compliance program.  An effective compliance plan 
includes an auditing schedule and identifies the auditing and monitoring 
techniques that will be used by an organization and the areas that will be 
subject to audit.   
Procedures for responding to compliance violations. All 79 compliance plans 
indicated that sponsors have procedures in place for ensuring prompt 
response to detected offenses and for developing and implementing 
corrective actions.  However, 43 plans did not describe these procedures. 
For example, one plan merely stated that the compliance officer is 
responsible for requesting an investigation of a suspected violation of the 
law or the sponsors compliance policy.  Another plan only stated that the 
sponsor would conduct an investigation as promptly as practicable when a 
violation is reported. 
Detected but uncorrected compliance violations can seriously endanger the 
mission, reputation, and legal status of an organization.  The development 
of procedures for conducting timely and reasonable inquiries into reported 
misconduct and responding to the results of such inquiries is critical to 
ensuring that organizations respond appropriately to suspected 
noncompliance. 
Procedures for implementing corrective actions. Fifty-four of seventy-nine 
compliance plans did not provide detailed descriptions of the types of 
corrective actions sponsors undertake in response to compliance violations.  
Some of these plans offered only brief, general statements regarding 
sponsors corrective actions.  For example, several plans indicated that 
sponsors employees are subject to  . . . disciplinary action up to and 
including termination . . .  in response to compliance violations.  Effective 
compliance programs include guidance regarding disciplinary actions for 
compliance violations. 
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While all compliance plans addressed the fraud and  While all plans in some way 
abuse element in some way, only 15 of 79 plans  addressed at least 2 of the 
11 CMS recommendations 
addressed all 11 recommendations that we reviewed 
that we reviewed regarding 
regarding fraud detection, correction, and prevention 
the development of a 
comprehensive fraud and abuse plan, only 15 plans addressed all 11 
selected recommendations. At the median, plans addressed 7 of these 11 
recommendations. The eighth compliance plan element set forth in Part D 
regulations requires PDP sponsors to have a comprehensive fraud and 
abuse plan to detect, correct, and prevent fraud, waste, and abuse.12 
CMSs manual chapter, issued in April 2006, contains a number of 
recommendations regarding the overall design of PDP sponsors compliance 
plans. We selected 11 of these recommendations that were specific to fraud 
detection, correction, and prevention and determined whether sponsors 
compliance plans addressed them. The number of plans that did not 
address each recommendation selected for review is presented in Table 2 of 
the Appendix. 
Sponsors efforts to detect fraud and abuse are essential to the integrity of 
the Part D benefit. Of the 79 compliance plans reviewed, 14 did not 
indicate that sponsors have any procedures in place to identify fraud, 
waste, and abuse. In addition, analysis of claims and other data is a key 
activity in identifying fraud,13 yet 28 compliance plans did not indicate 
that sponsors conduct any analysis of program data to examine trends, 
identify potential errors, or detect fraud. Effective compliance plans 
include specific techniques that are utilized to monitor an organizations 
activities for potential fraud and abuse, procedures for conducting reviews 
of identified issues, and policies and procedures for responding to identified 
noncompliance. 
Nineteen of seventy-nine plans did not indicate that sponsors have policies 
and procedures in place for coordinating and cooperating with CMS and 
law enforcement entities. CMSs manual chapter includes a 
recommendation that sponsors have procedures to voluntarily report fraud 
or misconduct to Government authorities such as OIG or the Department 
of Justice, yet 19 plans did not indicate that sponsors have such procedures 
in place. 
Forty-six compliance plans did not indicate that sponsors addressed CMSs 
recommendation that their compliance training programs educate 
employees on fraud and abuse laws. Fifty compliance plans did not 
indicate that sponsors have methods to educate their enrollees on fraud, 
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waste, and abuse.  Educating employees and enrollees is a key component 
to ensuring that such individuals recognize and know how to report 
potential fraud and abuse and compliance violations.   
Even when compliance plans addressed certain CMS recommendations, over 
40 percent did not include detailed information  
In addition to determining whether sponsors compliance plans addressed 
CMSs recommendations in any way, we also determined whether plans 
included detailed information for six recommendations regarding the 
establishment of fraud detection, correction, and prevention procedures.  
Over 40 percent of plans that addressed the 6 recommendations did not 
contain detailed information for each of the recommendations.  A 
compliance plan should include detailed and specific policies and 
procedures for how the various plan elements will be implemented in order 
to operate as a functioning and effective compliance program. 
