Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
R P W  
E TAIL  HARMACIES  ITH
 
Q  
  UESTIONABLE 
 
P D B  
ART    ILLING
 
 
 
 
 
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
May 2012 
OEI-02-09-00600   
   
EXECUTIVE SUMMARY:  RETAIL PHARMACIES WITH QUESTIONABLE 
PART D BILLING 
OEI-02-09-00600 
 
 
WHY WE DID THIS STUDY  
 
Under the Medicare Part D program, the Centers for Medicare & Medicaid Services 
(CMS) contracts with private insurance companies, known as sponsors, to provide 
prescription drug coverage to beneficiaries who choose to enroll.  In the 6 years since 
Part D began, the Office of Inspector General (OIG) has issued several reports that found 
that Part D had limited safeguards in place. 
 
HOW WE DID THIS STUDY 
 
We based this study on an analysis of prescription drug event records.  Sponsors submit 
these records to CMS for each prescription dispensed to beneficiaries enrolled in their 
plans.  Each record contains information about the pharmacy, prescriber, beneficiary, and 
drug.  We analyzed all of the records for prescriptions billed by retail pharmacies in 
2009.  We developed eight measures to describe Part D billing and to identify pharmacies 
with questionable billing. 
 
WHAT WE FOUND 
 
Retail pharmacies each billed Part D an average of nearly $1 million for prescriptions in 
2009.  Over 2,600 of these pharmacies had questionable billing.  These pharmacies had 
extremely high billing for at least one of the eight measures we developed.  For example, 
many pharmacies billed extremely high dollar amounts or numbers of prescriptions per 
beneficiary or per prescriber.  This could mean that a pharmacy is billing for drugs that 
are not medically necessary or were never provided to the beneficiary.  Although some of 
this billing may be legitimate, pharmacies that bill for extremely high amounts warrant 
further scrutiny.  The Miami, Los Angeles, and Detroit areas were the most likely to have 
pharmacies with questionable billing. 
 
WHAT WE RECOMMEND 
 
Together, the findings of this report and prior OIG reports call for a strong response to 
improve Part D oversight.  Therefore, we recommend that CMS:  (1) strengthen the 
Medicare Drug Integrity Contractors monitoring of pharmacies and ability to identify 
pharmacies for further review, (2) provide additional guidance to sponsors on monitoring 
pharmacy billing, (3) require sponsors to refer potential fraud and abuse incidents that 
may warrant further investigation, (4) develop risk scores for pharmacies, (5) further 
strengthen its compliance plan audits, and (6) follow up on the pharmacies identified as 
having questionable billing.  CMS concurred with four of the recommendations and 
partially concurred with the other two. 
   
   
TABLE OF CONTENTS 
 
Objectives ....................................................................................................1 
Background ..................................................................................................1 
Methodology ................................................................................................5 
Findings........................................................................................................9 
Retail pharmacies each billed Part D an average of nearly  
$1 million for prescriptions in 2009.................................................9 
Over 2,600 retail pharmacies had questionable billing .................. 11 
The Miami, Los Angeles, and Detroit areas were the most likely  
to have pharmacies with questionable billing ................................15 
Conclusion and Recommendations ............................................................19 
Agency Comments and Office of Inspector General Response .....22 
Appendixes ................................................................................................23 
A:  Most Common Drugs Billed to Medicare Part D by Retail 
Pharmacies, 2009 ...........................................................................23 
B:  Most Common Schedule II and III Drugs Billed to  
Medicare Part D by Retail Pharmacies, 2009 ................................24 
C:  Number of Pharmacies That Billed Extremely High  
Amounts by Number of Measures, 2009 .......................................26 
D:  Percentage of Pharmacies With Questionable Billing in Each 
Area That Exceeded the Threshold, 2009 ......................................27 
E:  Agency Comments ...................................................................28 
Acknowledgments......................................................................................32 
 
 
   
   
OBJECTIVES 
1.  To describe Part D billing by retail pharmacies in 2009. 
2.  To identify retail pharmacies with questionable Part D billing in 2009. 
BACKGROUND  
The Medicare Part D program provides an optional prescription drug 
benefit to Medicare beneficiaries.1  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 
in the program.  In 2010, approximately 35 million beneficiaries were 
enrolled.2 
In the 6 years since Part D began, the Office of Inspector General (OIG) 
and others have raised concerns about Part D billing.  In several reports, 
OIG found that the program has limited safeguards in place and is 
vulnerable to fraud, waste, and abuse.3 
Additionally, recent investigative cases have illustrated a variety of alleged 
fraud schemes by pharmacies.  For example, a pharmacist who owned  
26 pharmacies was charged with health care fraud and drug diversion.  
The owner allegedly paid physicians to write prescriptions that were 
medically unnecessary and to direct patients to fill them at his pharmacies.  
The pharmacies purportedly billed $37.7 million to Medicare.4  In another 
case, the owners of two pharmacies were charged with fraudulently billing 
Part D for $3 million for drugs that were never purchased by their 
pharmacies or dispensed to beneficiaries.5 
Concerns about program vulnerabilities have been further heightened by 
the growing prescription drug abuse problem in the Nation.  The number 
 
1 The Medicare Prescription Drug, Improvement, and Modernization Act of 2003,               
P.L. 108-173. 
2 The Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical 
Insurance Trust Funds, 2011 Annual Report of the Boards of Trustees of the Federal Hospital 
Insurance and Federal Supplementary Medicare Insurance Trust Funds, p. 9.  Accessed at 
https://www.cms.gov/ReportsTrustFunds/downloads/tr2011.pdf on June 28, 2011.   
3 Examples include OIG, Medicare Drug Plan Sponsors Identification of Potential Fraud and 
Abuse, OEI-03-07-00380, October 2008; and OIG, Medicare Drug Integrity Contractors 
Identification of Potential Part D Fraud and Abuse, OEI-03-08-00420, October 2009. 
4 United States Attorneys Office, Eastern District of Michigan, Twenty-six Indicted in Drug 
Distribution Investigation That Led to Uncovering Massive Health Care Fraud,  
August 2, 2011.  Accessed at 
http://www.justice.gov/usao/mie/news/2011/2011_8_2_bpatel.html on August 4, 2011. 
5 Department of Justice, Two Brooklyn, New York Pharmacists Charged in $3 Million Health 
Care Fraud Scheme, July 26, 2011.  Accessed at http://www.justice.gov/opa/pr/2011/July/11-
crm-970.html on November 14, 2011. 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  1 
   
   
of accidental deaths caused by prescription painkillers each year has 
increased substantially since 2000.6  In 2007, more people died from 
overdoses of prescription painkillers, such as oxycodone, than from 
cocaine and heroin combined.7 
Despite these concerns, little information is currently available about  
Part D billing.  There are no data about how pharmacies typically bill  
Part D, or about questionable billing.  Identifying these data is an 
important first step in detecting potential fraud, waste, and abuse. 
This study provides a first look at Part D billing by pharmacies 
nationwide.  It is part of the Health Care Fraud Prevention and 
Enforcement Action Team Initiative (HEAT), which focuses on detecting 
health care fraud through innovative data analysis and enhanced 
cooperation between the Department of Justice, OIG, and CMS.8 
Medicare Part D 
Medicare beneficiaries who choose to participate in the Part D program 
enroll in one of many plans offered by Part D sponsors.  The sponsors may 
contract directly with pharmacies or they may contract with third-party 
entities, such as pharmacy benefit managers (PBM), which contract with 
pharmacies on the sponsors behalf.9  Pharmacies include retail,  
long-term-care, and mail-order; they may be independently owned or part 
of a chain.  Retail pharmacies are the most common type of pharmacy 
participating in Part D.  Currently, almost all retail pharmacies in the 
Nation participate in Part D.10 
Types of Part D Fraud and Abuse 
CMS has identified a number of potential pharmacy fraud schemes.11  
Many of these schemes include inappropriate billing practices, such as 
billing for nonexistent prescriptions, billing for brand-name drugs when 
 
