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72–484 PDF 2012

S. Hrg. 112–455 

COSTS OF PRESCRIPTION DRUG ABUSE IN THE 

MEDICARE PART D PROGRAM 

HEARING 

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

OCTOBER 4, 2011 

Available via the World Wide Web: http://www.fdsys.gov 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 

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(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JERRY MORAN, Kansas 

MICHAEL L. ALEXANDER, Staff Director 

NICHOLAS A. ROSSI, Minority Staff Director 

TRINA DRIESSNACK TYRER, Chief Clerk 

JOYCE WARD, Publications Clerk and GPO Detailee 

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

MARK L. PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

MARK BEGICH, Alaska 

SCOTT P. BROWN, Massachusetts 

TOM COBURN, Oklahoma 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

JOHN KILVINGTON, Staff Director 

WILLIAM WRIGHT, Minority Staff Director 

DEIRDRE G. ARMSTRONG, Chief Clerk 

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(III) 

C O N T E N T S 

Opening statements: Page 

Senator Carper ................................................................................................. 1 

Senator Brown .................................................................................................. 4 

Prepared statements: 

Senator Carper ................................................................................................. 35 

Senator Brown .................................................................................................. 37 

WITNESSES 

TUESDAY, OCTOBER 4, 2011 

Gregory D. Kutz, Director, Forensic Audits and Special Investigations, U.S. 

Government Accountability Office ...................................................................... 6 

Jonathan Blum, Deputy Administrator and Director, Centers for Medicare 

and Medicaid Services, U.S. Department of Health and Human Services ..... 7 

Louis Saccoccio, Executive Director, National Health Care Anti-Fraud Association .................................................................................................................... 9 

ALPHABETICAL LIST OF WITNESSES

Blum, Jonathan: 

Testimony .......................................................................................................... 7 

Prepared statement .......................................................................................... 51 

Kutz, Gregory D.: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 39 

Saccoccio, Louis: 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 63 

APPENDIX 

Chart referenced by Senator Carper ...................................................................... 81 

Questions and responses for the record from: 

Mr. Kutz ............................................................................................................ 82 

Mr. Blum ........................................................................................................... 87 

Mr. Saccoccio ..................................................................................................... 96 

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(1) 

COSTS OF PRESCRIPTION DRUG ABUSE IN 

THE MEDICARE PART D PROGRAM 

TUESDAY, OCTOBER 4, 2011 

U.S. SENATE,

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT,

GOVERNMENT INFORMATION, FEDERAL SERVICES,

AND INTERNATIONAL SECURITY,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS,

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:33 a.m., in 

Room SD–342, Dirksen Senate Office Building, Hon. Thomas R. 

Carper, Chairman of the Subcommittee, presiding. 

Present: Senators Carper and Brown. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. The Subcommittee will come to order—although 

this is not a disorderly gathering here this morning. It is good to 

see all of you. Thanks to our witnesses for joining us. Thanks to 

our Ranking Republican for joining us. Good morning. 

Over the past several years, we have been engaged here in 

Washington and across the country in a conversation about our Nation’s deficit and debt and the cost of Federal programs. The conversation has been serious and at times heated. Unfortunately, we 

have yet to reach a consensus on a plan to extract the country from 

the serious financial challenges that we face, but there is one thing, 

however, that I think we can all agree upon, and that is, we must 

stop the fiscal bleeding caused by waste, by fraud, and by abuse. 

This is a small Subcommittee, but for years we have been almost 

singularly focused on how the Federal Government can get better 

results for less money or better results for the same amount of 

money. Whether the Chairman is Tom Carper or Tom Coburn, this 

has been our singular focus and continues to be. 

Working together with partners such as the Government Accountability Office (GAO), the Office of Management and Budget 

(OMB), Inspectors General (IG) , and other Government watchdog 

groups, we have tried to maximize our oversight, and I believe that 

we have begun to make a real impact. We have drilled down on 

how the Federal Government wastes millions annually maintaining 

properties and buildings we neither want nor need. We have examined the billions that agencies waste, $125 billion, in avoidable improper payments made to contractors, to ineligible programs, to 

participants, and even to dead people. We have focused like a laser 

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2 

on Federal information technology projects that have gone billions 

of dollars over budget without ever delivering any real benefit. 

One issue we spent a lot of time taking a look at recently is the 

enormous amount of fraud and waste and abuse perpetrated within 

Medicare and Medicaid. These programs provide life-saving benefits, as we know, to millions of our Nation’s most vulnerable citizens. Unfortunately, too often criminals have figured out how to 

use Medicare and Medicaid for their own gain. 

Roughly 2 years ago, we held a hearing dealing with fraud and 

abuse in the Medicaid program in this room. At that hearing we 

learned that GAO had found tens of thousands of Medicaid beneficiaries and providers involved in fraudulent or abusive purchases 

of controlled substances through the program. After that hearing, 

we asked the Government Accountability Office to see whether or 

not something similar might be going on with the Medicare Part 

D prescription program. I was disappointed but not surprised to 

learn that GAO has found evidence that a number of Part D beneficiaries are likely abusing the system to obtain powerful drugs to 

fuel their own addictions or to sell them on the street. 

As part of their analysis, GAO auditors looked at all of the prescriptions paid for by Part D in 2008. Combing through over 1 billion prescription records, they found that over 170,000 Part D beneficiaries apparently engaged that year in a practice commonly 

known as ‘‘doctor shopping.’’ These beneficiaries have gone to five 

or more doctors to obtain prescriptions for the same drug. 

In one case, GAO found a beneficiary who received prescriptions 

from 87 different medical practitioners in that one year, 2008. In 

another case, a beneficiary received 3 years’ worth of oxycodone 

pills from 58 different prescribing doctors in just one year. 

We need to be honest about what these findings mean. They 

mean that Federal dollars intended to address the health needs of 

the elderly and the poor are instead being used to feed addictions 

or to pad the wallets of drug dealers. This is clearly unacceptable. 

According to GAO, the controls that the Centers for Medicare 

and Medicaid Services (CMS) has put into place to stop this sort 

of abuse have not done the trick. Under the plan CMS has put in 

place to combat doctor shopping, if a Part D plan sponsor suspects 

a beneficiary is doctor shopping, they send a letter to the doctors 

who have been visited. The letter is sent along with a self-addressed envelope in which the doctors can send a response to the 

sponsor’s concerns. In some cases, the doctors will stop giving the 

doctor-shopping patients prescriptions. In other cases, they will 

not. Sometimes the letters go unanswered. 

GAO has made several recommendations to CMS on how to 

tighten up controls of the program. Included among these recommendations is a suggestion that beneficiaries be limited to one 

doctor and one pharmacy, an approach that many States use in 

their Medicaid programs. I look forward to hearing more about this 

suggestion from our witnesses today. 

In addition, I understand that just last week, perhaps as a result 

of GAO’s work, CMS has issued new guidance to Part D plan sponsors. This guidance suggests that plans begin denying beneficiaries 

at the point of sale if they suspect abuse. This is an important 

change, and, again, I want to hear more about that today as well. 

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I have worked with Senator Tom Coburn, with Senator Brown, 

and with others on this panel to work on bipartisan legislation that 

curbs waste and fraud in both Medicaid and in Medicare. Our legislation, S. 1251, contains a set of important steps that will help 

rein in those trying to defraud our Federal health care programs. 

Our legislation has provisions that directly affect fraud in Medicare 

Part D, including strengthening the prescription drug monitoring 

programs (PDMP) and requiring closer coordination between CMS, 

their oversight contractors, Drug Enforcement Agency (DEA)—and 

State and local law enforcement. Our proposal also requires that 

the list of doctors who can prescribe controlled substances like 

painkillers be maintained up to date and accurate. 

As many of you know, 12 of our colleagues are currently serving 

on a bipartisan, bicameral Joint Committee that has been tasked 

by the rest of us with coming up with a plan to begin to put our 

fiscal house in order. If at some point that Committee and Congress as a whole are to come to agreement on a meaningful plan 

for addressing our country’s fiscal challenges, we will need to address issues like the ones we are talking about here today. 

As I close this opening statement, I want to comment on prescription drug abuse. The dangers associated with the misuse of 

prescription drugs have become known in the past few years as celebrities and other public figures have succumbed to their lethal effects. However, less widely publicized are the millions of Americans, including children, who abuse the same drugs. Unfortunately, 

children are abusing prescription drugs at an alarming rate. One 

out of seven teenagers reportedly has abused or is abusing prescription drugs today. This is a drug problem that could impact any 

American home with a medicine cabinet. 

As a father, I find this news especially troubling, and I want to 

make this point so that it is clear. While there is a financial cost 

to the fraud and abuse of controlled substances paid for by Medicare—and we are mindful of that—we cannot ignore the fact that 

there is a human cost as well. Prescription drug abuse is the fastest-growing addiction in the United States. The difference between 

a street drug like cocaine and a prescription painkiller is that in 

many cases, as this hearing and this Subcommittee’s previous work 

show, the Federal Government is often paying to feed this addiction with taxpayer money. 

Aside from our financial imperative, then, we have a moral imperative to ensure that our public health care system is not used 

or misused to further intensive and subsidize a public health crisis. 

Before I turn it over to Senator Brown, I do not have the full list 

of the illegal drugs whose cost, if you add up their street sales, actually are still less than the value of the prescription drugs, the 

controlled substances that are being shopped and sold. But it includes cocaine, heroin, and others combined. So think about it. 

When we think about how big is this problem, add up heroin and 

cocaine sales and a number of other illegal drugs, and add them 

all up and the total is less than is involved in the sale of these controlled substances. It is a big problem. It is a problem that we are 

beginning to address. We are going to learn a lot more today about 

how we can further address it. 

With that having been said, Senator Brown, you are on. Thanks. 

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OPENING STATEMENT OF SENATOR BROWN 

Senator BROWN. Good to see you, Mr. Chairman. Again, thank 

you, and thank you for holding this hearing. This is something, Mr. 

Chairman, I am not sure if you are aware of, that I was working 

on a task force back in Massachusetts on these types of abuses, especially just the rampant drug problem amongst our youth and others with these types of substances. We really did not get into the 

fraud part of it, but we certainly got into the issue itself, and 

Maine Senator Steve Tolman and I and others tried to tackle this 

very real problem. And I know that we are trying also to address 

these difficult decisions, and we are trying to put our Nation on a 

path of fiscal stability. 

Folks, you all know what is going on. We are in a financial emergency and we are trying to find a way to do it better. It has been 

an honor to be on this Subcommittee and try to tackle a lot of these 

very real issues and try to find a way to do it better. And I do support, have very strong support for the Medicare prescription drug 

programs. They are important programs, we all know, that provide 

essential benefits to our seniors. That is why now more than ever, 

we must protect these programs because they are looking to be 

changed, and if we can weed out a lot of this fraud and abuse, we 

will have more money in the system, obviously, to give back to the 

people that need it the most. 

