Department of Health and Human Services
OFFICE OF 
   
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
M P D
EDICARE  ART                  
 
 
E-P S :
RESCRIBING  TANDARDS   
 
E   A S
ARLY  SSESSMENT  HOWS 
 
P C  
AR  TIAL  ONNECTIVITY 
 
 
 
 
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
October 2009 
OEI-05-08-00320    
 
 
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 the extent of Medicare Part D plan sponsors 
implementation of electronic prescribing (e-prescribing) standards to 
support connectivity with prescribers and dispensers. 
BACKGROUND 
The Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 established the Medicare Part D e-prescribing program, which 
stipulates that plan sponsors must implement e-prescribing standards 
specified by the Secretary of the Department of Health and Human 
Services (the Secretary).  E-prescribing standards facilitate the 
communication of prescription information among prescribers (e.g., 
physicians), Part D plan sponsors, and dispensers (e.g., pharmacies).   
On behalf of the Secretary, the Centers for Medicare & Medicaid 
Services (CMS) established e-prescribing standards.  Three of these 
standards enable the flow of eligibility, medication history, and 
formulary and benefits information between plan sponsors and 
prescribers at the point of care.  These plan-to-prescriber standards are 
Accredited Standards Committee X12N 270/271, SCRIPT 8.1, and 
Formulary & Benefits Standard 1.0.  Further, Formulary & Benefits 
Standard 1.0 consists of four components:  Formulary Status List, 
Formulary Alternatives List, Coverage List, and Copayment List.  The 
flow of eligibility information and copayment amounts between plan 
sponsors and dispensers is supported by one standard, 
Telecommunication 5.1.  CMS required that plan sponsors implement 
two standards by January 2006 and the remaining standard by April 
2009.  In some cases, however, plan sponsors are exempt from 
implementing SCRIPT 8.1.     
Between August and September 2008, we surveyed all Part D plan 
sponsors for plan year 2008 to determine the extent of their 
implementation of the standards.  We received responses from 262 plan 
sponsors for a 94-percent response rate.   
FINDINGS 
Nearly 80 percent of plan sponsors reported at least partial                 
plan-to-prescriber connectivity but few reported complete 
connectivity.  Seventy-seven percent of plan sponsors responding to our 
survey reported either partial or complete implementation of the                      
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plan-to-prescriber standards.  Sixty-nine percent of plan sponsors 
reported partial plan-to-prescriber connectivity.  In contrast, only                  
8 percent of plan sponsors reported complete connectivity.  Additionally, 
16 percent of plan sponsors reported no plans to achieve                            
plan-to-prescriber connectivity.  The remaining plan sponsors did not 
provide information on plan-to-prescriber connectivity. 
Problems implementing Formulary & Benefits Standard 1.0 limit 
complete plan-to-prescriber connectivity.  Plan sponsors                   
plan-to-prescriber connectivity is limited because only 8 percent of plan 
sponsors have completely implemented Formulary & Benefits Standard 
1.0.  In contrast, over 70 percent of plan sponsors reported complete 
implementation of each of the other two plan-to-prescriber standards.  
To achieve complete plan-to-prescriber connectivity, plan sponsors have 
to completely implement all three plan-to-prescriber standards.   
Of the Formulary & Benefits Standard 1.0 components, fewer plan 
sponsors reported complete implementation of the Coverage List and 
the Copayment List than the Formulary Status List and the Formulary 
Alternatives List.  According to plan sponsors, the batch data upload 
process (a way of transmitting data at specified intervals) is a barrier to 
complete implementation of the Coverage List and the Copayment List.     
Only 5 percent of plan sponsors reported no plan-to-dispenser 
connectivity.  Five percent of plan sponsors responding to our survey 
reported no plans to implement the plan-to-dispenser standard.  These 
plan sponsors are Program for All-Inclusive Care for the Elderly (PACE) 
plan sponsors.  Most of these PACE plans reported that they believed 
that they were exempt from e-prescribing requirements.  Entities that 
only send prescriptions internally are exempt from implementing 
SCRIPT 8.1, but no exemption exists for the plan-to-dispenser standard, 
Telecommunication 5.1.   
Eighty-three percent of plan sponsors reported complete                            
plan-to-dispenser connectivity.  The remaining plan sponsors did not 
provide information on plan-to-prescriber connectivity. 
RECOMMENDATIONS 
Based on the results of our review, CMS should: 
Ensure that plan sponsors completely implement the                          
plan-to-prescriber and plan-to-dispenser standards.  To achieve this, 
CMS could:  (1) continue to educate plan sponsors about e-prescribing 
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requirements; (2) clarify e-prescribing standards exemptions; or (3) use 
available compliance mechanisms when necessary, such as corrective 
action plans and civil monetary penalties, to bring plan sponsors into 
compliance.   
Collaborate with plan sponsors and industry representatives to 
address barriers to full implementation of Formulary & Benefits 
Standard 1.0.  CMS should collaborate with plan sponsors, 
pharmaceutical benefits managers, and standards-development 
organizations to address the batch-processing problems identified in 
this report.  CMS could consider pilot-testing a real-time standard that 
enables plan sponsors to transmit beneficiary-specific formulary and 
benefits information.  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with each of our recommendations.  To address our 
recommendations, CMS will continue to educate plan sponsors about               
e-prescribing requirements.  If necessary, CMS will also use available 
compliance mechanisms to bring plan sponsors into compliance.  In 
addition, CMS plans to continue its collaboration with the National 
Council for Prescription Drug Programs, Inc., to continually update and 
develop new e-prescribing standards.     
Although CMS concurred with our recommendations, it asserted there 
were significant methodological limitations with our data collection and 
analysis, resulting in inflated findings of plan sponsor noncompliance 
with e-prescribing standards.  Specifically, CMS asserted that our 
results would have likely been different if our plan sponsor survey had 
been conducted closer to the implementation deadline.  If we had 
conducted our survey at a later date, we acknowledge that 
implementation rates could have risen.  However, we do not believe that 
the results reported here are inflated.  CMS did conduct educational 
activities that clarified requirements; however, plan sponsors reported 
that technical difficulties were often a barrier to complete 
implementation, rather than a lack of clarity regarding the regulations.      
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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 
Nearly 80 percent of plan sponsors reported at least partial                  
plan-to-prescriber connectivity but few reported complete  
connectivity  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 
  Problems implementing Formulary & Benefits Standard 1.0                  
limit complete plan-to-prescriber connectivity. . . . . . . . . . . . . . . . 14 
Only 5 percent of plan sponsors reported no plan-to-dispenser 
connectivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 
   
R E C O MMEN D A T ION S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 
Agency Comments and Office of Inspector General Response . . . 20 
 
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 
  A:  Formulary & Benefits Standard 1.0 Components . . . . . . . . . . 23 
   B:  Analysis Categories for Plan-to-Prescriber and                          
Plan-to-Dispenser Connectivity . . . . . . . . . . . . . . . . . . . . . . . . 24 
  C:  Implementation of Plan-to-Prescriber Standards . . . . . . . . . . 26 
  D:  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 
 
