Department of Health and Human Services
OFFICE OF
INSPECTOR GENERAL
ACCURACY OF PART D PLANS'
DRUG PRICES ON THE
MEDICARE PRESCRIPTION DRUG
PLAN FINDER
Daniel R. Levinson
Inspector General
July 2009
OEI03-07~00600   
 
 
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 whether selected Part D plans drug prices displayed on  
the Medicare Prescription Drug Plan Finder (Plan Finder) accurately 
reflect actual drug costs  on Part D claims. 
BACKGROUND 
The Medicare prescription drug program, known as Medicare Part D,  
provides an optional prescription drug benefit for all Medicare  
beneficiaries. Many of the beneficiaries who choose to  enroll in Part D  
drug plans must pay premiums; deductibles; prescription drug 
copayments; and, during the coverage gap phase of the benefit, total 
prescription drug costs.  Therefore, plans drug prices are a significant 
factor to beneficiaries selecting a plan.  Drug prices on Plan Finder that 
do not reflect actual drug costs may cause beneficiaries to enroll in a 
plan based on incorrect information,  incur unexpected costs,  or decline 
to enroll in a Part D plan altogether. 
The Centers for Medicare & Medicaid Services (CMS) developed Plan 
Finder as an online tool to help beneficiaries compare and select Part D 
plans. Beneficiaries may view estimated plan and drug costs for 
individual plans by entering information about the prescription drugs 
that they take. After entering this information in Plan Finder, 
beneficiaries may conduct a general search to find the least expensive 
plan for their needs.  Beneficiaries may also elect to view estimated plan 
and drug cost information for the specific pharmacy where they plan to 
fill their prescriptions.  For this review, we conducted general rather 
than pharmacy-specific searches in Plan Finder. At the time of our 
review, both CMS and AARP (formerly the American Association of 
Retired Persons) recommended that conducting a general search rather 
than a pharmacy-specific search could improve a beneficiarys ability to 
find the least expensive plan. 
To determine whether Part D plans drug prices  displayed on Plan 
Finder accurately reflect actual drug costs, we compared plans retail 
drug prices listed on Plan Finder for 10 drugs commonly used by seniors  
to drug costs on corresponding prescription drug event (PDE) claims for 
the same period.  In this report, actual drug costs represent the sum of 
the Ingredient Cost Paid and Dispensing Fee Paid fields on PDE 
claims. We  collected drug prices on Plan Finder between September 24 
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E X E C U T I V E   S U M M A R Y   
and October 7, 2007. We obtained PDE claims with dates of service for 
this period in March 2008. 
FINDING 
Drug prices  posted on Plan  Finder generally exceeded actual  drug 
costs, frequently by  large amounts.  Plan Finder indicates on the plan 
drug details screen that drug costs displayed are only estimates and 
that actual costs at the pharmacy may vary slightly.  However, Plan 
Finder drug prices were 28 percent (or $18) higher than actual drug 
costs at the median for the 10 drugs included in our review. 
Drug prices  posted on Plan Finder were higher than actual drug costs 
on corresponding PDE claims for 92 percent of all claims in our review.   
For 19 percent of these claims, Plan Finder prices were more than     
100 percent higher than actual drug costs.  Plan Finder prices were     
50 to 100 percent higher than actual drug costs for another 30 percent of 
claims. 
Drug prices  posted on Plan Finder were less than actual drug costs on 
corresponding PDE claims for 7 percent of all claims in our review.   For  
68 percent of these claims, Plan Finder drug prices were within            
10 percent of the actual costs on corresponding PDE records. Plan 
Finder prices equaled actual drug costs for 1 percent of the claims  
reviewed. 
Percentage  differences  between Plan Finder prices and actual costs 
were generally greater for the generic drugs in our review, while dollar 
differences  were greater for the brand-name drugs. 
RECOMMENDATIONS 
Medicare beneficiaries use Plan Finder to compare and select Part D 
plans that best fit their prescription drug needs as well as their health 
care budgets.  The monthly prescription drug cost estimates that Plan 
Finder displays make up part of the estimated annual cost of a Part D 
plan, along with deductible and premium  costs.  For Plan Finder to 
serve its intended purpose, the prescription drug price information 
should closely reflect beneficiaries  actual drug costs. However, our 
finding suggests that when using a general search to find the least 
expensive plan, beneficiaries may not have the most accurate drug price 
information on which to base their selection of a Part D plan. 
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E X E C U T I V E   S U M M A R Y   
In an April 2008 memorandum to Part D plans, CMS outlined a detailed 
list of quality assurance checks that it performs  and that it expects plans to  
perform on the data that plans submit for posting on Plan Finder. The  
application of these data checks to plans drug price data may have  
increased the accuracy of prices displayed on Plan Finder since the period  
of our review.  However, the list of data checks that CMS provided did not 
include comparing plans drug prices to actual costs on prescription drug 
claims. 
To  ensure that drug prices displayed on Plan Finder are reasonably 
accurate estimates of beneficiaries actual drug costs, we recommend that 
CMS: 
Ensure that  plans drug  prices displayed on Plan  Finder accurately  reflect 
actual drug costs on Part D claims.   CMS may want to consider using PDE 
claims to monitor the accuracy of a sample of  Part D plans drug prices 
displayed on Plan Finder at regular intervals during the coverage year. 
As an immediate measure to ensure  that beneficiaries are aware of  
potential significant discrepancies between plans drug prices  displayed on  
Plan Finder and actual drug costs, we recommend that CMS:  
Add a disclaimer to the Plan Finder plan search results screen indicating 
that drug cost estimates may differ more than slightly from actual drug 
costs. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
CMS concurred with the Office of Inspector Generals recommendation 
that it ensure that Part D plans drug prices displayed on Plan Finder  
accurately reflect actual drug costs.  CMS did not concur with OIGs 
recommendation that it add a disclaimer to the Plan Finder plan search 
results screen indicating that drug cost estimates may differ more than 
slightly from actual drug costs.  
CMS stated that OIG should have used pharmacy-specific Plan Finder 
prices and compared these prices to  drug costs on PDE claims because 
the drug prices and dispensing fees that plans negotiate with individual 
pharmacies can vary widely.  CMS, therefore, stated that OIGs 
methodology is flawed, that OIGs findings are false and misleading, 
and that the OIG report  substantially overestimates the variation 
between point-of-sale drug prices and prices displayed on Plan Finder  
because OIG conducted a general search rather than a  
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E X E C U T I V E   S U M M A R Y   
pharmacy-specific search in Plan Finder.  According to CMS, its 
analysis using a pharmacy-specific search found that 39 percent of 
claims did not match the pharmacy-specific Plan Finder prices and      
20 percent of claims differed from corresponding Plan Finder prices by 
more than 5 percent. 
By choosing  to conduct a general search in Plan Finder, we  employed  
the same method that beneficiaries  using Plan Finder would have 
employed to  find the least expensive  plan for their needs.  At  the time of  
our review, CMS did not advise or recommend to beneficiaries that they 
conduct pharmacy-specific searches in Plan Finder. 
While CMS did not concur with the recommendation to add a disclaimer 
on Plan Finder, it indicated that it will revise language on the Plan 
Finder Web site to encourage beneficiaries to select the pharmacy they  
currently use in order to get more precise [point-of-sale] pricing.  In 
doing so, CMS acknowledged that Plan Finder  drug price  estimates 
displayed from a general search, rather than a pharmacy-specific 
search, may not be as accurate.  The revised language addresses, in  
part, our concerns about raising beneficiaries awareness of potential 
significant discrepancies between drug prices displayed on Plan Finder 
and actual drug costs. 
  OEI-03-07-00600   ACCURACY OF  PART D  PLANS  DRUG  PRICES ON  PLAN  FINDER   iv     
 
