Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
M S
AN  UFACTURER  AFEGUARDS 
 
M N P
AY  OT  REVENT 
 
 
C C U
OPAYMENT  OUPON  SE FOR 
 
 
P  D D  
ART   RUGS 
 
Daniel R. Levinson  
Inspector General  
 
September 2014 
OEI-05-12-00540   
   
EXECUTIVE SUMMARY:  MANUFACTURER SAFEGUARDS MAY NOT 
PREVENT COPAYMENT COUPON USE FOR PART D DRUGS  
OEI-05-12-00540 
 
WHY WE DID THIS STUDY  
Pharmaceutical manufacturers offer copayment coupons to reduce or eliminate the cost of 
patients out-of-pocket copayments for specific brand-name drugs.  The anti-kickback 
statute prohibits the knowing and willful offer or payment of remuneration to a person to 
induce the purchase of any item or service for which payment may be made by a Federal 
health care program.  Manufacturers may be liable under the anti-kickback statute if they 
offer coupons to induce the purchase of drugs paid for by Federal health care programs, 
including Medicare Part D. The anti-kickback statute applies to all Federal health care 
programs, but this study focused on Part D.  The use of coupons by Medicare 
beneficiaries could impose significant costs on the Part D program because many 
coupons encourage beneficiaries to choose more expensive brand-name drugs over less 
expensive alternative drugs. In two surveys by outside groups, approximately 6 percent 
to 7 percent of seniors surveyed reported using coupons to purchase prescription drugs. 
 
HOW WE DID THIS STUDY  
To identify the safeguards pharmaceutical manufacturers employ to prevent their 
copayment coupons from being used for drugs paid for by Part D and to identify 
vulnerabilities in those safeguards, we surveyed 30 manufacturers of the top 100 Part D 
brand-name drugs with coupons and with the highest Medicare expenditures.  We also 
reviewed selected safeguards offered for a purposive sample of those drugs.  In addition, 
we interviewed staff at various organizations involved in pharmacy claims transactions to 
understand other vulnerabilities associated with coupon use in Part D. 
 
WHAT WE FOUND 
Pharmaceutical manufacturers current safeguards may not prevent all copayment 
coupons from being used for drugs paid for by Part D. All surveyed manufacturers 
provide notices directed to beneficiaries and pharmacists that coupons may not be used in 
Federal health care programs.  Most surveyed manufacturers use pharmacy claims edits 
to prevent coupons from being processed for drugs covered by Part D.  Most of these 
edits may not prevent all coupons from being processed for Part D-covered drugs.  
Finally, Part D plans and other entities cannot identify coupons within pharmacy claims. 
 
WHAT WE RECOMMEND 
The Office of Inspector Generals concurrent Special Advisory Bulletin affirms that 
pharmaceutical manufacturers are at risk of sanctions if they fail to take appropriate steps 
to ensure that their copayment coupons do not induce the purchase of Federal health care 
programs items or services, including but not limited to, drugs paid for by Medicare 
Part D. For this reason, manufacturers may engage industry stakeholders and the Centers 
for Medicare & Medicaid Services (CMS) in an effort to identify a solution to ensure that 
coupons are not used for drugs paid for by Part D. CMS should cooperate with industry 
stakeholder efforts to improve the reliability of pharmacy claims edits and make coupons 
transparent. CMS concurred with our recommendation. 
   
   
TABLE OF CONTENTS 
 
Objectives ....................................................................................................1 

Background..................................................................................................1 

Methodology................................................................................................8 

Findings......................................................................................................10 

All surveyed manufacturers provide notices to beneficiaries and 

pharmacists that copayment coupons may not be used in Federal 

health care programs ......................................................................10 

Most surveyed manufacturers use pharmacy claims edits to prevent 

copayment coupons from being processed for drugs paid for by 

Part D .............................................................................................15 

Surveyed manufacturers pharmacy claims edits may not prevent 

copayment coupons from being processed for drugs paid for by 

Part D .............................................................................................17 

Part D plans and other entities cannot identify copayment coupons 

within pharmacy claims  .................................................................19 

Conclusion and Recommendation .............................................................22 

Agency Comments and Office of Inspector General Response .....24 

Appendixes ................................................................................................25 

A: Discussion on Data Collection and Analysis ...........................25 

B: Agency Comments  ...................................................................28 

Acknowledgments......................................................................................29 

 
   
   
OBJECTIVES 
1. 	  To describe safeguards pharmaceutical manufacturers employ to 
prevent copayment coupon use for drugs paid for by Medicare Part D. 
2. 	  To identify vulnerabilities in these safeguards. 
3. 	  To identify any other vulnerabilities associated with copayment 
coupon use for drugs paid for by Medicare Part D. 
BACKGROUND 
Pharmaceutical manufacturers offer copayment coupons to reduce or 
eliminate the cost of patients out-of-pocket copayments for specific 
brand-name drugs and thereby induce the purchase of those drugs.  
Although coupons reduce individual patients immediate costs, coupons 
may increase the cost of prescription drugs for health insurers, including 
those offering Medicare prescription drug coverage through Part D plans.1  
The anti-kickback statute prohibits knowing and willful solicitation, 
receipt, offer, or payment of remuneration to induce the purchase of any 
item or service for which payment may be made in whole or in part under 
a Federal health care program.2  Pharmaceutical manufacturers may be 
liable under the anti-kickback statute if they offer coupons to induce the 
purchase of drugs paid for by Medicare Part D or any other Federal health 
care program.3  
Recent surveys by outside organizations found that approximately 
6 percent to 7 percent of surveyed seniors reported using manufacturer 
coupons toward their copayment for prescription drugs purchased through 
 
1 Joseph S. Ross and Aaron S.  Kesselheim,  Prescription Drug  Coupons  No  Such Thing 

as a Free Lunch, The  New England Journal of Medicine, August 28, 2013, 

http://www.nejm.org/doi/pdf/10.1056/NEJMp1301993. Accessed on August 30, 2013.  

David Grande, The Cost of Drug  Coupons, JAMA, June  13, 2012, 

http://jama.jamanetwork.com/article.aspx?articleid=1182868. Accessed on June 14, 

2012.  These articles describe how the use of coupons to encourage brand-name drug 
 
utilization could increase insurers costs.  This description applies to Medicare Part D, 

which uses an insurance model to provide prescription drug  benefits. 
 
2  42 U.S.C.  1320a-7b(b).  