A C K NO WL E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33   
   
 I N T R O D U C T I O N  
 I N T R O D U C T I O N  
 
OBJECTIVE 
To determine the extent of Medicare Part D plan sponsors 
implementation of electronic prescribing (e-prescribing) standards to 
support connectivity with prescribers and dispensers. 
BACKGROUND 
In general, e-prescribing is the electronic communication of prescription 
information among health insurance companies, doctors, and 
pharmacies.  E-prescribing is one example of health information 
technology, which the Presidential agenda outlines as a way to improve 
care and lower health care costs.1  E-prescribing benefits that may 
lower costs include decreased adverse drug events, increased clinical 
efficiency, and increased generic utilization.  A 2008 study indicated 
that, with access to formulary information, doctors prescribed lower cost 
medications, leading to an estimated savings of $845,000 per 100,000 
patients.2   
E-prescribing benefits result from prescriber access to prescription 
information at the point of care.  To make prescription information 
available at the point of care, e-prescribing systems use uniform 
standards that enable multiple data systems to exchange information 
with one another.  Without e-prescribing standards, different data 
systems cannot send and receive drug information, limiting benefits 
such as improved patient safety, increased clinical efficiency, and cost 
savings.   
Traditional Prescribing Versus E-Prescribing                                           
Traditional prescribing occurs when a prescriber provides a written 
prescription to a beneficiary.  Prescribers are persons licensed to issue 
prescriptions for drugs (e.g., physicians, dentists, or physician 
assistants).3  Then, a beneficiary takes the prescription to a dispenser to 
be filled.  Dispensers are persons or other legal entities licensed to 
dispense prescription drugs (e.g., pharmacies).4  A dispenser may call a 
 
1 The White House, The Agenda:  Technology.  Available online at 
http://www.whitehouse.gov/agenda/technology/.  Accessed on March 13, 2009. 
2 M. Fischer, et al. (2008).  Effect of Electronic Prescribing with Formulary Decision 
Support on Medication Use and Cost.  Archives of Internal Medicine, 168 (22),                  
pp. 24332439.      
3 42 CFR  423.159(a). 
4 Ibid. 
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prescriber to verify a drug dosage or to ask for authorization to dispense 
a generic drug.  This followup may take several attempts if the 
prescriber is not available when the dispenser calls.   
In contrast to traditional prescribing, e-prescribing occurs when a 
prescriber uses a computer or an electronic hand-held device, such as a 
personal digital assistant, to write and send a prescription directly to a 
dispenser.  Before a prescriber sends a prescription to a dispenser, he or 
she can request beneficiary eligibility, formulary and benefits, and 
medication history information from a plan sponsor or its 
pharmaceutical benefits manager (PBM).  PBMs are companies that 
provide pharmacy support services to plan sponsors, including claims 
processing and adjudication.   
Prescribers can use prescription information to prescribe low-cost, 
alternative drugs and potentially avoid adverse drug events, such as 
drug allergies or drug-to-drug interactions.  Plan-to-prescriber 
communication is a new feature in the prescribing process that is not 
available in traditional prescribing. 
Plan-to-dispenser communication in e-prescribing works the same as in 
traditional prescribing.  Dispensers electronically communicate with 
health insurers or with the insurers PBMs to obtain beneficiary 
eligibility information and copayment amounts.  PBMs communicate 
prescription information to dispensers on behalf of the health insurers 
with which they contract.   
Figures 1 and 2 illustrate the communication among health insurers, 
PBMs, prescribers, and dispensers in traditional prescribing and                 
e-prescribing. 
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Figure 1.  Flow of Prescription-Related Information in Traditional Prescribing  
  Prescription:  Prescriber 
provides written prescription to 
beneficiary.  The beneficiary 
 
takes the prescription to the 
dispenser to be filled. 
 
 
 
  Followup:  If needed, 
dispenser calls prescriber to 
Prescriber
ask questions about the 
 
prescription (e.g., dosage, 
generic substitutions, etc.) 
 
and to make refill requests.  
 
 
 
 
 
 
   
He a lth Insurer  Health insurer    Plan Eligibility:  PBM communicates   
  provides PBM    PBM electronically with dispenser to verify  Dispenser
with beneficiary  beneficiary enrollment and copayment 
 
eligibility and  amounts.
  benefit 
information. 
 
 
Source: Office of Inspector General (OIG) analysis, 2008. 
 
Figure 2.  Flow of Prescription-Related Information in E-Prescribing  
 
  Medication History:  PBM electronically 
  sends the prescriber a list of drugs that 
have been dispensed to the beneficiary to  Prescription Order:  Prescriber 
  give the prescriber information to help  electronically sends a prescription to 
  prevent potential drug interactions.  the dispenser.  As part of this process, 
  the prescriber can request medication 
  history from the dispenser.  The 
 Prescriber
Plan Eligibility:  PBM electronically  dispenser can notify the prescriber 
 
communicates with the prescriber to verify  when the prescription has been filled.    
b eneficiary enrollment. 
 
Formulary & Benefits:  PBM 
electro nically sends the prescriber  Followup:  If needed, the 
information about the beneficiarys  dispenser can make refill 
formulary, preferred drug alternatives,    requests electronically.  For 
coverage, and copayment amounts to help  other questions, the dispenser 
the pre scriber make the most appropriate  can call the prescriber.  
drug choice without extensive 
   
communication with the dispenser or 
health insurer. 
 
  Health insurer    Plan Eligibility:  PBM communicates   
Health Insurer  provides PBM    electronically with the dispenser to verify 
with beneficiary  beneficiary enrollment and copayment 
PBM  Dispenser 
eligibility and  amounts. 
benefit 
information. 
Source:  OIG analysis, 2008. 
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Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
The Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (MMA) established the Medicare prescription drug program, 
known as Medicare Part D, which provides optional drug benefits to 
Medicare beneficiaries.5  The Centers for Medicare & Medicaid Services 
(CMS) contracts with private insurance companies, known as plan 
sponsors, to provide prescription drug coverage for beneficiaries who 
choose to enroll in the program.  Plan sponsors may offer prescription 
coverage as a stand-alone prescription drug plan or as part of a 
managed care plan, known as a Medicare Advantage Prescription Drug 
Plan.6  As of February 2009, approximately 26.6 million beneficiaries 
were enrolled in Medicare Part D.7   
MMA and E-Prescribing                                                                                    
The MMA also established the Medicare Part D e-prescribing program,8 
which requires that plan sponsors support e-prescribing activities by 
implementing e-prescribing standards specified by the Secretary of the 
Department of Health and Human Services (the Secretary).9                           
E-prescribing standards enable interoperability among e-prescribing 
systems.  With interoperable systems, plan sponsors, prescribers, and 
dispensers can exchange drug information with one another.  The 
Secretary delegated oversight of plan-sponsor implementation of the              
e-prescribing standards to CMS. 
The requirement to implement e-prescribing standards is incorporated 
into plan sponsors contracts.10  CMS contracts with plan sponsors by  
 
 
5 Title I of the MMA, P.L. No. 108-173, Part D of Title XVIII of the Social Security Act,  
42 U.S.C.  1395w-101 et seq. 
6 MMA, P.L. No. 108-173  101(a), Social Security Act,  1860D-1(a)(1),                                 
42 U.S.C.  1395w-101(a)(1). 
7 CMS, Total Medicare Beneficiaries With Prescription Drug Coverage. 2009.  Available 
online at http://www.cms.hhs.gov/PrescriptionDrugCovGenIn/.  Accessed on February 23, 
2009.   
8 MMA, P.L. No. 108-173  101(a), Social Security Act,  1860D-4(e), 42 U.S.C.                            
 1395w-104(e). 
9 42 CFR  423.160(a).  Although the MMA does not explicitly mandate that plan 
sponsors support e-prescribing, CMS has interpreted the e-prescribing program established 
at section 1860D(4) of the Social Security Act as being unworkable without such mandatory 
support.  See 69 Fed. Reg. 46632, 46671 (Aug. 3, 2004). 
10 42 CFR  423.505(b)(6). 
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September for the following plan year, which begins in January.11  
Because CMS includes e-prescribing requirements in plan sponsor 
contracts, it may institute corrective action plans, issue civil monetary 
penalties, and terminate plan sponsors contracts for plan sponsors that 
fail to implement the e-prescribing standards.12   
E-Prescribing Standards                                                                                      
CMS established four e-prescribing standards to support the 
interoperability of plan sponsors e-prescribing systems with other                
e-prescribing systems.  CMS required that plan sponsors implement two 
standards by January 2006.13  In April 2008, CMS issued a final rule 
requiring that plan sponsors implement two additional standards by 
April 2009.14  Table 1 describes the e-prescribing standards and groups 
them according to whether they facilitate plan-to-prescriber or                            
plan-to-dispenser connectivity. 
Table 1:  E-Prescribing Standards for Medicare Part D Plan Sponsors  
Implementation 
Connectivity  E-Prescribing Standard  Deadline  Flow of Prescription Information 
Accredited Standards 
Committee (ASC) X12N  Plan sponsors respond to prescribers requests about beneficiary 
270/271  January 2006  eligibility. 
Plan-to-Prescriber  Plan sponsors respond to prescribers requests for a beneficiarys  
Connectivity  SCRIPT 8.1  April 2009  Part D medication history. 
  Formulary & Benefits  Plan sponsors respond to prescribers requests for formulary, 
  Standard 1.0  April 2009  alternative drug, coverage, and copayment information. 
Plan-to-Dispenser  Plan sponsors respond to dispensers requests about eligibility and 
Connectivity   Telecommunication 5.1  January 2006  copayment amounts. 
Source:  OIG analysis of e-prescribing standards, 2008. 
CMS provided education to plan sponsors about e-prescribing 
requirements.  In September 2008, CMS issued a memorandum 
reminding plan sponsors of the implementation deadlines for each 
standard and reiterating the expectation that all components of each 
 