 
  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  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9 
  
  Drug prices  posted on Plan Finder generally exceeded actual 
        
drug costs, frequently by large amounts  . . . . . . . . . . . . . . . . . . . . .  9 
  
 
R E C O MMEN D A T ION S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13 
  
  Agency Comments and  Office of Inspector General Response . . .  14 

 
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16 
  
  A: Methodology for Selecting ZIP Codes for Medicare  
        
Prescription Drug Plan Finder Searches. . . . . . . . . . . . . . . . . . . .  16 
  
  B: Methodology for Selecting Prescription Drug Event Data for 

  Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17 
  
  C:  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19 
  
 
 
A C K NO WL E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
  
   
    ACCURACY OF PART D PLANS  DRUG PRICES ON PLAN FINDER  ii 
   
  
   
  I N T R O D U C T I O N
OBJECTIVE 
To determine whether selected Part D plans drug prices displayed on  
the Medicare Prescription Drug Plan Finder (Plan Finder) accurately 
reflect actual drug costs  on Part D claims. 
BACKGROUND 
The Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (MMA) established Medicare Part D to provide an optional 
prescription drug benefit for all Medicare beneficiaries.  Private 
sponsors administer the benefit through Part D drug plans.  
Prescription drug prices  are a significant factor to beneficiaries choosing  
a Part D plan. Inaccurate drug prices on Plan Finder may cause 
beneficiaries to enroll in a plan based on incorrect information, incur 
unexpected  costs, or decline to enroll in a Part D plan altogether. 
The Centers for Medicare & Medicaid Services (CMS) developed Plan 
Finder as an online tool to help beneficiaries compare and select Part D 
plans. Beneficiaries may view estimated plan and drug costs for 
individual plans by entering information about the prescription drugs 
that they take. After entering this information in Plan Finder, 
beneficiaries may conduct a general search to find the least expensive 
plan for their needs.  Beneficiaries may also elect to view estimated plan 
and drug cost information for only the specific pharmacy where they  
plan to fill their prescriptions.  For this review, we conducted general 
rather than pharmacy-specific searches in Plan Finder.   
Part D Benefit Structure and Costs 
Medicare beneficiaries may enroll in either a standalone prescription 
drug plan (PDP) or a Medicare Advantage plan that provides a 
prescription drug benefit as well as other health care benefits.  As of 
September 2008, 26 million beneficiaries were enrolled in Part D plans.  
Two-thirds  of these beneficiaries were enrolled in PDPs.1  
Beneficiaries costs and benefits under Medicare Part D vary by drug 
plan. Drug plan sponsors are permitted to offer plans with alternative  
benefits that are actuarially equivalent to the standard Part D benefit. 
Part D plans may also offer enhanced plan benefit packages. 
 
1 CMS, Monthly Contract and Enrollment Summary Report, September 2008.  
Available online at http://www.cms.hhs.gov/MCRAdvPartDEnrolData/. Accessed on October 
6, 2008. 
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I N T R O D U C T I O N   
The standard annual Part D drug benefit in 2008 required beneficiaries  
to pay a $275 deductible and 25-percent coinsurance until drug spending 
by both the drug plan and beneficiary totaled $2,510.  At that point, 
beneficiaries entered a coverage gap.  During the coverage gap phase, 
beneficiaries paid 100 percent of their drug costs.  The catastrophic 
coverage phase began when beneficiaries out-of-pocket costs reached  
$4,050. Once that threshold was reached, beneficiaries paid 5 percent of 
their drug costs as coinsurance. 
Part D Drug Prices 
Prescription drug prices  vary across  plans and pharmacies because plan 
sponsors individually negotiate with pharmacies to set pharmacy 
reimbursement amounts and with drug manufacturers to obtain rebates 
or other discounts.  The MMA requires sponsors to provide their 
enrollees access to negotiated prices.  Pursuant to 42 CFR  423.100, 
negotiated prices mean prices for covered Part D drugs that:  (1) are  
available to beneficiaries at the point of sale at network pharmacies;   
(2) are reduced by those discounts, direct or indirect subsidies, rebates,  
other price concessions, and direct or indirect remunerations that the 
Part D sponsor has elected to pass through to Part D enrollees at the 
point of sale; and (3) include any dispensing fees. 
Part D plans drug prices may have a significant impact on the cost of 
the Part D benefit to beneficiaries.  Plans drug prices significantly affect 
beneficiaries out-of-pocket expenses in the deductible and coverage gap 
phases of the benefit because during those phases, beneficiaries are 
responsible for the full costs (i.e., negotiated prices) of their drugs. In 
addition, these prices affect how quickly beneficiaries meet plan 
deductibles and reach the Part D coverage gap and catastrophic 
coverage phases.  Plans drug prices  also affect beneficiaries expenses  
when copayments are a percentage of prescription costs rather than a 
flat fee. As  drug prices rise, these copayments also rise. 
Medicare Prescription Drug Plan Finder 
Pursuant to 42 CFR  423.48 and 423.505(f)(2), Part D plans must 
submit information that enables CMS to provide current and 
prospective beneficiaries with the information that they need to choose a  
Part D plan. The public may access this information using CMSs Plan 
Finder on the Medicare  Web site.  Plan Finder is an online tool to assist 
beneficiaries and others, such as family members and State Health 
Insurance Assistance Program counselors, to compare Part D drug 
plans. Plan Finder displays information about prescription  drug 
coverage and estimated costs under individual plans. 
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I N T R O D U C T I O N   
Users may access Plan Finder on the Medicare Web site at 
http://www.medicare.gov/.  Users follow a series of steps in Plan Finder 
to personalize their drug plan search by entering information such as 
ZIP Codes and answering questions about drug and health coverage.  
Users may view estimated plan and drug costs for individual plans by 
entering information about the prescription drugs that they take, 
including drug names, dosage amounts, and monthly quantities.  
Beneficiaries may also elect to view  estimated plan and drug costs for 
only the specific pharmacy where they plan to fill their prescriptions.  
However, both CMS and AARP (formerly the American Association of  
Retired Persons) recommended conducting a general search, rather than 
a pharmacy-specific search, to improve a beneficiarys ability to find the 
least expensive plan. 
Based on information entered by the user, Plan Finder will generate a 
list of plans in the users area.  By default, the list of plans is ordered by 
the estimated annual cost of each plan, which includes prescription drug 
costs.  This list displays the name of  each plan, its identification 
number, estimated annual cost, monthly drug premium, annual 
deductible, coverage gap information, and number of network 
pharmacies. 
Users may view more details about each plan on the list by clicking on  
the name of  an individual plan.  For each of the prescription drugs that 
the user entered, Plan Finder displays details such as monthly drug 
costs for preferred retail and mail-order pharmacies.2  Plan Finder 
includes disclaimers on the plan details screen that the drug costs 
displayed are only estimates and that actual costs at the pharmacy 
may vary slightly. 
Data for Plan Finder 
CMS currently requires  Part D plans to submit updated drug price data 
to a CMS contractor every 2 weeks for posting on Plan Finder. Plans 
must submit files that contain prices for all drugs included on plans 
CMS-approved formularies.  CMS identifies a formulary reference 
national drug code (NDC), or proxy NDC, for each unique drug/dosage 
combination and requires plans to submit Plan Finder prices for the 
proxy NDCs only. 
The CMS contractor receives plans drug price files, processes the files,  
and uploads the files to Plan Finder every 2 weeks.  If no price updates 
 