Sixty-five of seventy-nine plans indicated that sponsors have procedures in 
place for the identification of fraud, waste, and abuse, but 28 of the  
65 plans (43 percent) included only basic references to these procedures.  
Thirteen of these twenty-eight plans made brief references to the sponsors 
fraud hotline, or to fraud, waste, and abuse training.  Another five plans 
stated only sponsors intentions to address fraud, waste, and abuse in the 
future.  Forty-three of seventy-nine plans indicated that sponsors have 
processes to identify overpayments or repay such overpayments, yet 41 of 
the 43 plans (95 percent) did not describe these processes in any detail. 
Fifty-one of seventy-nine plans indicated that sponsors conduct data 
analysis to detect fraud.  Thirty-seven of these 51 plans (73 percent) did 
not include descriptions of data analysis processes or methods to identify 
errors and questionable data patterns. 
Twenty-nine plans indicated that sponsors have methods to educate their 
enrollees on fraud, waste, and abuse.  However, 19 of these plans    
(66 percent) did not describe sponsors education methods in detail. 
Sixty-nine of seventy-nine plans indicated that sponsors have monitoring 
and auditing procedures that test sponsors compliance with laws, 
regulations, and internal policies, but 40 of the 69 plans (58 percent) did 
not provide descriptions of these procedures to protect against potential 
fraud and abuse. Sixty of seventy-nine plans indicated that sponsors have 
policies and procedures in place for coordinating and cooperating with CMS 
and law enforcement entities.  Of these, 46 plans (77 percent) did not 
describe sponsors policies and procedures for such coordination and 
cooperation. 
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E X E C U T I V E   S U M M A R Y
  R E C O M M E N D A T I O N  

This report provides results of our early review of PDP sponsors 
compliance plans.  When implemented successfully, a compliance plan that 
includes a comprehensive fraud, waste, and abuse program helps sponsors 
protect the integrity of Medicare funds and may also improve the operating 
efficiency and effectiveness of sponsors PDPs. 
We found that all PDP sponsors have compliance plans.  However, these 
plans have not fully addressed all of the requirements that CMS specified in 
its guidance documents for the eight required compliance plan elements.  In 
addition, our findings suggest that certain PDP sponsors compliance plans 
contain only the broad outlines of a fraud and abuse plan.  These compliance 
plans do not include descriptions of specific processes to implement and 
monitor a fraud and abuse plan. Effective compliance plans should include 
detailed and specific policies and procedures for how plan elements will be 
implemented. 
CMS has not specifically audited PDP sponsors compliance plans or fraud, 
waste, and abuse programs to determine whether sponsors have addressed 
the eight elements established by regulation.  Therefore, CMS should: 
Ensure that PDP sponsors compliance plans address all requirements.   
The manual chapter issued by CMS in April 2006 includes both required 
and recommended provisions regarding compliance plan elements.  CMS 
should ensure that sponsors compliance plans address all requirements 
presented in its manual chapter regarding the eight elements set forth in 
regulation. CMS should also encourage sponsors to provide sufficient 
detail in their compliance plans to clearly demonstrate how sponsors are 
actually implementing the compliance plan requirements.  
AGENCY COMMENTS 
CMS agreed that effective compliance plans are an important tool for 
monitoring fraud, waste, and abuse in PDP sponsors Part D plans and 
concurred with OIGs recommendation.  CMS stated that it stands ready to 
take appropriate action against any plan that fails to respond to its 
concerns. 
CMS also provided additional comments and context on some issues in the 
report.  CMS stated that the short timeframes for implementing many new 
provisions of the Medicare Prescription Drug, Improvement, and 
Modernization Act may have had an impact on how thorough documents, 
such as compliance plans, were.  CMS also stated that, although 
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R E C O M M E N D A T I O N S  
compliance plan audits will not begin until January 2007, CMS account 
managers have been conducting routine compliance efforts with PDP 
sponsors since the start of the Part D program. CMS stated that the 
routine audits beginning in 2007 will review the required compliance plan 
elements and that sponsors will be accountable for meeting all 
requirements. 
CMS stated that it would not be possible for compliance plans to address 
all 17 requirements to the extent that these requirements were found in 
the April 2006 manual chapter because OIG reviewed compliance plans 
that sponsors provided between November 2005 and January 2006. 
CMS also suggested modifying language in the report concerning PDP 
sponsors voluntary reporting of possible fraud or misconduct to 
Government authorities, such as OIG or the Department of Justice. 