This Subcommittee is releasing a GAO report that I think was 

asked to be done by Senator Carper which exposes the outrageous 

practice, that taxpayer dollars are potentially funding, through the 

Medicare Part D program, illicit prescription drug dealing. The 

findings in the GAO report highlight this problem. 

As the Senator noted—I cannot remember if he said this, but one 

Medicare recipient, as you know, visited 58 different doctors to obtain 3,655 oxycodone pills equivalent to a 1,679 day supply. These 

prescriptions equate to a street value of almost $300,000. And 

many of these highly addictive prescription narcotics will find their 

way onto the streets, hurting communities, kids, families, and the 

doctor shopping is the primary way that these abusers get around 

the lawful use of these medications. 

Only a very small percentage of Medicare Part D beneficiaries, 

approximately 1.8 percent, are engaging in this type of behavior. 

Though the percentage is small, we are still talking about approximately 170,000 people abusing the system according to the GAO, 

which costs the taxpayer approximately $148 million annually. 

That is real money, folks, and what I have tried to do since I have 

been here is to keep an open mind and try to find ways, without 

throwing bombs at all—you know, like where is the breakdown? 

And the key that we need to try to find out is where is the breakdown. Where can we try to fix it? 

This not only wastes taxpayer dollars by paying for huge 

amounts of unneeded prescription drugs and unneeded doctor’s visits, but it also take a very high human toll, and we all know what 

that involves. This prescription drug abuse is one of the Nation’s 

fastest-growing drug problem and is now categorized by the Centers for Disease Control (CDC) as an epidemic. We must do everything we can do to create stronger oversight of these controlled 

substances. 

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5 

In fact, in some cases our entitlement programs, which were established to benefit our country’s most vulnerable, are instead 

being used to fuel addiction and abuse, and it is really, with all due 

respect, Mr. Chairman, unconscionable what is happening. 

We have held several important hearings. Some I think have 

been really just fascinating, the things that I have learned through 

your leadership. I commend the Chairman for holding them, but 

this one, I do not think there are any that are more important than 

this one, quite frankly. 

So I am looking forward to beginning with the hearing, and, Mr. 

Chairman, I appreciate you bringing it up. Thank you. 

Senator CARPER. You bet, and thank you for your statement and 

for joining us today, Senator Brown. 

Senator BROWN. I have not missed one yet, Mr. Chairman. 

Senator CARPER. I know. You have a perfect attendance record 

here with me. 

I asked my staff, I said, let me have the sentence from our briefing memo about just how big a problem the abuse of prescription 

drugs is, and here is just a sentence from our briefing memo. It 

was not in my statement. I wish it had been, but it says: ‘‘It is estimated that 7 million Americans abuse prescription drugs every 

year. That is more than the number who are abusing cocaine, heroin, hallucinogens, Ecstasy, and inhalants combined.’’ Combined. 

We welcome our witnesses. How many of you have testified before this Subcommittee before? All right. Well, thanks for continuing to come back, and we appreciate that. 

Our first witness today, Greg Kutz, is Director of GAO’s Forensic 

Audits and Special Investigations Unit. Mr. Kutz has spent over 20 

years at GAO working to uncover abuse of government credit cards, 

abuse in the response to Hurricanes Katrina and Rita, problems 

with the U.S. border security, among many other issues. He has 

testified before this Subcommittee many times before, and I thank 

him for agreeing to be with us here today. 

I hope you do not start charging us on a per visit basis. We have 

a very large deficit. But, seriously, we are grateful for your help. 

Our next witness is Mr. Jonathan Blum, Deputy Administrator 

and Director at the Centers for Medicare & Medicaid Services. Mr. 

Blum is responsible for overseeing the Medicare prescription drug 

program and formerly worked as an adviser to one of our good 

friends and colleagues, Senator Max Baucus, on the Finance Committee staff. Thanks. 

Our final witness is Louis Saccoccio, who is Executive Director 

of the National Health Care Anti-Fraud Association (NHCAA). Mr. 

Saccoccio and his group work to increase awareness and improve 

the detection and prevention of health care fraud. I also understand that Mr. Saccoccio is a former Navy JAG lawyer and a graduate of the U.S. Naval Academy, and I am told he served for 8 

years, including a tour as a legal officer on the carrier the USS 

Kitty Hawk. Is that correct? Good for you. Bravo Zulu. I am an old 

Navy guy, I have a JAG guy here next to me, so we are in good 

company, I think. Thank you for that service and thanks for being 

here today. 

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6 

1The prepared statement of Mr. Kutz appears in the appendix on page 39. 

Folks, the drill. I would ask that you take about 5 minutes for 

your statement. If you go a little bit over that, that is OK. If you 

go way over that, that is not OK, so we will rein you back in. 

Mr. Kutz, why don’t you lead us off? Thank you. 

TESTIMONY OF GREGORY D. KUTZ,1 DIRECTOR, FORENSIC AUDITS AND INVESTIGATIVE SERVICE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. KUTZ. Mr. Chairman and Ranking Member Brown, thank 

you for the opportunity to discuss Medicare Part D. In 2009, I testified before this Subcommittee on doctor shopping in Medicaid. Today’s testimony highlights the results of our investigation into doctor shopping in Medicare Part D. My testimony has two parts: first, 

I will discuss our findings; and, second, I will discuss our recommendations. 

First, we found indications of doctor shopping for 14 classes of 

frequently abused prescription drugs, including Vicodin, Ritalin, 

and OxyContin as examples. Specifically, 170,000 beneficiaries acquired the same class of prescription drug from five or more prescribers during 2008. This represents about 1.8 percent of the beneficiaries acquiring these classes of drugs, and they showed indications, as I mentioned, of doctor shopping. The cost of these drugs 

was about $148 million, which excluded the cost of office visits. We 

referred 48 of the most egregious of these cases to the Medicare 

Drug Integrity Contractor (MDIC) for further investigation. 

Our report documents the facts related to 10 individuals that 

were doctor shopping. Many of these individuals had prior criminal 

histories. This was not a random sample, and the results from 

these 10 cases cannot be projected to all 170,000 cases. 

Examples that you both mentioned from our work for these 10 

cases include: 

A California man received a 1,758-day supply of fentanyl patches, which is a narcotic painkiller, from 21 different prescribers. 

A Georgia woman received a 1,679-day supply of oxycodone, also 

a narcotic painkiller, and other drugs from 58 different prescribers 

and 45 different pharmacies. 

And a Maryland woman received a 1,450-day supply of oxycodone 

from 11 different prescribers. 

The graphic in your package, which I have in my hand here— 

it looks like this—illustrates an actual case from our investigation. 

As you can see, between September 8 and September 19, this individual received three 30-day supplies of the painkiller hydrocodone. 

These prescriptions were obtained from three different prescribers 

and filled at three different pharmacies. In cases like this, the prescribers told us that they were unaware that their patients were 

receiving the same prescription drugs from other prescribers. 

Our recommendations to address doctor shopping are consistent 

with those used in the Medicaid program, as you mentioned, Mr. 

Chairman, and also in the private sector. First, we recommend that 

CMS consider the use of a restricted recipient program. This program would limit known system abusers to one prescriber, one 

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1The prepared statement of Mr. Blum appears in the appendix on page 51. 

sequences and will not be removed from Part D, this lock-in program provides a valid mechanism to protect taxpayer interests. 

Second, if a restricted recipient program is implemented, CMS 

should consider enhancing the sharing of information on these doctor shoppers between the drug plans. This is necessary to prevent 

abusers from circumventing controls by simply switching drug 

plans. 

Third, and finally, because of CMS concerns about its legal authority to make these changes, we recommend that CMS consider 

seeking congressional authority as necessary to implement the recommendations. 

In conclusion, as you both mentioned, Medicare dollars are being 

used to finance prescription drug abuse in our Nation. GAO is 

hopeful that Congress and CMS will use this report to improve the 

integrity and the safety of the Medicare Part D program. 

Mr. Chairman and Ranking Member Brown, that ends my statement, and I look forward to your questions. 

Senator CARPER. Thanks very much for that statement. Thanks 

very much for the work that backs it up. Mr. Blum. 

TESTIMONY OF JONATHAN BLUM,1 DEPUTY ADMINISTRATOR 

AND DIRECTOR, CENTERS FOR MEDICARE & MEDICAID 

SERVICES, U.S. DEPARTMENT OF HEALTH AND HUMAN 

SERVICES 

Mr. BLUM. Chairman Carper, Ranking Member Brown, I would 

like to thank you and the Subcommittee for your focus to ensure 

that the Medicare Part D program is as strong as possible. 

Today, the Medicare Part D program provides outpatient prescription drug benefits to more than 29 million Medicare beneficiaries. There are more than 3,400 Part D plans that provide drug 

benefits to Medicare beneficiaries, and Medicare beneficiaries may 

choose from a multitude of plans to deliver their benefits. The majority receives benefits in stand-alone Part D drug plans—that is, 

private plans that only provide outpatient drug benefits. 

By many measures, the Part D program has been a great success. Overall, costs have risen more slowly than the original Congressional Budget Office (CBO) and the Office of the Actuary 

(OACT) projections, and a majority of beneficiaries report being 

satisfied with its benefits. But we know that the benefit is not perfect. 

While the program is stronger today than ever before, we know 

there are vulnerabilities which must be addressed. I want to thank 

the GAO for its work highlighting the potential of fraud and abuse 

in the program specifically related to controlled substances. We 

have reviewed carefully the GAO’s report and its recommendations, 

and we agree with the GAO that the misuse of controlled substances is a growing problem in the Medicare Part D program. 

It is difficult to quantify the extent of the problem, but we agree 

the program can do more to curb potential fraud and abuse. At a 

time of scarce resources and significant budget deficits, we must 

ensure that every Federal dollar is spent as wisely as possible. 

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8 

Since the Part D program is relatively new, to date our focus at 

CMS has been to ensure that Medicare beneficiaries receive the 

drugs they are entitled to. The Medicare Part D program pays private Part D plans a capitated payment and works to make sure 

that the Part D plans provide drugs consistent with the program’s 

requirements. 

Our compliance efforts in recent years have been focused on the 

underutilization of drugs. We have placed significant audit and 

oversight resources to ensure that beneficiaries receive the drugs 

they need at the point of sale. We have placed significant sanctions 

on Part D plans that have failed to deliver benefits consistent with 

the law and our regulations. 

But the Part D program has reached a new state of maturity so 

that we now need to shift our oversight focus. We cannot just focus 

on the underutilization of Part D drugs. We must shift our focus 

on the overutilization of Part D drugs. To this end, we have recently taken the following steps: 

First, last week CMS put out new guidance to plans to ensure 

they are putting into place more comprehensive drug utilization review programs to ensure they are screening for misuse of controlled 

substances and other drugs. If clinical reviews reveal misuse, we 

will expect our Part D plans to stop payment and report the fraud 

to law enforcement. 