2 Individual drug plans drug  prices displayed on  Plan Finder do  not include sales tax. 
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I N T R O D U C T I O N   
occur for a 2-week period, plans may electronically certify that there are 
no updates, and the previous drug price data are maintained.  If plans 
do not submit pricing for a specific drug, Plan Finder will display 
average wholesale prices (AWP) minus 10 percent for brand-name drugs 
and AWP minus 30 percent for generic drugs plus a standard dispensing  
fee.3  If CMS finds errors with the data that a plan submits for Plan 
Finder, it will suppress the plans pricing data from display until the 
plan submits corrected data.4  
CMS issued a memorandum to all Part D plan sponsors in April 2008 
regarding the importance of accurate Plan Finder data.  CMS noted that 
the submission of accurate data [is]  critically important to ensure that 
Medicare beneficiaries obtain correct and complete information . . . to  
make the most informed choices.  The memorandum provided a 
detailed list of the quality assurance checks that CMS performs and 
expects plans to perform on the data that plans submit for posting on 
Plan Finder.  The quality assurance checks of drug price data include 
identifying missing files and values, comparing brand-name to generic 
prices for the same drug, and comparing drug prices to multiples of 
AWPs.5   The list of quality assurance checks does  not include  comparing 
the drug prices that plans submit for posting on  Plan Finder  to drug 
costs on prescription drug claims. 
Prescription Drug Event Data 
Part D plans are required to submit electronic records for all covered 
prescriptions filled by their enrollees to CMS. Each record, called a 
prescription drug event (PDE) record, contains drug cost and payment 
data that enable CMS to administer the Part D benefit. CMS also uses 
PDE records for quality oversight and Medicare program integrity 
activities. 
In 2007, the PDE record contained 39 required data fields, including 
identification data for the beneficiary, plan, pharmacy, and prescribing 
 
3 AWPs are listed in commercial publications, derived from manufacturer-reported data 
for both brand-name and generic drugs, and not defined in law or regulation. 
4 2008 Plan Year Pricing Data Requirements.  Available online at 
http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/MPDPFDataRequirements 
SubmissionGuidelines.pdf. Accessed on October 6, 2008. 
5 Quality Assurance Checks for Data Submitted for Posting on the Medicare Prescription 
Drug Plan Finder Tool.  Available online at 
http://www.cms.hhs.gov/PrescriptionDrugCovContra/HPMSGH/list.asp. Accessed on 
June 9, 2008.  As specified in this memorandum, CMS identifies NDC unit costs that are 
priced at 25 times greater than [the] highest AWP and NDC unit costs that are priced at 
25 times less than [the] lowest AWP. 
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I N T R O D U C T I O N   
physician; as well as prescription drug data, such as the NDC, quantity 
dispensed, number of days supplied, and date filled.  The sum of two  
payment information fields on the PDE record, Ingredient Cost Paid 
and Dispensing Fee Paid, is the amount paid to the pharmacy for the 
drug and for dispensing the medication.  
METHODOLOGY 
To determine whether selected Part D plans drug prices displayed on  
Plan Finder reflect actual drug costs  on Part D claims, we compared the 
retail prices  listed on Plan Finder to  drug costs on corresponding PDE 
claims for the same period.6  Plans update the drug prices that they 
submit for Plan Finder every 2 weeks.  We  collected drug prices on Plan  
Finder for the period September 24 to October 7, 2007.  In March 2008, 
we obtained PDE claims with dates of service from September 24 to  
October 7, 2007. 
Data Collection 
Plan Finder drug prices. We used 2005 Pennsylvania Pharmaceutical 
Assistance Contract for the Elderly (PACE) data to select the five  most 
commonly used single-source brand-name drugs and the five most  
commonly used generic drugs among seniors.7  Table 1 contains the 
names and strengths for the 10 prescription drugs we selected. 
 
Table 1: Prescription Drugs Selected for Plan Finder Searches 
Generic Drug and Strength  Brand-Name Drug and Strength  
Amlodipine besylate  5 mg  Fosamax  70 mg 
Furosemide  40 mg  Lipitor  10 mg 
Hydrochlorothiazide  25 mg  Nexium  40 mg 
Metoprolol tartrate  50 mg  Plavix  75 mg 
Simvastatin  20 mg  Protonix  40 mg 
 
 
6 In this report, actual drug costs represent the sum of the Ingredient Cost Paid and 
Dispensing Fee Paid fields on  PDE claims. 
7 The PACE program was implemented in Pennsylvania in 1984 to help qualified 
residents aged 65 and older pay for prescription drugs.  A June 2006 Families USA report 
entitled Big  Dollars, Little Sense:  Rising Medicare Prescription Drug Prices states that 
Because of the [PACE] programs size and the abundance of claims data, it is commonly 
used to estimate prescription  drug  use among older Americans. 
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I N T R O D U C T I O N
   
Users must enter a ZIP Code to begin a Plan Finder plan search.  We 
selected two ZIP Codes from each of 34 PDP regions, for a total of 68 ZIP 
Codes to  enter into Plan  Finder.8  A detailed description of the ZIP Code  
selection process is provided in Appendix A. 
Using the 68 ZIP Codes and drug and dosage information for the              
10 prescription drugs, we conducted general plan searches for drug 
prices on Plan Finder.  We did not conduct pharmacy-specific searches.  
We identified and recorded preferred  retail pharmacy prices  for the     
10 selected  drugs for every Part D plan in each ZIP Code.9   Plan Finder 
displayed from 45 to 66 different plans for each ZIP Code we entered for 
the plan searches.  We collected 37,300 unique drug prices. 
Actual drug costs on prescription drug event claims.   We obtained PDE 
claims processed from September 2007 through December 2007 from 
CMS and created a file of all standalone PDP drug claims with dates of 
service from September 24 to October 7, 2007.  This file contained      
29 million claims.  We limited the PDE data file to ensure that PDE 
drug claims corresponded to the Plan Finder drug price information we  
collected.  A detailed description of the process we used to identify the 
PDE claims for our analysis is provided in Appendix B. 
After identifying the PDE claims for  our review, we matched  these PDE  
claims to plans drug prices posted on Plan Finder using the following 
data: ZIP Code, Part D plan contract number, Part D plan benefit 
package number, and drug name and dosage amount.  We  identified           
19,628 PDE claims that corresponded to 5,337 unique drug prices 
collected from Plan Finder. 
Analysis of Plan Finder Prices and Actual Drug Costs 
We determined whether and to what extent preferred retail pharmacy 
drug prices collected from Plan Finder differed from actual drug costs on 
corresponding PDE claims.  We summed the Ingredient Cost Paid and 
Dispensing Fee Paid fields on each PDE claim to calculate actual drug 
costs.10  We calculated the dollar and  percentage  differences  between 
 
8 There are 39 standalone  drug plan regions.  Five of these regions include one U.S. 
territory. We excluded the U.S.  territories from our review. 
9 The Plan Finder displays drug  prices available at plans preferred network pharmacies 
by default if the user does not select a specific pharmacy.  As specified in 42 CFR  423.100, 
Preferred pharmacy means a network pharmacy that offers covered Part D drugs at 
negotiated prices to Part D enrollees at lower levels of cost-sharing than apply at a          
non-preferred pharmacy under its pharmacy network contract with a Part D plan. 
10 We did not include sales tax in our calculation of actual drug costs on PDE claims  
because plans drug prices displayed on Plan Finder do  not include sales tax. 
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I N T R O D U C T I O N
  
the Plan Finder drug price and the actual drug cost for each  PDE claim.   
We calculated an overall median dollar difference and overall medi an 
percentage difference between Plan Finder prices and actual drug costs.  
We examined the magnitude and direction of these differences and  
reviewed dollar and percentage differences by drug and drug type.  
Selected drug, price, and cost fields from two of the claims in our  
analysis are presented in Table 2. 
 
