Department of Health and Human Services
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
OVERS IGHT OF PRESCRIPTION 
 
D P S 
RUG  LAN  PONSORS  
 
 
C P  
OMPLIANCE  LANS
 
 
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
October 2008 
OEI-03-08-00230    
 
 
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.   
  
   
 E X E C U T I V E   S U M M A R Y  
OBJECTIVE
 
To determine what oversight the Centers for Medicare & Medicaid 
Services (CMS) has conducted of prescription drug plan (PDP) sponsors 
compliance plans. 
BACKGROUND 
The Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 established Medicare Part D to provide prescription drug 
benefits under the Medicare program beginning January 1, 2006.     
Part D prescription drug coverage is provided by private entities known 
as plan sponsors.   
An effective compliance plan helps PDP sponsors protect the integrity of 
Medicare funds by preventing and detecting fraud, waste, and abuse.  
Federal regulations in effect since March 22, 2005, require that PDP 
sponsors have compliance plans in place and that these compliance 
plans address eight elements.  Chapter 9 of CMSs Prescription Drug 
Benefit Manual includes the eight elements as well as additional 
requirements and recommendations for addressing each of these 
elements. 
The Office of Inspector General (OIG) released a report on PDP 
sponsors compliance plans in December 2006 that found that most 
sponsors compliance plans did not address all of the CMS requirements 
or recommendations.  In comments on the report, CMS stated that 
account managers would follow up with PDP sponsors regarding 
deficiencies in their compliance plans.  CMS also stated that it would 
conduct routine audits of PDP sponsors compliance plans beginning in 
January 2007.  Routine audits are scheduled audits conducted to ensure 
compliance with program requirements.  CMS can also conduct focused 
audits outside the routine audit process to confirm the correction of 
previously identified deficiencies.   
We collected documentation and interviewed CMS staff regarding their 
oversight activities related to PDP sponsors compliance plans.  Data 
collection was conducted in April and May 2008. 
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FINDINGS 
CMS conducted one audit of a PDP sponsors compliance plan in 
2007.  CMS conducted 17 routine audits and 2 focused audits of PDP 
sponsors in 2007.  However, CMS did not include a compliance plan 
review in any of the 17 routine audits conducted.  One of the two 
focused audits included a review of one PDP sponsors compliance plan.  
The audit found that the sponsor did not have a comprehensive plan to 
detect, correct, and prevent fraud, waste, and abuse.  
In April 2008, CMS reported that it plans to begin specific audits of 
compliance plans in the summer of 2008.  However, as of early August 
2008, CMS had not yet conducted any specific audits of PDP sponsors 
compliance plans.   
PDP sponsors completed a compliance plan self-assessment but 
CMS did not verify sponsors responses.  In response to OIGs 
December 2006 report, CMS instructed all 91 PDP sponsors to complete 
a compliance plan self-assessment in June 2007.  The self-assessment 
was based on Chapter 9 of the Prescription Drug Benefit Manual; 
however, CMS did not include all requirements from Chapter 9 in the 
self-assessment.  In addition, CMS did not request documentation to 
support sponsors responses to the self-assessment.   
Twenty-three of the ninety-one PDP sponsors attested in June 2007 
that they had not implemented 1 or more of 11 compliance plan 
requirements included in the self-assessment.  In April 2008, CMS had 
account managers follow up with these 23 PDP sponsors.  Based on this 
followup, only one sponsor reported that it was not meeting all of the 
requirements included in the self-assessment.  However, CMS did not 
instruct account managers to request supporting documentation to 
confirm that PDP sponsors made corrections to their compliance plans.    
RECOMMENDATION 
Effective compliance plans are a fundamental tool in preventing and 
detecting fraud, waste, and abuse in the Part D program.  Although 
CMS originally planned to begin routine compliance plan audits in 
January 2007, as of early August 2008, CMS had not conducted any 
routine audits of PDP sponsors compliance plans.  In addition, while 
CMS instructed all PDP sponsors to complete a compliance plan  
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E X E C U T I V E   S U M M A R Y  
self-assessment, the self-assessment did not include all requirements 
from Chapter 9 of the Prescription Drug Benefit Manual.  Also, CMS 
did not ensure that PDP sponsors attestations were accurate by 
independently verifying their responses.  Therefore, CMS has only    
self-reported information to determine whether PDP sponsors 
compliance plans are meeting Federal requirements.   
Therefore, we recommend that CMS: 
Conduct audits to verify that PDP sponsors compliance plans meet 
requirements.  CMS should conduct routine audits of PDP sponsors 
compliance plans to ensure that these compliance plans meet all 
Federal requirements.  Specifically, these audits should cover all 
compliance plan requirements contained in regulations as well as 
requirements included in Chapter 9 of the Prescription Drug Benefit 
Manual.  CMS may also want to assess the degree to which PDP 
sponsors have implemented the recommendations described in   
Chapter 9. 
AGENCY COMMENTS 
CMS concurred with our recommendation that it should conduct audits 
of PDP sponsors compliance plans.  CMS noted that due to critical 
funding shortfalls, it was not able to conduct compliance plan audits 
prior to the issuance of this report.  However, CMS stated that it will 
begin audits of sponsors compliance plans in the near future.  These 
audits will consist of a limited number of desk audits; however, as more 
resources become available, CMS stated that it will include more audits, 
onsite reviews, and other more comprehensive fraud prevention 
activities. 
 