11 CMS, Solicitation for Applications for New Prescription Drug Plans Sponsors:                
2010 Contract Year, 2009.  Available online at 
http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/PDPApplication.pdf.  
Accessed on June 12, 2009. 
12 42 CFR  423.509(a)(1) and (c) and 42 CFR  423.752(c)(1). 
13 42 CFR  423.160(b)(2)(i) and (ii), as promulgated in 70 Fed. Reg. 67568, 67573  
(Nov. 7, 2005), now found at 42 CFR  423.160(b)(3)(i) and (ii).  CMS also established a 
standard for transmitting prescriptions at what is now 42 CFR  423.160(b)(2), effective 
January 2006.  However, we did not test this standard as it is the only standard in use for 
the transmission of electronic prescriptions. 
14 42 CFR  423.160(b)(1), (b)(4), and (b)(5), as promulgated in 73 Fed. Reg. 18918, 
18926 (Apr. 7, 2008). 
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standard be implemented.15  Additionally, CMS held an e-prescribing 
conference in October 2008.  The conference included educational 
sessions and presentations about e-prescribing, e-prescribing standards, 
and the effective date for standards implementation. 
Plan-to-prescriber connectivity.  CMS established three e-prescribing 
standards to be used by plan sponsors, or PBMs on their behalf, when 
communicating prescription information to prescribers.  These are    
ASC X12N 270/271, SCRIPT 8.1, and Formulary & Benefits Standard 
1.0.   
ASC X12N 270/271 and SCRIPT 8.1 require that plan sponsors populate 
drug information through a real-time transaction.  A real-time 
transaction is a process by which plan sponsors send current eligibility 
and medication history information for each beneficiary upon request. 
Formulary & Benefits Standard 1.0 is composed of four components:  
Formulary Status List, Formulary Alternatives List, Coverage List, and 
Copayment List.  Each component is further divided into several 
elements.  See Appendix A for a detailed description of Formulary & 
Benefits Standard 1.0 components. 
Formulary & Benefits Standard 1.0 requires that plan sponsors 
populate component information through a batch data upload process.  
A batch data upload is the process by which plan sponsors send batches 
of formulary and benefit information at specified intervals, such as 
weekly or monthly, rather than providing information for each 
beneficiary upon request.  CMS adopted this process because of 
successful pilot-testing and because it was the current industry practice 
for sending Formulary Status List information.16 
Plan-to-dispenser connectivity.  CMS established one e-prescribing 
standard to be used when plan sponsors, or PBMs on their behalf, 
communicate prescription information to dispensers.  This standard is 
Telecommunication 5.1.  Plan sponsors use a real-time transaction for 
Telecommunication 5.1 to communicate beneficiary eligibility  
 
 
 
15 CMS, Memorandum to Part D Sponsors, Supporting Electronic Prescribing Under 
Medicare Part D, September 19, 2008. 
16 73 Fed. Reg. 18918, 18924 (Apr. 7, 2008). 
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information and copayment amounts to dispensers.  CMS adopted             
this standard because it was already widely used in the pharmacy 
industry.17   
E-Prescribing Standards Exemptions                                                                   
In some cases, plan sponsors are exempt from implementing SCRIPT 
8.1.  Implementation of SCRIPT 8.1 is optional for entities18 that 
transmit prescriptions or prescription information internally.19  In these 
cases, sometimes referred to as closed e-prescribing systems, the 
prescriber and the recipient (e.g., a pharmacy) are part of the same legal 
entity.  However, the entity is required to use SCRIPT 8.1 for any 
electronic prescriptions for a Part D beneficiary sent to an external 
recipient. 20  Entities that transmit prescriptions by computer-generated 
facsimile or are required by law to issue a written prescription for a 
patient to a nonprescribing provider, such as a nursing facility, are also 
exempt from using this standard.21   
Related OIG Reports                                                                                               
In 2007, OIG conducted a study that evaluated State Medicaid agencies 
implementation of health information technology initiatives, which 
included e-prescribing initiatives.  OIG found that in 2007 several State 
Medicaid agencies were developing networks to enable health care 
providers and payers to securely exchange clinical information, such as 
prescription history.22 
OIG plans to release a companion e-prescribing report to this report.  
The companion report will provide details about Part D plan sponsor 
initiatives to promote e-prescribing among prescribers. 
METHODOLOGY 
Scope 
We assessed plan sponsor e-prescribing connectivity by reviewing plan 
sponsors implementation of, or plans to implement, the four                         
 
17 70 Fed. Reg. 67568, 67574 (Nov. 7, 2005). 
18 Entities include plan sponsors, prescribers, PBMs, and other organizations that 
transmit prescriptions or prescription-related information. 
19 42 CFR  423.160(a)(3)(iii). 
20 42 CFR  423.160(a)(1). 
21 42 CFR  423.160(a)(3)(i) and (iv).   
22 OIG, State Medicaid Agencies Initiatives on Health Information Technology and 
Health Information Exchange, OEI-02-06-00270, August 2007. 
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e-prescribing standards.  We did not evaluate prescriber or dispenser             
e-prescribing volume or use of the standards.    
Data Collection 
We used CMSs Health Plan Management System (HPMS) data from 
July 2008 to identify plan sponsors and their associated PBMs for plan 
year 2008.23  The HPMS provides information about Part D plans.   
We also used HPMS data to identify the number of beneficiaries 
enrolled with each plan sponsor in 2008.  As of July 2008, 26.2 million 
beneficiaries were enrolled in Part D. 
Survey.  Between August and September 2008, we conducted an email 
survey of all plan sponsors or their PBMs for plan year 2008.  Although 
CMS allows exemptions to the e-prescribing standards, we did not 
exclude any plan sponsors from our study because CMS had not granted 
any exemptions.   
The survey consisted of questions about the extent to which plan 
sponsors had implemented or planned to implement Part D                   
e-prescribing standards.  Where applicable, we asked plan sponsors to 
explain why they had not implemented the standards.     
We followed up with plan sponsors and PBMs if they reported that they 
did not currently support e-prescribing and did not indicate their future 
plans to implement the e-prescribing standards.  Through this                
followup, we determined these plan sponsors and PBMs future plans to 
implement the e-prescribing standards.  We also placed phone calls and 
sent emails to plan sponsors and PBMs to clarify survey responses, 
when necessary. 
We surveyed 278 plan sponsors.  We received responses from 262 plan 
sponsors for a 94-percent response rate.  Two-hundred eleven responses 
were provided by 29 of 31 PBMs that we surveyed on behalf of plan 
sponsors.  Responses were provided by 51 of 61 plan sponsors without 
PBMs.   
We conducted a pretest of the survey.  Where appropriate, we revised 
the survey based on feedback from this pretest.  
 