Yesterday, CMS proposed new proposed rules for the Part C and 

Part D programs that would ensure that the prescriber ID number 

is put on all Part D drug claims. This will ensure that we can 

produce more sophisticated data analyses and spot those prescribers that present vulnerabilities to the Part D program. 

CMS also shares concerns over the high use of antipsychotic 

medications given to beneficiaries in nursing homes. There is evidence that the financial relationships between long-term-care pharmacies and drug manufacturers can lead to this overutilization. 

Our proposed rules put out last night suggest possible steps CMS 

could take to address this overprescribing. 

CMS is also using data much more proactively. Again, our data 

analyses and data mining to date have been primarily focused on 

plans that may discourage the appropriate prescribing, denying our 

beneficiaries needed drugs. Our data analysis will also include 

proactively focusing on drug overutilization. The GAO report suggests that CMS should consider a program whereby it restricts prescribing of controlled substances to a single physician dispensed by 

a single pharmacy. CMS does not believe that such a measure, 

which has been employed by State Medicaid programs, would work 

well in the Part D program. Part D in its current form cannot restrict a beneficiary to a single physician or a single pharmacy. CMS 

believes that the responsibility to prevent Part D drugs rests with 

Part D sponsors. 

We must also be very concerned that beneficiaries do not face 

undue restrictions to necessary medications. Beneficiaries seeing 

many doctors may have very complicated health care needs or may 

be victims to a dysfunctional health care delivery system. Any programs that are believed to curb overuse and misuse and overutilization must always involve strong clinical review and judgment to 

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9 

1The prepared statement of Mr. Saccoccio appears in the appendix on page 63. 

strictions. CMS’ response to this growing problem will continue to 

follow these principles. 

Thank you for the opportunity to testify today, and I look forward to your questions. 

Senator CARPER. And we look forward to your questions. Thanks 

very much for that testimony. We look forward to asking you some 

questions. 

Mr. Saccoccio, please proceed. 

TESTIMONY OF LOUIS SACCOCCIO,1 EXECUTIVE DIRECTOR, 

NATIONAL HEALTH CARE ANTI–FRAUD ASSOCIATION 

Mr. SACCOCCIO. Thank you. Good morning, Chairman Carper, 

Ranking Member Brown. 

The amount of health care dollars spend on prescription drugs in 

this country continues to grow. National health expenditure data 

reveal that in 2009 $250 billion was spent on prescription drugs, 

and that by the year 2020 that spending is projected to more than 

double, reaching more than $500 billion. NHCAA believes that the 

amount of health care dollars spent on prescription drugs continues—as that amount continues to grow, the problem of prescription drug diversion and fraud will also continue to grow as a segment of the total health care fraud problem. 

While doctor shopping by patients is the primary focus of the 

GAO report released today, NHCAA believes it important to acknowledge that prescription drug fraud and diversion can take 

many forms. At its most complex, perpetrators of drug diversion 

undertake a multi-faceted criminal enterprise directed at reselling 

drugs in high volume and for large profit on the streets, with the 

cost of the drugs fraudulently billed to health insurers, both public 

and private. 

Significantly, the money lost to prescription drug fraud through 

the payment of unnecessary or bogus pharmacy claims is only part 

of the financial impact of this problem. In the process of obtaining 

a prescription, a patient typically will generate claims for related 

medical services. Insurers often find that they have paid not just 

for unnecessary drugs but also for related emergency room visits, 

inpatient hospital stays, visits to physician offices and clinics, and 

diagnostic testing—all based on injuries, illnesses, and conditions 

feigned in order to obtain a prescription. Then there are the additional costs associated with treating the addictions and the 

overdoses arising from this behavior. 

More importantly, the financial losses due to prescription drug 

fraud are compounded by instances of patient harm and sometimes 

death—insidious side effects of this fraud. The Office of National 

Drug Control Policy calls prescription drug abuse ‘‘the Nation’s 

fastest-growing drug problem,’’ and the Centers for Disease Control 

and Prevention classifies prescription drug abuse as an epidemic. 

Of course, prescription drug abuse in itself does not necessarily indicate fraud. Nevertheless, in many instances the drugs are obtained through fraud. 

A cogent example of the human toll of this problem was all too 

clear in a recent case arising in Kansas. In October 2010, a Kansas 

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physician and his wife, a licensed practical nurse who also acted 

as the office manager of her husband’s pain management clinic, 

were sentenced to 30 and 33 years in Federal prison, respectively, 

for illegally distributing prescription pain medications to patients 

who overdosed. A 4-year investigation of this pill mill uncovered 

evidence of extensive overprescribing of controlled substances. 

More than 100 drug overdoses requiring visits to Wichita area 

emergency rooms and the deaths of at least 68 persons are linked 

to this case, as well as more than $4 million in Medicaid and private insurance claims. After an 8-week trial, the jury convicted the 

couple, finding that they directly contributed to the deaths of several patients. This case demonstrates that prescription drug fraud 

is a dangerous crime that can yield tragic results, including death. 

Private insurers have acknowledged drug diversion and doctor 

shopping as a fraud trend for the last several years, and their antifraud efforts regularly identify dangerous prescription drug abuse 

by patients. In my written testimony, we provide examples of how 

two insurers, Humana and WellPoint, are using monitoring, letter 

notification to prescribers, and restricted recipient programs with 

success. 

NHCAA also supports State prescription drug monitoring programs that help both to identify fraud and to ensure patient safety. 

NHCAA recommends that State investments in those monitoring 

programs be incentivized whenever possible. Also, NHCAA recommends taking full advantage of interoperability opportunities 

and information sharing among prescription drug monitoring programs for States sharing borders with one another. 

For instance, in August 2011, Kentucky Governor Steve Beshear 

announced the formation of an interstate task force with border 

States Ohio, Tennessee, and West Virginia committed to targeting 

fraudulent or abusive prescription drug activities in those States. 

NHCAA also is encouraged by the memorandum dated September 28th issued by CMS to Medicare Part D sponsors asking for 

their comments on how the Medicare Part D program can more 

successfully exert control over payment for inappropriate overutilization of drugs. In addition to responding to the ideas outlined in 

the memo, NHCAA suspects that many Part D sponsors will suggest that a restricted recipient program be considered to curb drugseeking behavior due to drug abuse or diversion. 

Thank you for the opportunity to testify this morning, and I look 

forward to any questions you may have. 

Senator CARPER. Great. Thanks very much. That was great testimony, Mr. Saccoccio. 

Let me start off by saying that one of the things that we focus 

most on in this Subcommittee is finding out results. We are not interested in process. We are interested in having the ability to actually measure results, and we focus on success and how do we measure success. 

Senator Brown probably remembers me mentioning, not in this 

room but in the Finance Committee hearing room—a couple of 

months ago, we were having a hearing on deficit reduction. We had 

four or five really smart people there as our witnesses. One of them 

was Dr. Alan Blinder, who now teaches at Princeton. He used to 

be the Vice Chairman of the Federal Reserve when Alan GreenH605-41331-79W7 with DISTILLER

11 

span was Chairman. And he was before us to testify on deficit reduction, and he said in his testimony, he said, the 800-pound gorilla in the room in health care cost explosion—in deficit explosion 

is health care costs. And he said unless you do something about 

that, everything else is sort of window dressing. 

And when it came around to my turn to ask questions, I said, 

Dr. Blinder, you talked about how health care costs is the 800- 

pound gorilla in the room with respect to the deficit and how it was 

imperative that we do something about that. And I said, ‘‘Do you 

have any advice for us today as to what we might do?’’ And he said, 

‘‘I am not a health economist. I am not an expert in that stuff. Let 

me just say here is my advice: Find out what works, do more of 

that.’’ That is all he said. ‘‘Find out what works, do more of that.’’ 

And I said, ‘‘Well, is the corollary to that find out what does not 

work and do less of that?’’ And he said, ‘‘That would be true.’’ 

So in the spirit of finding out what works and do more of that, 

let us talk about what works, and I think, Mr. Saccoccio, you mentioned in your testimony about Humana and WellPoint, some of the 

steps that they are taking. We have the experiences in Medicaid 

where some States are saying one doc—if you are taking these controlled substances, use one doc, maybe one pharmacy, to try to control it. Talk to us about what is working and how we might take 

those ideas and incorporate them into whatever we might do in 

terms of legislation or a regulatory approach. 

Mr. Kutz, would you lead us off? 

Mr. KUTZ. Well, you mentioned restricted recipient. That has 

been successful in Medicaid. There are 30 to 40 States that have 

some variety of the one prescriber/one pharmacy or both or some 

different—some are two, actually. And that has been proven in 

those States to be successful in Medicaid. 

Senator CARPER. Let me just interrupt for just a moment. Mr. 

Blum, in your testimony you said you did not think that the success that has been realized in Medicaid in addressing this problem 

would necessarily work in Medicare Part D. Just take a minute— 

and then I will come back to you, Mr. Kutz. Just take a minute 

and explain that. 

Mr. BLUM. Sure. State Medicaid pharmacy benefits tend to work 

very differently than the Part D drug benefit. The State Medicaid 

program generally has one fee-for-service program where they can 

have a complete view of pharmacy benefits. The Part D program 

by statute works very differently than State Medicaid pharmacy 

benefits. We have 3,400 different Part D plans that provide the 

kind of day-to-day transactions of the pharmacy benefit. To our 

view, because of the wide diffusion to Part D benefits designed by 

statute, to our minds we have to have the Part D plans themselves 

provide the kind of review, the oversight to ensure that drugs are 

being dispensed consistent with the law. 

Senator CARPER. OK. That is fine. Just stop right there. 

Mr. Kutz, just briefly respond to what Mr. Blum has said on this 

point, if you would. 

Mr. KUTZ. Well, we agree with Medicare that there needs to be 

a comprehensive fraud prevention plan in place, and their documents, their Chapter 7 and Chapter 9 of the regulations, state 

that. And to me that includes prevention, monitoring, and some 

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12 

consequence at the end of the day for people that beat the system. 

So if you do not have a restricted recipient program in place, I see 

a hole in the comprehensiveness of their fraud prevention plan in 

that what are the deterrents to people actually doing this. Their 

belief is probably they are not going to get caught, and if they get 

caught, there are no consequences. 

So I believe it is important that in any fraud prevention program—and I testify across Congress on these things—you have to 

have some consequences at the end of the day for people that might 

deter them. 

Senator CARPER. All right. Thanks. 

Go ahead. What else in terms of the spirit of what works? 