3 Federal  health care program is defined in  the anti-kickback statute as (1) any plan or 

program that provides health  benefits, whether directly, through insurance, or  otherwise,
  
which is funded directly, in whole or  in  part, by  the United States Government  (other 

than the health insurance program under chapter 89 of title 5; or (2) any State health care 

program, as defined in section  1320a-7(h)  of this title.  42 U.S.C.   1320a-7b(f). 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   1   
   
their Medicare prescription plans.4, 5 Applying these results to the 
population of 36 million Part D beneficiaries, the utilization of copayment 
coupons to obtain prescription drugs paid for by Part D could exceed 
2 million beneficiaries.  
Pharmaceutical manufacturers use of coupons to reduce the cost-sharing 
obligations for Medicare Part D drugs could impose significant costs on 
Federal health care programs and taxpayers.  A 2013 study from  The  New 
England Journal of Medicine found that 58 percent of coupons were for 
brand-name drugs for which a lower cost generic alternative was 
available.6  If manufacturer coupons encourage Medicare beneficiaries to 
obtain more expensive brand-name drugs when lower cost alternatives are 
available, the coupon may reduce individual beneficiaries immediate 
out-of-pocket costs but Part D plans  and the Part D programs costs may 
increase, ultimately increasing costs to taxpayers.7  
Medicare Part D Cost Controls 
CMS contracts with private insurance companies, called sponsors, to 
provide Part D prescription drug benefits for approximately 36 million 
beneficiaries.8,  9  Sponsors use a variety of methods to control prescription 
drug coverage costs through the Part D program. 
Part D Formularies. Sponsors can establish formularies, or lists of 
covered drugs, to give preference to more effective drugs over less 
effective drugs or less expensive drugs over more expensive drugs that 
treat the same condition. To drive utilization toward equally effective but 
less expensive drugs, formularies are generally organized into tiers, which 
have different beneficiary copayments for a prescription drug.  Drugs in 
lower tiers are typically the least expensive and have the lowest 
beneficiary copayments.  Drugs in the subsequent and ascending tiers are, 
 
4 National Coalition on Health  Care (NCHC), Seniors Awareness And Use of  
Prescription Co-pay Coupons in Medicare,  Survey.  March 26-30, 2012.  
5 Pharmaceutical Care Management Association (PCMA), Survey of Seniors Enrolled in 
the Medicare Prescription Drug Plan, Survey.  February  15-17, 2011. 
6 Joseph S. Ross and Aaron S.  Kesselheim,  Prescription Drug  Coupons  No  Such Thing 
as a Free Lunch, The  New England Journal of Medicine, August 28, 2013, 
http://www.nejm.org/doi/pdf/10.1056/NEJMp1301993. Accessed on August 30, 2013. 
7 Joseph S. Ross and Aaron S.  Kesselheim,  Prescription Drug  Coupons  No  Such Thing 
as a Free Lunch, The  New England Journal of Medicine, August 28, 2013, 
http://www.nejm.org/doi/pdf/10.1056/NEJMp1301993. Accessed on August 30, 2013.  
David Grande, The Cost of Drug  Coupons, JAMA, June  13, 2012, 
http://jama.jamanetwork.com/article.aspx?articleid=1182868. Accessed on June 14, 
2012. 
8 The Part  D program was established as part of the Medicare Prescription  Drug, 
Improvement, and  Modernization Act  of 2003, P.L. 108-173  101;  Social  Security  Act,  
  1860D-1 and it was codified at 42  U.S.C.  1395w-101 et seq.  
9  42 U.S.C.  1395w-101 et seq.  
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   2   
   
in general, relatively more expensive and have increasing beneficiary 
copayments.  For example, a lower tier drug is typically a low-cost generic 
drug for which a beneficiary might have a $5 or $10 copayment, while a 
higher tier drug is likely to be a more expensive brand-name drug for 
which a beneficiary might have a $45 copayment. 
Generic Substitution. Sponsors can control prescription drug costs by 
requiring less expensive, chemically equivalent generic drugs to be 
substituted for costlier brand-name  drugs.  Generic substitution may 
reduce the amounts that both Part D plans and beneficiaries pay for 
covered drugs.  For instance, the average brand-name drug prescription 
costs $89, while the average generic drug prescription costs $23, a 
difference of $66.10  
Beneficiary Copayments in Part D 
Beneficiaries, Part D plans, and CMS share Part D prescription drug 
coverage costs. Beneficiary cost sharing begins in the initial benefit stage,  
which beneficiaries reach after paying their deductible. Beneficiaries  
cost-sharing responsibilities for covered drugs then change as they move 
through different stages of the Part D benefit.11  
During the initial benefit stage, beneficiaries pay copayments for 
prescription drugs on the basis of factors such as whether the drug is a 
generic or a brand, which formulary tier the drug is on, and whether the 
pharmacy is preferred or nonpreferred by the Part D plan.12, 13, 14  
After reaching an initial coverage limit set in statute, beneficiaries 
typically enter the coverage gap stage where their cost-sharing  
increases.15, 16  In this stage, in 2013, pharmaceutical manufacturers 
provided beneficiaries a 50-percent discount on applicable drugs 
(generally, covered brand-name  drugs) at the point of sale.17  For most 
generic drugs, in 2013, beneficiaries were responsible for 79 percent of the 
cost as their copayment.18  
 
10 Congressional Budget  Office, Effects of Using Generic Drugs on Medicares 
Prescription Drug  Spending, September  2010, p.  8. 
11 42 CFR   423.104.  

12  See, e.g., CMS, Copayment/coinsurance in drug plans,  http://www.medicare.gov/part
d/costs/copayment-coinsurance/drug-plan-copayments.html. Accessed on April 24, 

2014. 

13 42 CFR   423.104(d)(2)(ii). 

14 42 CFR   423.120(a)(9).  

15  42 U.S.C.  1395w-102(b)(2)(A). 

16  See, e.g., CMS, Costs in the coverage gap,  http://www.medicare.gov/part
d/costs/coverage-gap/part-d-coverage-gap.html. Accessed on April 30, 2014. 

17  42 U.S.C.  1395w-114a. 

18  42 U.S.C.  1395w-102(b)(2)(C). 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   3   
   
The coverage gap continues until beneficiaries true out-of-pocket 
(TrOOP) spending reaches the annual TrOOP threshold.19  Generally, for 
brand-name drugs, the full amount of drug costs, including the 
out-of-pocket amount beneficiaries paid, counts toward their TrOOP.20 For 
generic drugs, only the out-of-pocket amount counts toward beneficiaries  
TrOOP thresholds. 
After reaching the TrOOP threshold, beneficiaries enter the catastrophic 
benefit stage.21  During catastrophic coverage, the Part D program pays the 
majority of beneficiaries drug costs and beneficiaries are generally 
responsible for limited cost sharing through copayments. 
Copayment Coupons 
Pharmaceutical manufacturers typically offer copayment coupons to 
insured patients to reduce or eliminate patients out-of-pocket costs for 
specific brand-name drugs.  Manufacturers may contract with coupon 
vendors to create and administer coupon programs on their behalf.  
(Manufacturers includes all manufacturers or vendors acting on their 
behalf.) A manufacturer may offer a coupon for a brand-name drug that 
reduces the copayment for that drug and makes it cheaper than the 
copayment for a competitor drug.  For example, a coupon may reduce a 
patients copayment for Brand Drug A from $20 to $4, making the 
copayment for the brand drug cheaper than the copayment for a generic 
equivalent, which may be $10.  In some cases, the coupon eliminates the 
copayment altogether. 
Pharmaceutical manufacturers may offer copayment coupons for several 
reasons. It has been reported that manufacturers may use coupons to try to 
retain market share when generic and other brand-name drugs that treat 
the same condition become available to patients.  It also has been reported 
that manufacturers may use coupons to attract new patients who may be 
using an alternative therapy.   Additionally, manufacturers indicate that 
they offer coupons to encourage patients to adhere to their prescription 
drug regimen.  Finally, it has been reported that manufacturers may offer  
 
19 For 2013, the TROOP threshold was $4,750.  Generally, TrOOP spending  includes all 
 
beneficiary  payments (excluding monthly  premiums) and any payments made by other 
 
approved  payers, such as health savings accounts and certain charities.  42  CFR  
 
423.104(d)(5)(B)(iii); CMS, Medicare Prescription Drug  Benefit Manual, 

Pub. No. 100-18, ch. 5,  30. 