 
 
23 The plan year begins in January and ends in December. 
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Data Analysis 
We conducted our analysis at the plan sponsor level because plan 
sponsors are responsible for implementing the regulations.  We did not 
assess the implementation of e-prescribing standards by individual 
plans offered by plan sponsors.   
For our analysis of plan sponsor implementation of e-prescribing 
standards, we grouped the standards by the e-prescribing connectivity 
they facilitated:  plan-to-prescriber or plan-to-dispenser.                             
Plan-to-prescriber connectivity includes three e-prescribing standards:  
ASC X12N 270/271, SCRIPT 8.1, and Formulary & Benefits Standard 
1.0.  Plan-to-dispenser connectivity includes only one e-prescribing 
standard:  Telecommunication 5.1.  
We then categorized plan sponsors responses based on implementation 
status.  To analyze plan-to-prescriber connectivity, we used four 
categories:  complete, partial, no connectivity, and missing information.  
Of the three plan-to-prescriber standards, only Formulary & Benefits 
Standard 1.0 can be partially implemented because it has four distinct 
components.   
In our analysis of these categories, we combined plan sponsors that 
reported implementation with those that reported that they were 
planning implementation.  For example, the number of plan sponsors 
that have complete plan-to-prescriber connectivity includes plan 
sponsors that have complete connectivity and plan sponsors with plans 
to achieve complete connectivity.  We took this approach to give plan 
sponsors as much credit for their efforts as possible because this is an 
early implementation review and we collected data before the          
April 2009 implementation deadline for SCRIPT 8.1 and Formulary & 
Benefits Standard 1.0.   
Because Formulary & Benefits Standard 1.0 has several components, 
we conducted additional analysis of plan sponsors implementation of 
this standard.  To analyze plan sponsor implementation of the four 
Formulary & Benefits Standard 1.0 components, we divided each of the 
four components into the same four implementation categories outlined 
in the previous paragraph.   
To analyze plan-to-dispenser connectivity, we divided the                   
plan-to-dispenser standard into three implementation categories:  
complete, no connectivity, and missing information.  Plan sponsors 
having complete connectivity have implemented or have plans to  
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completely implement this standard.  We did not have a partial 
connectivity category because Telecommunication 5.1 cannot be 
partially implemented.   
See Appendix B for a detailed description of the plan-to-prescriber,    
plan-to-dispenser, and Formulary & Benefits Standard 1.0 component 
analysis categories. 
Limitations 
This report relies on self-reported data.  We did not validate plan 
sponsor or PBM responses.   
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspections approved by the Council of Inspectors General on Integrity 
and Efficiency. 
 
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 F I N D I N G S  
 
Nearly 80 percent of plan sponsors reported at  Seventy-seven percent of plan 
least partial plan-to-prescriber connectivity but few  sponsors responding to our 
reported complete connectivity  survey reported either partial or 
complete implementation of the                      
plan-to-prescriber standards.  Sixty-nine percent of plan sponsors 
reported that they had partially implemented or planned to partially 
implement the plan-to-prescriber standards.  In contrast, only 8 percent 
of plan sponsors (23 plan sponsors) reported that they had implemented 
or planned to implement all three plan-to-prescriber standards to 
achieve complete plan-to-prescriber connectivity.  See Appendix C for 
plan sponsors implementation of each standard.  Chart 1 shows the 
status of plan sponsor plan-to-prescriber connectivity. 
 
Chart 1.  Plan 
Sponsors        
Plan-to-Prescriber  No connectivity
Connectivity  16%
  Planning
partial Missing 
implementation information
24% 7%
Partial 
Complete 
connectivity  implementation
   69% 0.4% Complete 
connectivity
Planning 
   8%
complete 
implementation
Partial  8%
implementation
45%
  Source:  OIG analysis of survey data, 2008. 
While our assessment took place 7 months before the April 2009 
deadline for two of the plan-to-prescriber standards, it is reasonable to 
expect that, at that time, all plan sponsors would have been aware of 
these standards and would have either implemented them or had plans 
to implement them.   
Plan sponsors should have known of the final implementation deadline 
by April 2008.  CMS required plan sponsors to implement one of the                     
plan-to-prescriber standards by January 2006.  Further, CMS issued 
the final rule for the other two standards in April 2008.  Also, CMS 
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issued a memorandum in September of 2008 reminding plan sponsors of 
the standards implementation requirements and deadlines.  Further, 
fiscal year 2009 contracts with CMS required that plan sponsors 
support e-prescribing activities.  As in other years, these contracts 
would have been in place by September.   
In addition, for plan sponsors to achieve complete connectivity by the 
April 2009 deadline, implementation planning would have to begin 
earlier.  Industry representatives have indicated that setup and 
implementation of e-prescribing standards takes 3 to 6 months on 
average.     
Sixty-nine percent of plan sponsors reported partial plan-to-prescriber 
connectivity                                                                                                       
Forty-five percent of plan sponsors reported that they had partially 
implemented the plan-to-prescriber standards, and 24 percent reported 
plans to partially implement the plan-to-prescriber standards.  These 
plan sponsors did not report plans to achieve complete implementation.  
Partial implementation of these standards limits prescriber access to 
prescription information at the point of care, which may limit the 
potential benefits of e-prescribing.  In 2008, 69 percent of Part D 
beneficiaries (18.1 million beneficiaries) were enrolled with plan 
sponsors that reported partial plan-to-prescriber connectivity.   
Of the 24 percent of plan sponsors planning to partially implement the 
plan-to-prescriber standards, 34 percent planned to do so by April 2009.  
Sixteen percent reported plans to partially implement these standards 
after April 2009 but did not provide specific dates for implementation.  
Another 50 percent of plan sponsors did not specify whether they 
planned to implement these standards before or after April 2009.  
Eight percent of plan sponsors reported complete plan-to-prescriber 
connectivity                                                                                                       
Of the 8 percent of plan sponsors reporting complete plan-to-prescriber 
connectivity, one plan sponsor reported that it had completely 
implemented all three plan-to-prescriber standards.  The remaining               
22 plan sponsors reported plans to completely implement the                           
plan-to-prescriber standards.  Approximately 30 percent of Part D 
beneficiaries (7.8 million beneficiaries) were enrolled with these 23 plan 
sponsors in 2008.  Approximately 90 percent reported that they would 
implement all three of the standards by the April 2009 deadline.   
 