6 Centers for Disease Control and Prevention (CDC), Office of the Director, Public Health 
Grand Rounds, February 17, 2011, p. 10.  Accessed at http://www.cdc.gov/about/grand-
rounds/archives/2011/pdfs/PHGRRx17Feb2011.pdf on July 12, 2011. 
7 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. 
8 U.S. Department of Health and Human Services and U.S. Department of Justice, HEAT Task 
Force Success. Accessed at http://www.stopmedicarefraud.gov/heattaskforce/index.html on 
January 11, 2011. 
9 PBMs can provide a number of other services to sponsors, including processing prescription 
drug claims and managing formularies. 
10 OIG, Retail Pharmacy Participation in Medicare Part D Prescription Drug Plans in 2006,  
OEI-05-06-00320, June 2007. 
11 CMS, Prescription Drug Benefit Manual Chapter 9  Part D Program to Control Fraud, 
Waste, and Abuse, April 2006.  Accessed at 
http://www.cms.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_FWA.p
df on June 28, 2011. 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  2 
   
   
generics were dispensed, and billing for prescriptions that were never 
picked up.  Other schemes include drug diversion and kickbacks.  Drug 
diversion occurs when a pharmacy dispenses a prescription drug for 
inappropriate or illegal purposes.  A kickback occurs when a pharmacy 
pays a prescriber to write or a beneficiary to fill an unnecessary 
prescription that is billed to Medicare. 
These schemes have often involved Schedule II or III controlled 
substances.  Schedule II drugs have a high potential for abuse and may 
lead to severe psychological or physical dependence if abused.12  They 
include drugs such as oxycodone and morphine.  Federal law prohibits the 
refilling of prescriptions for Schedule II drugs.  Schedule III drugs also 
have potential for abuse and include anabolic steroids, codeine with 
hydrocodone, and barbiturates. 
Detecting and Deterring Fraud and Abuse 
CMS relies on sponsors to help safeguard the Part D program from fraud 
and abuse.  CMS requires sponsors to have compliance plans that contain 
measures to detect, prevent, and correct fraud, waste, and abuse.13  As part 
of these plans, CMS expects that sponsors will monitor their contractors 
and subcontractors, including pharmacies.14  CMS also recommends that 
sponsors use data analysis to detect and prevent fraud, waste, and abuse.15  
Specifically, sponsors should use data analysis to recognize unusual trends 
and identify problem areas and to target their audits of contractors and 
subcontractors, including pharmacies. 
Additionally, CMS contracts with two Medicare Drug Integrity 
Contractors (MEDIC) to help identify vulnerabilities in the Part D 
program.  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 
 
12
 These are drugs regulated by the Controlled Substances Act, which established five 
schedules based on the medical use and the potential for abuse.  The most restrictive is 
Schedule I, which includes drugs that have no currently accepted medical use and a high 
potential for abuse.  Schedule V is the least restrictive.  See 21 U.S.C.  801-971. 
13 42 CFR  423.504(b)(4)(vi). 
14 Part D regulations and CMS guidance refer to these contractors and subcontractors as first-
tier and downstream entities.  See 42 CFR 423.501(k) and CMS, Prescription Drug Benefit 
Manual Chapter 9  Part D Program to Control Fraud, Waste, and Abuse  40, April 2006.  
Accessed at 
http://www.cms.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_FWA.p
df on July 19, 2011. 
15 CMS, Prescription Drug Benefit Manual Chapter 9  Part D Program to Control Fraud, 
Waste and Abuse   50.2.6.2, April 2006.  Accessed at 
http://www.cms.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_FWA.p
df on July 19, 2011. 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  3 
   
   
MEDICs responsibilities include performing special studies and 
providing technical assistance to CMS. 
CMS is responsible for overseeing the sponsors and MEDICs.  CMS 
conducts onsite audits of sponsors compliance plans to assess the 
effectiveness of their fraud and abuse programs.  CMS evaluates MEDICs 
performance annually. 
Related Work 
In a 2008 report, OIG found that in the first 6 months of 2007, 24 of the  
86 sponsors did not identify any potential fraud and abuse incidents.16  Of 
the incidents that were reported, inappropriate billing, such as submitting 
claims for drugs that were not provided, was the most common.  OIG 
recommended that CMS determine why certain sponsors had identified 
especially high or low volumes of potential fraud and abuse incidents and 
determine whether sponsors were initiating inquiries and corrective 
actions, as required.  CMS concurred with these two recommendations. 
In another 2008 report, OIG found that although CMS relied partly on 
audits to oversee sponsors compliance plans, CMS had conducted only 
one such audit in 2007.17  OIG recommended that CMS conduct routine 
audits of sponsors compliance plans to verify that they meet all Federal 
requirements.  CMS concurred with this recommendation and stated that it 
would begin compliance plan audits in 2007 and that sponsors would be 
accountable for meeting all requirements. 
In 2009, OIG issued a report that highlighted vulnerabilities in the 
MEDICs ability to identify Part D fraud and abuse.18  Specifically, the 
report found that the MEDICs did not typically use proactive data 
analysis, such as identifying pharmacies that billed the highest Part D 
amounts, to detect potential fraud and abuse.  The report also found that 
the MEDICs may not be aware of some potential fraud and abuse 
incidents because sponsors are not required to refer them to the MEDICs.  
OIG recommended that CMS ensure that the MEDICs have access to 
accurate and comprehensive data and require sponsors to report all 
incidents that are referred to law enforcement to MEDICs as well.  CMS 
concurred with these recommendations, but stated that it did not have the 
regulatory basis to require sponsors to report such incidents. 
 