20  See, e.g., CMS, Costs in the coverage gap,  http://www.medicare.gov/part
d/costs/coverage-gap/part-d-coverage-gap.html. Accessed on April 30, 2014. 
21  See, e.g., CMS, Catastrophic coverage,  http://www.medicare.gov/part
d/costs/catastrophic-coverage/drug-plan-catastrophic-coverage.html. Accessed on 
May 9,  2014. 
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   4   
   
coupons to offset the high cost of specialty and biologic drugs, which may 
not have generic alternatives.22  
Copayment coupons have become increasingly prevalent.  In recent years,  
the number of coupons has increased from 86 in July 200923 to 525 in 
December 2012.24   This increase may be related to competition from  
generic drugs. From 2009 to 2012, numerous blockbuster drugsdrugs 
that have generated $1 billion in saleslost their patent protection.  For 
many of those drugs, generic versions became available.  The number of 
generic drugs the Food and Drug Administration (FDA) approved 
increased 27 percent between 2009 and 2012.25  
Copayment Coupon Formats. Copayment coupons typically are available 
in four formats:  (1) print coupons, (2) electronic coupons, (3) debit cards, 
and (4) direct reimbursements.  Print coupons are printed cards or 
documents that the patient physically takes or sends to the pharmacy to 
purchase a prescription drug. Electronic coupons are cardless programs 
that evaluate prescription drug claims as they are submitted through the 
pharmacy claims transaction system, which applies copayment reductions.  
Debit cards include any prepaid and/or bank-authorized card that is 
processed at the point of sale to pay for some predetermined portion of the 
copayment.  Direct reimbursements are any payments by a manufacturer 
offered directly to a patient for all or part of the patients out-of-pocket 
cost for a purchased prescription drug.  Direct reimbursements occur after 
a prescription drug is purchased and generally do not involve pharmacies. 
Most coupons offered by manufacturers are typically in the format of print 
coupons. Manufacturers offer electronic coupons to a lesser extent.  A  
small number of coupons are offered in the format of debit cards and 
direct reimbursements.  See Table 1, on the next page, for a breakdown of 
the prevalence of coupon formats among 30 manufacturers surveyed by 
the Office of Inspector General (OIG).  
 
22 Biologics are  among the most expensive drugs available.  The average cost of a 
biologic drug is about 22 times that of  nonbiologic drugs.  Health Policy Brief:  
Biosimilars, Health Affairs,  October 10, 2013,  
http://healthaffairs.org/healthpolicybriefs/brief_pdfs/healthpolicybrief_100.pdf. 
Accessed on December 6, 2013. 
23 Cleveland Research Company, Co-Pay Cards:  The Past, Present, and Future, March 
2012. 
24 OIG analysis of drugs available on  http://www.internetdrugcoupons.com. 
25 OIG analysis of 2009 to 2012 FDA Abbreviated New Drug  Approvals (ANDAs) by  
month available at  
http://www.accessdata.fda.gov/scripts/cder/drugsatfda/index.cfm?fuseaction=Reports.Re 
portsMenu. 
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   5   
   
Table 1: Coupon Formats for Manufacturers Surveyed by OIG  
Number of Manufacturers  Percentage of  All Coupons  
Coupon Format  
Offering   Offered by  Manufacturers  
Print  27  71%  
Electronic  22  26%  
Debit Card   9  2%  
Direct 
16  1%  
Reimbursement  
    Source:  OIG analysis of pharmaceutical manufacturer  survey responses, 2013. 
Accessing Copayment Coupons. Patients commonly access copayment 
coupons in four ways. Patients may access or receive coupons from their 
prescribing physicians. Patients also may access coupons through Web 
sites and toll-free telephone numbers managed by manufacturers or 
companies hired to manage their coupon programs.  Finally, patients may 
be given coupons by pharmacists filling their prescriptions. 
Redeeming Copayment Coupons. Patients typically redeem copayment 
coupons at pharmacies when they purchase prescription drugs.  However,  
patients do not always redeem coupons at pharmacies and may request 
reimbursements directly from the manufacturer after purchasing 
prescription drugs. 
Copayment Coupons and Pharmacy Claims Processing 
Copayment coupon claims are typically processed in the same way as 
payments received from a secondary insurance source using the National 
Council for Prescription Drug Programs (NCPDP) Telecommunication 
Standard D.0 for pharmacy claims.  Using this standard format, all 
pharmacy claims, including coupon claims, are electronically routed from 
the pharmacy to various payers by companies known as switches.  Once 
a claim is routed to a payer, the payer sends coverage and payment 
information back to the pharmacy through the switch. 
The processing of primary insurance and coupon claims occurs in real 
time and involves several steps to coordinate payment for a single claim.   
First, a patients primary insurance claim is processed, and the patients 
copayment amount is determined.  Second, the coupon claim is processed, 
and how much of the copayment the manufacturer will pay is determined.  
Finally, the patient pays the remaining copayment balance, if any. See 
Figure 1, on the next page, for an illustration of how primary insurance 
and coupon claims are processed. 
   
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   6   
   
Figure 1: Processing of Primary Insurance and Coupon Claims  
   
1  Primary   2  Coupon  claim  
  insurance  claim   processed  
processed  
 
 
Switch   Switch 
 
 
Pharmacy  
Primary   Coupon 
 
Insurance  /    
Part  D    
Source:  OIG analysis of interview responses, 2013. 
The coordination of primary insurance and coupon or secondary payers is 
facilitated by unique identifiers that route the claim to the entity 
responsible for paying the claim.  One identifier is the Bank Identification 
Number (BIN), which identifies the responsible payer.  Primary insurers, 
including Part D plans, have BINs that route primary insurance claims to 
them for payment.  Manufacturers also have BINs that route their coupon 
claims to them for payment.  The Processor Control Number (PCN) is a 
secondary identifier that is internal to an insurance company or  
manufacturer and further routes the claim within that company.  
To attempt to determine a patients Part D enrollment status before 
submitting a coupon claim, a pharmacist may submit an optional 
enrollment verification request, called an E1 transaction, to the Part D 
Transaction Facilitator.   CMS contracts with the Transaction Facilitator to 
track Part D beneficiaries benefit stages and to conduct E1 transactions, 
which provide pharmacists with information about a patients Part D 
enrollment status.26  The pharmacist submits the patients identification 
information to the Transaction Facilitator, which compares it to patient 
information in CMSs Medicare enrollment database to determine whether 
the patient is enrolled in Part D.  Pharmacies pay less than 1 cent per 
transaction to submit this verification request.27  
 