The complete text of CMSs comments can be found in Appendix C. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
CMSs planned audits, as described, address our recommendation.  In 
addition, OIG acknowledges the efforts CMS described to ensure that PDP 
sponsors comply with requirements on a range of issues and we have 
revised language in our recommendation section accordingly.   
We have revised language in the report concerning PDP sponsors 
procedures for voluntarily reporting misconduct to Government 
authorities.  We also revised wording in the report to clarify that the  
17 requirements included in our review were contained in the summary 
document issued to PDP sponsors in June 2005.  These requirements were 
later included in CMSs manual chapter as well.  Therefore, the PDP 
sponsors compliance plans should have addressed the 17 requirements at 
the time of our review. 
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  A P P E N D I X ~ A  
A P P E N D I X ~ A  
Table 1. Number of Compliance Plans That Did Not Address 17 CMS Requirements for the Eight 
Compliance Plan Elements  
Plans  Plans addressed 
Plans did not 
addressed the  the requirement, 
Compliance plan requirements  address the 
requirement in  but not in detail 
requirement 
some way  NR=Not Reviewed 
Element 1:  Written policies, procedures, and standards of conduct 
1. Sponsor has written policies, procedures, and standards of conduct 
articulating the organizations commitment to comply with all applicable  0  79  NR 
Federal and State standards. 
Element 2:  Compliance officer and compliance committee 
2. Sponsor has a compliance officer in place.  12  67  NR 
3. Sponsor has a compliance committee in place.  11  68  NR 
4. Sponsor has established a compliance committee that is overseen by the 
compliance officer, advises the compliance officer, and assists in the  16  63  NR 
implementation of the compliance program. 
5. Compliance officer is responsible for developing, operating, and 
63  16  NR 
monitoring the fraud, waste, and abuse program. 
Element 3:  Compliance training and education 
6. Sponsor has a training and education program in place.  1  78  41 
Element 4:  Lines of communication 
7. Sponsor has established lines of communication to provide organization- 
wide information about how to report compliance concerns and suspected or  4  75  44 
actual misconduct. 
8. Sponsor has mechanisms in place for capturing concerns and risks, such 
4  75  NR 
as hotlines, suggestion boxes, or employee exit interviews. 
Element 5:  Disciplinary guidelines 
9. Sponsor enforces standards through disciplinary guidelines.  4  75  NR 
Element 6:  Internal monitoring and auditing 
10. Sponsor has an internal monitoring and auditing program.  1  78  44 
11. Sponsor has a plan in place to monitor and audit contractors 
44  35  26 
responsibilities and activities. 
12. When requested, sponsor is prepared to allow CMS to audit its financial 
48  31  NR 
records. 
13. Sponsor allows access to any auditor acting on behalf of the Federal 
58  21  NR 
Government or CMS to conduct an onsite audit. 
14. Sponsors contractors provide records to CMS or its designee.  64  15  NR 
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A P P E N D I X ~ A  

Plans  Plans addressed 
Plans did not 
addressed the  the requirement, 
address the 
Compliance plan requirements  requirement in  but not in detail 
requirement 
some way  NR=Not Reviewed 
Element 7:  Response to offenses and corrective actions 
15. Sponsor has procedures for ensuring prompt responses to detected 
0  79  43 
offenses and development of corrective action initiatives. 
16. Sponsor conducts appropriate corrective actions in response to 
0  79  54 
potential violations. 
Element 8: Comprehensive fraud and abuse plan to detect, correct, and prevent fraud, waste, and abuse 
17. Sponsor has a comprehensive fraud and abuse plan to detect, 
0  79  NR 
correct, and prevent fraud, waste, and abuse. 
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  A P P E N D I X ~ B  
Table 2. Number of Compliance Plans That Did Not Address 11 Selected CMS Recommendations 
Regarding Sponsors Fraud and Abuse Plans 
Plans 
Plans
Plans did not  addressed the 
 addressed the 
Compliance plan recommendations*  address the  recommendation, 
recommendation 
recommendation  but not in detail 
in some way 
NR=Not Reviewed 
Element 8:  A comprehensive fraud and abuse plan to detect, correct, and prevent fraud, waste, and abuse 
1. Sponsor has procedures for the identification of fraud, waste, and 
14  65  28 
abuse in its network. 
2. Sponsor has a process to identify overpayments at any level within 
its network and to properly repay such overpayments in accordance with  36  43  41 
CMS policy. 
3. Sponsor has policies and procedures for coordinating and 
cooperating with MEDICs, CMS, and law enforcement, including policies 
19  60  46 
that fully cooperate with any audits conducted by the abovementioned 
entities or their designees. 