16 OIG, Medicare Drug Plan Sponsors Identification of Potential Fraud and Abuse,  
OEI-03-07-00380, October 2008. 
17
 OIG, Oversight of Prescription Plan Sponsors Compliance Plans, OEI 03-08-00230, 
October 2008. 
18 OIG, Medicare Drug Integrity Contractors Identification of Potential Part D Fraud and 
Abuse, OEI-03-08-00420, October 2009.  
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METHODOLOGY 
This study is based on an analysis of prescription drug event (PDE) 
records for all Part D drugs billed by retail pharmacies in 2009.  We 
matched these records to data from the National Council of Prescription 
Drug Programs (NCPDP) and First DataBank to obtain descriptive 
information about the pharmacies and drugs, respectively. 
PDE Data 
We first identified all PDE records with dates of service from January 1 to 
December 31, 2009, for covered Part D drugs.19  In total, we identified 
1.07 billion PDE records.  Sponsors submit a record, called a PDE, to 
CMS for each prescription dispensed to beneficiaries enrolled in their 
plans.  Each PDE record contains information about the drug and 
beneficiary, as well as identification numbers for the pharmacy and 
prescriber. 
To determine which PDE records were billed by retail pharmacies, we 
used the National Provider Identifier (NPI) for each pharmacy and 
matched the PDE records to the NCPDP database. 20  This database 
contains descriptive information about each pharmacy, including its 
address, the type of pharmacy (e.g., retail), and ownership status (e.g., 
chain).21  We identified 59,307 retail pharmacies that billed a total of 
873.3 million PDE records.22   These records represented 82 percent of all 
PDE records and 90 percent (59,307 of 65,888) of all pharmacies that 
billed Part D in 2009.  Other types of pharmacies billed the remaining 
196.2 million records.  They included long-term-care pharmacies,  
mail-order pharmacies, and home infusion pharmacies.  We excluded these 
pharmacies from our analysis because they offer different services and, 
therefore, may have billing patterns that are different from those of retail 
pharmacies. 
 
19
 We used 2009 data because they were the most current full year of data available when we 
started the review. 
20
 For almost all PDE records, the NPI of the pharmacy was included on the PDE record either 
by the sponsor or by CMS.  We excluded 0.1 percent of the PDE records from our analysis 
because the NPI was missing, we could not determine whether the pharmacy that submitted 
the record was a retail pharmacy, or the pharmacy had multiple locations in the NCPDP. 
21
 For the purposes of the report, we used the definitions of retail, chain, and independent 
pharmacies from the NCPDP.  Accordingly, retail pharmacies are those in which the 
pharmacists store, prepare, and dispense prescription drugs for local patient populations.  
Chain pharmacies are part of a group of four or more pharmacies under common ownership.  
Independent pharmacies are one to three pharmacies under common ownership.  We included 
franchise pharmacies with independent pharmacies because they are independently owned.   
22
 We did not include 272 retail pharmacies that were alternate dispensing sites or 
Government pharmacies because they do not typically serve the public. 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  5 
   
   
Using the National Drug Code on the PDE record, we matched the  
873.3 million PDE records to data from First DataBank.  First DataBank 
contains information about each drug, such as the drug name and whether 
the drug is brand name or generic.23  It also indicates whether a drug is a 
controlled substance and, if so, which schedule the drug is on  
(Schedule II or III).  For the purposes of this study, we use the term 
prescription to mean one PDE record. 
Measures of Pharmacy Billing 
We calculated the total dollar amount and total number of prescriptions 
billed to Part D by retail pharmacies in 2009. 24  We also calculated the 
total number of beneficiaries who received Part D drugs from retail 
pharmacies in 2009 and the total number of prescribers who ordered these 
drugs.25  We then calculated the number of different types of drugs billed 
by retail pharmacies.  For this analysis, we considered a type of drug to 
include all drugs with the same name, regardless of dosage or strength. 
Next, we developed eight measures to describe Part D billing and identify 
pharmacies with questionable billing.  We developed these measures based 
on the results of past OIG analysis and fraud investigations of pharmacies, 
as well as input from CMS and contractor staff. 
The eight measures are: 
(1) average amount billed per beneficiary, 
(2) average number of prescriptions per beneficiary, 
(3) average amount billed per prescriber, 
(4) average number of prescriptions per prescriber, 
(5) percentage of prescriptions that were for Schedule II drugs, 
(6) percentage of prescriptions that were for Schedule III drugs, 
(7) percentage of prescriptions that were for brand-name drugs, and 
 
23
 First DataBank determines whether a drug is brand name or generic based on the drugs 
name. 
24
 To calculate the total Part D amount billed, we summed three fields on the PDE records that 
 
represent the total gross drug costs:  ingredient cost, dispensing fee, and sales tax.  
25
 To calculate the total number of beneficiaries, we identified the Health Insurance Claim 
Number (HICN) associated with each PDE record.  To calculate the total number of 
prescribers, we identified the NPI for the prescriber on each PDE record.  Because the PDE 
record can contain different types of identification numbers, such as an NPI or a Drug 
Enforcement Administration (DEA) number, we used a crosswalk developed by OIG analysts 
to identify the NPI associated with each prescriber identification number.  We were able to 
identify the NPIs for 97 percent of the PDE records.  For the remaining 3 percent, we used the 
alternative prescriber identification numbers included on the PDE records. 
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(8) percentage of prescriptions that were refills.26 
We calculated these eight measures for each pharmacy.  We then analyzed 
the distribution of all pharmacies for each measure and calculated the 
national averages for retail pharmacies.27 
Identification of Pharmacies With Questionable Billing 
For each measure discussed above, we set a threshold that indicated a 
pharmacy had billed an extremely high amount.28  We used a standard 
technique for identifying outliers, known as the Tukey method.29  Using 
this method, we set the threshold for each measure at the 75th percentile 
plus three times the interquartile range.30  Values that exceeded these 
thresholds are extreme outliers.  We considered all pharmacies that 
exceeded one or more of these thresholds to have questionable billing. 
Lastly, we determined whether the pharmacies with questionable billing 
shared certain characteristics.  Specifically, we determined the proportion 
of pharmacies with questionable billing that were independent and the 
proportion that were part of a chain.  We also determined whether the 
pharmacies with questionable billing were concentrated in certain 
metropolitan areas.  To do this, we identified each pharmacys Core Base 
Statistical Area (CBSA) based on the pharmacys address.  A CBSA is a 
region around an urban center that has at least 10,000 people.31  CBSAs 
include the entire metropolitan area, not just the urban center.  For 
example, the New York metropolitan area includes counties in New York 
and New Jersey.  We focused our analysis on the 52 CBSAs that had at 
least 250 pharmacies because we wanted to concentrate on large 
metropolitan areas.  These 52 CBSAs included 47 percent of all retail 
pharmacies nationwide that billed Part D in 2009.  We then determined the 
 
26
 Each PDE record indicates whether the drug is a refill. 
27
 The average number of prescriptions per beneficiary represents the average number of 
prescriptions one pharmacy billed per beneficiary.  It does not represent the average number 
of prescriptions that each beneficiary received because beneficiaries can go to multiple 
pharmacies. 
28
 We focused our analysis of questionable billing on pharmacies that billed for at least  
100 PDE records and were paid at least $100,000 for Part D drugs in 2009.  In total,  
3,344 retail pharmacies did not meet these criteria.  We also identified 163 retail pharmacies 
that reported providing some specialty pharmacy services.  Specialty pharmacies generally 
dispense high-cost drugs to patients with chronic, complex illnesses.  Because we could not 
determine whether differences in their billing were due to their specialty services, we 
excluded them from this analysis.  A total of 55,963 pharmacies and 870.9 million PDE 
records were included in this analysis. 
29
 See J.W. Tukey, Exploratory Data Analysis.  Addison-Wesley, 1977. 
30 The interquartile range is calculated by subtracting the value at the 25th percentile from the 
value at the 75th percentile.   
31
 U.S. Census Bureau, Metropolitan and Micropolitan Statistical Areas.  Accessed at  
http://www.census.gov/population/www/metroareas/aboutmetro.html on March 3, 2011. 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  7 
   