Mr. KUTZ. One of the things we have seen in some of the States 

is the prescription drug monitoring plans have real-time data that 

doctors can actually access so that they could potentially know before they actually write the prescription that their patient is seeing 

other doctors or prescribers for the same thing. So if you think 

about the first step in the process, which is the writing of the prescription, you could perhaps prevent some of the prescriptions 

being written by having real-time data available for the prescribers 

to look at for their patients. 

The next step is the point of sale at the pharmacy, and I know 

that CMS agrees with us on this, that it is very important to focus 

on information the pharmacist has before the drug is dispensed to 

see doctor-shopping activity. The issue really is, when they are getting alerts at the pharmacy, what are they doing with it? Are they 

actually using it to deny someone or is someone walking out with 

the drugs? Even though there was an indicator set, it is called a 

‘‘soft edit,’’ which can be overridden. 

Senator CARPER. Called what? ‘‘Soft edit’’? 

Mr. KUTZ. ‘‘Soft edits,’’ where basically they get an alert, but 

they do not have to do anything with it, and someone can walk out 

the door. So to me that is important. 

I will just quickly mention a third thing, which is monitoring. 

Once you have—and, again, CMS promotes this—data mining and 

data matching, similar things we have done here but much more 

comprehensive is to me another important element of a comprehensive fraud prevention plan. 

Senator CARPER. All right. Good. Mr. Blum. 

Mr. BLUM. I totally agree with everything that Mr. Kutz said. We 

need to make sure that we are providing very strong guidance to 

our Part D plans to take a more complete and holistic picture of 

a beneficiary and that they are given the pain medication they 

need. I think to date we have systems that are set up that are 

much more transactional in nature at the point of sale, that there 

are edits in place, and we need to look—or to encourage the Part 

D plans to take a more complete picture so they can figure out 

whether or not beneficiaries are being prescribed medications that 

exceed good sound clinical judgment. 

I think it is important to point out that a beneficiary who is seeing many physicians could have very legitimate needs. They also 

could be going to the ER. They could also be going to a clinic setting and just being bounced around the health care system, 

through no fault of their own. So to our minds, any system in place 

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13 

that will stop doctor shopping and stop abuse needs to be based 

upon sound clinical judgment to make sure that we are stopping 

the bad behavior but also preventing harm to beneficiaries who 

have very legitimate needs who are being bounced around the 

health care system through no fault of their own. 

Senator CARPER. All right. Mr. Saccoccio, go ahead. What is 

working? What is working out there? 

Mr. SACCOCCIO. Well, I think it is a combination of several 

things. No single thing works by itself. 

First, you need to analyze data. You need to take a look at what 

is happening out there. CMS in the fee-for-service Medicare area 

is moving towards predictive modeling. You need to be able to do 

that so you could figure out what is going on. Then you need to 

take some action. Now, the action should include notification to the 

physicians that are prescribing the drugs, also notification to the 

patients themselves, and then looking to those patients to see if 

they do have a problem, maybe trying to get them into programs 

that address the problem. 

But I think the other big piece of it is a restricted recipient program, a lock-in program, where under certain circumstances, allowing for utilization for certain types of conditions that may need a 

lot of pain medication, that you lock those folks in. And that does 

not mean they do not have access to those drugs. For example, in 

the Humana example that we give, Humana may lock them into 

a pharmacy that has multiple locations, so it is not just, hey, you 

have to go to this one pharmacy down the street. You could go to 

different locations, but you are locked into that one pharmacy. So 

I think that should seriously be considered. 

Given the right circumstances with the right patients that, hey, 

we are not making any dent in this, otherwise, we need to take 

that additional step. 

Senator CARPER. All right. Good. Thanks very much. Senator 

Brown. 

Senator BROWN. Thank you, Mr. Chairman. 

Mr. Kutz, in your report you cite a case, amongst others, where 

in 2008 alone a beneficiary received 5,923 oxycodone pills after 

going to 11 different doctors. That is a 1,450-day supply in one 

year. I know as your report indicates that the beneficiary stated to 

his or her doctor that the pattern of abuse was a case of mistaken 

identity. But that, in fact, was not the case, and it is doubtful that 

the person could consume that amount of narcotics in that time 

frame. So what was really going on here? 

Mr. KUTZ. Well, we did not interview all of these people, the reason being 8 of the 10 had prior criminal histories, and our criminal 

investigators do not carry weapons. So we do not go interview people that could potentially be dangerous. But certainly drug abuse 

is going on and potentially drug dealing is going on in that case. 

Senator BROWN. Well, I agree because I hear the word ‘‘diversion,’’ and diversion is drug dealing. It is clear what is happening. 

The person is shopping around, getting the drugs, and selling 

them, and taking advantage of basically a tax-free public benefit 

program and receiving government-funded health care. And as you 

can see from our chart,1 Case 1, the street value is almost 

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14 

1The chart referenced by Senator Brown appears in the appendix on page 00. 

$500,000. In Case 2, it is almost $300,000. Obviously, there is a 

breakdown. 

I do not know about you, Mr. Chairman, but I have kids, and I 

remember those ear infections. You have to go get the Zithromax 

or whatever there was, and God forbid you left it somewhere. It 

was like getting Federal Bureau of Investigation (FBI) clearance to 

go and get another prescription of Zithromax for an ear infection. 

Yet you have instances where you have people like this that are 

going around doctor shopping. I mean, aren’t these people paying 

co-pays or taking—I mean, isn’t there like a system in place where 

there is a main record locator that says, hey, this person has been 

to 11 doctors for the same issue? Isn’t there something in place like 

that? 

Mr. KUTZ. There is, and as was mentioned by the other witnesses, there are prescription drug monitoring plans, and actually 

the plan sponsors that send letters—and we saw this in several of 

our cases—to the doctors. However, all the doctors can do really is 

kick the patient out. Some of them that even got the letters said, 

‘‘Well, I know the person is in pain. I kept prescribing even though 

I know they were going to 10 other doctors.’’ 

Senator BROWN. That makes no sense. 

Mr. KUTZ. That does not prevent it from continuing. 

Senator BROWN. It makes no sense. A letter is sent out, and the 

doctor sees the letter, and yet he or she continues to prescribe the 

medication because the person is in pain. I mean, isn’t there a realization that, gosh, these people are abusing drugs and they could 

potentially be dealing drugs? Isn’t there an affirmative obligation 

for the doctors to find out what is going on? And isn’t there an affirmative obligation once those letters are sent to take it a step further, call the doctor, refer it to law enforcement? I mean, a letter, 

I mean, gosh, they get so many papers every day. Is it really working? 

Mr. KUTZ. I would say mixed results, but not really working to 

prevent it from happening. Several of them kicked the people out 

of their programs because they had violated their pain management agreement. Other ones kept prescribing. At the end of the 

day, Senator, we did not look at the culpability of the doctors because some of these doctors are potentially part of the problem in 

what they are doing, because if you look at the actual quantity of 

drugs that they were prescribing, it does raise questions. And it 

raises questions about the pharmacies, too. If you get the printouts 

at the pharmacy of how many drugs these people are getting, it 

was not just Medicare supplying it. They were going in with other 

prescriptions and paying cash for others and getting it from other 

sources. So typical doctor shoppers, they are looking for multiple 

sources, and as you said, that would indicate potential dealing. 

Senator BROWN. The findings do not come as a surprise to CMS. 

In 2009, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) report cited that drug diversion by 

beneficiaries or drug dealing, as I referenced it, as the top type of 

potential fraud and abuse referred to the Inspector General’s office. 

And in your investigation, what did you find with CMS’ guidance 

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to plan sponsors in response to a beneficiary who was doctor shopping? 

Mr. KUTZ. Well, some of the sponsors—we mentioned a restricted 

recipient program. Some of the sponsors have actually asked CMS 

if they could to it, and it is right in CMS’ Chapter 7 of the regulations that a lock-in program like that is prohibited at this point. 

Whether that is a legal or a policy issue, I think Mr. Blum could 

answer that question. 

Senator BROWN. He is next. 

Mr. KUTZ. I believe it still is a valid part of a comprehensive 

plan, and I agree with the other witness that said not one thing 

alone does it. You have to have stuff at the beginning, the monitoring at the end, and people have to believe there is a chance they 

will get caught, and if they get caught, that there will be consequences. 

Senator BROWN. The thing I find amazing since I have been here 

is there is always an angle. Everyone has always got an angle to 

kind of screw the government, out of taxpayer money. Whether it 

is dealing with waste, fraud, and abuse in contracting, whether it 

is dealing with these sorts of things, whether it is selling government property or holding it back, we are just doing things so inefficiently it is mind-boggling. 

Mr. Blum, just following up on you, knowing that according to 

OIG and GAO about the possible drug dealing as a result of the 

prescription drug abuse, CMS’ primary response to a case where a 

beneficiary is found to have inappropriately obtained the abused 

drug is to have plan sponsors issue an educational letter to the doctor. And since issuing this guidance to plan sponsors to send an 

educational letter, have you seen a decline in cases of beneficiaries’ 

doctor shopping or prescription drug dealing? And if so, what is the 

decline? What has the result been? 

Mr. BLUM. I think quite honestly, Senator, we are hearing about 

an overall increase in potential overutilization and misuse of controlled substances. 

Senator BROWN. So even though the letter has gone out, it has 

increased? 

Mr. BLUM. I think that CMS fully agrees that our response must 

be stronger. 

Senator BROWN. So the letter is not working. 

Mr. BLUM. That is why we put out guidance—— 

Senator BROWN. Is the letter not working? 

Mr. BLUM. I believe that we are seeing more complaints coming 

into our fraud and abuse contractor. We are having more reports—— 

Senator BROWN. So if the letter went out and the cases are increasing, then it is not working. 

Mr. BLUM. I believe that we—— 

Senator BROWN. Yes or no. Is it working or not? 

Mr. BLUM. I do not know, to be honest. What I do know is that 

there are more complaints coming into our MDIC of potential doctor shopping. Those cases get referred to law enforcement, and we 

are very concerned regarding the potential overuse of controlled 

substances. 

H605-41331-79W7 with DISTILLER

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Senator BROWN. Let me tell you, it is not working. OK? That is 

kind of the reason we are here, because it is not working. And I 

would encourage you to do more than just send a letter that is 

going to be lost in the shuffle. 

Mr. BLUM. We are, Senator. 

Senator BROWN. And if you need help or guidance or additional 

help from us, great, let us know. But sending a letter when we are 

talking about millions of taxpayer dollars just makes no sense to 

me. 

Mr. Kutz, as you know, the DEA administers special licenses to 

doctors which enables them to prescribe these narcotic drugs. In 

preparing for this hearing, my staff talked with the DEA about 

their relationship with CMS and the effort to curb this real tragic 

abuse and found that the DEA had very little relationship with 

CMS and did not even know who the Medicare Drug Integrity Contractor was, much less share information with them. How important is it for CMS and the MDIC to be working with the DEA or 

sharing information about potential doctor shopping with the DEA? 