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 T A B L E   O F   C O N T E N T S  
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
 
 
I N T RO DUC T IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 
 
 
F I N D IN G S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7  
  CMS conducted one audit of a PDP sponsors compliance plan. . . . 7  
  CMS did not verify PDP sponsors self-assessment responses . . . . 7  
   
R E C O MMEN D A T ION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 
  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 
 
APPENDIX ................................................. 12 
  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 
 
A C K NO WL E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 
 
   
  
   
 I N T R O D U C T I O N  
OBJECTIVE 
To determine what oversight the Centers for Medicare & Medicaid 
Services (CMS) has conducted of prescription drug plan (PDP) sponsors 
compliance plans. 
BACKGROUND 
The Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 established Medicare Part D to provide prescription drug 
benefits under the Medicare program beginning January 1, 2006.1    
Part D prescription drug coverage is provided by private entities   
known as plan sponsors.  Plans offered by sponsors include PDPs and 
Medicare Advantage prescription drug plans (MA-PD) that offer 
integrated coverage for both prescription drugs and other health care.  
As of August 2008, 26 million beneficiaries were enrolled in a Part D 
plan.  Two-thirds of these beneficiaries were enrolled in a PDP.2  
Medicare expenditures for Part D benefits were approximately        
$49.5 billion in 2007.3  
Compliance Plan Requirements  
An effective compliance plan helps PDP sponsors protect the integrity of 
Medicare funds by preventing and detecting fraud, waste, and abuse.  
Federal regulations in effect since March 22, 2005, require that PDP 
sponsors have compliance plans in place and that these compliance 
plans address eight elements.4  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; 
 
1 The Medicare Prescription Drug, Improvement, and Modernization Act of 2003,           
P.L. No. 108-173, Social Security Act  1860D-1(a), 42 U.S.C.  1395w-101(a). 
2 CMS, Monthly Contract Summary Report, August 2008.  Available online at  
http://www.cms.hhs.gov/MCRAdvPartDEnrolData/MCESR.  Accessed on August 28, 2008. 
3 The Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary 
Medical Insurance Trust Funds, 2008 Annual Report, p. 111, March 2008.  Available 
online at http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2008.pdf.  Accessed on 
April 22, 2008. 
4 42 CFR  423.504(b)(4)(vi). 
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I N T R O D U C T I O N  
(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 responses to detected offenses and 
development of corrective action initiatives relating to the 
organizations contract as a Part D plan sponsor; and 
(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. 
In December 2007, CMS issued a final rule that revises Federal 
regulations and clarifies that the elements relating to training and 
education and effective lines of communication must include PDP 
sponsors first tier, downstream, and related entities (e.g., contractors).  
In addition, this final rule removes the eighth compliance plan element 
regarding a fraud and abuse plan effective January 1, 2009.5  Although 
this element is being removed, CMS has added language to the 
regulation which specifies that PDP sponsors compliance plans must 
include measures to detect, correct, and prevent fraud, waste, and 
abuse.  Also, CMS is working on additional regulatory changes to make 
self-reporting of potential fraud or misconduct mandatory rather than 
voluntary.6 
Chapter 9 of CMSs Prescription Drug Benefit Manual includes 
additional requirements and recommendations for addressing each of 
the required compliance plan elements.7  CMS is currently updating 
 