26 CMS, Medicare Prescription Drug Benefit Manual,  Pub.  No.  100-18, ch. 14,  30.4. 
27 CMS, Changes Involving Medicare Eligibility Queries (E1) and Other TrOOP  
Facilitator-related Transactions,  December 9, 2010, 
http://www.cms.gov/Medicare/Prescription-Drug
Coverage/PrescriptionDrugCovContra/Downloads/MemoE1ChangesTipSheet_120910.p 
df.  Accessed on November 30, 2012. 
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)  7   
   
METHODOLOGY 
Scope 
The anti-kickback statute applies to all Federal health care programs, but 
this study focused on Medicare Part D. This study analyzed the 
copayment coupon safeguards of pharmaceutical manufacturers for the 
most costly brand-name Part D prescription drugs with coupons covered in 
2012. These prescription drugs were covered under stand-alone 
prescription drug plans and Medicare Advantage prescription drug plans.  
The study did not include coupons for generic drugs because copayment 
coupons are not commonly offered for generic drugs.  This study did not 
estimate the use of coupons by Part D beneficiaries.  It also did not 
estimate the overall cost of coupons to Part D plans and the Part D 
program. 
Data Collection and Analysis 
We collected information on safeguards pharmaceutical manufacturers 
employ to prevent copayment coupon use for drugs paid for by Medicare 
Part D through a survey of manufacturers and a review of copayment 
coupons and coupon Web sites.  We collected information on other 
vulnerabilities through interviews with a variety of industry stakeholders. 
We sent an online survey to 34 pharmaceutical manufacturers of drugs 
with coupons, and 30 responded. We  selected these manufacturers by 
identifying the manufacturers offering the top 100 Part D-covered 
brand-name drugs with coupons by cost to Part D.  The 30 complete 
surveys we received represented an 88-percent response rate.  We  
analyzed survey responses to determine the extent to which manufacturers 
surveyed had safeguards in place to prevent the use of coupons for drugs 
paid for by Part D. 
We also reviewed safeguards in place for a subset of the top 100 
Part D-covered brand-name drugs with coupons.  We attempted to obtain 
50 coupons to determine the extent to which manufacturers had safeguards 
directed to beneficiaries and pharmacists in place.  We reviewed these 
safeguards for the 40 coupons that we obtained. 
In addition, we conducted structured interviews with staff at organizations 
involved in the pharmacy claims  transaction process, including 
pharmacists, coupon vendors, a switching company, and NCPDP, to 
understand other vulnerabilities associated with coupon use in Part D. 
For a discussion of our data collection and analysis, see Appendix A. 
Data Limitations 
Although we did not verify manufacturers survey responses, we selected a 
sample of coupons offered by surveyed manufacturers to review 
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   8   
   
safeguards on or associated with coupons. We used this information to 
confirm the accuracy of manufacturers responses.  We could not review 
safeguards that were not on coupons or on coupon Web sites.  For these 
safeguards, this report relies on self-reported data. 
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency.   
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   9   
   
FINDINGS 
All surveyed manufacturers provide notices to 
beneficiaries and pharmacists that copayment 
coupons may not be used in Federal health care 
programs 
All manufacturers surveyed report providing notices directed to Federal 
health care program beneficiaries or pharmacists for at least one of the 
coupon formats they offer.  These notices state that copayment coupons 
may not be used to purchase drugs paid for by Federal health care 
programs, including Medicare Part D.  Notices to beneficiaries and 
pharmacists are more prevalent for print coupons, which is the most 
commonly offered coupon format according to manufacturers surveyed.  
Notices are still widely used for other formats, but to a lesser extent.  See 
Table 2 for the percentages of surveyed manufacturers that report using 
notices for the coupon formats they offer. 
Table 2: Notices by Coupon Format 
Direct 
  Print  Electronic   Debit Card   Any Format  
Reimbursement  
Notice   n = 27  n = 22  n = 9  n = 30 
n = 16 
Beneficiary Notices  27 (100%)   16 (73%)   8 (89%)   13 (81%)   30 (100%)  
Pharmacist Notices  18 (67%)   7 (32%)   2 (22%)   N/A28   20 (67%)  
Source:  OIG analysis of pharmaceutical manufacturer  survey responses, 2013. 
Notices Directed to Beneficiaries. Manufacturers notices directed to 
beneficiaries are typically printed on coupons or on materials associated 
with coupons, such as coupon brochures, Web sites, or advertisements.  
Notices also can be triggered by eligibility questions asked online or over 
the telephone. Eligibility questions may ask patients:  Do you purchase 
your prescription medication through Medicare, Medicaid, or a similar 
Federal or State prescription drug program?  If patients indicate that they  
are enrolled in Federal health care programs, these manufacturers notify 
them that they are not eligible to access the coupon.  
OIGs review of 40 coupons offered by surveyed manufacturers found 
results similar to the survey responses.  Nearly all of the coupons OIG 
obtained had a notice printed on them, and 80 percent had a notice printed 
on the coupon Web site.  Further, 75 percent had an eligibility question 
online or over the phone. However, only 3 percent had a tracking 
mechanism on their Web sites to prevent a patient from changing his or 
her answer to the eligibility question to obtain the coupon. 
 
28 Notices to pharmacists do not pertain to direct reimbursements because direct 
reimbursements are not adjudicated by the pharmacy.  
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   10   
   
Manufacturers notices to beneficiaries are typically printed in small font.  
In some instances, notices are printed on the back of a coupon.  See 
Figure 2 for an example of a coupon with a notice printed in small font on 
the back. This coupon is approximately the size of a credit card. 
Figure 2: Example of a Coupon With a Notice Printed in Small Font on 
Back of Coupon 
Notice to 
beneficiaries 
 
        Source:  OIG review of manufacturers copayment coupon safeguards, 2013. 
   
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   11   
   
In some instances, notices to beneficiaries, particularly those downloaded 
and printed from the Internet, are on pages following the coupons and not 
on the coupons themselves.  See Figure 3 for an example of a coupon and 
a notice on the following page.  The actual size of each page below is 
812 by 11 inches. 
Figure 3: Example of a Coupon With a Notice Printed on Following Page  
Notice to 
beneficiaries 
 
 
 
LIPITOR $4 Co-Pay Card TERMS AND CONDITIONS  
  By using the LIPITOR $4 Co-Pay  Card (the Card), you acknowledge that you currently meet the eligibility criteria 
and will comply  with the terms & conditions described below:  
 
 
  This Card is not valid for prescriptions that are eligible to be reimbursed, in whole or in part, by Medicaid, Medicare or 
other federal or state healthcare programs (including any state prescription drug assistance programs and the 
 
Government Health Insurance Plan available in Puerto Rico [formerly known as La Reforma de Salud]).  
   
The Card is not valid for prescriptions that are eligible to be reimbursed by private insurance plans or other health or  
 
pharmacy  benefit programs which reimburse you for the entire cost of your prescription drugs.  
 
  Source:  OIG review of manufacturers copayment coupon safeguards, 2013. 
 