Mr. KUTZ. I would hope someone in DEA knows who the MDIC 

is. Apparently the person you talked to did not, but there certainly 

would seem to be some relationship and coordination since DEA 

looks at large cases, and DEA is typically looking, I think, at 

Schedule I, which is not what we are talking about here—cocaine 

and marijuana and heroin and those types of things. But certainly 

better coordination with them, if it is not happening, is something 

that—some of these could be big cases. Even our individuals we 

found out of these 10, they might be part of some bigger network, 

and so sharing of information would seem to potentially be useful 

here. 

Senator BROWN. We ran into problems about 10 years ago when 

we failed to share information. This is obviously different, but it 

still bears to learn the lesson that, we need to provide this information if the DEA and no one seems to be really putting their foot 

down, so I would encourage whoever is not communicating to start 

to do it. 

I would like a second round, if we could. 

Senator CARPER. We will have maybe three. All right. Thanks 

very much. 

I want to come back to you, if I could, Mr. Blum. We talked a 

bit earlier about your office putting out a memo to the Medicare 

Part D plan sponsors that is intended to tamp down on doctor 

shopping in the program. I think it is probably in response to the 

GAO study that was released last week, and for the hearing that 

we are having today. 

I am told that the memo that went out last week does not actually direct the plan sponsors to make changes. The memo, I am 

told, only asks for ideas and suggestions. I am also told that the 

memo left many potential experts and stakeholders out of the process. For example, I do not believe it was distributed to pharmacies 

or to law enforcement. 

Let me just say, Mr. Blum, I think it is critical that we put into 

place concrete steps to stop this form of abuse and waste, to the 

extent that we can. When do you plan to complete the guidance by 

establishing a change of rules or other new procedures? 

H605-41331-79W7 with DISTILLER

17 

Mr. BLUM. I think it is a fair statement that we put out our guidance to plans as an opportunity to solicit comments, and I think 

we want to understand from our Part D plan sponsors themselves 

how best to implement the policy goals that we have to address 

and to respond very quickly, more quickly than in the past, to the 

overuse and the misuse of controlled substances and other drugs. 

As I said during my testimony, we have to strike the careful balance, and so in stopping the behavior that Senator Brown points 

out in his chart, that is clear fraud, that needs to be stopped. But 

at the same time, there are legitimate beneficiaries who have legitimate pain needs, and so we need to find the right balance. We 

need to stop the egregious behavior that makes no clinical sense, 

but at the same time some beneficiaries who are seeing four and 

five physicians may have very legitimate health care needs. 

We are open to all ideas, and your suggestion to share our guidance with others is a good one that we will follow up on, but we 

need to make sure that law enforcement best supports our work, 

that the pharmacists and the physician community are at the front 

line to these transactions; but I think it is fair to say we are open 

to every idea that strikes the right balance between stopping the 

behavior that is clearly fraudulent and illegal, but at the same time 

making sure beneficiaries have access to the medications they 

need. And it is not just controlled substances that we are concerned 

about. We are also concerned about antipsychotics and other drug 

classes. And to our minds, we cannot just focus only on controlled 

substances, but on all drug classes that could have potential misuse. 

Senator CARPER. All right. I appreciate that response. In that 

case, it sounds like CMS is prepared to distribute that memo that 

you put out last week to others, including law enforcement and 

pharmacies. 

Mr. BLUM. They are public documents, and so I think we have 

to do a better job to make sure that the entire public can see it. 

But they are public documents, and we will do our best to make 

sure that they are shared more widely than just our Part D plan 

sponsors. 

Senator CARPER. I would encourage you to at least include those 

two areas, law enforcement and pharmacies. 

Mr. BLUM. Absolutely. 

Senator CARPER. Having said that, I also want to note that the 

Centers for Medicare & Medicaid Services I think just yesterday— 

finalized some new rules that take in—— 

Mr. BLUM. Proposed rules. 

Senator CARPER. Is it proposed rules? OK. That take one important step to help curb fraud in Medicare prescription drugs. And 

I think starting next year Part D plan sponsors would have to confirm that a prescription was written by a valid physician, something we discussed at a similar hearing I think last year here. It 

is a good example, I think, of CMS taking action, and I hope that 

it can be repeated with many of the ideas that we are talking about 

here today. So that is good news. 

A question, if I can, maybe for Mr. Kutz and Mr. Blum, if I could. 

I understand the Medicare Part D benefit is made up of two types 

of beneficiaries: those who are eligible because they are over 65 and 

H605-41331-79W7 with DISTILLER

18 

eligible for Medicare, and those who are eligible because of a disability or low income and they can be under the age of 65. I am 

told that the GAO found that nearly 70 percent of those Part D 

beneficiaries suspected of doctor shopping were low-income or disabled individuals. Is that correct? 

Mr. KUTZ. Yes, it was 120,000 of the 170,000, and I want to 

make sure that those are indicators. They are not all necessarily 

doctor shopping, as Mr. Blum said, but they were disability. They 

were SSI and DI participants. 

Senator CARPER. Just take a moment and let us drill down on 

that. What do you think those findings might mean? What are the 

implications of that? 

Mr. KUTZ. Well, one of the things is it is not typically the over65’s that are doing this, which is something that one would look 

at Medicare and maybe assume that without digging into the numbers. 

Senator CARPER. Is it true that for folks in the Medicare Part D 

program, if they are 65 and over, they are not there because they 

are disabled and unable to work, but they are there because they 

are 65 and over, traditional Medicare, they can only change their 

benefit plan—is it annually? 

Mr. KUTZ. If they are not in the low-income subsidy (LIS), my 

understanding is they can only change annually. 

Senator CARPER. Annually. But for the folks that are in the lowincome category or population or those in the disabled population, 

they can change their plans monthly, can’t they? 

Mr. KUTZ. Right. 

Senator CARPER. All right. That would seem to be ripe for abuse. 

Mr. KUTZ. Right, and that is a risk here of, if you actually stop 

it happening in one plan, we recommended that sharing between 

the plans of the known abusers is something for CMS to consider. 

Senator CARPER. Let me just ask you, Mr. Blum, if I could, does 

CMS believe the ability to change plans monthly for those particular beneficiaries is an idea that the Congress should revisit? 

Did we do that in the law? I presume that is in the actual law that 

we adopted 5 or 6 years ago. 

Mr. BLUM. My understanding is that the ability for low-income 

beneficiaries to change plans month to month was through CMS 

guidance, not through the legislation. The history is that when 

CMS set up the new Part D program authorized by the Congress, 

there were lots of concerns regarding low-income beneficiaries 

being transitioned from pretty open drug formularies offered by 

State Medicaid programs over to more restricted Part D drug 

formularies that mirrored commercial formularies. As a beneficiary 

protection, the agency now allows low-income beneficiaries to 

change plans month to month. Given that they have oftentimes 

very complicated health care needs and very complicated drug regimens, the agency’s goal is not to interfere with those health care 

needs. 

That being said, this policy—— 

Senator CARPER. Could we have an unintended consequence 

here? 

Mr. BLUM. I think that is one unintended consequence, potentially, that the operational framework that we operate under, those 

H605-41331-79W7 with DISTILLER

19 

who might be out to game the system could change plans month 

to month. I think we have to find the right balance between protecting consumer access and also stopping those that intend to defraud the program. But the current policy that the agency has is 

to permit low-income beneficiaries to change plans month to 

month. 

Senator CARPER. As you consider this, just keep in mind—I am 

going to read the same statement I gave earlier. It is estimated 

that 7 million Americans abuse prescription drugs every year, more 

than the number who are abusing cocaine, heroin, hallucinogens, 

Ecstasy, and inhalants combined. And the point you had made, Mr. 

Kutz, did you say 70 percent—— 

Mr. KUTZ. Seventy-one percent were disability. They were in the 

program through disability, SSI and DI. 

Senator CARPER. All right. Well, let us explore this a bit more 

and see if this is something that maybe has not worked as intended 

and if we ought to make some changes. Senator Brown. 

Senator BROWN. Thank you, Mr. Chairman. I am going to go to 

the floor after this. This will be my last round. But I appreciate you 

holding this. 

Mr. Blum, you said we have to strike a careful balance. I do not 

think we are—I think we are too careful, to be honest with you. 

I think that, we have 170,000 people abusing the system, according 

to my information. It could be more, it could be a little less. But, 

clearly, there is an issue, and I know that in a September 28 memo 

to Medicare Part D sponsors CMS admits that the MDIC contractor, the contractor responsible for identifying and investigating 

Medicare Part D fraud, has, in fact, identified excessive utilization 

of drugs, opioids and drugs, and that CMS considers these patterns 

highly indicative of drug abuse or diversion, a/k/a drug dealing. 

Since the MDIC contractor has identified this outrageous fraud, 

how many cases have actually been referred by MDIC to the Inspector General for prosecution? 

Mr. BLUM. I will have to defer to law enforcement, but my understanding is that every case that was revealed by the GAO of true 

patterns of illegal behavior—somewhere in the neighborhood of, I 

think, 50 to 60 cases—was referred to the MDIC. Those cases were 

all investigated. Some of those cases were referred to the IG, and 

the IG I think has decided to pursue a handful of those cases 

through law enforcement channels. But according to the data that 

I have from our MDIC, they continue to receive growing complaints 

regarding misuse, and they continue to fulfill their obligation to 

refer those cases to law enforcement. 

I think it is also important to break down the 170,000 figure that 

you cite. There are four potential reasons for that number. One is 

that there is diversion or drug dealing going on. Two is that beneficiaries are fueling their own addiction. Three is they have a legitimate clinical need. And fourth is they are just the victims to a dysfunctional health care system. I do not believe the GAO report has 

broken down that 170,000 number into those four categories. 

Senator BROWN. Can you just repeat that? What did you say, a 

dysfunctional health care system? What do you mean? 

Mr. BLUM. Beneficiaries bouncing around from one ER to another 

ER, that we have a very uncoordinated health care system today 

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that we are working hard to reform. But beneficiaries who are seeing multiple physicians might be going to the ER, might be going 

to different physicians because they do not have a regular source 

of primary care. So that is not the fault of the beneficiary. 

Senator BROWN. When are you going to implement edits that will 

capture if a beneficiary is acquiring more drugs that are actually 

clinically necessary? When will those safeguards be put in? 

Mr. BLUM. Our strategy right now is to solicit comment, take 

that comment, and then work as far as we can to—— 

Senator BROWN. Here is a comment for you. Just fix it. We are 

talking hundreds of millions of dollars of taxpayer money. We need 

the money for other things, quite frankly. 