   
proportion of pharmacies in each CBSA that had questionable billing and 
identified the CBSAs with the highest proportions.  For these areas, we 
also calculated the percentage of pharmacies with questionable billing that 
billed extremely high numbers or amounts for each measure.  We also 
determined the types of drugs these pharmacies billed most frequently. 
Limitations 
We did not independently verify the accuracy of the PDE records or the 
data from the NCPDP or First DataBank.  We based our analysis on the 
pharmacy type that each pharmacy reported in the NCPDP.  As a result, 
our analysis of questionable billing may contain pharmacies that neglected 
to report providing specialty services.  Providing such services may make 
a pharmacy more likely to exceed certain billing thresholds. 
We designed this study to identify pharmacies that warrant further 
scrutiny.  None of the measures we analyzed confirm that a particular 
pharmacy is engaging in fraudulent or abusive practices.  Some 
pharmacies may be billing extremely high amounts for legitimate reasons.  
For example, a pharmacy located in a rural area with few physicians may 
bill for an extremely high average number of prescriptions per prescriber.  
Alternatively, a pharmacy located next to a pain clinic may bill for an 
extremely high percentage of Schedule II or III drugs. 
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 
Retail pharmacies each billed Part D an average of 
nearly $1 million for prescriptions in 2009 
In total, 59,307 retail pharmacies billed Medicare Part D in 2009.  These 
pharmacies billed Part D for a total of 873.3 million prescriptions for  
24.4 million beneficiaries.32  Part D paid $56.9 billion for these 
prescriptions.33 
On average, retail pharmacies billed almost $1 million each for Part D 
prescriptions in 2009.  Half of them billed more than $750,000, while  
10 percent billed more than $1.8 million.  In total, retail pharmacies billed 
for 3,804 different types of drugs; however, some drugs were more 
common than others.  Twenty drugs accounted for one-third of all Part D 
prescriptions billed.  See Appendix A for more information about these 
drugs. 
Two-thirds of the retail pharmacies that billed Part D were chain 
pharmacies, while one-third were independent pharmacies.  In all,  
39,401 chain pharmacies and 19,906 independent pharmacies billed Part D 
in 2009. 
Retail pharmacies billed about $1,500 per beneficiary and 
$1,800 per prescriber, on average 
As shown in Table 1, retail pharmacies billed an average of $1,576 for 
each beneficiary they served.  On average, they served 648 beneficiaries 
and billed for 24 prescriptions per beneficiary.  Additionally, most  
(90 percent) pharmacies billed for fewer than 38 prescriptions per 
beneficiary. 
Also, as shown in Table 1, retail pharmacies billed an average of  
$1,818 per prescriber.  They had an average of 587 prescribers and billed 
for an average of 28 prescriptions per prescriber.  Additionally, most 
pharmacies billed for fewer than 54 prescriptions per prescriber. 
Schedule II and III drugs were a relatively small percentage of 
the prescriptions billed 
On average, 2 percent of each pharmacys Part D prescriptions were for 
Schedule II drugs.  Schedule II drugs have a high potential for abuse and 
may lead to severe psychological or physical addiction.  The most 
common Schedule II drugs billed were all painkillers and included 
 
32
 For the purposes of this report, we use the term prescription to mean one PDE record. 
33
 This includes the amount paid by sponsors, the Government, and by, or on behalf of, 
beneficiaries. 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  9 
   
   
oxycodone-aceteminophen, oxycodone hydrochloride, morphine sulfate, 
and fentanyl. 
On average, 3 percent of each pharmacys Part D prescriptions were 
Schedule III drugs.  Schedule III drugs also have potential for abuse.  The 
most common drugs billed were hydrocodone-acetaminophen, 
acetaminophen-codeine, hydrocodone bitartrate-ibuprofen, and AndroGel.  
See Appendix B for the most common Schedule II and III drugs billed to 
Part D. 
 
Table 1:  Distribution of Part D Billing by Retail Pharmacies, 2009 
National Average  10th   50th   90th  
for Retail 
Percentile*  Percentile  Percentile 
Pharmacies 
 
Average Amount Billed per Beneficiary  $1,576  $799  $1,390  $2,333 
Average Number of Prescriptions per Beneficiary   24  13   22   38  
Average Amount Billed per Prescriber  $1,818  $650   $1,335   $3,232  
Average Number of Prescriptions per Prescriber  28  10   21   54  
Percentage of Schedule II Drugs  2.2%  0.3%  1.7%  4.2% 
Percentage of Schedule III Drugs  3.1%  1.0%  2.8%  5.3% 
Percentage of Brand-Name Drugs  30.9%  24.9%  30.0%  37.9% 
Percentage of Refills  55.4%  40.7%  57.9%  66.8% 
*The 10th percentile indicates that 10 percent of all pharmacies fell below this value.  The 50th percentile (also known as the median) indicates 
that half of all pharmacies fell below this value.  The 90th percentile indicates that 90 percent of all pharmacies fell below this value. 
Note:  For the purposes of this report, we considered a prescription to be one PDE record.   
Source:  OIG analysis of Part D data, 2011. 
 
Brand-name drugs and refills were common 
On average, almost one-third of the prescriptions pharmacies billed for 
were for brand-name drugs.  Brand-name drugs are typically more costly 
than generics.  Lipitor, Plavix, Nexium, and Diovan were the most 
common brand-name drugs in 2009.  For most pharmacies, 38 percent or 
less of their prescriptions was for brand-name drugs.  At the same time, 
refills accounted for 55 percent of the prescriptions billed by retail 
pharmacies, on average.  The remaining were new prescriptions, not 
refills. 
   
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Over 2,600 retail pharmacies had questionable billing 
In total, 2,637 retail pharmacies had questionable Part D billing.  Each of 
these pharmacies exceeded the threshold that indicated extremely high 
billing for at least one of the eight measures we developed.  See Table 2 
for these thresholds.  These pharmacies represented 4 percent of all retail 
pharmacies nationwide.  Together, they billed $5.6 billion to Part D in 
2009.  While some of this billing may be legitimate, all pharmacies that 
bill for such extremely high amounts warrant further scrutiny. 
More than one-third of the pharmacies with questionable billing exceeded 
the thresholds for multiple measures.  Specifically, 949 pharmacies did so 
for 2 or more measures; 54 did so for 4 or more measures.  See  
Appendix C. 
 
Table 2:  Number of Pharmacies That Billed Extremely High Amounts by Measure, 2009 
National Average  Threshold for  Number of Pharmacies 
for Retail  Extremely  That Billed Extremely 
Pharmacies  High Amounts  High Amounts 
 
Average Amount Billed per Beneficiary  $1,576  $4,050  778 
Average Number of Prescriptions per Beneficiary  24  66   133 
Average Amount Billed per Prescriber  $1,818  $5,977  850 
Average Number of Prescriptions per Prescriber  28  102  559 
Percentage of Schedule II Drugs  2.2%  8.1%  871 
Percentage of Schedule III Drugs  3.1%  10.1%  276 
Percentage of Brand-Name Drugs  30.9%  51.5%  439 
Percentage of Refills  55.4%  99.1%  6 
     Total Number of Pharmacies  2,637* 
 
*A number of pharmacies exceeded multiple thresholds.  As a result, the sum does not equal 2,637. 
Note:  For the purposes of this report, we considered a prescription to be one PDE record. 
Source:  OIG analysis of Part D data, 2011. 
 