 
Table 2: Drug, Price, and Cost Fields for Two  Claims 
 
Actual   Dollar 
Plan ID    Drug Name  National Drug  Plan Finder  Drug  Difference  Percentage 
Code  Price  Difference 
Cost  (Price  Cost) 
 
S####-###  Fosamax  00006003144  $88.44  $83.27  $5.17  6% 
S####-###  H ydrochlorothiazide  00172208380  $5.44  $10.77  -$5.33  -49% 
Source:  Office of  Inspector General (OIG) review of selected Plan Finder drug prices and actual drug costs on  corresponding   
PDE claims. 
 
To determine whether prices displayed on Plan Finder would accurately 
reflect actual drug costs  for the reference NDCs that plans must use to  
submit drug prices to CMS, we repeated our analysis of Plan Finder 
prices and actual costs using only PDE claims for the reference NDCs 
for the 10 drugs in our review. 
Review  of Average Wholesale Prices for 10 Drugs  
The data checks that CMS performs on the drug price files  that Part D 
plans submit for posting on Plan Finder include comparing drug prices 
to multiples of AWPs.11   We examined quarterly AWPs for the 10 drugs 
in our review to determine whether  prices for these drugs were  
particularly volatile in 2007.  We identified quarterly AWPs reported in 
the Red Book for NDCs for the 10 drugs and determined whether and to 
what extent AWPs for these NDCs fluctuated during 2007.  Our review 
revealed that AWPs for these NDCs  were not volatile in 2007.  The 
AWPs for 87 percent of  NDCs remained constant.  The AWPs for          
13 percent of NDCs changed once during 2007.  All of the AWPs that 
changed were for brand-name drug NDCs, and all but one of the changes 
 
11 Quality Assurance Checks for Data Submitted for Posting on the Medicare 
Prescription Drug Plan Finder Tool.  Available online at 
http://www.cms.hhs.gov/PrescriptionDrugCovContra/HPMSGH/list.asp. Accessed on 
June 9, 2008.  As specified in this memorandum, CMS identifies NDC unit costs that are 
priced at 25 times greater than [the] highest AWP and NDC unit costs that are priced at 
25 times less than [the] lowest AWP. 
  OEI-03-07-00600   ACCURACY OF  PART D  P LANS  DRUG  PRICES ON  PLAN  FINDER   7    
  
   
I N T R O D U C T I O N   
reflected an increase in the value of the AWP.   The median of percentage  
changes in AWP for these NDCs was 3 percent. 
Limitations 
We did not review Part D plans premiums, copayments, or other price  
information displayed on Plan Finder.  We did not verify the accuracy or  
completeness of CMSs drug claims data with CMS or Part D plan 
sponsors.  The results presented in the Findings section of the report are 
limited to the Plan Finder prices and PDE claims that we reviewed. 
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.
  OEI-03-07-00600   ACCURACY OF  PART D  P LANS  DRUG  PRICES ON  PLAN  FINDER   8    
  
   
  F I N D I N G
   Part D plans drug prices posted on  
Drug prices  posted on Plan  Finder 
Plan Finder were a median of       
generally exceeded actual  drug costs,  
28 percent (or $18) higher than 
frequently  by large amounts  
actual costs on PDE claims for the 
10 drugs in our review.  Although Plan Finder indicates that drug costs 
displayed are only estimates and that actual costs at the pharmacy 
may vary slightly, our comparison revealed that Plan Finder prices 
were not accurate estimates of actual drug costs for the majority of the 
claims in our review. 
Plan Finder  prices differed from actual drug costs for 99 percent of the  
claims reviewed and equaled actual drug costs for 1 percent of the 
claims reviewed.  When we confined our analysis to PDE claims for just 
the reference or proxy NDCs for the  10 drugs, Plan Finder prices 
differed from actual costs for 98 percent of claims.  Plans drug prices 
displayed on Plan Finder were a median of 22 percent (or $17) higher 
than actual costs on PDE claims for the reference NDCs. 
As shown in Chart 1 below, drug prices posted on Plan Finder exceeded  
actual drug costs for 92 percent of the claims in our review  and were less 
than actual drug costs for 7 percent of claims.  Percentage differences  
between Plan Finder prices and actual costs were generally greater for 
the generic drugs in our review, while dollar differences were greater for  
the brand-name drugs reviewed. 
Chart 1. Percentage of Claims on Which Plan Finder Prices Differed From Actual Drug 
Costs  
1% 
Plan Finder Prices 
7% 
Exceeded Actual Costs 
Plan Finder Prices Were 
Less Than Actual Costs 
92% 
Plan Finder Prices 
Equaled Actual Costs 
 
Plan Finder prices exceeded actual costs for 92 percent of drug claims 
Drug prices  posted on Plan Finder were higher than actual drug costs on 
corresponding PDE claims for 92 percent of all claims in our review.  
  OEI-03-07-00600   ACCURACY OF  PART D  P LANS  DRUG  PRICES ON  PLAN  FINDER   9    
  
   
F I N D I N G   
Plan Finder prices were a median of 40 percent (or $27) higher than 
actual drug costs for these claims.  Plan Finder prices ranged from a 
minimum of less than 1 percent higher than actual drug costs to a 
maximum of 3,157 percent higher than actual drug costs on a 
corresponding PDE claim.  In dollar  terms, Plan Finder prices ranged  
from a minimum of less than $1 higher than actual drug costs to a 
maximum of $201 higher than actual drug costs. 
For 19 percent of the claims on which Plan Finder prices exceeded  
actual costs, Plan Finder prices were more than double actual drug 
costs.  Plan Finder prices for claims in this group were 365 percent (or 
$84) higher than actual drug costs at the median.  Plan Finder prices 
were 50 to 100 percent higher than actual drug costs for another           
30 percent of claims.   
As shown in Table 3, percentage differences between Plan Finder prices  
and actual drug costs were much greater for claims on which Plan 
Finder prices exceeded actual drug costs than for claims on which Plan 
Finder prices were less than actual drug costs.  For example, for           
49 percent of claims on  which Plan Finder prices exceeded actual drug 
costs, prices were greater by more than 50 percent.  In contrast, for only 
2 percent of claims on which Plan Finder prices were less than actual 
drug costs, prices were lower by more than 50 percent. 
 
Table 3: Mag nitude and Direction of Percent Differences Between Plan Finder 
Prices and Actual Drug Costs 
 
  Within 10  10.01 to 20  20.01 to 30  30.01 to 50  50.01 to   More than 
 
Percent  Percent  Percent  Percent  100  100 
  Difference  Difference  Difference  Difference  Percent  Percent 
Difference  Difference 
 
 
Percentage of Claims on 
  8%  13%  27%  4%  30%  19% 
Which Plan Finder Price 
Exceeded Actual  Drug Cost1  
   
Percentage of Claims on 
68%  15%  3%  12%  2%  0% 
Which Plan Finde r Price Was 
 Less Than Actual Drug Cost 
1The percentages displayed in this  row sum to more than 100 percent because of rounding.
  