Mr. BLUM. And my understanding is that some of the cases that 

have been pointed out by the GAO are true fraud and illegal behavior, and some of those cases are very legitimate health care 

needs. CMS has to find that right balance between—— 

Senator BROWN. Wait a minute. You just said fraud and illegal 

behavior, but you need to balance it with the health care needs. 

The people that need some care and coverage, I understand that. 

But we are talking clearly about taxpayer-funded Medicare prescription drugs that are probably being used to care for that individual, but the rest of it is being sold on the black market or, just 

being sold to friends or neighbors or whatever. So I get the fact we 

have to treat everybody, reasonably and make sure the care—but, 

obviously, if they are doing that, there is a deeper problem that I 

think supersedes the actual pain that they are in. And I think you 

have to take the gloves off a little bit. Instead of seeking and requesting, you have to dictate and actually come out with some suggestions of your own as to how to fix it. It seems pretty straightforward how to fix it. You have to have a check and balance. You 

have to have a top-to-bottom review of everything you are doing, 

have a check and balance, and when you have any indication that 

there is any type of abuse, you have to go right for the jugular and 

make sure that it does not happen. There has to be a sharing of 

information. 

I would encourage your Department and the people that are responsible. And I know there are good people over there, hard-working people. I get that. But, we have a real problem here. We would 

not be here—if we did not have a problem. Right, Mr. Chairman. 

So, I mean, we are all ears. I think out of probably all the Senators 

here, you have the two guys who work together the best in trying 

to find solutions. We are not just throwing bombs. We are trying 

to find out where the problems are and try to find a way to kind 

of get to the bottom of it to put money back into the system that 

can be used for people who legitimately care and respect the care 

and coverages that they are getting from the American taxpayer, 

because, quite frankly, there are other folks that do not have those 

luxuries and benefits and they are hurting and they need help, too. 

So I do not want to preach. I think you know where I am at, and 

I know you know where the Chairman is at, too. We just have to 

do it better. We are in this together. 

I appreciate your bringing this forward, Mr. Chairman. Once 

again, you are on it. So I appreciate it, and I am going to head to 

the floor. 

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21 

Senator CARPER. And we appreciate very much the work of our 

staffs and certainly the work of GAO. 

Senator BROWN. Yes, a great job, both of them. 

Senator CARPER. We are very grateful for that. 

We have a place at Rehoboth Beach called ‘‘Funland.’’ I do not 

know if anybody in the audience—I see the audience reaction, people that have been there with their kids. It is great fun. Great fun 

for children of all ages, including our age. But one of the games 

they have at Funland is called ‘‘Whack-a-Mole.’’ The idea is like if 

something pops up, you knock it down, and another one pops up. 

Senator BROWN. It is all Republicans that come out and they—— 

[Laughter.] 

Senator CARPER. In any event, in terms of whether the issue 

happens to be abuse of prescription drugs, feeding the drug trade 

and hooking people on controlled substances, or whether it happens 

to be surplus property or it happens to be waste in IT systems, you 

name it, there is plenty out there. We will stay busy in this Subcommittee for as long as I get to serve on it and continue to focus 

on these. 

I want to come back, if I can, to Mr. Saccoccio. You mentioned 

Humana and WellPoint. Let us just come back and let us talk a 

bit more about what are they doing there to address these particular challenges? 

Mr. SACCOCCIO. Well, they do several things. The first thing that 

they do is they take a look at their prescription drug claims in certain categories for the controlled type substances, and Humana, 

from has a three-three-three program, so it—— 

Senator CARPER. Has a what? 

Mr. SACCOCCIO. A three-three-three program. 

Senator CARPER. A lot of threes. 

Mr. SACCOCCIO. A lot of threes. To the extent that you had three 

prescribers, three pharmacies, and three actual prescriptions filled 

over the course of a year, they will then take a closer look at that 

particular case and, if necessary, send out notifications to the physicians involved letting them know that there could be potentially 

abusive behavior going on here; and then after a further look at 

those cases, maybe putting those folks into a lock-in type program 

where they are restricted to one particular pharmacy in order to 

obtain those types of drugs. And they seem to have some success 

with that. Talking to Humana, they have seen a decrease in the 

amount of prescription drugs for these particular patients when 

they do that. 

WellPoint had a similar program. They also have a program now 

where they will look at individuals that have 10 prescriptions over 

a 90-day period, and they carve out, again, when they are looking 

at that—going to Mr. Blum’s point about, cases where patients do 

need those particular drugs, so they do carve out things like oncology or MS, and they carve those out. But then they look at those 

prescriptions over the 90 days, and, again, they notified the prescribers in those cases, and then they also put those individuals on 

a lock-in type program. 

The other thing that they do is they look at geography, because 

even with the prescription drug monitoring programs that the 

States have, it is important folks that are living in States where 

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22 

they can cross the border and avoid those types of programs that 

the States have, they will do that. If they need to travel outside 

a certain geographic area to go to other physicians to get drugs, 

they will do that. So one of the things that they do is they look at 

is the patient traveling a long distance in order to see a provider 

in order to get a prescription. 

They also look at things like prescribers prescribing outside their 

area of expertise, so if you have, a certain type of doctor that is 

prescribing a lot of pain medication drugs that is not really working in an area where you expect that type of prescribing, they take 

a look at that. 

I am sure CMS probably has similar edits, and to the extent that 

the sponsors in Part D have those types of edits, but, again, it gets 

back to a combination of things. And what we were told is that 

companies like Humana and WellPoint that are Part D sponsors 

would like to use those lock-in programs but are not allowed to in 

Medicare Part D. 

Senator CARPER. OK. Mr. Blum and then Mr. Kutz, I am going 

to ask you just to react, if you will, to what Mr. Saccoccio just explained about what they are doing at Humana and WellPoint. 

Mr. BLUM. I think what is encouraging about the examples that 

are raised in the testimony is the notion that Part D plans can look 

more comprehensively regarding the entire case of a beneficiary. 

That is very consistent with where we would like the program to 

go, our Part D sponsors taking into account much more comprehensive drug utilization reviews so they are seeing the history of the 

patient’s care to make sure that the total drugs being dispensed 

over the course of a given benefit period are consistent with sound 

clinical judgment. 

We understand that oncology patients and other patients have 

very legitimate care needs, and also many of our beneficiaries have 

very unique geographic circumstances that at this time we do not 

believe that a restrictive program would work well in the Part D 

program. To our strategy and our belief, we have to have clinical 

judgment, clinical review drive those behaviors, and when our Part 

D sponsors—our hope is that when our Part D sponsors see prescribing that cannot be justified by any means through clinical review and judgment, those payments are cut off. Our Part D sponsors do not carry guns. CMS does not carry guns. So we have to 

refer those cases to law enforcement. But our responsibility is, 

number one, to make sure there is good clinical judgment, and then 

two is to make sure that we are providing the necessary direction 

to our plans for clear cases to law enforcement for investigation 

and for follow-up. 

Senator CARPER. Mr. Kutz, would you just respond to what Mr. 

Saccoccio has been saying? 

Mr. KUTZ. Right, and I would agree that some of these 170,000, 

as we mentioned before, are not necessarily doctor shopping. Some 

are. And there are some people that go to two, three, or four that 

would meet the definition of doctor shopping. So that number is a 

soft number. You would have to really investigate all 170,000 to 

know what really is happening. 

I think the sponsors told us the same thing, that they would like 

several to do a lock-in if they have the infrastructure in place. So, 

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23 

again, I still think that CMS should at least consider this as a 

valid part of the back end of the process, which really, if you think 

about it, feeds into the front end, too. If you are only allowed to 

go to one pharmacy, it is kind of hard. We had people that went 

to 45 pharmacies. So if you are locked into one pharmacy—we are 

not denying you the drugs. We are just actually trying to better 

control your behavior. And, again, you have to have a safety net 

for the legitimate people so you do not lock legitimate people out 

of the program. We certainly agree with that. 

Senator CARPER. All right. Mr. Blum, is it CMS’ position that restricted recipient programs are a proven mechanism to minimize 

program issues in Medicaid but would not minimize program issues 

in Medicare Part D? We talked a bit about that. That seemed to 

be what you were saying. And in response to the request for comments from the plan sponsors that CMS put out, I believe last 

week, do you think that there is a chance that the plan sponsors 

would ask that a restricted recipient program actually be put into 

place? It sounds like some might be. And if so, would CMS’ position 

change? 

Mr. BLUM. We are certainly open to all ideas, and I think based 

upon the conversation and the testimony today, we will certainly 

take a second look to make sure that we are thinking about restricted programs correctly. If our Part D sponsors feel confident 

they can put these programs into place in a way that prevents 

fraud but does not restrict necessary care, we will consider being 

open to this idea. I think, again, our current judgment is that we 

think that more comprehensive drug utilization review is the best 

strategy right now, and we agree that broader data sharing, broader data analytics would give us new tools to help support law enforcement. But CMS will continue to stay open to all ideas, and we 

are very much committed to making sure that taxpayer dollars are 

being spent as wisely as possible. 

Senator CARPER. All right. Thank you for that. 

Back to Mr. Kutz, if I could. According to the report released by 

GAO today, the costs of drugs that were likely obtained through 

doctor shopping was close to $150 million. I think that was for one 

year? 

Mr. KUTZ. 2008. 

Senator CARPER. Yes, 2008. Could you talk further with us about 

that figure? How did GAO come up with it? 

Mr. KUTZ. It really was using—I guess we had the 2008 claims 

data. We have information from the NPIs, the national identifiers 

for prescribers. We had Social Security data, national drug code information that we used for those 14 classes. Remember, it is limited to 14 classes of drugs. We simply went in and did the data 

mining to see who was going to five or more prescribers for the 

same class of drug, whether it was a generic brand or a name 

brand, within—like oxycodone, oxycodone versus OxyContin, they 

would be within that same class, is our understanding. So that was 

how we actually organized the data, and then the information was 

for five or more. And, again, we got that five or more. There are 

a lot of people that have used three, four, five, six. It seems that 

there is a consensus in the three to six area. We actually used six 

when we did Medicaid before, but other State audits, the PDMPs, 

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24 

and the plan sponsors I think all would—five is in the ballpark for 

an indicator that there is a potential further review necessary. 

Senator CARPER. OK. Is there any way to factor in those costs 

to arrive at the true taxpayer price of this abuse? 

Mr. KUTZ. Well, it is not all taxpayer. This also affects the beneficiaries who are not doctor shoppers and are not abusing the program. That would presumably increase their share of paying for 

this. And then we did not include the office visit. I think it was 

mentioned that some of these people actually went to emergency 

rooms to get their drugs. 

Senator CARPER. I think, Mr. Saccoccio, didn’t you mention that? 

Mr. KUTZ. Right, and we saw evidence of that also, and we saw 

it in Medicaid also, that in some cases they would go to the emergency room. It is just another way to doctor shop, is to go get several—they will not usually give you a full month, but they might 

give you enough to get you through a few days. Then I would assume Medicare has to pay for the cost of the emergency room visit 

in that particular case. 