   
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   12   
   
Notices Directed to Pharmacists. Two-thirds of manufacturers surveyed 
report providing notices to pharmacists for at least one of the coupon 
formats they offer.  See Table 2, on page 9, for the percentage of survey 
manufacturers that report using notices to pharmacists broken out by 
coupon format. 
Manufacturers notices to pharmacists typically include reminders to 
pharmacists not to accept coupons for drugs paid for by Federal health 
care programs.  These notices may include statements such as Do not 
process coupon if Government beneficiary.  Or, they may include more 
specific language, such as Pharmacist:  When you use this card, you are 
certifying that you have not submitted and will not submit a claim for 
reimbursement under any Federal, State, or other Governmental programs 
for this prescription.  Notices to pharmacists can be printed on coupons 
or on associated materials.  They also may appear as alerts to pharmacists 
through the pharmacy claims transaction system. 
OIGs review of the 40 coupons obtained found that slightly more than 
half, or 58 percent, of coupons we reviewed had notices with specific 
language directed to pharmacists. 
   
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   13   
   
Manufacturers notices to pharmacists, in some instances, are printed in 
small font among other types of information, such as instructions on how 
to process the coupon. See Figure 4 for an example of a coupon with a 
notice printed among instructions to pharmacists.  The actual size of the 
coupon below is 812 by 11 inches. 
Figure 4: Example of a Coupon With a Notice Printed Among Instructions to Pharmacists  
Instructions to 
pharmacists 
about coupon  
processing  
Notice to 
pharmacists 
 
Source:  OIG review of manufacturers copayment coupon safeguards, 2013. 
 
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   14   
   
Additionally, manufacturers notices may be sent through alert messages 
within the pharmacy claims transaction system.  Studies show that 
pharmacists may experience alert fatigue because of the high volume of 
drug alert notices that appear through the pharmacy claims transaction 
system.29  A notice to check enrollment status in Federal health care 
programs may be one of the many notices that pharmacists receive.  
Manufacturers notices to beneficiaries and pharmacists only communicate 
information stipulating the terms and conditions of copayment coupons.  
These notices cannot necessarily stop coupons from being processed to 
purchase drugs paid for by Federal health care programs. 
Most surveyed manufacturers use pharmacy claims 
edits to prevent copayment coupons from being 
processed for drugs paid for by Part D 
Most surveyed manufacturers report having edits in the pharmacy claims  
transaction system to prevent the use of copayment coupons for drugs paid 
for by Part D. Twenty-eight of thirty manufacturers surveyed use claims  
processing edits for at least one of the coupon formats they offer.  Of these 
manufacturers, 13 offered specific information about their edits.  More of 
these manufacturers report using edits for print coupons than for other 
coupon formats.  See Table 3 for information about a breakdown of these 
edits by coupon formats offered. 
Table 3: Claims Processing Edits by  Coupon Format 
Direct 
  Print  Electronic   Debit Card   Any Format  
Reimbursement   
Edit  n = 27  n = 22  n = 9  n = 30 
n = 16 
Primary Insurance 
7 (26%)   3 (14%)   1 (11%)   2 (13%)   9 (30%)  
Information  
Benefit Stage Information   5 (19%)   3 (14%)   0 (0%)   1 (6%)   6 (20%)  
Patient Date of Birth  4 (15%)   1 (5%)   0 (0%)   0 (0%)   5 (17%) 
  Source:  OIG analysis of pharmaceutical manufacturer survey responses, 2013. 
All of the manufacturers that offered specific information about their 
claims processing edits use proxies to approximate Part D coverage.  The 
data these manufacturers edits use as proxies are routinely transmitted on 
pharmacy claims and include information about a patients primary 
insurance, Part D benefit stage, and date of birth.  Manufacturers rely on 
proxies to approximate Part D coverage because they lack access to Part D 
enrollment status.  CMS indicated that Part D enrollment data are not 
 
29 John R. Horn  and Philip D. Hantse, Making Computerized Screening  Work for You, 
Pharmacy Times, February 2006, p. 26. 
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   15   
   
available to manufacturers because they contain sensitive health care 
information.30  
Thirty Percent of Manufacturers Use Edits Relying on Primary Insurers 
BIN. These manufacturers report having a claims processing edit that uses 
the primary insurers BIN for at least one of the coupon formats they offer.  
The primary insurers BIN is the only information identifying a patients 
primary insurance that is transmitted to manufacturers on the coupon 
claim.  Manufacturers attempt to determine which BINs are used by 
insurance companies that offer Part D plans by assembling lists of BINs 
from previously adjudicated primary insurer pharmacy claims and other 
sources, such as payer sheets.31  The edit compares the primary insurers 
BIN on the coupon claim to the list of collected BINs.  If the edit identifies 
that the primary insurers BIN represents an insurance company that offers 
a Part D plan, the claims processing system may automatically stop the 
coupon from being processed and/or send a message to the pharmacist that 
the patient is not eligible to use the coupon. 
Four surveyed manufacturers report using an edit that relies on the 
primary insurers BIN and PCN, the secondary identifier specifying 
unique insurance plans offered by the same insurance company.  The PCN 
must be obtained from the primary insurance claim because it is not 
transmitted on the coupon claim.  These edits use the BIN and PCN in 
combination to determine whether the primary insurance claim is being 
submitted to a Part D plan or a commercial plan within the same insurance 
company. 
Twenty Percent of Manufacturers Use Edits Relying on the Part D Benefit 
Stage. These manufacturers report having a claims processing edit that 
uses Part D benefit stage information for at least one of the coupon 
formats they offer.  Benefit stage fields contain data only if the claim is for 
a Part D beneficiary.  If the edit identifies data in these fields, the edit 
either automatically stops the coupon from being processed or sends a 
message to the pharmacist to reverse the claim.  
Seventeen Percent of Manufacturers Use Edits Relying on Patient Date of 
Birth.   These manufacturers report having an edit that uses the patients 
date of birth for at least one of the coupon formats they offer.  
Manufacturers use edits relying on patients date of birth to calculate a 
 
30 Because Part D enrollment status is unavailable to manufacturers, those  manufacturers 
that did not offer specific information about their edits likely use proxies and face the 
same challenges outlined in this report. 
31 Payer sheets are templates created to help claims processors communicate necessary 
claims processing information to  pharmacies, vendors, and  other entities.  Information on  
payer sheets can vary  by insurance plan but  generally contains the BIN.  
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   16   
   
patients age.  Manufacturers may require pharmacists to submit the 
patient date of birth as part of the coupon claim.  If a pharmacy claim  
indicates that the patient is at or older than a certain thresholdtypically 
age 62 or 65these edits will either stop the coupon from being processed 
or send a message to the pharmacist to verify Part D enrollment. 
Surveyed manufacturers pharmacy claims edits may 
not prevent copayment coupons from being 
processed for drugs paid for by Part D 
Pharmaceutical manufacturers claims processing edits currently in use 
may not stop all coupons from being processed for drugs paid for by 
Part D because manufacturers cannot accurately identify a beneficiarys 
Part D enrollment status.  Manufacturers claims processing edits use 
proxies that are substitutes for but do not replicate actual enrollment 
information.  These proxies use data that may be unreliable or cannot be 
obtained by all manufacturers. 
Claims Processing Edits Using Primary Insurance BINs Cannot Always 
Accurately Identify Part D Coverage. Manufacturers claims processing 
edits that use primary insurers BINs cannot always identify Part D 
coverage because they may be unreliable proxies.  These edits may not be 
reliable because they use BIN lists that are collected at a point in time and 
may not be accurate or current.  Further, BINs may not provide the 
specificity needed to determine whether a patient is enrolled in a Part D 
plan. Coupon vendors report that the BIN indicates the insurance 
company but does not, in most cases, distinguish a companys Part D plan 
from other commercial plans the company offers.  To avoid stopping 
coupon claims associated with commercial plans, manufacturers BINs 
lists may contain only BINs known to be exclusively for insurance 
companies Part D plans.  For instance, one manufacturer reported that its 
BIN edit relies on a list of BINs dedicated to Part D plans.  Thus, this 
manufacturers claims processing edit would allow coupons to be 
processed for claims containing BINs for insurance companies that offer 
both Part D and commercial plans.  
Claims Processing Edits Using Patient Date of Birth Cannot Identify All 
Part D Beneficiaries.  Manufacturer claims processing edits that rely on 
patient date of birth cannot always approximate Part D coverage.  These 
edits may not identify all Part D beneficiaries because not all Medicare 
beneficiaries fit a specific age demographic.  In fact, 17 percent of 
Medicare beneficiaries are disabled and under age 65.32 Additionally, 
 