Source:  OIG review of selected Plan  Finder drug prices  and actual drug costs on corresponding PDE claims. 

Plan Finder prices were less than actual costs for 7 percent of drug claims 
Drug prices  posted on Plan Finder were less than actual drug costs on 
corresponding PDE claims for 7 percent of all claims in our review.   Plan 
Finder prices were a median of 5 percent (or $1.60) less than actual drug 
costs for these claims.  Plan Finder prices ranged from less than              
  OEI-03-07-00600   ACCURACY OF  PART D  P LANS  DRUG  PRICES ON  PLAN  FINDER   10    
  
   
F I N D I N G
   
1 percent below actual drug costs to  93 percent below actual drug costs 
on a corresponding PDE claim.  In dollar terms,  Plan Finder prices 
ranged from less than $1 to $126 lower than actual drug costs on a 
corresponding PDE claim. 
Table 3 on the previous page shows that for 68 percent of the claims on 
which Plan Finder prices were less than actual drug costs, Plan Finder 
drug prices were within 10 percent of the actual costs on corresponding 
PDE records.  For another 15 percent of these claims, Plan Finder prices  
were 10 to 20 percent less than actual drug costs. 
Generic drugs account for 40 percent of all claims in our review, but 
these drugs  account for 71 percent of claims on  which Plan Finder prices 
were less than actual drug costs. The remaining 29 percent of claims in 
this group were for brand-name drugs. 
Overall, percentage differences between Plan Finder prices and actual costs 
were greater for generics,  while dollar differences were greater for        
brand-name drugs 
Forty percent of all claims in our review were for five generic drugs: 
amlodipine besylate, furosemide, hydrochlorothiazide, metoprolol 
tartrate, and simvastatin.  Plan Finder prices exceeded actual costs for  
this group of drugs by 80 percent (or $4) at the median. 
Medians of the percentage differences between Plan Finder prices and  
actual drug costs on corresponding PDE claims for the individual 
generic drugs we reviewed ranged from 37 to 472 percent, as shown in 
Table 4 on the next page.  For four  of the five generic drugs reviewed, 
median dollar differences between Plan Finder prices and actual drug 
costs ranged from $2 to $13. 
  OEI-03-07-00600   ACCURACY OF  PART D  P LANS  DRUG  PRICES ON  PLAN  FINDER   11    
  
   
F I N D I N G
   
 
Table 4: Percentage and Dollar Differences Between Plan Finder Prices and 
Actual  Costs for 10 Drugs 
Median of Dollar  
Median of Percentage  
  Differences 
Drug Type   Drug Name   Differences for Claims 
for Claims 
of Each Type  
  of Each Type 
Hydrochlorothiazide  37%  $2 
 
Amlodipine besylate  50%  $13 
 
Generic Drugs  Furosemide  70%  $3 
  Metoprolol tartrate  217%  $9 
Simvastatin  472%  $90 
 
Fosamax  11%  $9 
 
Lipitor  21%  $16 
Brand Dru gs  Protonix  24%  $28 
Nexium  26%  $37 
 
Plavix  66%  $83 
             
          Source:  OIG review of selected Plan Finder drug prices and actual drug costs on corresponding PDE claims. 
Median percentage and dollar differences between prices posted on  Plan 
Finder and actual costs on corresponding drug claims were both 
substantially greater for the remaining generic drug, simvastatin.  Plan 
Finder prices for simvastatin exceeded actual drug costs by a median of         
472 percent, or $90. 
Sixty percent of all claims reviewed were for five brand-name drugs:  
Fosamax, Lipitor, Nexium, Plavix, and Protonix.  Prices posted on Plan 
Finder were 25 percent (or $35) higher than actual costs for these  
brand-name drugs at the median. 
For four of the five brand-name drugs in our review, medians of the  
percentage  differences  between prices posted on Plan Finder and actual  
drug costs ranged from 11 to 26 percent.  The  median percentage  
difference between Plan Finder prices and actual costs for the remaining 
brand-name drug, Plavix, exceeded this range,  with a median of           
66 percent.   Medians of the dollar differences between Plan Finder 
prices and actual drug costs for the individual brand-name drugs in our 
review ranged from $9 to $83.
  OEI-03-07-00600   ACCURACY OF  PART D  P LANS  DRUG  PRICES ON  PLAN  FINDER   12    
  
   
R E C O M M E N D A T I O N S  
  R E C O M M E N D A T I O N S
 
 
Medicare beneficiaries use Plan Finder to compare and select Part D plans that 
best fit their prescription drug needs as well as their health care budgets.  The 
monthly prescription drug cost estimates that Plan Finder displays make up 
part of the estimated annual cost of a Part D plan, along with deductible and 
premium costs.  For Plan Finder to  serve its intended purpose, the prescription 
drug price information should closely reflect beneficiaries actual drug costs. 
Our comparison of selected Part D plans drug prices displayed on Plan Finder  
to actual drug costs on corresponding PDE claims revealed that Plan Finder 
prices were not accurate estimates of actual drug costs for the majority of 
claims in our review.  Plan Finder prices were  overestimates of actual drug 
costs for most of these claims.  In cases like this, beneficiaries may be pleased to 
find that their prescription costs at the pharmacy are lower than the drug cost  
estimates that they viewed on Plan Finder.  However, our finding suggests that 
when using a general search to identify the least expensive plan, beneficiaries 
may not have the most accurate drug price information on which to base their 
selection of a Part D plan. 
In an April 2008 memorandum to Part D plans, CMS outlined a detailed list of 
quality assurance checks that it performs and expects plans to perform on the  
data that plans submit for posting on Plan Finder.  The application of these 
data checks to plans drug price data may have increased the accuracy of prices 
displayed on Plan Finder since our review.  However, the list  of data checks 
that CMS provided did not include comparing plans drug prices to actual costs 
on prescription drug claims. 
To  ensure that drug prices displayed on Plan Finder are reasonably accurate 
estimates of beneficiaries actual drug costs, we recommend that CMS: 
Ensure That Plans Drug Prices Displayed on Plan Finder Accurately Reflect 
Actual Drug Costs on Part D Claims  
CMS may want to consider using PDE claims to monitor the accuracy of a 
sample of Part D plans drug prices displayed on Plan Finder at regular 
intervals during the coverage year.  
 