Senator CARPER. And talking about $148 million in 2008, does 

that include doctor’s office visits? Does it include—— 

Mr. KUTZ. No, it does not include office visits or emergency room 

visits, no. 

Senator CARPER. OK. Mr. Saccoccio, I have no idea how much 

that would add up to, but are we talking about several millions of 

dollars or maybe more than that? 

Mr. SACCOCCIO. Yes, I think there is a ratio. Some information 

we had seen is for every prescription drug, say, that was obtained 

for abusive purposes, you may have as many as $14 behind that, 

and emergency—— 

Senator CARPER. Say that again. 

Mr. SACCOCCIO. It is 14:1. Say the drug costs $20 to obtain. Between the office visits, emergency room visits, those kinds of 

things, you are talking about a ratio of, say, 14:1. So for every abusive drug that you may have seen, the cost could be that much 

higher. 

Senator CARPER. Fourteen times higher? 

Mr. SACCOCCIO. Well, because of those additional services that go 

along with obtaining that drug. So if you go to an emergency room 

and say, ‘‘I hurt my leg and I need to get the drug,’’ I mean, there 

is the cost—either Medicare or Medicaid or commercial insurer is 

paying for that emergency room visit that goes along with that little prescription that you get as you walk out the door to go get that 

drug. 

Senator CARPER. Even if it were four times higher, that would 

be a heck of a lot money. That would be like $600 million in a year. 

Mr. KUTZ. We did not pick these drugs because of their cost, and 

as you mentioned, the cost in society in perhaps the bigger issue. 

We picked them because the street value of OxyContin is several 

thousand dollars for one prescription. So that gets into some of the 

other factors to consider here in why we picked them. But in working with you and your staff, we looked at the 14 drugs that we 

thought were the most dangerous and most highly abused in our 

country right now. 

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Senator CARPER. All right. Mr. Blum, if I could, as you know, I 

worked with Senator Brown and others, Tom Coburn, Senator 

Coburn, and others on our Subcommittee to try to write legislation 

that is aimed at curbing waste and fraud in both Medicare and 

Medicaid. We have introduced bipartisan legislation, S. 1251—I 

mentioned it earlier in my statement—the Medicare and Medicaid 

Fighting Fraud and Abuse to Save Taxpayer Dollars Act. That is 

a mouthful, isn’t it? And there is no good acronym for that one, you 

will be pleased to know. But the legislation contains a number of 

ideas that I think directly impact the diversion of drugs from the 

Medicare prescription drug program. 

For example, the legislation aims to help States establish and 

strengthen prescription drug monitoring programs. It also helps to 

stop identity theft of physicians who prescribe controlled substances. One of the terms I have learned this year is what is called 

the ‘‘Master Death File.’’ People say, ‘‘Well, what is the Master 

Death File?’’ And I say, ‘‘That is the list you do not want your 

name to appear on because it means you are dead.’’ And yet we 

have doctors whose names appear on the Master Death File because they are dead, and they are still writing prescriptions. And 

we have beneficiaries whose names paper on the Master Death 

File, and they are still receiving benefits even though they are 

dead. And we know that in reality that doctors cannot be writing 

prescriptions and the beneficiaries cannot be receiving benefits. 

One of the cornerstones of our bill is to require closer coordination and better information sharing among Medicare officials and 

their staff, Medicare oversight contractors, or private partners such 

as the prescription drug plan sponsors, as well as local, State, and 

Federal law enforcement. And I would ask you, if I could, Mr. 

Blum, do you think that these provisions of our legislation would 

help to curb, at least to some extent, drug diversion from Medicare? 

And, second, do you believe that such steps as better communication and data sharing with law enforcement can prove beneficial? 

Mr. BLUM. I had a chance to carefully review the legislation that 

you introduced, and I think there are some very good ideas that 

will improve both the Part D program and the Medicare program 

overall. And I think that it is fair to say that any barriers that can 

be taken down for data sharing and data analysis will prove very 

beneficial to the program. The program has been built in silos. We 

have physician data systems and hospital data systems and Part 

D data systems historically that have prevented very sophisticated 

data analysis. We do not always have the feedback loops between 

the program and law enforcement, and law enforcement back to the 

program. And those are barriers that we need to break down—that 

your legislation, I think, would be helpful to continuing that effort. 

But now we have much more sophisticated data systems. We 

have Part A and Part B and Part D claims, the common data sets. 

We are moving to making sure that the prescriber’s ID number is 

part of the drug claim so we can see where prescriptions start from 

much more easily. And I think any effort that we can use to be 

much more proactive in our focus and to put into place procedures 

up front will serve the program well, and also to facilitate the feedback between the programs and law enforcement and the oversight 

agencies to make sure that we are acting when we can. 

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26 

I think the report that came to our attention through the great 

work of the GAO led us to take steps. The more that we can continue that feedback, the program will be better off. 

Senator CARPER. Mr. Saccoccio, do you want to comment as well 

on that question, please? 

Mr. SACCOCCIO. Yes, I think we have always stood for the proposition that information sharing is critical to being successful 

against health care fraud, whether that information sharing is between Federal agencies, between Federal agencies and State agencies, or between the private and public sector. So to the extent that 

the legislation endorses that idea and creates an environment 

where that type of information sharing could take place, I think 

that is critical. 

Data analysis is important and looking at data and analyzing 

that is all well and good, but once you get that information, you 

need to do something with it. And it is important not only to just 

keep it in the little silo that it is in, but to share that information 

with others that are involved in the fight. So I think that is critically important. 

Senator CARPER. OK. Well, as some of you know, when we hold 

these hearings, I describe the way I try to give speeches, and I like 

to tell people what I am going to tell them, and then at the end 

I tell them again what I have told them. It is almost like a diamond here. I do not do that as well as I ought to, but at least that 

is what I try to do. And at these hearings I like to give each of you 

a chance to make some comments at the end given what you may 

have learned or thought of or just want to react to. And I am going 

to do that here in a little bit. 

Another question I oftentimes like to ask is: What implications 

flow from this hearing for those of us in the Legislative Branch? 

A lot of times we talk here about our responsibility to provide oversight, good oversight, and in many cases to work with GAO in 

order to find behavior that is financially wasteful and to put a spotlight on that. In some cases we like to put a spotlight on good behavior, too, and to positively reinforce that behavior. 

Let me just ask each of you, in terms of what we are doing or 

are not doing, what should we maybe be doing more of on the legislative side or less of in order to get us to the point we are actually 

getting better results for less money? Mr. Kutz. 

Mr. KUTZ. With respect to you, I think, having constructive hearings like this, talking about concrete solutions, this is a drill-down 

from the normal improper payment where you talk at a little bit 

higher level in general. Having drill-downs like this periodically I 

think is good to actually see what is really going on out there behind the numbers. This is a teeny little piece of your bigger fraudulent and improper payments story, and each one of those little 

pieces of that has concrete solutions that can be implemented. And 

so this is an example of that, and so I commend you for having this 

hearing. I think it is very good. 

Legislatively, if it is determined that a restricted recipient is 

something they are considering, they may or may not need your assistance with legislation on that. That is just something from a 

standpoint of what you might need to help with. 

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27 

And then just there is no one piece of a solution to the discussion 

today. It is a comprehensive solution. A fraud prevention program 

includes front-end monitoring and something happening at the 

back end, and all those things working together in a feedback loop 

so that if someone rips off the program, you utilize that so that 

they do not do it again at the front end. 

So I think that there is a combination of things that could be 

done to address doctor shopping here. 

Senator CARPER. All right. Thank you. 

Mr. Blum, implications for us in the Legislative Branch, what 

can we do that would be helpful? What should we do more of or 

less of? 

Mr. BLUM. Well, I think we as an agency overall, our strategy 

is to be much more proactive with data analysis and with more sophisticated monitoring and oversight to our data to find clues and 

to find trends that are troubling. We do not have all the resources 

that we could to do this kind of monitoring. The more that we can 

have outside experts and the oversight agencies sharing in that 

analysis to kind of bring things to our attention that our work does 

not necessarily highlight, but I think the more that we can have 

other analytic shops go into our data, mine our data, find relationships that are troubling, that is better for the program, and I think 

that is the best thought I have right now. 

Senator CARPER. All right. Mr. Saccoccio, what can we be doing 

on our side over here? 

Mr. SACCOCCIO. Well, the first thing with respect to this particular issue, again, gets back to the restricted recipient program. 

I do not know if there is some sort of statutory restriction with respect to that. If there is, then I would think, to the extent there 

is, a legislative fix may be the way to go in order to allow CMS— 

we believe that once CMS has now asked the sponsors. I think the 

sponsors are going to come back and recommend some sort of lockin program. So, will CMS have the authority to do that? 

But beyond that, on the broader question of health care fraud, 

I think one of the critical things is simply resources, the funding 

for the Inspector General’s office, for the FBI, for CMS to implement the type of predictive modeling that they are doing now and 

to continue to fund them in such a way that allows them to do that 

job effectively, because it is an effort that you just cannot do in 1 

or 2 years. It has to be an effort that continues over the course of 

many years if you are going to start driving this stuff down, because it is not going to happen overnight. 

So I think, the funding, I think the Affordable Care Act provided 

some solid funding in the anti-fraud area for, again, the FBI Inspector General, both at the front end with respect to data analytics and preventing the money from going out the door in the first 

place, and then to the extent it has, to investigating that and taking the appropriate judicial and legal action on the back end. 

Senator CARPER. All right. I sometimes use the example of my 

mom when we are talking about better outcomes for less money. 

My mom is now deceased. She died about 5 years ago, about the 

time that the Part D program was introduced. But for a number 

of years, she—she outlived my dad, but she lived down near Clearwater, Florida, and she had dementia in her later years. She had 

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dementia, arthritis, congestive heart failure, just a number of problems that sometimes happen to us when we get older. She was seeing about five or six doctors. My sister and I would take turns 

every other month going down to visit with her, and we had folks 

literally with her in her home around the clock near the latter part 

of her life. But we found out that five or six doctors were prescribing maybe as many as 15 different prescriptions, and none of 

the doctors ever talked to each other. They did not have electronic 

health records for my mom, people like in her situation, so no one 

was really monitoring to see which medicines were compatible with 

other medicines and, frankly, which ones were not. 

We are at a point now—I was in a pharmacy, I actually visited 

Walgreen’s, like pharmacy of the future. I was in Chicago a couple 

of weeks ago. And they are doing pretty amazing things in that 

pharmacy. And they, along with other pharmacies, especially the 

chain pharmacies, have gotten very good at being able, before they 

fill a prescription, to look at the other medicines that a person is 

taking and deciding which ones are compatible and which ones are 

not. And we are doing a better job, a lot better work now with electronic health records, some of which we funded through the stimulus act and some of which we are funding through the Affordable 

Care Act. 