 
Almost 800 pharmacies billed extremely high dollar amounts 
per beneficiary; a smaller number billed for an extremely high 
number of prescriptions per beneficiary 
Although some of this billing may be legitimate, billing high dollar 
amounts per beneficiary or for a high number of prescriptions per 
beneficiary could mean that a pharmacy is billing for drugs that were not 
medically necessary or were never provided to the beneficiary. 
As shown in Table 2, 778 pharmacies billed extremely high dollar 
amounts, each with an average of at least $4,050 per beneficiary.  This 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  11 
   
   
amount was 212 times the national average of $1,576 per beneficiary.  In 
one case, a pharmacy billed an average of $23,145 for each beneficiary it 
served. 
One hundred and thirty-three pharmacies billed for an extremely high 
number of prescriptions per beneficiary, each with an average of at least 
66 prescriptions per beneficiary.  Again, this number is more than  
212 times the national average of 24.  More than half of these pharmacies 
billed for more than 300 prescriptions for at least 1 beneficiary.  One of 
these pharmacies billed for 946 prescriptions for a single beneficiary in  
1 year. 
Eight hundred and fifty pharmacies billed extremely high 
dollar amounts per prescriber, while 559 billed for an 
extremely high number of prescriptions per prescriber 
Billing high dollar amounts per prescriber or billing for a high number of 
prescriptions per prescriber may indicate that a pharmacy has relationships 
with certain prescribers.  Although in some cases they may be legitimate, 
these relationships are a concern because the pharmacy and prescriber may 
be working together to bill for drugs that were not medically necessary or 
were never provided to the beneficiary. 
The 850 pharmacies that billed extremely high dollar amounts per 
prescriber each averaged at least $5,977 per prescriber.  This amount was 
about three times the national average of $1,818.  Some of these 
pharmacies billed considerably more per prescriber on average.  For 
example, five of these pharmacies each billed more than $90,000 per 
prescriber. 
Additionally, 559 pharmacies billed for an extremely high number of 
prescriptions per prescriber; each averaged at least 102 prescriptions per 
prescriber.  This number was about 312 times the national average of  
28 prescriptions per prescriber. 
For many of these 559 pharmacies, a large percentage of the prescriptions 
were ordered by just a few prescribers.  At one third of these pharmacies, 
one or two prescribers ordered more than half of the prescriptions.  At  
1 pharmacy, a single prescriber ordered 46,868 prescriptions.  In another 
case, a single prescriber ordered 85 percent of the 20,186 prescriptions 
billed by 1 pharmacy during the year. 
Over 1,000 pharmacies billed for an extremely high percentage 
of Schedule II or III drugs, which have potential for addiction 
and abuse 
Schedule II and III drugs have a high risk for abuse.  Although there may 
be valid reasons why some pharmacies bill for high percentages of 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  12 
   
   
Schedule II and III drugs, all of these pharmacies warrant further scrutiny.  
Billing for a high percentage of these drugs may indicate that a pharmacy 
is billing for medically unnecessary drugs, which may be used 
inappropriately or diverted and resold for a profit.  Misuse of these drugs 
has serious human and financial costs. 
A total of 1,067 retail pharmacies billed for Schedule II or III drugs for an 
extremely high percentage of their prescriptions.  Specifically,  
871 pharmacies billed for a high percentage of Schedule II drugs.  At least 
8 percent of each of these pharmacies Part D prescriptions were for 
Schedule II drugs.  This was four times the national average of 2 percent.  
The most common Schedule II drugs among these 871 pharmacies were 
oxycodone hydrochloride, OxyContin, morphine sulfate, and Endocet.  
Several pharmacies billed over half their prescriptions as Schedule II 
drugs.  Notably, about 75 percent of one pharmacys prescriptions were 
billed as Schedule II drugs, and most of these prescriptions were ordered 
by one physician. 
In addition, 276 pharmacies billed for Schedule III drugs for a high 
percentage of their prescriptions.  More than 10 percent of each of these 
pharmacies prescriptions were Schedule III drugs.  This was more than 
three times the national average of 3 percent.  The most common  
Schedule III drugs among these pharmacies were hydrocodone-
acetaminophen, acetaminophen-codeine, Suboxone, and Lortab.  In one 
case, almost one-third of the pharmacys prescriptions were for  
Schedule III drugs.  Eighty pharmacies had an extremely high percentage 
of prescriptions for both Schedule II and III drugs. 
Over 400 pharmacies billed for an extremely high percentage 
of brand-name drugs, while a few pharmacies billed for an 
extremely high percentage of refills 
Billing for a high percentage of brand-name drugs may indicate that a 
pharmacy is billing for brand names but dispensing generics or is billing 
for prescriptions never dispensed.  A high percentage of refills could mean 
that a pharmacy is automatically billing for refills even when beneficiaries 
have not requested them or is billing for prescriptions that beneficiaries 
never picked up. 
A total of 439 pharmacies billed for brand-name drugs for an extremely 
high percentage of their prescriptions.  More than half of each of these 
pharmacies prescriptions were for brand-name drugs, compared to the 
national average of 31 percent.  The most common brand-name drugs 
billed by these pharmacies were Lipitor, Plavix, and Nexium.  For one 
pharmacy, 99 percent of its prescriptions were for brand-name drugs. 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  13 
   
   
Additionally, six pharmacies billed for an extremely high percentage of 
refills.  More than 99 percent of each of these pharmacies prescriptions 
for Part D drugs were refills, compared to the national average of  
55 percent.  One of these pharmacies billed for 5,297 prescriptions, all of 
which were refills. 
 
  Examples of Questionable Part D Billing 
    One suburban pharmacy had particularly concerning billing.  It 
billed more than $8.4 million to Part D in 2009, which is nine times 
 
the national average.  Also, it billed for an average of  
  116 prescriptions per beneficiary and 132 prescriptions per 
prescriber.  These are both almost five times the national average. 
 
  One midwestern pharmacy billed for over 1,000 prescriptions each 
 
for 2 beneficiaries.  One physician ordered almost all the 
 
prescriptions for one of these beneficiaries.   
 
  A third pharmacy billed an average of $132,845 per prescriber, 
  which is 73 times the national average.  Virtually all of these 
prescriptions were for brand-name drugs. 
 