 
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F I N D I N G S  
 
Sixteen percent of plan sponsors reported no plans to achieve                    
plan-to-prescriber connectivity 
Plan sponsors that do not implement any of the plan-to-prescriber 
standards limit potential e-prescribing benefits, such as savings from 
increased generic substitution and decreased adverse drug events.  In 
2008, approximately 200,821 beneficiaries, or less than 1 percent, of 
Part D beneficiaries were enrolled with these plan sponsors.   
Seventy percent of these plan sponsors are Program of All-Inclusive Care 
for the Elderly plan sponsors that may be exempt from the standards.  
Seventy percent of plan sponsors that reported no plans to implement 
any of the plan-to-prescriber standards were Program of All-Inclusive 
Care for the Elderly (PACE) plan sponsors.24  Of these 30 PACE plan 
sponsors, 18 reported that they are exempt from implementing the  
plan-to-prescriber standards because they are PACE plan sponsors.  
Some of these PACE plan sponsors offered a more specific explanation.  
They stated that they are exempt because they are closed prescribing 
systems.  They reported that their prescriptions for beneficiaries are 
prescribed and filled internally or through a contracted pharmacy.     
A few PACE plan sponsors provided additional reasons for not 
implementing the plan-to-prescriber standards related to being a closed 
prescribing system.  Four PACE plan sponsors do not plan to implement 
SCRIPT 8.1.  They reported that as PACE employees in a closed 
prescribing system, PACE prescribers already have access to 
beneficiaries medication history.  One PACE plan sponsor expressed 
confusion about whether it is required to implement the e-prescribing 
standards.  The plan sponsor asked for clarification from CMS about its 
responsibilities regarding the e-prescribing standards. 
Although some of these plan sponsors may be exempt from 
implementing SCRIPT 8.1 under the closed system exemption, PACE 
plan sponsors are not explicitly exempt.  In addition, they are not 
exempt from implementing the remaining plan-to-prescriber standards, 
as the exemption covers only SCRIPT 8.1.  None of the PACE plan 
sponsors provided us with official documentation stating that they were 
exempt from implementing the e-prescribing standards.   
 
24 A PACE organization is a not-for-profit private or public entity that is engaged 
primarily in providing comprehensive medical and social services.  PACE services use an 
interdisciplinary team approach in an adult day health center. 
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A few PACE plan sponsors provided other reasons for not planning to 
implement the plan-to-prescriber standards.  Five PACE plan sponsors 
stated that they do not need to implement Formulary & Benefits 
Standard 1.0 because they do not use formularies.  One other PACE 
plan sponsor expressed concern about the financial burden that may be 
caused by implementing the standards.       
An additional 28 percent of plan sponsors gave no reason for not planning 
to implement any of the plan-to-prescriber standards.  Twelve plan 
sponsors gave no reason for not planning to implement any of the                            
plan-to-prescriber standards.  Three PBMs represent 10 of these plan 
sponsors.  The other two plan sponsors do not work with a PBM.  
 
Problems implementing Formulary & Benefits 
Because only 8 percent of plan 
Standard 1.0 limit complete plan-to-prescriber 
sponsors reported that they had 
connectivity  completely implemented or 
planned to completely implement 
all four components of Formulary & Benefits Standard 1.0, complete 
plan-to-prescriber connectivity is also low.  On the other hand, over              
70 percent of plan sponsors reported complete implementation of each of 
the other two plan-to-prescriber standards.  In particular, 76 percent 
reported complete implementation of ASC X12N 270/271 and 79 percent 
reported complete implementation of SCRIPT 8.1.  Despite these high 
implementation rates, plan sponsors overall plan-to-prescriber 
connectivity is low because plan sponsors have to completely implement 
all three plan-to-prescriber standards to achieve complete                         
plan-to-prescriber connectivity.  For more details on the implementation 
status of each plan-to-prescriber standard, see Table C1 in Appendix C. 
Plan sponsors reported varying rates of complete implementation of the 
four components that make up Formulary & Benefits Standard 1.0:  
Formulary Status List, Formulary Alternatives List, Coverage List, and 
Copayment List.  Complete implementation rates for each of the four 
components ranged from a high of 71 percent to a low of 24 percent.  
Only one plan sponsor reported complete implementation of all four 
components. 
 
 
 
 
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F I N D I N G S  
Fewer plan sponsors reported complete implementation of the Coverage 
List and the Copayment List than the Formulary Status List and the 
Formulary Alternatives List 
Complete implementation rates were the lowest for the Coverage List 
and the Copayment List.  Thirty percent and twenty-four percent of 
plan sponsors reported that they had completely implemented or 
planned to completely implement the Coverage List and the Copayment 
List, respectively.  In contrast, 71 percent and 56 percent of plan 
sponsors reported that they had completely implemented or planned to 
completely implement the Formulary Status List and the Formulary 
Alternatives List, respectively.  Table 2 provides the implementation 
status of each component of Formulary & Benefits Standard 1.0.  For 
more details on the implementation status by component, see Table C2 
in Appendix C. 
Table 2:  Plan Sponsors Implementation of Formulary & Benefits Standard 
1.0 Components 
  Complete  Partial  Not Planning  Missing 
Component  Implementation  Implementation  Implementation  Information 
Formulary Status List  
(n = 262)  71%  7%  2%  20% 
Formulary Alternatives 
List 
(n = 262)  56%  0%  24%  20% 
Coverage List* 
(n = 262)  30%  37%  13%  21% 
Copayment List * 
(n = 262)  24%  14%  44%  20% 
* Totals add to greater than 100 percent because of rounding. 
Source:  OIG analysis of survey data, 2008. 
Plan sponsors offered reasons for not completely implementing the 
Formulary Alternatives List, Coverage List, and Copayment List.25  In 
some cases, the reasons were specific to the component.  For example, 
some plan sponsors not planning to implement the Formulary 
Alternatives List stated that this component duplicates information in 
the Formulary Status List.  Others reported that determining 
alternative drug information was a clinical decision they did not feel 
they were in a position to make.  For the Coverage List and the 
Copayment List, plan sponsors reported difficulties transmitting 
 
25 Plan sponsors did not offer any reasons for not completely implementing the 
Formulary Status List. 
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F I N D I N G S  
complete data, which prevents complete implementation of these 
components.   
The batch data upload process is a barrier to complete implementation of 
the Coverage List and the Copayment List                                                                
According to 80 percent of plan sponsors that lacked complete                    
plan-to-prescriber connectivity, the batch data upload process is a 
barrier to complete implementation of the Coverage List and the 
Copayment List components of Formulary & Benefits Standard 1.0.  
Eleven PBMs represent these plan sponsors.   
Plan sponsors explained that their current processing systems are not 
compatible with the batch process.  Their processing systems are built 
to handle real-time transactions for claims processing.  Plan sponsors 
reported that they would have to make custom changes to their systems 
to make them compatible with batch processing.  Some plan sponsors 
PBMs have taken this step but reported that it is expensive and does 
not enable plan sponsors to transmit comprehensive beneficiary-level 
data for coverage and copayment information.  
According to industry comments in CMSs final e-prescribing rule, using 
the batch process instead of a real-time process results in beneficiary 
information that is often outdated and lacks detail. 26  This can lead to 
higher copayments for patients.27  Thus, it prevents plan sponsors, 
PBMs, prescribers, and beneficiaries from fully realizing the benefits of                    
e-prescribing.  Figure 3 explains limitations of the batch data upload 
process.   
 
 
 
 
 
 
 
 
 
26 73 Fed. Reg. 18918, 18924 (Apr. 7, 2008). 
27 Ibid. 
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Figure 3:  Explanation and Examples of Problems With the Batch Data Upload Process in 
Formulary & Benefits Standard 1.0  
 
Coverage and copay data are inadequately represented in a batch format as the batch data are provided only 
once a month and are often out of date.  Additionally, batch data do not provide the patient level of information 
required to display the patients coverage and copay information.  For example: 
 
 If a medication requires a coverage review but that review was already completed and the medication approved 
for a specific member, there is no way to display the patients status in a batch framework. 
 
 Most batch copay displays provide a simple reference point (for example, symbols that represent copay 
amounts ranging from low to high:  $, $$, $$$), not the actual copay amount; this level of information is not as 
useful to a prescriber or patient as knowing the actual expense for the patient. 
 