32 Henry J. Kaiser Family Foundation, Medicare at a Glance, November 14, 2012, 
http://kff.org/medicare/fact-sheet/medicare-at-a-glance-fact-sheet/.  Accessed on 
November 27, 2013.  
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   17   
   
some individuals who are eligible for Medicare may be enrolled in 
commercial plans and not in Part D. 
Some Claims Processing Edits Use More Accurate Proxies To Identify 
Part D Coverage, but Cannot Be Used by All Manufacturers. Claims  
processing edits that more accurately determine Part D enrollment are 
imperfect because these edits use information that cannot be obtained by 
all manufacturers.  These edits rely on the more accurate proxies of 
BIN/PCN and benefit stage information. 
While edits that rely on the primary insurers BIN/PCN are more accurate 
proxies, access to this combination of information is limited.   To access 
the BIN/PCN, a manufacturers coupon vendor needs to have access to 
primary insurance claims because the PCN is not transmitted as part of the 
coupon claim. OIG identified one entity with such access to the 
BIN/PCN. This entity plays a dual role as a coupon vendor and a 
switching company that electronically routes claims, giving it access to the 
primary insurance claim containing the BIN/PCN that indicates Part D 
insurance. 
For other manufacturers coupon vendors to access the PCN, NCPDP  
would need to revise its pharmacy claims transaction standards to enable 
the PCN to be transmitted as part of the coupon claim. Revising the 
NCPDP standards is an industrywide process that typically takes years to 
complete and requires all involved entities to update their claims  
transaction systems to comply with the new standards.  The current 
NCPDP standards were updated and released in 2009. 
Edits that rely on benefit stage information also are more accurate proxies,  
but access to this information also is limited.  Although some  
manufacturers report having this edit, it is unclear how they obtain benefit 
stage information. As cited by NCPDP guidance, only entities that report 
Part D beneficiaries financial TrOOP amounts are allowed to request or 
receive this information, such as insurance companies that offer Part D 
plans.33, 34  
Other Vulnerabilities in Claims Processing Edits Exist. In addition to the 
vulnerabilities associated with the proxies manufacturers use for edits, 
there may be implementation errors in claims processing edits.  Most 
surveyed manufacturers have no way to verify that edits are being applied 
 
33 NCPDP, NCPDP WG9 Medicare Part D Questions  and Answers, Version 3.0, 
August 2013, p. 12.  Accessed at 
http://www.ncpdp.org/members/wg09/NCPDP_WG9_Medicare_Part_D_FAQ_Documen 
t_v3.0.pdf on  January 30, 2014. 
 
34 Entities that can obtain benefit stage information may include State pharmaceutical 

assistance programs. 
 
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   18   
   
correctly because they do not audit claims processing edits.  Only 
30 percent of manufacturers surveyed report having auditing practices in 
place to analyze claims processing edits.  These audits may include 
reviews of processes used to identify and reject claims for Part D 
beneficiaries or retrospective reviews that assess the number of coupons 
processed and rejected as a result of the edits.  
Part D plans and other entities cannot identify 
copayment coupons within pharmacy claims 
It is difficult for entities other than manufacturers to identify coupons as 
they are processed through the pharmacy claims transaction system or after 
they are adjudicated. Coupons are not transparent in the pharmacy claims 
transaction system to entities other than manufacturers.  This vulnerability 
impedes other entities, including Part D plans, other primary insurers, and 
pharmacies, from preventing the use of  coupons for drugs paid for by 
Part  D and oversight entities, like CMS and OIG, from  monitoring the use 
of coupons.  
Primary insurers, including Part D plans, cannot identify coupons as they 
are processed or after they are adjudicated because of the way coupons are  
processed.  Coupons are typically processed as secondary insurance claims, 
after a patients primary insurance claim, including Part D, has been 
processed. Because of this, Part D plans, like other primary insurers, cannot 
identify when a coupon is used.  See Figure 5, on the next page, for an  
illustration of how, as a coupon claim is processed, it is not submitted to  
primary insurers. 
   
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   19   
   
Figure 5: Transmission of Information Among Payers and Entities Coordinating Coupon 
Claims Processing  
  
 
 
  1  Pharmacy  submits   Pharmacy  3 Pharmacy  submits  
c laim  for  payment  to    claim  for  coupon  
  primary  insurance   payment  to  coupon  
via  switch   vendor via  switch  
 
 
 
 
Switch  
 Primary  
Insurance  /   Coupon  
 
Part  D  Plans   Vendor  
 
 
2  Primary  Insurer  receives   4 Vendor  receives  request  
  request  for  pa yment  and   for  payment  and  returns  
returns  copayment  amount   copayment  amount  to  
  to  pharmacist  via  switch  pharmacist  via  switch  
Source:  OIG analysis of interview responses, 2013. 
Further, specific coupon formats may be difficult, or impossible, for 
pharmacists dispensing to beneficiaries on behalf of Part D plans to identify 
as coupon claims are processed through the pharmacy claims transaction 
system. When pharmacies cannot identify coupons, they do not know to  
attempt to verify Part D enrollment to prevent the use of coupons to 
purchase drugs paid for by Part D.  Coupon formats that are difficult to  
identify include electronic coupons, debit cards, and direct reimbursements.  
Electronic coupons may be difficult for pharmacists to identify because 
they are automatically applied as prescriptions are submitted through the 
pharmacy claims transaction system rather than being presented by 
patients at the point of sale as with print coupons. Debit card coupons 
may be difficult to identify because patients may use them to pay their 
copayments without handing the card to the pharmacist.  Finally, direct 
reimbursements cannot be identified by pharmacists because they are 
offered directly to patients and processed outside of the pharmacy claims  
transaction system. 
It is also difficult to identify coupons after they are adjudicated.  As  
previously stated, it not always possible to distinguish coupon claims from 
secondary insurance claims because  both manufacturers and insurers use 
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)  20   
   