 
Independent pharmacies were eight times more likely than 
chains to have questionable billing 
Independent pharmacies were far more likely than chain pharmacies to 
have extremely high billing on one of more of the eight measures.  As 
shown in Figure 1, almost 11 percent of independent pharmacies had 
questionable billing, compared to just over 1 percent of chain pharmacies. 
Although independent pharmacies made up 34 percent of all retail 
pharmacies that billed Part D, they accounted for 80 percent of the 
pharmacies with questionable billing.  Of the 2,637 pharmacies with 
questionable billing, 2,120 were independent. 
 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  14 
   
   
Figure 1:  Percentage of Independent and Chain Pharmacies With Questionable Billing, 2009 
15% 
s g 
en
maciBilli 10.7%  
re 10% 
habl
Pa
of on
e sti
ge
au 5% 
nQ
ceh 
rt
PeWi 1.3%                               
0% 
Independent  Chain 
(N=19,906)  (N=39,401) 
Type of Retail Pharmacies 
 
Source:  OIG analysis of Part D data, 2011. 
The Miami, Los Angeles, and Detroit areas were the 
most likely to have pharmacies with questionable 
billing 
Certain metropolitan areas had a higher percentage of pharmacies with 
questionable billing than the Nation, which had 4 percent.  The percentage 
of pharmacies with extremely high billing on one or more of the eight 
measures was four times higher in the Miami area than in the Nation as a 
whole.  The percentages in the Los Angeles area and the Detroit area were 
about 212 times the national percentage.  Percentages in other metropolitan 
areas, including New York, Baltimore, and Tampa, were about two times 
the national percentage.  See Figure 2. 
Together, these six metropolitan areas accounted for almost 28 percent of 
all pharmacies with questionable billing in 2009.  Ninety-three percent of 
the pharmacies with questionable billing in these six areas were 
independent pharmacies. 
Miami.  Nineteen percent of Miami area pharmacies had questionable 
billing in 2009.  This is more than four times the percentage of pharmacies 
with questionable billing in the Nation as a whole. 
Three-quarters of the pharmacies with questionable billing in the Miami 
area billed extremely high amounts per beneficiary.  Some of these 
pharmacies billed exorbitant amounts.  For example, 10 pharmacies billed 
an average of $8,000 or more per beneficiary, which is five times the 
national average per beneficiary.  See Appendix D for more information 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  15 
   
   
about the pharmacies with extremely high billing in the Miami area and 
the other metropolitan areas. 
Brand-name drugs made up an extremely high percentage of prescriptions 
in 40 percent of the Miami area pharmacies with questionable billing.  
These pharmacies also billed for certain brand-name drugs at a much 
higher rate than pharmacies nationally.  For example, they billed for Sure 
Comfort brand insulin needles 50 times more often than pharmacies 
nationwide.  They also billed for Prevacid, a brand-name drug used to treat 
acid reflux, five times more often than pharmacies nationwide. 
 
Figure 2:  Percentage of Pharmacies in Each Area With Questionable Billing, 2009 
19.4% 
20% 
s 
e
macing 15% 
harBilli 12.1% 
Pe 
ail abl 10.5%  9.6% 
Reton10%  9.0%  8.8% 
f sti
oe
e u
gQ
entaWith  5%  4.4% 
c
r
e
P
0% 
Nation  Miami  Los  Detroit  Baltimore  New  Tampa 
Angeles  York 
 
Source:  OIG analysis of Part D data, 2011. 
Los Angeles.  Twelve percent of Los Angeles area pharmacies had 
questionable billing in 2009, which is over 212 times the percentage of 
pharmacies with questionable billing in the Nation as a whole. 
Most commonly, pharmacies billed for extremely high percentages of 
brand-name drugs; over half of the pharmacies with questionable billing in 
the Los Angeles area did this.  Like pharmacies in the Miami area, these 
pharmacies billed for certain brand-name drugs at a much higher rate than 
pharmacies in the Nation as a whole.  For example, they billed for 
Celebrex, a brand-name drug used to treat arthritis, three times more often 
than pharmacies nationwide. 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  16 
   
   
In addition, almost half the pharmacies with questionable billing in the 
Los Angeles area billed for extremely high dollar amounts per prescriber.  
In fact, three pharmacies billed an average of more than $20,000 per 
prescriber. 
Detroit.  Almost 11 percent of the pharmacies in the Detroit area had 
questionable billing in 2009.  This is almost 212 times the percentage of 
pharmacies with questionable billing in the Nation as a whole. 
Schedule III drugs were the biggest problem in the Detroit area.  Over  
60 percent of pharmacies with questionable billing billed for an extremely 
high percentage of Schedule III drugs.  Hydocodone acetaminophen, an 
addictive painkiller, was the most common Schedule III drug billed by 
these pharmacies. 
New York.  Nine percent of the pharmacies in the New York area had 
questionable billing in 2009, which is twice the percentage of pharmacies 
with questionable billing in the Nation as a whole.  By far, the two most 
common problems in the area were billing for high dollar amounts per 
beneficiary and billing for a high percentage of brand-name drugs. 
Seventy percent of the pharmacies with questionable billing in the  
New York area billed for extremely high average dollar amounts per 
beneficiary.  Eight of these each billed an average of at least $10,000 per 
beneficiary. 
Sixty-three percent of the areas pharmacies with questionable billing 
billed for extremely high percentages of brand-name drugs.  In fact, more 
than one-third of all pharmacies in the Nation that billed for brand-name 
drugs for an extremely high percentage of their prescriptions were in the 
New York area.  The three most common drugs they billed for were 
Plavix, Lipitor, and Nexium, which were the drugs most commonly billed 
for in the Nation as a whole.  However, they also billed for an unusually 
high percentage of the Lidoderm patch, a local anesthetic (numbing 
medication) used to relieve postshingles pain. 
Baltimore and Tampa.  Like New York, both the Baltimore and Tampa 
areas had twice the percentage of pharmacies with questionable billing as 
the Nation as a whole. 
Baltimore and Tampa both had a problem with Schedule II drugs.  Over  
80 percent of the pharmacies with questionable billing in each area billed 
for extremely high percentages of Schedule II drugs.  For Tampa 
pharmacies with questionable billing, the most common drug was 
oxycodone hydrochloride, a narcotic painkiller that is frequently abused 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  17 
   
   
for its euphoric effects.34  It accounted for almost 4 percent of the 
prescriptions billed by these pharmacies.  This is 15 times higher than the 
percentage billed nationally, which is less than 1 percent.  Oxycodone 
hydrochloride was also among the most common drugs billed by 
pharmacies in the Baltimore area. 
   
 
34
 See DEA, Drugs and Chemicals of Concern:  Oxycodone, October 2000.  Accessed at 
http://www.deadiversion.usdoj.gov/drugs_concern/oxycodone/summary.htm on  
October 19, 2011.  Oxycodone is often used to alleviate or prevent the onset of opiate 
withdrawal by street users of heroin and methadone.  Products with large amounts of 
oxycodone are highly attractive to opioid abusers. 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  18 
   
   
CONCLUSION AND RECOMMENDATIONS 
Thousands of pharmacies nationwide have questionable billing.  While 
some pharmacies may be billing extremely high amounts for legitimate 
reasons, all warrant further scrutiny.  Specifically, we found that many 
pharmacies billed for extremely high dollar amounts or numbers of 
prescriptions per beneficiary or per prescriber.  Many also billed for 
extremely high amounts of Schedule II or III controlled substances,  
brand-name drugs, or refills.  In addition, these pharmacies were more 
likely to be independent and to be in certain metropolitan areas, such as 
Miami, Los Angeles, and Detroit. 
Our findings further indicate vulnerabilities in the oversight of the Part D 
program.  Prior OIG reports have also found evidence of these 
vulnerabilities.  For example, a 2009 OIG review revealed that the 
MEDICs may not be aware of some potential fraud and abuse incidents 
because sponsors are not required to refer these incidents to the MEDICs.  
Another report found that more than one-quarter of stand-alone Part D 
plan sponsors did not identify any potential fraud and abuse in 2007, even 
though CMS requires sponsors to have programs to detect, correct, and 
prevent fraud and abuse.  A subsequent OIG report found that CMSs 
oversight of sponsors compliance plans was extremely limited. 
Together, these findings call for a strong response to improve Part D 
oversight.  OIG is committed to continuing to conduct investigations and 
audits of pharmacies with questionable billing and to monitor pharmacy 
billing.  CMS must also use all of the tools at its disposal to more 
effectively identify and fight fraud, waste, and abuse in Part D. 
Therefore, we recommend that CMS: 
Strengthen the MEDICs Monitoring of Pharmacies and Ability 
To Identify Pharmacies for Further Review 
One of the MEDICs is responsible for detecting, preventing, and 
investigating potential fraud, waste, and abuse.  CMS should ensure that 
this MEDIC does more to systematically monitor pharmacies and to 
identify those with questionable billing.  On an ongoing basis, the MEDIC 
should monitor pharmacy billing and identify those that need further 
review.  It should use the measures presented in this report, as well as 
others it deems appropriate.  It should also focus on independent 
pharmacies and those in the metropolitan areas we identified as having 
high percentages of pharmacies with questionable billing. 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  19 
   