 
Source:  OIG analysis of survey data, 2008. 
CMS has also recognized the importance of a real-time formulary and 
benefits standard.  In the April 2008 final rule, CMS indicated that a 
real-time standard for formulary and benefits information would be an 
important step towards realizing the potential benefit of the standard.28  
CMS also stated that once the current Formulary & Benefits Standard 
1.0 is widely used, it expects marketplace forces to encourage 
incorporation of a real-time standard for formulary and benefits 
information.29 
Five percent of plan sponsors      
Only 5 percent of plan sponsors reported no     
(12 plan sponsors) responding to 
plan-to-dispenser connectivity 
our survey reported no plans to 
implement the plan-to-dispenser 
standard, which had an implementation date of January 2006.  In 2008, 
less than 1 percent of Part D beneficiaries (17,375 beneficiaries) were 
enrolled with these plan sponsors.  All 12 plan sponsors are PACE plan 
sponsors that also reported no plans to implement the plan-to-prescriber 
standards.  Ten of the twelve plan sponsors reported that they did not 
implement the plan-to-dispenser standard because, as closed 
prescribing systems, they believed they were exempt from e-prescribing 
requirements.  Entities that only send prescriptions within their 
organization are exempt from implementing SCRIPT 8.1, but no 
exemption exists for the plan-to-dispenser standard,  
 
28 73 Fed. Reg. 18918, 18924 (Apr. 7, 2008). 
29 Ibid. 
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Telecommunication 5.1.  None of these PACE plan sponsors requested 
an exemption from CMS.  Chart 2 shows the status of plan sponsor 
plan-to-dispenser connectivity. 
 
Chart 2.  Plan 
Planning complete
Sponsors   implementation   No connectivity
Plan-to-Dispenser  3% 5%
Connectivity 
Missing 
 
information
12%
Complete 
connectivity
83%
Complete 
implementation
80%
  Source:  OIG analysis of survey data, 2008. 
Eighty-three percent of plan sponsors reported that they had 
implemented or planned to implement Telecommunication 5.1.      
Eighty percent of plan sponsors reported that they had implemented the 
standard and an additional 3 percent of plan sponsors reported 
planning to implement the standard.  In 2008, 78 percent of Part D 
beneficiaries (20.4 million beneficiaries) were enrolled with these plan 
sponsors.   
An additional 12 percent of plan sponsors did not provide any 
information about implementation of the plan-to-dispenser standard.  
Twenty of these plan sponsors are PACE plan sponsors, one PBM 
represents five plan sponsors, and seven plan sponsors have no PBMs.   
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B A N N E R   2 N D   P A G E  
 R E C O M M E N D A T I O N S  
 
As of September 2008, most plan sponsors had at least partial             
plan-to-prescriber connectivity but few reported complete connectivity.  
Plan-to-prescriber connectivity is limited because of problems with 
batch processing that prevent plan sponsors from completely 
implementing Formulary & Benefits Standard 1.0.   
Partial plan-to-prescriber connectivity limits the potential benefits of                      
e-prescribing because most e-prescribing benefits rely on prescriber 
access to prescription information at the point of care.  These benefits 
include decreased adverse drug events, increased clinical efficiency, and 
increased generic utilization resulting in savings.  A 2008 study 
indicated that, with access to formulary information, prescribers 
prescribed lower cost medications, leading to an estimated savings of 
$845,000 per 100,000 patients.     
On the other hand, 83 percent of plan sponsors reported complete                
plan-to-dispenser connectivity.  Only 5 percent of plan sponsors reported 
no plans to implement the plan-to-dispenser standard.  All of these plan 
sponsors are PACE plan sponsors. 
Although CMS educational activities in the fall of 2008 may have 
increased plan sponsor awareness of requirements, complete 
connectivity remains a problem likely because of plan sponsors 
technical difficulties with the batch data upload process.  Most plan 
sponsors indicated that their implementation is limited because of 
system incompatibility with Formulary & Benefits Standard 1.0 rather 
than a lack of knowledge about requirements. 
Based on the results of our review, CMS should: 
Ensure that plan sponsors completely implement the plan-to-prescriber and 
plan-to-dispenser standards 
To ensure plan sponsor compliance with requirements to implement            
e-prescribing standards, CMS could implement all of the following:   
  Continue to educate plan sponsors about e-prescribing standards 
requirements.  In September 2008, CMS issued a memorandum 
clarifying e-prescribing requirements for plan sponsors.  In October 
2008, CMS held an e-prescribing conference with educational 
sessions and presentations about e-prescribing standards and the 
effective date for standards implementation.  In addition, CMS has 
conducted e-prescribing open door forums to educate plan sponsors 
and prescribers about e-prescribing requirements.   
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RR EE CC OO MM MM EE NN DD AA TT II OO NN SS   
  Clarify the e-prescribing standard exemption for closed prescribing 
systems and the way to claim the exemption when appropriate.  
CMS should consider clarifying the exemption with PACE plan 
sponsors specifically.   
  Use available compliance mechanisms when necessary, such as 
corrective action plans and civil monetary penalties, to bring plan 
sponsors into compliance.       
Collaborate with plan sponsors and industry representatives to address 
barriers to full implementation of Formulary & Benefits Standard 1.0 
CMS should collaborate with plan sponsors, PBMs, and                       
standards-development organizations to address the batch processing 
problems identified in this report.  CMS could consider pilot-testing a 
real-time standard that enables plan sponsors to transmit                
beneficiary-specific formulary and benefits information.  Several plan 
sponsors and PBMs indicated that a real-time formulary and benefits 
standard would enable them to transmit comprehensive                  
beneficiary-specific formulary and benefits information to prescribers.  
Currently, a few industry organizations are developing a real-time 
formulary and benefits standard.  CMS acknowledged the benefits of a 
real-time formulary and benefits standard in the comment and response 
section of the April 2008 final e-prescribing rule. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE  
CMS concurred with each of our recommendations.  To address our 
recommendations, CMS will continue to educate plan sponsors about               
e-prescribing requirements.  If necessary, CMS will also use available 
compliance mechanisms to bring plan sponsors into compliance.  In 
addition, CMS plans to clarify the e-prescribing requirements for PACE 
plan sponsors.  In the 2011 PACE application, CMS will formally waive 
the e-prescribing requirements for PACE plan sponsors.  Finally, CMS 
plans to continue collaboration with the National Council of Prescription 
Drug Program, Inc., to continually update and develop new e-prescribing 
standards.     
Although CMS concurred with our recommendations, it asserted there 
were significant methodological limitations with our data collection and 
analysis, resulting in inflated findings of plan sponsor noncompliance with 
e-prescribing standards. 
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R E C O M M E N D A T I O N S  
Specifically, CMS asserted that our results would have likely been 
different if our plan sponsor survey had been conducted closer to the 
implementation deadline.  First, CMS stated that our surveys did not 
capture the impact of CMSs plan sponsor e-prescribing educational 
activities, which clarified that all standards had to be adopted.  Second, 
CMS stated that, at the time of our survey, plan sponsors did not fully 
appreciate the potential impact of Medicare Improvements for Patients 
and Providers Act of 2008 (MIPPA) e-prescribing incentive payments.  As 
a result, CMS stated it believes that, after our survey, more plan sponsors 
may have decided to comply with e-prescribing requirements to prepare 
for the increasing number of prescribers adopting e-prescribing to obtain 
MIPPA incentive payments.  
If we had conducted our survey at a later date, we acknowledge that 
implementation rates could have risen.  However, we do not believe that 
the results reported here are inflated.  While CMSs educational activities 
clarified requirements and MIPPA may have increased the desire to 
implement the standards, neither would have changed the technical 
difficulties reported in our findings.  The primary reason plan sponsors 
reported incomplete implementation of the standards was technical 
difficulties with Formulary & Benefits Standard 1.0, which CMSs 
educational activities did not address. 
CMS also noted that it does not consider plan sponsors to be out of 
compliance with the e-prescribing standards if prescribers do not request 
e-prescribing information.  Specifically, CMS does not expect many 
prescribers to request information on the Formulary Alternatives List 
because this information is available through other sources.  According to 
CMSs response, as long as no prescribers request the Formulary 
Alternatives List, then a plan sponsor is not out of compliance for not 
implementing the Formulary Alternatives List.   
We note that the primary focus of this study was not on plan sponsors 
compliance with the e-prescribing standards.  Rather, this study focused 
on plan sponsors ability to support and implement the foundation for       
e-prescribing connectivity between plan sponsors and prescribers.  
Because this study is focused on plan sponsors ability to support               
e-prescribing connectivity with prescribers, our findings describe the 
completeness of plan sponsors implementation of the e-prescribing 
standards that CMS identified as the foundation for connectivity.   
In addition, although information in the Formulary Alternatives List may 
be available from other sources, this and other e-prescribing standards are 
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R E C O M M E N D A T I O N S  
still required if at least one prescriber requests the information provided 
by those standards, according to CMS guidance.  Further, our findings 
show nonimplementation of the Formulary Alternatives List is not the 
main contributor to plan sponsors reported problems with Formulary & 
Benefits Standard 1.0.  Plan sponsors reported higher implementation of 
the Formulary Alternatives List and the Formulary Status List than the 
Copayment List and the Coverage List.  Plan sponsors reported that the 
batch data upload process prevented them from fully implementing the 
Copayment List and the Coverage List. 
Finally, CMS recommended that we remove PACE plan sponsors from our 
findings because CMS has now waived the e-prescribing requirement for 
PACE plan sponsors.  We did not remove PACE plan sponsors from our 
findings because, at the time of our data collection, PACE plan sponsors 
were required to implement e-prescribing standards.  In addition, our 
findings show that PACE plan sponsors were confused about the                
e-prescribing standards.  Based on this finding, we suggested that CMS 
clarify requirements for PACE plan sponsors, which it has now done. 
For the full text of CMSs comments, see Appendix D.  
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Formulary & Benefits Standard 1.0 Components   
Formulary & Benefits Standard 1.0 is composed of four components:  
Formulary Status List, Formulary Alternatives List, Coverage List, and 
Copayment List.30  Each component includes several elements that can 
assist prescribers in prescribing the most appropriate drug for a 
beneficiary.   
The four components are: 31      
1.  Formulary Status List:  This component provides prescribers with 
the drug name and indicates whether the drug is preferred, not 
preferred, or not reimbursable according to a plans formulary.    
2.  Formulary Alternatives List:  This component provides prescribers 
with a list of alternative drugs, such as generic drugs, low-cost 
alternatives, and therapeutically equivalent alternatives that are 
covered for a beneficiary.     
3.  Coverage List:  This component provides prescribers with 
information on the conditions under which the patients policy covers 
a medication, such as prior authorization requirements, step therapy 
lists,32 quantity limits, age limits, and gender limits.   
4.  Copayment List:  This component provides the cost of the 
prescription to the beneficiary, such as dollar or percentage 
copayment amounts, copayment tiers (higher tiers mean higher 
copayments), and prescription quantity covered under the 
copayment. 
 