5 72 Fed. Reg. 68700, 68705 (Dec. 5, 2007). 
6 72 Fed. Reg. 68700 (Dec. 5, 2007). 
7 CMS, Prescription Drug Benefit Manual, Rev. 2, April 25, 2006, ch. 9,  50.1.  
Available online at 
http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_F
WA.pdf.  Accessed on January 18, 2008. 
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I N T R O D U C T I O N  
Chapter 9 in response to the recent regulatory changes and will publish 
the revised chapter when all of the additional changes are finalized. 
Oversight Strategy 
Audit procedures.  CMS uses audits as part of its oversight strategy to 
ensure compliance with program requirements.  In November 2006, 
CMS issued a memorandum outlining its plans for auditing Part D 
sponsors.8  CMS stated in this memorandum that it would conduct 
regularly scheduled (i.e., routine) program audits of PDP sponsors using 
selected chapters of the Prescription Drug Plan Sponsor Part D Audit 
Guide (hereafter referred to as the Audit Guide).  For these audits, 
CMS requires PDP sponsors to provide supporting documentation to 
demonstrate their compliance with Federal requirements.  
The Audit Guide contains 14 chapters corresponding to various program 
areas, such as enrollment and disenrollment, claims processing, and 
compliance plans.  Each chapter has individual components that can be 
reviewed.  Chapter 10 of the Audit Guide covers compliance plans and 
includes components that correspond with the eight required 
compliance plan elements.9   For example, one component states that 
PDP sponsors compliance plans must include a comprehensive plan to 
detect, correct, and prevent fraud, waste, and abuse.   
CMS can also conduct focused audits to confirm the correction of 
previously identified deficiencies or in response to indications of 
noncompliance.  Focused audits are conducted outside of the routine 
audit process.    
Request for PDP self-assessment.  As part of its activities to monitor the 
implementation of the Part D program, CMS instructed PDP sponsors 
to complete a self-assessment regarding their compliance plans in     
June 2007.10  CMS indicated that it would use this self-assessment to 
determine the extent to which PDP sponsors had implemented the 
 
8 CMS, Final MA-PD and PDP Part D Audit Guides for Part D Program Audits,     
November 13, 2006.  Available online at 
http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/MemoAuditGuides.pdf.  
Accessed on January 24, 2008. 
9 CMS, Medicare Prescription Drug Plan Sponsor Part D Audit Guide, Version 1.0, 
April 10, 2006.  Available online at 
http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/PDPAuditGuide.pdf.  
Accessed on January 18, 2008. 
10 CMS, Compliance Plan Best Practices Self-Assessment Tool, June 11, 2007. 
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requirements and recommendations outlined in Chapter 9 of the 
Prescription Drug Benefit Manual.       
Account managers.  Account managers within CMS perform the        
day-to-day oversight of PDP sponsors.  Account managers serve as the 
primary point of contact for PDP sponsors and ensure PDP sponsors 
compliance with program rules and guidance.  Account managers also 
coordinate all audits of PDP sponsors.  
Medicare Drug Integrity Contractors.  Medicare Drug Integrity 
Contractors (MEDIC) are responsible for many Part D oversight 
activities.  According to the MEDICs umbrella statement of work, their 
responsibilities may include analyzing claims and other data, 
investigating complaints, and reviewing the fraud and abuse 
components of PDP sponsors compliance plans.11  CMS issues 
individual task orders to define the specific responsibilities of MEDICs.  
CMS has contracted with three companies to serve as MEDICs.  
MEDICs early efforts focused on processing complaints regarding Part 
D fraud, waste, and abuse. 
Previous Office of Inspector General Work  
In December 2006, the Office of Inspector General (OIG) issued a report 
entitled Prescription Drug Plan Sponsors Compliance Plans         
(OEI-03-06-00100).12  The report found that most PDP sponsors 
compliance plans did not address all of the CMS requirements or 
recommendations.  For example, 71 of 79 PDP sponsors compliance 
plans reviewed did not address all requirements related to internal 
monitoring and auditing.  OIG recommended that CMS take steps to 
ensure that PDP sponsors compliance plans address all requirements.  
In its comments on the report, CMS stated that account managers 
would follow up with the PDP sponsors identified in the report 
regarding deficiencies in their compliance plans.  In addition, CMS 
stated that in January 2007, it would begin routine audits that would 
include PDP sponsors compliance plans. 
 