As an immediate measure to ensure that beneficiaries are aware of potential 
significant discrepancies between plans drug prices displayed on Plan Finder 
and actual drug costs, we recommend that CMS:  
Add a Disclaimer to the Plan Finder Plan Search Results Screen Indicating That 
Drug Cost Estimates May Differ More Than Slightly From Actual Drug Costs 
  OEI-03-07-00600   ACCURACY OF  PART D  P LANS  DRUG  PRICES ON  PLAN  FINDER   13    
  
   
R E C O M M E N D A T I O N S  

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
CMS concurred with OIGs recommendation that it ensure  that Part D 
plans drug prices displayed on  Plan Finder accurately reflect actual 
drug costs.  CMS did not concur with OIGs recommendation that it add 
a disclaimer to the Plan Finder plan search results screen indicating 
that drug cost estimates may differ more than slightly from actual 
drug costs. 
CMS stated that OIG should have used pharmacy-specific Plan Finder 
prices and compared these prices to  drug costs on PDE claims because 
the drug prices and dispensing fees that plans negotiate with individual 
pharmacies can vary widely.  CMS, therefore, stated that OIGs 
methodology is flawed, that OIGs findings are false and misleading, and  
that the OIG report substantially overestimates the variation between 
point-of-sale drug prices  and prices displayed on Plan Finder.  The full 
text of CMSs comments is provided in Appendix C.  
OIG does not agree that our methodology is flawed or that our findings 
are false, misleading, or  inflated.  By choosing to  conduct a general 
search in Plan Finder,  we employed  the same method that beneficiaries 
using Plan Finder were advised to employ to find the least expensive 
plan for their needs.  Our findings generate concerns about the accuracy 
of the plan and drug cost information provided to beneficiaries who 
choose to conduct a general search rather than a pharmacy-specific 
search in Plan Finder.  CMSs comments about the wide variation in 
negotiated drug prices and dispensing fees across pharmacies 
underscore these concerns. 
At the time  of our review, CMS did not advise or recommend to 
beneficiaries that they conduct pharmacy-specific searches in Plan 
Finder.  Both CMS and AARP recommended  conducting a general 
search rather than a pharmacy-specific search to improve a beneficiarys 
ability to find the least expensive plan.  Guidance on the Plan Finder 
Web site stated that you may not find the least expensive plan if you 
select a preferred pharmacy or pharmacies.  A Plan Finder step-by-step 
search guide on AARPs Web site also advised against selecting a 
specific pharmacy because doing so may prevent you from finding the 
plans that are least expensive for your needs. 
In its comments on the  draft report, CMS stated that it routinely ensures  
that Plan Finder prices  closely reflect PDE costs by conducting in-depth 
quality assurance checks and other longitudinal analyses.  However, all 
  OEI-03-07-00600   ACCURACY OF  PART D  P LANS  DRUG  PRICES ON  PLAN  FINDER   14    
  
   
R E C O M M E N D A T I O N S  
of these quality assurance checks focus on reviewing pharmacy-specific 
data and do not address the issue of  the accuracy of drug prices displayed 
on Plan Finder when a general search is conducted.  CMS described its 
own analysis of a sample of PDE claims from 2007 in which CMS 
compared PDE drug costs to Plan Finder prices.  CMS matched the 
pharmacy for which the PDE was filled to the pharmacy for which the 
[Plan Finder] price was displayed.  In this pharmacy-specific review, 
CMS found that PDE drug costs did not match Plan Finder price data for 
39 percent of claims reviewed.  CMS also reported that, for 20 percent of 
claims reviewed, PDE costs differed from corresponding Plan Finder 
prices by more than 5 percent. These results indicate that additional 
quality assurance checks may be necessary to  ensure that prices 
displayed on Plan Finder closely correlate to the  prices paid by 
beneficiaries at the point of sale. 
CMS also stated that the OIG report did not take into account that 
pharmacies often provide drugs at the lower of the negotiated price or the 
customary price at their pharmacy.  CMS raised the issue of retail 
pharmacies special low pricinglike the Wal-Mart $4 Prescriptions 
Programand suggested that these prices, offered at the point of sale,  
may account for many of  the claims on which Plan Finder prices exceeded  
actual drug costs for generic drugs.   We understand that pharmacies such 
as Wal-Mart may provide special low pricing, such as $4 generic 
prescriptions.  However, these programs do not appear to explain the  
variation that we identified in our analysis.  For the five generic drugs in  
our review, we analyzed the PDE claims on which actual drug costs did  
not match Plan Finder prices.  We found that less than 3 percent of the 
PDE claims had prescription costs as low as $4.  
Finally, while CMS did not concur with the recommendation to add a 
disclaimer on Plan Finder, it indicated that it will revise language on the 
Plan Finder Web site to encourage beneficiaries  to select the pharmacy 
they currently use in order to get more precise [point-of-sale] pricing.  
CMS deleted the language that advised Plan Finder users that they may 
not find the least expensive plan if they select a specific pharmacy when 
conducting their plan search.  The revised language includes the 
statement, If you dont  pick a pharmacy, the cost that you see may be 
different from the cost at your pharmacy.  With this statement, CMS 
acknowledged that Plan Finder drug price estimates displayed from a 
general search, rather than a pharmacy-specific search, may not be as  
accurate. The revised language addresses, in part, our concerns about  
raising beneficiaries awareness of potential significant discrepancies 
between drug prices displayed on Plan Finder and actual drug costs. 
  OEI-03-07-00600   ACCURACY OF  PART D  P LANS  DRUG  PRICES ON  PLAN  FINDER   15    
  
   
  A P P E N D I X ~ A
 
Methodology for Selecting ZIP Codes for Medicare Prescription Drug Plan 
Finder Searches 
 
Users must enter a ZIP Code into the online Medicare Prescription Drug  
Plan Finder tool to generate a list of Part D plans and prescription drug 
prices for those plans.  We selected  two ZIP Codes from  each of 34 of the 
39 Prescription Drug Plan (PDP) regions, for a total of 68 ZIP Codes to 
enter into Plan Finder.   Part D plans are offered across 39 standalone 
PDP regions.  Of the 39 regions, 25 include one State each, 6 include two  
States each, 3 include more than two States each, and the remaining     
5 include one U.S. territory each.  We excluded the U.S. territories from  
our review. 
We used information contained in a 2006 Prescription Drug Event 
(PDE) data file and a ZIP Code database to select the 68 ZIP Codes.  
First, we accessed a data file that contained approximately 1 percent of 
PDE data for January to October 2006.  We summarized the number of 
PDE claims  by ZIP Code to determine the distribution of drug claims  
across ZIP Codes.  We then used a database from CD Light to obtain a 
list of all U.S. ZIP Codes.12  We grouped the ZIP Codes by State, then by 
PDP region.  
For each of the 25 single-State PDP regions, we  selected the ZIP Code  
with the highest number of PDE claims and randomly selected another 
ZIP Code from the pool of all other ZIP Codes in the region. 
For each of the six PDP regions with two States, we selected the ZIP 
Code with the highest number of PDE claims from each of the two  
States. 
For each of the three PDP regions with more than two States, we  
randomly chose two States and selected the ZIP  Code with the highest 
number of PDE claims from each of the two States.  Using this  
approach, we did not select any ZIP Codes from the following eight 
States located in these regions:  Massachusetts, Vermont, Maryland, 
Iowa, Minnesota, North Dakota, South Dakota, and Wyoming. 
 