 
 
30 National Council for Prescription Drug Programs, Inc. (NCPDP).  NCPDP Formulary 
and Benefits Standard Implementation Guide excerpt, version 2.0, May 2008. 
31 Ibid. 
32 A step therapy list describes a progression of drugs for a medical condition, beginning 
with the most cost-effective and safest medications and then moving on to more costly or 
risky medications if necessary. 
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 A P P E N D I X   ~   B  
Analysis Categories for Plan-to-Prescriber and Plan-to-Dispenser 
Connectivity  
  
Table B1:  Detailed Description of Plan-to-Prescriber and Plan-to-Dispenser Connectivity 
E-Prescribing  Implementation  Implementation  
Connectivity  Category  Phase  Description 
Plan sponsor has completely implemented Accredited Standards Committee (ASC) 
Implemented  X12N 270/271, SCRIPT 8.1, and all four components of Formulary & Benefits 
Standard 1.0.  
Complete  
Plan sponsor has plans to completely implement all three plan-to-prescriber 
connectivity 
standards.  Plan sponsor may have implemented one or two standards and is 
Planning 
planning to implement the rest.  For example, the plan sponsor has completely 
implementation 
implemented ASC X12N 270/271 and is planning to implement SCRIPT 8.1 and all 
four components of Formulary & Benefits Standard 1.0. 
Plan sponsor has implemented some, but not all, of the plan-to-prescriber 
standards and has no plans to implement the other standards.  For example, the 
Implemented 
Plan-to-Prescriber  plan sponsor has implemented ASC X12N 270/271 and SCRIPT 8.1 but is not 
planning to implement Formulary & Benefits Standard 1.0. 
Partial  
connectivity  Plan sponsor has plans to implement some, but not all, of the plan-to-prescriber 
standards.  For example, the plan sponsor plans to implement ASC X12N 270/271, 
Planning 
SCRIPT 8.1, and two of the four components of Formulary & Benefits Standard 1.0.  
implementation 
It has no plans to implement the remaining two Formulary & Benefits Standard 1.0 
components. 
Plan sponsor has no plans to implement ASC X12N 270/271, SCRIPT 8.1, or any of 
No connectivity  N/A 
the four components of Formulary & Benefits Standard 1.0.  
Missing 
N/A  Plan sponsor did not answer any plan-to-prescriber questions. 
information 
Implemented  Plan sponsor has implemented Telecommunication 5.1. 
Complete  
connectivity  Planning  Plan sponsor has plans to implement Telecommunication 5.1. 
implementation 
Plan-to-Dispenser 
No connectivity  N/A  Plan sponsor has no plans to implement Telecommunication 5.1.  
Missing 
N/A  Plan sponsor did not answer the plan-to-dispenser question. 
information 
Source:  Office of Inspector General (OIG) analysis of survey data, 2008. 
Analysis Categories for the Formulary & Benefits Standard 1.0 Components  
To assess plan sponsor implementation of each of the four Formulary & 
Benefits Standard 1.0 components, we divided plan sponsors into four 
implementation categories.  Table B2 provides a detailed description of 
the categories for the Formulary & Benefits Standard 1.0 components:  
Formulary Status List, Formulary Alternatives List, Coverage List, and 
Copayment List.  
 
 
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A P P E N D I X   ~   B  
 
 
 