 
 
11 CMS, MEDIC Statement of Work,  3.2, Rev. 1, January 3, 2006.   
12 OIG, Prescription Drug Plan Sponsors Compliance Plans, OEI-03-06-00100, 
December 2006.  Available online at http://oig.hhs.gov/oei/reports/oei-03-06-00100.pdf.  
Accessed on March 11, 2008.   
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I N T R O D U C T I O N  
METHODOLOGY 
Data Collection and Analysis 
We collected documentation and interviewed CMS staff regarding the 
following oversight activities: 
 all audits of PDP sponsors conducted between January 1, 2007, and 
March 31, 2008; 
 any planned audits of PDP sponsors compliance plans scheduled for 
2008;  
 PDP sponsors self-assessment of their compliance plans and any steps 
taken to address deficiencies;  
 CMSs followup with PDP sponsors regarding the findings of OIGs 
December 2006 report; and  
 any other oversight conducted to ensure that PDP sponsors 
compliance plans meet Federal requirements.   
We collected this information from CMS officials with responsibility for 
oversight of PDP sponsors compliance plans.  CMS respondents 
included representatives from the Center for Beneficiary Choices 
Medicare Drug Benefit Group and Plan Oversight and Accountability 
Group as well as the Office of Financial Managements Program 
Integrity Group.  Data collection was conducted in April and May 2008.  
We reviewed CMS staff responses to our interview questions to 
determine what oversight has been conducted or planned regarding 
PDP sponsors compliance plans.  In addition, CMS provided data on 
audits of PDP sponsors conducted in 2007.  We analyzed the data to 
determine the number and types of audits conducted and whether any 
audits included a review of compliance plans.  CMS did not provide data 
on audits conducted between January and March 2008 because no PDP 
sponsors were audited during this time. 
CMS also provided data on the results of the June 2007 self-assessment 
and the followup to the self-assessment conducted by account managers 
in April 2008.  We reviewed these results to determine which 
compliance plan requirements PDP sponsors reported that they had not 
implemented and what steps were taken to address compliance plan 
deficiencies.  In addition, we reviewed Chapter 9 of the Prescription 
Drug Benefit Manual and the self-assessment to determine which 
requirements were included in both documents.   
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I N T R O D U C T I O N  
 