BINs to route claims within the pharmacy claims transaction system.  
Manufacturers currently do not disclose the BINs associated with their 
coupons to outside entities.  Compiling an accurate and comprehensive list 
of BINs that route coupon claims without manufacturer involvement would 
be challenging because coupons expire and BINs, while typically on print 
coupons, are not generally found on other coupon formats.  Because BINs 
that route coupon claims are not distinguishable from BINs that route 
insurance claims, entities that conduct oversight, such as CMS and OIG, 
cannot analyze pharmacy claims to determine whether manufacturer 
safeguards to prevent the use of coupons for drugs paid for by Part D are  
effectively stopping the coupons.   
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   21   
   
CONCLUSION AND RECOMMENDATION 
The anti-kickback statute prohibits knowing and willful solicitation, 
receipt, offer, or payment of remuneration to induce the purchase of any 
item or service for which payment may be made in whole or in part under 
a Federal health care program.   Pharmaceutical manufacturers may be 
liable under the anti-kickback statute if they offer coupons to induce the 
purchase of drugs paid for by Medicare Part D or any other Federal health 
care program. 
Pharmaceutical manufacturers report that they employ safeguards directed 
at preventing the use of copayment coupons for drugs paid for by Part D.  
All surveyed manufacturers provide notices to beneficiaries and 
pharmacists that coupons may not be used in Federal health care programs 
for at least one of the coupon formats they offer.  In addition, most 
surveyed manufacturers have implemented pharmacy claims edits to 
prevent coupons from being processed for drugs paid for by Part D. 
However, manufacturers edits may not reliably prevent coupons from  
being processed for drugs paid for by Part D.  In particular, most 
manufacturers claims edits only approximate Part D coverage using proxy 
data that may be unreliable.  Additionally, the proxy data that are currently 
available may not be obtained by all manufacturers. 
In addition to potentially implicating the anti-kickback statute,  
manufacturers use of coupons to reduce the cost-sharing obligations for 
drugs paid for by Medicare Part D could impose costs on Part D plans, on 
the Part D program, and ultimately on Part D beneficiaries.  While 
coupons provide an immediate financial benefit to beneficiaries by 
reducing their out-of-pocket costs, they may increase the cost of 
prescription drugs for Part D plans.35  Coupons may increase costs for 
Part D plans because they may encourage the purchase of more expensive 
brand-name drugs instead of less expensive alternative treatments, such as  
generic drugs. 
To protect themselves from excessive costs, Part D plans may have an 
interest in preventing the use of coupons for drugs paid for by their plans.  
 
35 Manufacturers that desire to assist Federal health care program beneficiaries who 
cannot afford their copayments have the option of donating  to independent charities that 
provide copayment support  without  regard  for the particular medication a patient may be 
using.  For OIGs guidance specifically related to  such charities, see OIG Special 
Advisory Bulletin on Patient  Assistance Programs for Medicare Part D Enrollees, 
70 Fed. Reg. 70623  (Nov. 22, 2005), available at 
http://oig.hhs.gov/fraud/docs/alertsandbulletins/2005/2005PAPSpecialAdvisoryBulletin.p 
df, and OIG Supplemental Special Advisory Bulletin:  Independent Charity Patient  
Assistance Programs, available at 
http://oig.hhs.gov/fraud/docs/alertsandbulletins/2014/independent-charity-bulletin.pdf. 
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   22   
   
However, a lack of coupon transparency impedes Part D plans from  
distinguishing coupon claims from secondary insurance claims as they are 
processed. Because entities other than manufacturers cannot identify 
coupons within pharmacy claims, Part D plans cannot implement their 
own edits to stop coupon claims as they are processed. 
Concurrently with the issuance of this report, OIG is issuing a Special 
Advisory Bulletin on Pharmaceutical Manufacturer Copayment Coupons.  
This document affirms that the offerors of coupons ultimately bear the 
responsibility to operate these programs in compliance with Federal law.   
Pharmaceutical manufacturers that sponsor copayment coupons may be 
subject to sanctions if they fail to take appropriate steps to ensure that such  
coupons do not induce the purchase of Federal health care program items  
or services, including, but not limited to, drugs paid for by Medicare 
Part D. Failure to take such steps may be evidence of intent to induce the 
purchase of drugs paid for by these programs, in violation of the 
anti-kickback statute.  
Improving the reliability of pharmacy claims edits and making coupons 
transparent within pharmacy claims  will likely require the coordination 
and cooperation of multiple stakeholders within the pharmacy claims  
transaction process, including CMS.  For this reason, pharmaceutical 
manufacturers may engage industry stakeholders, including CMS, in an 
effort to identify a solution to ensure that coupons are not used for drugs 
paid for by Part D. 
We recommend that CMS: 
Cooperate with industry stakeholder efforts to identify a 
solution to prevent coupons from being used to purchase 
drugs paid for by Part D 
As the oversight entity of the Part D program and the custodian of Part D 
enrollment data, CMS should cooperate with industry stakeholder efforts 
to improve the reliability of pharmacy claims edits and make coupons 
transparent.  For example, CMS could consider all options to facilitate 
verification of Part D enrollment status before a coupon is processed.  Or 
CMS could explore the possibility of making any feasible changes to the 
Part D program to facilitate Part D enrollment verification.  Additionally, 
CMS could explore with all involved entities how best to make coupons 
universally identifiable and transparent in pharmacy claims transactions. 
   
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   23   
   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
CMS concurred with our recommendation.  CMS specifically noted that it 
concurs with our recommendation to work with relevant stakeholders to 
improve the reliability of pharmacy claims edits that facilitate verification 
of Part D enrollment and to explore how best to make coupons universally 
identifiable and transparent in pharmacy claims data.  
For the full text of CMSs comments, see Appendix B. 
   
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   24   
   
APPENDIX A 
Discussion on Data Collection and Analysis 
We collected information about pharmaceutical manufacturer safeguards 
directed at preventing the use of coupons for drugs paid for by Medicare 
Part D through a survey of manufacturers and a review of copayment 
coupon safeguards. We collected information about other vulnerabilities 
associated with coupon use from interviews with staff at organizations 
involved in the pharmacy claims processing system.  
Drug Selection. We selected the top 100 Part D-covered brand-name  
drugs by cost that have copayment coupons for the study.  These 100 
drugs with coupons represent approximately 59 percent of all Part D drug 
costs.  
To select the top 100 Part D-covered brand-name drugs with coupons, we 
first identified brand-name drugs that were paid for by Part D as of 
June 2012 using Prescription Drug Event (PDE) data and First DataBank 
data.36,  37  Using these data, we matched the NDCs for brand-name drugs in 
First DataBank data to NDCs in PDE data.  Because multiple NDCs exist 
for a single brand-name drug, we collapsed brand-name drugs by the 
HICL_SEQNO identifier.38 Next, we summed the total cost for each drug 
in PDE data by the HICL_SEQNO and the brand name.  We then ranked 
each drug by its total cost.  
Next, we compiled a list of 520 coupons from  
www.internetdrugcoupons.com as of December 2012.  Internet Drug 
Coupons publishes a list of pharmaceutical manufacturer coupons and is 
recognized by the industry as a reliable listing for coupons. 
Finally, we matched the list of coupons to the list of the Part D-covered 
brand-name drugs.  We selected the first 100 Part D-covered brand-name  
drugsranked by total drug costwith coupons.  Because coupons are 
offered by drug and generally are not unique by package size, dosage 
form, or route of administration, we matched the common brand name for 
the drugs associated with these coupons to the brand names and the 
HICL_SEQNO identifiers in First DataBank.  
 