4. Sponsors compliance officers duties include responding to reports 
of potential and actual instances of Part D fraud, waste, or abuse, 
4  75  NR 
including the coordination of internal investigations and the development 
of appropriate corrective or disciplinary actions. 
5. Sponsors compliance officers duties include maintaining 
documentation for each report of potential fraud, waste, or abuse 
received through any of the reporting methods (i.e. hotline, mail, in-
12  67  NR 
person) which summarizes the initial report of noncompliance, the 
investigation, the results of the investigation, and all corrective and/or 
disciplinary action(s) taken as a result of the investigation. 
6. Sponsors compliance training addresses pertinent laws related to 
46  33  NR 
fraud and abuse. 
7. Sponsor has various methods to educate enrollees on prescription 
50  29  19 
drug fraud, waste, and abuse.   
8. Sponsor has procedures for internal monitoring and auditing to test 
and confirm compliance with the Part D benefit regulations, 
subregulatory guidance, contractual agreements, and all applicable  10  69  40 
State and Federal laws, as well as internal policies and procedures to 
protect against potential fraud, waste, or abuse.  
9. Sponsor receives and reviews at least one of the following data 
reports: payment reports, drug utilization reports, prescribing patterns  38  41  NR 
by physician reports, geographic ZIP reports. 
10. Sponsor conducts data analysis that includes the comparison of 
claim information against other data (e.g., provider, drug provided, 
28  51  37 
diagnoses, or beneficiaries) to identify potential errors and/or potential 
fraud. 
11. Sponsor has procedures in place to voluntarily self-report potential 
fraud or misconduct to Government authorities such as OIG (through  19  60  NR 
OIGs Provider Self-Disclosure Protocol) or the Department of Justice. 
*CMSs manual chapter specifies recommendations for designing the fraud and abuse plans outlined in Element 8.  We reviewed 
compliance plans to determine whether they addressed 11 recommendations specific to fraud detection, correction, and prevention that 
we selected for review. 
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E N D N O T E S  
  E N D N O T E S  

1 Medicare CoverageGeneral Information. Centers for Medicare & 
Medicaid Services (CMS).  December 2005.  Available online at 
http://www.cms.hhs.gov/CoverageGenInfo/. Accessed April 10, 2006,     
p. 1. 
2 Medicare Prescription Drug Benefit Fact Sheet.  Henry J. Kaiser 
Family Foundation.  May 2006.  Available online at 
http://www.kff.org/medicare/upload/7044-03-2.pdf.  Accessed 
May 16, 2006, p. 2. 
3 Medicare Prescription Drug Benefit:  Solicitation for Applications from 
Prescription Drug Plans (PDPs). CMS.  January 21, 2005, as revised on 
March 9, 2005, p. 4. 
4 Total Medicare Beneficiaries with Drug Coverage Data (v06.11.06). 
CMS. June 2006.  Available online at 
http://www.cms.hhs.gov/PrescriptionDrugCovGenIn/02_EnrollmentData 
.asp. Accessed June 15, 2006. 
5 Medicare Prescription Drug Benefit:  Solicitation for Applications 
from Prescription Drug Plans (PDPs). CMS.  January 21, 2005, as 
revised on March 9, 2005, pp. 24. 
6 42 CFR  423.504(b)(4)(vi). 
7 Ibid. 
8 Medicare Prescription Drug Benefit:  Solicitation for Applications 
from Prescription Drug Plans (PDPs). CMS.  January 21, 2005, as 
revised on March 9, 2005, p. 15. 
9 Fraud Prevention & DetectionCompliance Guidance. U.S. 
Department of Health and Human Services, Office of Inspector General. 
Available online at http://oig.hhs.gov/fraud/complianceguidance.html. 
Accessed April 28, 2006. 
10 42 CFR  423.504(b)(4)(vi). 
11 Ibid. 
12 Ibid. 
13 Prescription Drug Benefit Manual:  Chapter 9Part D Program to 
Control Fraud, Waste and Abuse. CMS.  April 2006, p. 43. 
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This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and Linda M. Ragone, Deputy Regional Inspector General.  
Other principal Office of Evaluation and Inspections staff who contributed 
include: 
Amy J. Sernyak, Team Leader 
Nancy J. Molyneaux, Program Analyst 
Emily Dolan Multari, Program Analyst 
Linda Abbott, Program Specialist 
Tricia Davis, Director, Medicare Branch 
Barbara Tedesco, Mathematical Statistician 
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