Standards 
This study 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  
 F I N D I N G S  
CMS conducted one audit of a PDP      CMS reported that it would begin 
sponsors compliance plan in 2007    routine audits of PDP sponsors in 
January 2007 that would assess the 
effectiveness of sponsors compliance plans.  CMS conducted 19 audits of 
PDP sponsors in 2007: 17 routine audits and 2 focused audits.  CMS did 
not include a compliance plan review in any of the 17 routine audits.  
One of the two focused audits included a review of one PDP sponsors 
compliance plan.  This focused audit was of a PDP sponsor that had 
deficiencies in several other program areas.  The audit reviewed the 
PDP sponsors compliance plan for one required component and found 
that the sponsor did not have a comprehensive plan to detect, correct, 
and prevent fraud, waste, and abuse. 
In April 2008, CMS staff reported that they plan to have the MEDICs 
conduct specific audits of compliance plans.  CMS originally intended to 
have the MEDICs start the compliance plan audits in the fall of 2007; 
however, CMS did not begin the audits at that time because of budget 
constraints.  CMS reported that the MEDICs would begin conducting 
these compliance plan audits in the summer of 2008.  However, as of 
early August 2008, the MEDICs had not yet audited any PDP sponsors 
compliance plans.     
  
PDP sponsors completed a compliance plan  In response to OIGs December 2006 
self-assessment but CMS did not      report, CMS stated that it would 
have account managers follow up 
verify sponsors responses 
with sponsors identified in the report 
to ensure that sponsors corrected their compliance plan deficiencies. 
CMS staff reported in April 2008 that, rather than follow up specifically 
with PDP sponsors identified in OIGs report, they had requested all 
PDP sponsors to complete a compliance plan self-assessment.  The  
self-assessment was the only followup conducted by CMS in response to 
OIGs report.   
CMS developed the self-assessment and sent it to all 91 PDP sponsors 
in June 2007.  All 91 PDP sponsors completed the self-assessment.  The 
self-assessment included 50 questions, 11 regarding required 
compliance plan items and 39 regarding recommended items.  CMS did 
not request that PDP sponsors submit documentation to verify their 
responses.   
Results of self-assessment.  Twenty-five percent of PDP sponsors         
(23 of 91) attested that they did not implement 1 or more of the            
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F I N D I N G S  
11 requirements included in the self-assessment.  For example,            
14 percent of PDP sponsors (13 of 91) attested that they did not have 
documented procedures for internal monitoring and auditing of their 
Part D compliance programs.  Nine percent (8 of 91) attested that they 
did not provide training and education between the compliance officer 
and employees, contractors, subcontractors, agents, and directors.  Five 
percent of PDP sponsors (5 of 91) attested that they did not have a 
documented comprehensive plan to detect, correct, and prevent Part D 
fraud, waste, and abuse. 
The other 39 questions in the self-assessment pertained to  
recommendations, according to CMS.  While not required by regulation, 
CMS drafted these recommendations to assist PDP sponsors in 
implementing an effective compliance plan.  For example, CMS 
recommends that PDP sponsors have a process in place to identify 
claims for drugs prescribed by excluded or deceased providers and a 
process to report and properly repay any overpayments.  However,       
45 percent of PDP sponsors (41 of 91) attested that their plans for 
preventing fraud, waste, and abuse did not include such processes.  
CMS also recommends that PDP sponsors distribute their code of 
conduct to first tier, downstream, and related entities.  However,         
52 percent (47 of 91) attested that they did not do so.  
Self-assessment did not include all compliance plan requirements.  CMS 
stated that the self-assessment was based on Chapter 9 of the 
Prescription Drug Benefit Manual.  Chapter 9 includes the eight 
regulatory compliance plan elements as well as additional requirements 
and recommendations for addressing these elements.  Chapter 9 states 
that statutory or regulatory program requirements are reflected by use 
of the terms must or shall.  CMSs self-assessment included              
11 requirements.  However, our review of Chapter 9 identified an 
additional 12 items that were referred to using the words must, 
shall, or, in one case, will that were not included in the                 
self-assessment as requirements.  Six of these twelve items were 
included in the self-assessment as recommendations, but the remaining 
six were not included as part of the self-assessment.  For example, the 
Chapter 9 requirement that a PDP sponsor must ensure the Part D 
Compliance Officer does not hold other responsibilities that could lead 
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to self-policing of his/her activities13 was not included in the                  
self-assessment.  
CMS followed up with 23 PDP sponsors but did not request documentation         
to ensure that sponsors corrected deficiencies identified through the                    
self-assessment 
In April 2008, CMS asked account managers to follow up with              
23 PDP sponsors regarding the June 2007 self-assessment.  These       
23 PDP sponsors attested in June 2007 that they had not implemented      
1 or more of 11 compliance plan requirements included in the            
self-assessment.   
As followup, CMS asked the 23 PDP sponsors whether they had come 
into compliance since responding to the self-assessment, or whether 
they misunderstood a question and had actually been in compliance 
from the beginning.  All 23 PDP sponsors responded to CMSs request 
for follow-up information.   
We reviewed a summary of the 23 PDP sponsors follow-up responses to 
CMSs request regarding the implementation of the compliance plan 
requirements.  Based on CMSs followup, only one sponsor reported that 
it was not meeting all of the requirements included in the                  
self-assessment.  However, CMS did not instruct account managers to 
request supporting documentation to confirm that PDP sponsors made 
corrections to their compliance plans.  
In addition, CMS did not follow up with PDP sponsors that attested that 
they had not implemented one or more of the recommended items 
included in the self-assessment.  This included six items that were 
requirements in Chapter 9 of the Prescription Drug Benefit Manual 
but were considered recommended items in the self-assessment.   
 