   
Provide Additional Guidance to Sponsors on Monitoring 
Pharmacy Billing 
Part D sponsors are responsible for monitoring and auditing pharmacies, 
which are critical steps in fighting fraud, waste, and abuse.  CMS should 
update its Part D manual or issue guidance reminding sponsors of the 
importance of conducting pharmacy-level data analysis.  As part of this 
effort, CMS should solicit input from sponsors and the MEDIC on other 
ways to effectively monitor pharmacy billing and include this information 
in the updated guidance.  CMS should also recommend that sponsors 
routinely generate and review reports on pharmacy billing to identify 
pharmacies for further review. 
Require Sponsors To Refer Potential Fraud and Abuse 
Incidents That May Warrant Further Investigation 
As we have previously recommended for Medicare Advantage 
organizations, CMS should require all Part D sponsors to report incidents 
of potential fraud and abuse that may warrant further investigation to CMS 
or other appropriate entities.35  If necessary, CMS should seek statutory 
authority to implement this change.  Current regulations stipulate that  
Part D sponsors should have procedures to voluntarily report this 
information.  Because sponsors are on the front line of detecting fraud, 
waste, and abuse in Part D, a significant vulnerability exists when 
sponsors are not required to report this information. 
Develop Risk Scores for Pharmacies 
As it does for other parts of Medicare through its National Fraud 
Prevention Program, CMS should analyze billing data to detect 
pharmacies with a high risk for fraud.  To do this, CMS should work with 
the MEDICs and sponsors to develop measures of pharmacy risk and 
assign each pharmacy a risk level, such as high, moderate, or low.  CMS 
should provide this information to sponsors routinely so that they can use 
it to target pharmacies for audits and further review. 
Further Strengthen Its Compliance Plan Audits 
CMS is responsible for conducting onsite audits of sponsors compliance 
plans to assess the effectiveness of their fraud and abuse programs.  CMS 
has recently improved its audit process.  As it continues these efforts, 
CMS should ensure that its audits include an in-depth review of how 
sponsors monitor and oversee pharmacies.  As part of these audits, CMS 
should review the extent to which sponsors are effectively using data 
analysis to detect aberrant billing patterns.  CMS should also review what 
 
35
 OIG, Medicare Advantage Organizations Identification of Potential Fraud and Abuse 
(OEI-03-10-00310), February 2012. 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  20 
   
   
actions sponsors take when they identify aberrant patterns and potential 
fraud, waste, and abuse. 
Follow Up On the Pharmacies Identified as Having 
Questionable Billing 
In a separate memorandum, we will refer the pharmacies with 
questionable billing to CMS for appropriate action. 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  21 
   
   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
 
In its comments on the draft report, CMS concurred with four of the 
recommendations and partially concurred with the other two.  CMS 
concurred with our first recommendation, to strengthen the MEDICs 
monitoring of pharmacies and ability to identify pharmacies for further 
review.  Specifically, CMS stated that it and the MEDIC will continue to 
refine the MEDICs data analysis based on emerging trends and best 
available data.  CMS also concurred with our second recommendation, to 
provide additional guidance to sponsors on monitoring pharmacy billing, 
stating that it has already issued guidance and will issue additional 
guidance in the 2013 Parts C and D Call Letter.  In addition, CMS 
concurred with our fifth recommendation, to further strengthen 
compliance plan audits.  It stated that it will continue to insist that an 
effective compliance program include the use of data analysis to detect 
potential fraud, waste, and abuse.  Finally, CMS concurred with our sixth 
recommendation, to follow up on the pharmacies identified as having 
questionable billing, stating that the MEDIC will review the cases referred 
by OIG and conduct peer-to-peer comparisons and other analysis. 
CMS partially concurred with our third recommendation, to require 
sponsors to refer potential fraud and abuse incidents that may warrant 
further investigations and stated that it will explore this option.  CMS also 
concurred in part with our fourth recommendation, to develop risk scores 
for pharmacies.  It stated that it will consider developing a risk assessment 
for pharmacies and sharing this information with sponsors.  OIG supports 
CMSs efforts to explore requiring sponsors to report potential fraud and 
to develop pharmacy risk scores.   
The full text of CMSs comments is provided in Appendix E.  We made 
minor changes to the report based on technical comments.   
   
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  22 
   
   
 
APPENDIX A 
Most Common Drugs Billed to Medicare Part D by Retail Pharmacies, 2009 
Percentage  
Number of 
of All 
Rank  Drug  Common Treatment  Prescriptions 
Prescriptions 
Billed  
Billed 
1  Simvastatin  High cholesterol  28,099,312  3.2% 
2  Lisinopril  High blood pressure  24,642,289  2.8% 
3  Hydrocodone-acetaminophen  Pain  23,006,544  2.6% 
4  Amlodipine besylate  High blood pressure  19,086,682  2.2% 
5  Levothyroxine sodium  Hypothyroidism  19,068,278  2.2% 
6  Furosemide  Swelling and fluid retention  18,183,668  2.1% 
7  Omeprazole  Gastroesophageal reflux disease   16,562,103  1.9% 
8  Metoprolol tartrate  High blood pressure  14,866,523  1.7% 
9  Metformin HCl  Type 2 diabetes  14,331,451  1.6% 
10  Hydrochlorothiazide  High blood pressure  14,011,233  1.6% 
11  Lipitor*  High cholesterol/heart disease  13,849,439  1.6% 
12  Atenolol  High blood pressure  13,045,879  1.5% 
13  Plavix*  Heart disease  12,767,221  1.5% 
14  Warfarin sodium  Blood clots  10,438,471  1.2% 
15  Metoprolol succinate  High blood pressure  9,537,572  1.1% 
16  Alendronate sodium  Osteoporosis  9,228,818  1.1% 
17  Gabapentin  Seizures  8,839,510  1.0% 
18  Zolpidem tartrate  Insomnia  8,037,495  0.9% 
19  Potassium chloride  Potassium deficiency  7,697,500  0.9% 
20  Nexium*  Gastroesophageal reflux disease   7,259,495  0.8% 
292,559,483  33.5% 
     Total 
* Indicates that this is a brand-name drug. 
Note:  For more information on the common use for each drug, see National Institutes of Health, National Center for 
Biotechnology Information Pub Med Health, Drugs and Supplements.  Accessed at 
http://www.ncbi.nlm.nih.gov/pubmedhealth on July 12, 2011. 
Source:  Office of Inspector General analysis of Part D data, 2011. 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  23 
   