Table B2:  Detailed Description of Implementation Categories for the Formulary & Benefits Standard 1.0 
Components 
Implementation Category  Implementation Phase  Description 
Implemented  Plan sponsor has implemented all elements of a component.   
Complete  
Planning implementation  Plan sponsor plans to completely implement all elements of a component.   
Plan sponsor has completely implemented some, but not all, of the 
elements of a component.  For example, a plan sponsor that has partially 
Implemented 
implemented Coverage List has implemented quantity limits and age limits 
Partial  
but not the other Coverage List elements.  
N/A  We did not ask plan sponsors to indicate plans to partially implement 
Planning implementation 
each component. 
Not planning   N/A  Plan sponsor has no plans to implement any elements of a component. 
Missing information  N/A  Plan sponsor did not answer any component questions. 
Source:  OIG analysis of Formulary & Benefits Standard 1.0, 2008. 
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A P P E N D I X   ~   C  
 AA PP PP EE NN DD II XX    ~~    CC   
Implementation of Plan-to-Prescriber Standards  
More plan sponsors reported complete implementation of Accredited 
Standards Committee (ASC) X12N 270/271 and SCRIPT 8.1 than 
Formulary & Benefits Standard 1.0.  Table C1 shows the 
implementation status of each plan-to-prescriber standard. 
Table C1:  Plan Sponsors Current and Planned Implementation of Plan-to-Prescriber Standards 
Complete Implementation  Partial Implementation 
Planning  Planning  Not Planning  Missing 
Standard  Implemented  Implementation  Implemented  Implementation  Implementation  Information 
ASC X12N 270/271  
(n = 262)  58%  18%  N/A  N/A  20%  4% 
SCRIPT 8.1 
(n = 262)  45%  34%  N/A  N/A  16%  5% 
Formulary & Benefits 
Standard 1.0* 
(n = 262)  0.4%  8%  46%  20%  16%  9% 
* Total does not add to 100 percent because of rounding. 
Source:  Office of Inspector General (OIG) analysis of survey data, 2008. 
ASC X12N 270/271.  Fifty-eight percent of plan sponsors reported that 
they had completely implemented ASC X12N 270/271.  These plan 
sponsors can respond to prescribers requests about beneficiary 
eligibility at the point of care.  Prescribers can use this information to 
identify beneficiaries eligibility for drug benefits.  As a result, a 
prescriber may see administrative cost savings because of fewer                    
callbacks from a dispenser requesting permission to change the 
prescription to a drug that is covered for a beneficiary.   
An additional 18 percent of plan sponsors reported plans to completely 
implement ASC X12N 270/271.  Of these plan sponsors, 86 percent 
reported plans to implement the standard by April 2009.  Nine percent 
reported plans to implement the standard after April 2009 but did not 
provide specific dates for implementation.  Five percent of plan sponsors 
did not provide any information about their timeframe for implementing 
this standard.  Plan sponsors did not provide reasons why they had not 
implemented ASC X12N 270/271 by the January 2006 deadline. 
Twenty percent of plan sponsors reported no plans to implement       
ASC X12N 270/271.  Additionally, 4 percent of plan sponsors did not 
reply to questions about this standard.   
SCRIPT 8.1.  Forty-five percent of plan sponsors reported that they had 
completely implemented SCRIPT 8.1.  These plan sponsors can provide 
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A P P E N D I X   ~   C  
prescribers with a list of Part D drugs dispensed to beneficiaries.  
Prescribers can use this medication history to reduce adverse drug 
events, such as drug-to-drug allergies or interactions. 
An additional 34 percent of plan sponsors reported plans to completely 
implement SCRIPT 8.1.  Of these plan sponsors, 82 percent reported 
plans to implement SCRIPT 8.1 by the April 2009 deadline.           
Sixteen percent plan to implement the standard after April 2009 but did 
not provide specific dates for implementation.  Two percent of plan 
sponsors did not provide any information about their timeframe for 
implementing this standard.   
Sixteen percent of plan sponsors reported no plans to implement 
SCRIPT 8.1.  Additionally, 5 percent of plan sponsors did not reply to 
questions about this standard. 
Formulary & Benefits Standard 1.0.  One plan sponsor, or less than                   
1 percent of plan sponsors, reported that it had completely implemented 
all components of Formulary & Benefits Standard 1.0.  This plan 
sponsor can provide prescribers with complete formulary and benefits 
information for beneficiaries.  Prescribers can use this information to 
save beneficiaries money by identifying and prescribing low-cost, 
alternative drugs.  Prescribers and dispensers may also save on 
administrative costs by reducing callbacks.   
An additional 8 percent of plan sponsors reported plans to completely 
implement all elements of Formulary & Benefits Standard 1.0.  Of these 
plan sponsors, 64 percent planned to completely implement the 
standard by the April 2009 deadline.  Fourteen percent plan 
implementation after April 2009 but did not provide specific dates.  
Twenty-two percent of plan sponsors did not provide any information 
about their timeframe for implementing this standard. 
Sixteen percent of plan sponsors reported no plans to implement 
Formulary & Benefits Standard 1.0.  Additionally, 9 percent of plan 
sponsors did not reply to questions about this standard.   
Implementation Detail for Formulary & Benefits Standard 1.0 Components  
Table C2 shows plan sponsors implementation status for each 
Formulary & Benefits Standard 1.0 component. 
 
 
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Table C2:  Plan Sponsors Implementation of Formulary & Benefits Standard 1.0 Components 
 
  Complete Implementation  Partial Implementation 
Planning  Planning  Not Planning  Missing 
Component  Implemented  Implementation  Implemented  Implementation  Implementation  Information 
Formulary Status List  
(n = 262)  51%  20%  7%  N/A  2%  20% 
Formulary 
Alternatives List 
(n = 262)  23%  33%  0%  N/A  24%  20% 
Coverage List* 
(n = 262)  10%  20%  37%  N/A  13%  21% 
Copayment List*  
(n = 262) 
3%  20%  14%  N/A  42%  20% 
* Totals do not add to 100 percent because of rounding. 
Source:  OIG analysis of survey data, 2008. 
 
 
 
 
 
 
 
 
 
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A P PEN D
x
D
Agency Comments
. .""''Vlot..
r'~ L, -P:'ErI 'AREN OF_em" HUJ;ERCf G~nt~rs fOr Msc;icare & Mc;lcalc; Seivices
Ad11inistriitor
Washington, DC 20201
DATE: AUG 2 i 2009
TO: Daniel R. Levinson
Inspector General
FROM: Charle.n Frizzera
Acting Administrator
SUBJECT: Offce of Inspector Geneta (OlG) Draf Report: "Medicare Part DE-Prescribing
Standards: Early Assessment Shows Partial  Connectivity"(OEl-05-08-00320)
Than you forthe opportunity to review and comment on this OIG draft report discussing the
extent of Medicare Pai1 0 sponsors' implementation of electronic prescribiii.~ (e-prescribing)
standards to support connectivity with prescribers and dispensers. The Centers for Medicare &
Medicaid Services (CMS) fully supports the advancement ofe-prescribing and is committed to
ensuring that the Part D sponsors support the adopted Part 0 e-prescribing standards.
The CMS generally concurs with the report's recommendations. However. we believdhatthere
W~re significant rnethodologicallimitations in the data collection and analysis utilized in this
report, which inflated the findings related to sponsor non-compliance with our e-prescribjtig
,
stadards. As the sponsoi:survey used in this  report was conducted 7 months prior to the
deadline forcornpliance with two ofthe e~prescribing staiidards examined in this repolt. the
report failed to capHlle the impact of  the sponsor  and provider e-prescribing education  and
outreach activities that occUlTed aftcr the date upon whjchthe survey' \Vas complete. As
, discussed in mOre detail below. the res!Jlts would have likely been difterel1jf the survey waS
.conducted c1oserto theimplementation deadline.
The report  findings related to  the National CouncilofPrescdption Drug Programs (NCPDP)
Formular & Benefits Standard, Version i, Release 0 (NCPDP Fomnilary ahd Benefits 1.0) are
the main driver behind the conclusion that most sponsors are only  partially coinpliant with
'provider to plan" communication standards. CMS believes it is important to clarify two issues
Wi~h the findings in this report with respect to the discussion ofthis standard in the report:
 First, the findings regarding implementation status reflect initial confusion among Part 0
sponsors that eMS addressed in a Septemher 20O8 memorandum to Part D sponsors.
Further claritication was ptovided at the October 2008 national e-prescribing conference.
Specifically, many Part D sponsors initially beHcved that they  only needed to support
transactions using the Formulary Status List function of the NCPOP Formulary &
Benefits 1.0 staiidill'd. The Septernbel' 2008 memorandum clarified that Part 0 sponsors
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A P P E N D I X   ~   D  
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AA PP PP EE NN DD II XX    ~~    AA   
 A C K N O W L E D G M E N T S  
This report was prepared under the direction of Ann Maxwell, Regional 
Inspector General for Evaluation and Inspections in the Chicago 
regional office, and Thomas Komaniecki, Deputy Regional Inspector 
General.   
Kelly Waldhoff served as the project leader for this study.  Other 
principal Office of Evaluation and Inspections staff from the Chicago 
regional office who contributed to the report include Suzanne Bailey, 
Abby Lopez, and Michelle Park.  Other principal central office staff who 
contributed include Robert Gibbons, Kevin Manley, and Matt 
McMullen.  
 
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