12 CD Light, LLC, can be found online at http://www.zipinfo.com. Accessed on 
December 11, 2008. 
 
  OEI-03-07-00600   ACCURACY OF  PART D  P LANS  DRUG  PRICES ON  PLAN  FINDER   16    
  
   
  A P P E N D I X ~ B
 
Methodology for Selecting Prescription Drug Event Data for Analysis 
 
We obtained Prescription Drug Event (PDE) claims processed from 
September through December 2007 from CMS and created a file of all 
standalone Prescription Drug Plan (PDP) drug claims with dates of 
service from September 24 to October 7, 2007.  This file contained      
29 million claims.   
We limited the PDE data file to ensure that PDE drug claims 
corresponded to the Plan Finder drug price information we  collected, as 
follows:  
 	  We compiled a list of National Drug Codes (NDC) for the               
10 selected  drug/dosage combinations from Red Book and First 
Data Bank drug compendia.  We used this list of NDCs to identify 
all PDE claims for the 10 selected drugs.  PDE claims for these 
NDCs accounted for 9 percent of all PDE claims with dates of 
service from September 24 to October 7, 2007. 
 	  We obtained the Centers for Medicare & Medicaid Services Part D 
Pharmacy Network File to identify the status and type of 
pharmacies on PDE claims.  We used data from this file to include 
only PDE claims for drugs purchased at preferred retail 
pharmacies in our review. 
 	  We included all PDE claims on which the beneficiaries ZIP Codes 
matched the 68 ZIP Codes we used to conduct our Plan Finder 
searches. 
 	  If a PDE claim was submitted in a nonstandard format, such as a 
beneficiary-filed claim, the Ingredient Cost Paid and Dispensing 
Fee Paid fields may not be populated correctly.13  Approximately 
1.5 percent  of all PDP drug claims for the 2-week period of our 
review were submitted in a nonstandard format.  We excluded 
PDE claims that were submitted in a nonstandard format using 
the Non-Standard Data Format Code field.   
 
13 Updated Instructions:  Requirements for Submitting Prescription Drug Event Data 
(PDE), pp. 1819.  Available online at 
http://www.cms.hhs.gov/DrugCoverageClaimsData/01_ PDEGuidance.asp. Accessed on July 
3, 2008. 
  OEI-03-07-00600   ACCURACY OF  PART D  P LANS  DRUG  PRICES ON  PLAN  FINDER   17    
  
   
A P P E N D I X ~ B  
 
 	  Plan Finder  displays preferred retail pharmacy prices for a            
1-month supply of a drug. We included PDE claims on which the 
Days Supply field reflected a 1-month supply and the Quantity 
Dispensed field equaled 30, except for claims for the drug  
Fosamax.  This drug is taken once per week, rather than once per  
day. We included PDE claims for Fosamax on which the Days 
Supply field reflected a 1-month supply and the Quantity 
Dispensed field equaled four. 
 
  OEI-03-07-00600   ACCURACY OF  PART D  P LANS  DRUG  PRICES ON  PLAN  FINDER   18    
  
   
  A P P E N D I X ~ C
 
Agency Comments 
.........""
/
~ S_E_R_V--i~">~~~r......-.......,-:--~_l.-
('S'r _D_E_P_A_R_T__ME_T_O_F_HE_A_L_T_H_&_I-_fUMAN .... __c_e_nl_ers_fo_'_M_ed_IC3_'_e_&_M_ed_lC3_ld_s_erv_lc_es_
200IndependenceAvenueSW
2009APR 22 PM 3: Q~ Washington.DC 20201
GENE L
DATE:
APR ~ 02009
TO: Daniel R. Levinson
InspectorGeneral
OeJ>6<aae~;&~
FROM:
ActingAdministrator
B.TECT: OfficeorIn pectorGeneral(OIG) DraftReport:'AccuracyofPartDPlans' Drug
PricesontheMedicarePrescription DrugPlanFinder,"OEI-03-07-00600
ThankyoufortheopportunitytocommentontheOIGdraftreportthatcomparesdrugprices
displayedontheMedicarePrescriptionDrugPlanFindertoactualdrugcostsonPartDclaims
orPrescription DrugEvents(PDE). Afterathorough review,theCentersforMedicare&
Medicaid ervices(CMS)continuetohaveconcernregardingthestudysmethodologies
fmding ,andconsequentrecommendations.
Iti importanttonotethatthekeyobjectivefortheMedicarePrescriptionDrugPlanFinder
(MPDPF)istoprovidebeneficiarie withacomparisonamongMedicaredrugplan.Onc
elementofthatcomparison istheestimatedannualcost forthedrugsthatabeneficiarycurrently
takes. CM strivestoensurethatcostcomparisonsareconducted fairlyacrossPartDplansby
requiringsponsorstosubmitpricingforarcferenceNational DrugCode(NDC),and by
providingdrugpricingassociated withpharmacies' pecificnegotiatedcosts. WhilethcMPDPF
wa neverintendedtoprovideag118ranteed pointofsale(PaS)price,CM ' internalanalysis
de cribedbelowdemonstratesthatMPDPFdoesprovidepriceinformationthatisgencrallyclose
to pasprices. CMScontcndsthatalthoughMPDPFprovidesestimateddrugcosts,theOIG
reportsubstantiallyoverestimatesthelevelofvariationbetween pas pricesandMPDPF.
TheC hasrepeatedlyexpressedstrongconcernstoOIGthatthestudy'smethodologyhas
seriouslimitationsregardingtherelationshipbetweenpriee displayed nMPDPFandprice
chargedatPO . Despitcresponding10someofourconcerns,the final reportsmethodology
remain ubstanliallyflawed,andconsequently,OIG'sfindingsoffrequent priceditTcrcnces
betweenMPDPFand PDEdataarefalseand misleading. Thefollowingdiscussionhighlights
theerrorsfound inOIG'smethodology.
ThemainerrorinOIG'sanalysisisthatpharmacy-specificPDEdatawerecomparedtonon
pharnlacy-specificMPDPFprices. LnordertobeconsistentwiththedataSITuctureu cdfor
MPDPF,OIG mustmatchpharmacy-specificdrugpricesforcomparisonbecausepharmacy-
pecificdi pensingfeescan vary widely,ascannegotiatedprices. Theaverage
  OEI-03-07-00600   ACCURACY OF  PART D  P LANS  DRUG  PRICES ON  PLAN  FINDER   19    
  