   
APPENDIX B 
Most Common Schedule II Drugs Billed to Medicare Part D by Retail Pharmacies, 2009 
Percentage of 
Number of  
All Schedule II 
Rank  Drug  Common Treatment  Prescriptions 
Prescriptions 
Billed  
Billed 
1  Oxycodone-acetaminophen  Pain  3,560,637  21.1% 
2  Oxycodone HCl  Pain  2,065,483  12.3% 
3  Morphine sulfate  Pain   2,038,891  12.1% 
4  Fentanyl  Pain  1,756,646  10.4% 
5  OxyContin*  Pain  1,358,823  8.1% 
6  Oxycodone HCl-acetaminophen  Pain  1,252,833  7.4% 
7  Endocet*  Pain  1,166,799  6.9% 
8  Methadone HCl  Pain  1,143,404  6.8% 
9  Hydromorphone HCl  Pain  564,687  3.4% 
10  Amphetamine salt combo  Attention deficit hyperactivity disorder  310,460  1.8% 
     Total  15,218,663  90.4% 
* Indicates that this is a brand-name drug. 
Source:  Office of Inspector General analysis of Part D data, 2011. 
 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  24 
   
   
Most Common Schedule III Drugs Billed to Medicare Part D by Retail Pharmacies, 2009 
Number of   Percentage of All 
Rank  Drug  Common Treatment  Prescriptions  Schedule III 
Billed   Prescriptions Billed 
1  Hydrocodone-acetaminophen  Pain  23,006,544  86.9% 
2  Acetaminophen-codeine  Pain  2,215,838  8.4% 
3  Hydrocodone BIT-ibuprofen  Pain  220,915  0.8% 
4  AndroGel*  Low testosterone  213,796  0.8% 
5  Suboxone*  Opioid dependence   198,129  0.7% 
6  Testosterone cypionate  Low testosterone  114,081  0.4% 
7  Butalbital compound-codeine  Tension headache  63,229  0.2% 
8  Butalbital-caff-APAP-codeine  Tension headache  59,242  0.2% 
9  Testim*  Low testosterone  58,533  0.2% 
10  Dronabinol  Nausea and vomiting  57,003  0.2% 
     Total  15,218,663  90.4% 
* Indicates that this is a brand-name drug. 
Source:  Office of Inspector General analysis of Part D data, 2011. 
 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  25 
   
   
APPENDIX C 
Number of Pharmacies That Billed Extremely  
High Amounts by Number of Measures, 2009 
Number of Pharmacies That  
Number of Measures  Billed Extremely High 
Amounts 
1  1,688 
2  685 
3  210 
4  46 
5  8 
     Total  2,637 
Source:  Office of Inspector General analysis of Part D 
data, 2011. 
 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  26 
   
   
APPENDIX D 
Percentage of Pharmacies With Questionable Billing in Each Area That Exceeded the 
Threshold, 2009 
 
Los   New  
Miami  Detroit  Baltimore  Tampa 
Measures  Angeles  York 
(N=119)  (N=52)  (N=51)  (N=56) 
(N=197)  (N=256) 
Average Amount Billed per 
76%  43%  31%  70%  18%  9% 
Beneficiary  
Average Number of Prescriptions 
21%  16%  6%  9%  2%  2% 
per Beneficiary  
Average Amount Billed per 
20%  48%  19%  8%  8%  9% 
Prescriber  
Average Number of Prescriptions 
7%  22%  4%  2%  4%  7% 
per Prescriber  
Percentage of Schedule II Drugs  6%  5%  6%  5%  82%  86% 
Percentage of Schedule III Drugs  0%  8%  62%  0%  0%  0% 
Percentage of  
40%  53%  6%  63%  0%  2% 
Brand-Name Drugs 
Percentage of Refills  0%  0%  0%  0%  0%  2% 
Note:  We considered a pharmacy to have questionable billing if it exceeded the threshold on one or more of the eight 
measures. This table shows the percentage of pharmacies with questionable billing that exceeded the threshold for a particular 
measure.  For example, 76 percent of the pharmacies in Miami that had questionable billing exceeded the threshold for average 
amount billed per beneficiary.  See Table 2 for the national averages and the thresholds for each measure.    
Source:  Office of Inspector General analysis of Part D data, 2011. 
  
 
 
 
 
 
 
 
 
 
 
 
 
   
   
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  27 
  APPENDIX E 
Agency Comments 
(:J-
DEPARTMENT OF HEALTH & HUMAN SERVICES  Cenl,,", fOt Medicare & Medicaid Sennces
Administrator 
Washinglon. DC 20201 
MAR 2 12012
DATE: 
TO: 	 Daniel R. I.e inson 
Insp'.!Clor General 
FROM: 	 Marllyn Tavarmer 
Acting Admj~trator 
SUBJECT: 	 Office of Inspector General Draft Report: '"Retail Pharmacies with Questionable 
Part D Billing" (OEI-02-09-00600) 
The Centers f<)r Medicare & Mcdicaid Services (eMS) appreciates the opportunity to review and 
comment on the Office of Inspector General (OIG) draft report entitled, "Retail Pharmacies with 
Questionable Part D Billing." This study provided a look at Part D billing by pharmacies 
nationwide. It is a part of the Ilealth Care fraud Prevention and Enforcement Action Team 
Initiative. which focuses on detecting health care fraud through thc use of innovative data 
analysis and cnhanced cooperation among the Department ofJustice {DOJ}. 010. and eMS. 
The CMS concurs in large part with OIO's recommendations. In fllct. eMS already has in place 
actions thaI address a number ofOIO's recommendations. For example, eMS will continue 10 
monitor pharmacy-related projects conducted by the Medicare drug integrity contractor 
(MEDIC). enhance its relationship with plan sponsors, and provide guidance on the regulatory 
requirements regarding Prescription Drug Plan (PDP) sponsors' and Medicare Advantage (MAl 
organizatioos' obligatinos tn prevent, detect, and correct Parts C and D program noncompliance 
and fraud, waste. and abuse.  We believe it is important to note that 010 report identified what 
appeared to be questionable billing based on its own data analysis but did not determine any 
actual fraud committed by the pharmacies. 
-Ibe CMS appreciates OIO's efforts in developing this study and Will consider using select 
aspects ofOIG's methodology in our own ongoing data analysis.  In particular, we will work 
with our MEDIC to assess the underlying reasons for the questionable billing 010 has identified. 
We will assess whether the indicators developed for the study point to actionable items. as well 
as determine if the results might be improVed by the application of certain adjustment factors the 
MEDIC hus applied in previous datil analyses. 
We appreciate OIO's efforts in working with eMS to help identity retail pharmacies with 

questionable Part 0 billing. Our response to each oflhe OIG recommendations follows. 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  28   
   
 
 
 
 
 
 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  29 
   
   
 
 
 
 
 
 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  30 
   
   
 
 
 
 
 
 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  31 
   
   
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 this report include Jenell Clarke, Jason Kwong, 
and David Rudich; central office staff who contributed include  
Eddie Baker Jr., Kevin Farber, Rob Gibbons, and Rita Wurm. 
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600)  32 
   
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.