36  The  PDE data represent each purchase of a Part D drug by a beneficiary and contain 
the National Drug Code (NDC), a universal identifier that specifies the pharmaceutical 
manufacturer, drug name, dosage form, strength,  and package size.  
37  First DataBank data  provide product  information, including drug name, standard  
therapeutic class, and whether the drug is a brand-name drug or a generic drug.  
38 The HICL_SEQNO identifies a drugs  unique combination of active ingredients, 
irrespective of  the package size, dosage form, route of administration,  or strength.  
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   25   
   
Survey of Pharmaceutical Manufacturers. In May 2013, we conducted an 
online survey of the 34 pharmaceutical manufacturers of the top 100 
Part D-covered brand-name drugs with copayment coupons. 
We identified these manufacturers through information on the coupons and 
Internet searches. We also asked manufacturers to verify this information.  
We made one followup attempt by email.  We received 30 complete 
surveys, an 88-percent response rate. 
The survey asked manufacturers to provide responses about the safeguards 
in place for the coupons they offer.  We asked manufacturers to report the 
coupon formats they offer and distribution methods through which 
patients obtain coupons. We also asked manufacturers about the types of 
safeguards they have in place for each coupon format they offer.   We  
asked them questions about coupon safeguards directed to Part D 
beneficiaries, safeguards directed to pharmacists, and safeguards within 
the pharmacy claims transaction system.  We did not ask manufacturers to 
specify the particular safeguards in place for each of the top 100 
Part D-covered brand-name drugs. 
We analyzed survey responses to identify specific manufacturer 
safeguards and determine the extent to which manufacturers surveyed had 
safeguards in place. For each type of safeguard identified, we calculated 
the number of manufacturers using the safeguard for at least one of their 
coupon formats.  We also calculated the number of manufacturers with 
each safeguard by coupon format. 
OIG Review of Coupon Safeguards. We reviewed copayment coupon 
safeguards for a subset of the top 100 Part D-covered brand-name drugs 
with coupons to determine whether safeguards directed to beneficiaries 
and pharmacies existed.  OIG attempted to obtain 50 coupons, and we 
reviewed safeguards for the 40 coupons that we obtained. The coupons 
we attempted to obtain were associated with 24 manufacturers, all of 
which were included in the population of manufacturers that OIG 
surveyed. We reviewed coupon safeguards that manufacturers had in 
place from February to June 2013. 
We reviewed and determined the extent to which manufacturers had 
safeguards directed to beneficiaries on the Internet, over the telephone, 
and on the print coupons. For safeguards on the Internet and over the 
telephone, we determined whether: (1) there was a notice about coupon 
use in Federal health care programs and (2) the notice was triggered by an 
eligibility question for Part D coverage.  For safeguards on the coupons, 
we determined whether there was a notice directed to beneficiaries about 
coupon use in Federal health care programs.  For each of these safeguards, 
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   26   
   
we calculated the number of manufacturers using it and identified 
vulnerabilities. 
We reviewed and determined the extent to which manufacturers had 
safeguards directed to pharmacists on the coupons.  For these safeguards, 
we determined whether:  (1) there was a general notice on the coupons 
about coupon use in Federal health care programs and (2) there was a 
specific notice on the coupons that pharmacists will not submit a claim to 
a Federal health care program for the prescription with the coupons.  We  
considered a general notice to be any other language directed to 
pharmacists stating that Federal health care beneficiaries are ineligible to 
use coupons. We considered a specific notice to be any language that 
indicates the pharmacist agrees or certifies that he or she will not submit a 
claim for reimbursement under any Federal health care program or 
certifies that the patient is not enrolled in any Federal health care program.   
For each of these safeguards, we calculated the number of manufacturers 
using the safeguard and identified vulnerabilities.  
As part of our review, we attempted to obtain the coupons for which we 
reviewed safeguards. For coupons available online, we attempted to 
download coupons and obtained 40 of them.  For coupons available over 
the telephone, we attempted to receive coupons through the mail but 
obtained none of them. 
Structured Interviews. We conducted structured interviews with staff at 
organizations involved in the pharmacy claims transaction process, 
including pharmacists, coupon vendors, a switching company, and 
NCPDP, regarding their experience processing pharmacy claims and 
coupon claims.  We conducted these interviews from February to 
August 2013. 
We reviewed structured interview responses to understand other 
vulnerabilities associated with coupon use.  In particular, we discussed the 
pharmacy claims transaction system  and the extent to which coupons are 
identifiable within it. We also reviewed interview responses to identify 
vulnerabilities in current safeguards. 
 
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   27  APPENDIX 8 
Agency Comments 
/S(.KVIct;s-1'\
~
(  DEPARTMENT OF HEALTH & HUMAN SERVICES  Centers for Medicare & Medicaid Services 
<~~ 
Administrator 
Washington, DC 20201 
JUL 30 2014
DATE: 
TO: 	 Daniel R. Levinson 

Inspector General 

FROM: 	 Marflyn Tavenner 

Administrat.or 

SUBJECT: 	 Office oflnspector General (OIG) Draft Report: "Manufacturer Safeguards May 
Not Prevent Copayment Coupon Use for Part D Drugs" (OEI-05-12-00540) 
The Centers for Medicare & Medicaid Services (CMS) appreciate the opportunity to provide 
comments on the above mentioned draft report. This draft report assesses the vulnerability of the 
Part D program to the use ofmanufacturer's copayment coupons.  We are also concerned about 
the appropriate use of manufacturer's copayment coupons and agree with the OIG that the use of 
manufacturer's coupons to reduce cost-sharing obligations for drugs paid for by Medicare Part D 
could impose costs on Part D plans, the Part D program, and ultimately Part D beneficiaries. 
OIG Recommendation 
The CMS should cooperate with industry stakeholder efforts to identify a solution to prevent 
coupons from being used to purchase drugs paid for by Part D. 
Specifically, the OIG noted that CMS should cooperate with industry stakeholder efforts to 
improve the reliability of pharmacy claim edits, including considering all options and any 
feasible changes to the Part D program, to facilitate verification of Part D enrollment status 
before a coupon is processed. The OIG also suggested that CMS could explore with all involved 
entities how best to make coupons universally identifiable and transparent in pharmacy claims 
transactions. 
CMS Response 
The CMS concurs with the recommendation to work with all relevant stakeholders to find a 
meaningful solution to prevent inappropriate use of manufacturers' copayment coupons for drugs 
paid for by Part D. CMS concurs with OIG's suggested recommendation to work with relevant 
stakeholders to improve the reliability ofpharmacy claim edits that facilitate verification of Part 
D enrollment and to explore how best to make coupons universally identifiable and transparent 
in pharmacy claims data. 
Thank you for the opportunity to review and comment on the draft OIG report. 
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)  28   
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of Ann Maxwell, Regional 
Inspector General for Evaluation and Inspections in the Chicago regional 
office, and Laura Kordish, Deputy Regional Inspector General. 
Melissa Baker served as the team leader for this study, and Jonathan Jones 
served as the lead analyst. Central office staff who provided support 
include Clarence Arnold and Meghan Kearns. 
Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540)   29   
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.