   
A P P E N D I X   ~   C  

Page2 -DanielR.Levinson
minimum/maximumdispensingfees is 0.75-$10.83forbrandnamedrugsand 0.84-$11.01
forgenericdrugs. orofound thelargestpercentagedifferenceingenericdrugs. Thisisnot
surprisinggiventhatgenericdrugshaveaJowertotalcost thusagreaterimpactfrom the
varianceindispensingfees. Forexample,forfOUIofthe fivegenericdrugslistedinthereport,
010found themediandollardifferencetorangefrom$2-$13. Thisistobeexpected,giventhe
averagedispensingfeedifferenceofover$10.00betweenpharmacieswithinaplanforageneric
drug.
APart0 sponsor'sdrugpricingcanalsovarybypharmacy. Thedrugplanssubmitmultiple
drugpricingfiles. Thepharmacynetworkfilessubmittedbythedrugplansareassociatedwitha
specificdrugpricingfile. Thevarianceinpharmacy-specificnegotiatedprice islostwhenusing
pharmacy-specificPDEdatathatarenotaffiliatedwithpharmacy-specificMPDPFpricing. For
example,theororeportshowsamedianpercentdifferenceforthegenericdrugfurosemide(40
mg)of70percentandamediandollardifferenceof$3. CMSfindsthatonePartDsponsor's
costsforthisdrugcanvaryacrossitsphannacynetworkbyarangeof$I.077to 3.984. This
costrangewouldbeequatedtoavarianceof270percentwithanabsolutecostdifferenceof
$2.91 basedsolelyonwhetherthepharmacyselectedwasassociatedwiththelowestorthe
highestnegotiatedcostforthisPartDsponsor.
Inaddition the010reportdidnottakeintoaccountth.atpharmaciesoftenprovidedrugsatthe
lesserofthenegotiatedpriceorthecustomarypriceatthcirpharmacy. Overthepastseveral
years manyretailpharmacychainshavebeguntoofferspeciallowpricingforcertaingeneric
products. Wal-Mart,oneofthefirstretail pharmacychainstomarketthistypeofprogram,
maintainsthattheir$4PrescriptionsProgramrepre entsupto95percentoftheprescriptions
writteninthemajorityoftherapeuticcategories. OIO'sfmdingsthatthePDEdatamoreoften
showedthebeneficiaryreceivinglowerpricingthanwasdisplayedontheMPDPFmaybe
consistentwiththeavailabilityofsavingsoffereddirectlybypharmacies. Costdifferencesthat
areattributedtosuchpharmacyprogramsshouldnotbeconstruedasMPDPFdataerrors.
OIG Recommendation
TheCMSensuresthatplans'drugpricesdisplayedonPlanFinderaccuratelyreflectactualdrug
co IsonPartDclaims.
CM Recommendation
TheCMSconcurswiththisrecommendation. CM routinelyensure thatMPDPFpric Closely
reflectPDEcosts. Asdiscussedearlier,thepurposeoftheMPDPFistoprovideestimatesof
beneficiaries'annualcostsinthePartDprogramforplanselectionandenrollment. CM 'in
depthqualityassurance(QA)checksandotherlongitudinalanalyseshaveproventhatplans'
estimatescloselycorrelatetothepricespaidbybeneficiarie atthepoint-of-sale. However,
CM recognizesthattheavailabilityoffinalactionclaimsasalimitationtocomparingMPDPF
pricesto PDEcostsa aregularQAcheck. Thatis,CM wouldnothavethedatanecessaryona
concurrentba~istodeterminethatMPDPFpriceswereaccuratelyreflected inPDEdata. To
circumventthislimitation,CMSinsteadevaluatesandranksthesimilarityofMPDPFtoPDE
pricesa onemeasureoftheplanratings. IntroducedbyCM inthe fall of2006asanMPDPF
  OEI-03-07-00600   ACCURACY OF  PART D  PLANS  DRUG  PRICES ON  PLAN  FINDER   20    
  
   
AA PP PP EE NN DD II XX   ~~   CC  

 
Page3 -DanielR. Levinson
enhancement,PlanRatingsenableMedicarebeneficiariestocompleteside-by-sidecomparisons
ofplancost,coverage,andqualityforplanselectionandenrollment. CMSalsousestheplan
ratingsforoversightand monitoringpurposestoensureplanquality. pecificallyinthedrug
pricingand patientsafetycategory,forthemeasurenamed 'HowsimilaraDrugPlan'sestimated
price ontheMedicarewebsiteareto pricesmemberspayatthepharmacy," MSevaluated
PDEclaimsfordrugsintheclassesofclinicalconcernagainstthecorrespondingpricedisplayed
onMPDPF. CMS' ratingidentifiedinstanceswherethecostssubmittedonPOEclaimswere
higherthantheprice displayedontheMPDPF. Therefore,plansreceived lowerstarratings
whenenrollec werechargedhighercoststhantheyhadviewedonMPOPF. Theaveragestar
ratingforPOPsandMA-PDswasthree tars,cquivalenttogoodperformance. Organizations
thatreceivedoneortwostarsreceivedadditionaloversightandmonitoringactionsbyCMS.
CMSbelievesthatthismcasureincreas stheSponsors levelofaccountabilityforsubmitting
accuratedrugcostestimatesforPlanFinder.
DIG Recommendation
TheCMSaddsadisclaimertothePlanFindcrplansearchresultsscreenindicatingthatdrugcost
estimatesmaydiffermorethan"slightly"fromactualdrugcosts.
eMSResponse
TheCMSdoesnotconcurwiththisrecommendationduetotheDIGreport's faulty methodology
thatincorrectlylooksatthevariationbetwccnMOPOFandPOE. WhenDIG'sanalysiswas
limitedto PDEclaimsforreference Des,thereportfound 'PlanFinderpricesdiffered from
actualcostsfor98 percentofclaims. Plans'drugpricesdi playedonPlanFinderwereamedian
of22percent(or$17)higherthanactualcostsonPOEclaims..." CM analyzedasampleof
over6.9millionPOEclaimsfrom2007 andappliedMPOPFdatalayoutandrelationships,
specificallymatchingthepharmacyforwhichthePDEwasfilledtothepharmacyforwhich the
MPOPFpricewasdisplayed,tocomparedifferencesbetweenMPDPFpricesandPOEcosts.
TheresultsofeMS'analysisweresignificantlydifferentfromtheorGreport'sfindings. Ofthe
claimsstudied,61 percentlisteddrugcostsequaltothecorrespondingMPDPFpricewhen
comparedtothe 1/1000ofonedollar. CM found thatforclaimswithdrugcostsnotequalto
MPOPFprices 13perccntofclaimshaddrugcostslessthanMPDPFcost,and26percentof
claimshaddrugcostsgreaterthan MPDPFcost. Intermsofthemagnitudeofpricedifference ,
19percentofclaimshaddifferencesof5percentorIe stothecorrespondingMPOPFprice.
Only20percentofclaimshaddifferencesgreaterthan5percentfromthecorrespondingMPOPF
pricewhich onaverage equatedtocostdifferencesthatranged from$0.08-$1.28. Basedon
theseresults,CMSassertsthatthecurrentdisclaimeronMPOPFindicatingthatdrugcost
estimatesmaydifferslightlyfromactualdrugcostsis ouod,andthatDIG'srecommended
modificationtothedisclaimerisunwarranted.
However,inordertoensurethatbeneficiariesviewpricingforaspecificpharmacylocation,the
curren!languagewill berevisedtoencouragebeneficiariestoselectthepharmacytheycurrently
useinordertogetmoreprecisePOSpricing.
OEI-03-07-00600   ACCURACY OF  PART D  P LANS  DRUG  PRICES ON  PLAN  FINDER   21   x  c 
A  P PEN  D 
PlIge4 -Daniel R. Levinson 
Curr~nt MPDPF language: Differerzt pharmacies may charge different prices for the same 
drug.  As a result, you may not find the least expensive plan ifyou select apreferred 
pharmacy or pharmacies.  . 
Modified MPDPF language: Different pharmacies can charge different prices for the 
samedrug. Togetanestimateofhowmuchyourprescription willcostatyourpharmacy, 
selectyourpharmacyfrom thelistbelow.  Youcanpickuptotwopharmacies;  Jfyou 
don'tpicka pharmacY, thecosttha,tyouseemaybedifferentfromthecostatyour 
pharmacy.  Jfyour pharmacy iSn't in the plan's network, the c(Jstywwil1 see is ihefull 
price ofthe drug with no inSUrance coverage. 
Thank you for the -opportunity to review and commentoD this draftrepiJrt. 
OE 10 30700600  ACCURACY OF PART D PLANS' DRUG PRICES ON PLAN FINDER  22   
  
   
  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. 
Amy Sernyak served as the team leader for this study.  Other principal 
Office of Evaluation and Inspections staff from the Philadelphia regional  
office who contributed to this report include Tara Bernabe, Isabelle 
Buonocore, Nancy Molyneaux, Emily Multari, and Chetra Yean; central 
office staff who contributed include Linda Abbott, Eddie Baker, Jr., 
David Graf, and Rita Wurm. 
  OEI-03-07-00600   ACCURACY OF  PART D  PLANS  DRUG  PRICES ON  PLAN  FINDER   23