13 CMS, Prescription Drug Benefit Manual, Rev. 2, April 25, 2006, ch. 9,  50.2.2.1.  
Available online at 
http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_F
WA.pdf.  Accessed on January 18, 2008. 
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Effective compliance plans are a fundamental tool in preventing and 
detecting fraud, waste, and abuse in the Part D program.  OIGs 
December 2006 report on PDP sponsors compliance plans found that 
many PDP sponsors compliance plans did not meet all of the 
requirements.  In response to that report, CMS indicated that it would 
conduct routine audits of PDP sponsors compliance plans and have 
account managers follow up with PDP sponsors identified in the report 
as having compliance plan deficiencies.  
Although CMS originally planned to begin routine compliance plan 
audits in January 2007, as of early August 2008, CMS had not 
conducted any routine audits of PDP sponsors compliance plans.  In 
addition, while CMS instructed all PDP sponsors to complete a 
compliance plan self-assessment, the self-assessment did not include all 
requirements from Chapter 9 of the Prescription Drug Benefit 
Manual.  Also, CMS did not ensure that PDP sponsors attestations 
were accurate by independently verifying their responses.  Therefore, 
CMS has only self-reported information to determine whether PDP 
sponsors compliance plans are meeting Federal requirements.     
Therefore, we recommend that CMS: 
Conduct Audits To Verify That PDP Sponsors Compliance Plans Meet 
Requirements 
CMS should conduct routine audits of PDP sponsors compliance plans 
to ensure that these compliance plans meet all Federal requirements.  
Specifically, these audits should cover all compliance plan requirements 
contained in regulations as well as requirements included in Chapter 9 
of the Prescription Drug Benefit Manual.  CMS may also want to 
assess the degree to which PDP sponsors have implemented the 
recommendations described in Chapter 9. 
 
AGENCY COMMENTS 
CMS concurred with our recommendation that it should conduct audits 
of PDP sponsors compliance plans.  CMS noted that due to critical 
funding shortfalls, it was not able to conduct compliance plan audits 
prior to the issuance of this report.  However, CMS stated that it will 
begin audits of sponsors compliance plans in the near future.  These 
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R E C O M M E N D A T I O N  
audits will consist of a limited number of desk audits; however, as more 
resources become available, CMS stated that it will include more audits, 
onsite reviews, and other more comprehensive fraud prevention 
activities.  The full text of CMSs comments are included in the 
Appendix.   
  
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 A P P E N D I X  
 
Agency Comments 
 
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A P P E N D I X    
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 A C K N O W L E D G M E N T S  
 
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.   
Tara J. Bernabe served as the team leader for this study.  Other 
principal Office of Evaluation and Inspections staff from the 
Philadelphia regional office who contributed to the report include  
Nancy J. Molyneaux; central office staff who contributed include                 
Rita Wurm.  
 
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