Talk to us a little bit, if you will, about how can we do a better 

job of using electronic health records as they become more common 

and more widespread. How can that help us in dealing with this 

particular issue? 

Mr. KUTZ. I will just start. My team is the Forensic Audit Team 

in GAO. That is what we do. We deal with data, and so data is 

very powerful. Over the years we have identified hundreds of thousands of potential cases of fraud and abuse across the government, 

so I would just say data is a powerful tool not just for investigators 

but for management to actually oversee and manage a program, 

and in this particular case to prevent and identify fraud. 

Senator CARPER. Aside from the fact that this stuff that is being 

done is illegal, aside from the fact that we are running out of 

money in the Medicare trust fund and are going to run out of 

money I think by about 2020, maybe even sooner, if we just sort 

of leave things on autopilot, but how do we—what is the interest, 

the financial interest, of the prescription benefit managers that are 

offering all these—what is their financial interest here in reducing 

the incidence of this kind of activity? Are they better off if it continues or not? For the doctors, who—I like to harness market forces 

rather than maybe pass legislation or to have regulations. How do 

we harness market forces in this situation to reduce this kind of 

illegal behavior? Or can we? 

Mr. BLUM. I think one of our challenges of the Part D program 

is that most of the beneficiaries who are in the Part D benefit receive drug benefits from stand-alone drug plans that do not have 

the same financial relationships to other parts of the benefits. 

Beneficiaries who are in comprehensive health plans like the Medicare Advantage plans have a more comprehensive benefit structure. And I think the challenge for the program and the Congress 

is for us to think about ways to incent Part D plans, the standalone Part D plans, to think about consistent goals that the proH605-41331-79W7 with DISTILLER

29 

gram has. We know that care coordination not just for pharmacy 

benefits but for all of our health care benefits is the best strategy 

we have to reduce costs but also to improve care for our beneficiaries. We are trying to accomplish that through accountable 

care organizations and new payment reforms to provide stronger 

incentives for care coordination and primary care medical homes. 

But I think a challenge with that is the fact that we have standalone Part D plans providing the bulk of the benefits to our beneficiaries, and so we have to build much stronger relationships with 

our stand-alone Part D plans to ensure that they are providing 

benefits that are consistent with the overall strategies that we 

have for the Medicare program. 

Senator CARPER. Mr. Saccoccio, in terms of harnessing market 

forces to incentivize, without regulations, maybe without laws, how 

might we do that in this instance? 

Mr. SACCOCCIO. Well, I think, coordination of care is critical, and 

to Mr. Blum’s point, to the extent that you have a stand-along Part 

D plan that is administering a drug benefit in Medicare and maybe 

using a PBM to do that, but is not at the same time—does not necessarily pay out anything or monitor any of the other care that the 

individual is receiving, then you have a disconnect between perhaps the prescription side of things and the actual medical care 

that the person is receiving, that may be receiving it through simple Medicare fee-for-service. 

One of the advantages, I think, of the Part C program, Medicare 

Advantage, is that the person is in a health plan that can look at 

all aspects of what is happening and be able to control that. So, to 

the extent that—and what you see in the States with Medicaid is 

a lot of States moving away from Medicaid fee-for-service to managed care for Medicaid as well so that you get that coordination of 

care. 

I think that coordination of care is critical, and I think maybe 

the ACOs under the Affordable Care Act are trying to move in that 

direction as well to try to put folks in situations where care is at 

least coordinated, where providers are speaking to each other. And 

your example about your mother, I know my mother as well now 

is on—we keep a list of all the medications she is on, because if 

she ever has to go to a hospital or anything, we show that list because it is up to about 10 or so. And she sees probably five or six 

different doctors. 

Senator CARPER. Sounds familiar. 

Mr. SACCOCCIO. And it is not clear to me that anybody is talking—that they are not really talking to each other. She is simply 

in Medicare fee-for-service. 

Senator CARPER. All right. Mr. Kutz, talk to us a little bit about 

is there some way we can be harnessing market forces and using 

that as a way to reduce this incidence of abuse. 

Mr. KUTZ. Well, I am not an expert at that issue, but, when we 

did our work, we did see some—we were not looking at it, but some 

of the pharmacies seemed somewhat culpable in what was happening in that if you actually got a printout of an individual who 

had gone to that pharmacy and all the different drugs they had 

gotten, all the different prescribers, and, in fact, they were going 

in with cash, because it was noted in the system that they got their 

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drugs with cash, they did not seem too concerned in some of the 

pharmacies with what was going on, and so perhaps it is because 

that would be a revenue source cut off if you kick someone out of 

your pharmacy. 

Senator CARPER. So the financial incentives might be working 

just the opposite. 

Mr. KUTZ. The opposite. It would seem the opposite. Now, again, 

I cannot say that. I am just saying it was an observation. We did 

not report on that, but it is just something we saw. When I looked 

at these printouts, it was pretty striking. You would think someone 

would have noticed. 

Senator CARPER. Good point. 

Mr. KUTZ. And the same thing with the doctors. Some of the doctors, even though they got the letters from the PDMPs and the 

drug sponsors that their patients were going to numerous other 

doctors for the same drug, they kept on prescribing and they did 

not do anything about it. So that was just another observation. I 

do not know what their incentives are, what their malpractice kind 

of liability is, but that was another observation. 

Senator CARPER. All right. Good. Thanks. 

We are getting close to the end, but I think before I ask you just 

to give a closing statement, I want each of you, if you will—we will 

start with you, Mr. Saccoccio. Given what you have heard—you 

bring a whole lot of knowledge and just great insights into these 

issues, anyway, but just tell us where you think there is consensus. 

One of the things I like to do is try to develop consensus at a hearing like this. But where do you think there is consensus on what 

is working now and next steps forward to address this problem? 

Where do you think the consensus lies in this arena? 

Mr. SACCOCCIO. Well, I think there is consensus that, first of all, 

there is an enormous problem. I think the problem may be even 

greater than what the GAO report reveals, especially since if you 

look at it from a national perspective, certainly Medicare Part D, 

looking at that piece. But from a national perspective, prescription 

drug fraud and diversion is an enormous issue, so I think there is 

consensus there. 

I think there is consensus on the concept that you cannot go 

after this problem with just one solution. You have to be monitoring closely. You have to have up-front solutions to try to keep 

it from happening in the first place, and then to the extent that 

you have found the problem, you need to notify the prescribers, you 

need to notify the patient, you need to try to get that patient, if 

you think there is an addiction problem, the treatment that patient 

needs. And then you need to do something to control it, and I think 

the lock-in programs and restrict recipient programs are probably, 

again, what CMS is going to hear a lot of from the Part D sponsors. 

So, I think you could do those lock-in programs in such a way 

that it does not interfere with the receiving of drugs that are needed by patients that actually need them. 

Senator CARPER. Good. Mr. Blum, where do you think the consensus lies? And feel free to repeat almost verbatim what Mr. 

Saccoccio said if you agree with him, or add to that or take away. 

Mr. BLUM. I do agree with the prior statement. I think there is 

consensus that we have a growing problem within the Part D proH605-41331-79W7 with DISTILLER

31 

gram of misuse and abuse. I think there is consensus within CMS 

and I think at this table that we need stronger responses. 

I think there is consensus that we need to work with our plan 

sponsors to figure out the best strategies to put in place so we are 

not cutting off access to those beneficiaries who have need. 

I think there is consensus that we need to explore some of the 

recommendations from the GAO more fully, but from CMS’ perspective, there is no lack of concern that this is a growing problem 

for the Medicare Part D program, and hopefully, Mr. Chairman, 

there is no concern that we are not going to do everything we can 

to ensure that we are stopping the misuse and abuse while permitting those in need to have access to the drugs they need. 

Senator CARPER. Thank you. 

Mr. Kutz, where do you think the consensus lies? 

Mr. KUTZ. That there is a problem; the problem is not just in 

Medicare Part D. This is a nationwide problem. You have pointed 

that out very clearly in some of the statistics so this goes beyond 

that. And we saw evidence of that. The sources of the drugs these 

people are getting was not just Medicare Part D. 

That a comprehensive approach is necessary that includes more 

than just one type of activity, the importance of data mining and 

data to this and breaking down the silos we have in our government within the health care system so the data can more freely be 

shared. 

And then with respect to the restrict recipient program, I do not 

think we have agreement on that, but we have agreement that if 

you have a program in place, you need to make sure you have a 

safety net for the individuals that have legitimate needs to make 

sure they do not get shut out of the program, and that is—— 

Senator CARPER. Give us an example of that. 

Mr. KUTZ. Well, you would not want to put someone on a restricted recipient program if they are going to five or more doctors 

for legitimate reasons. You have to have proven the case that they 

are, in fact, doctor shopping in an abusive way. So I think that is 

what we are talking about. We all agree on that. 

Senator CARPER. OK. All right. You all are welcome to take a 

minute or two just to help me with the benediction, a closing statement just as kind of a summary of what you are taking out of here 

and what you would have us take away from this hearing. It has 

been quite a good hearing, I think. Mr. Saccoccio. 

Mr. SACCOCCIO. Well, again, I think that a hard look should be 

taken at restricted recipient programs. I think they could be done 

in such a way that they take into account the valid needs of folks 

that need those pain medications. I think we have come a long way 

with respect to treating folks, recognizing pain as a major issue 

and to be able to manage pain for patients with certain conditions. 

But at the same time, I think we could do it in such a way that 

cuts down significantly on the abuse. Obviously, you are not going 

to take away all the abuse, but you could cut down on it, and I 

think these types of programs have a lot of promise. 

Senator CARPER. Mr. Blum. 

Mr. BLUM. Just in closing, just to thank you and the Subcommittee for having this hearing. I think from our perspective at 

CMS oversight helps us understand vulnerabilities and where we 

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can improve the Part D program. I think the Part D program, to 

our belief, is stronger for beneficiaries than it has been during its 

5- or 6-year history. But at the same time, there are 

vulnerabilities. We have to make sure those vulnerabilities are 

closed down while also maintaining the goals that we have for the 

Part D program to ensure that beneficiaries have drug benefits 

that will improve their health and to provide access. 

So, in closing, thank you for the attention, and thank you for 

commissioning the GAO report. It was very helpful for us, and 

there are some definite to-do’s for us to follow up on following this 

conversation. I look forward to working with you and your staff to 

report back on that follow-up. 

Senator CARPER. Good. We will welcome that. Mr. Kutz. 

Mr. KUTZ. Thank you for inviting us to this, and we enjoyed 

working in a bipartisan fashion with you and Senator Brown’s 

staff, and I appreciate the constructive nature of the hearing. 

Senator CARPER. All right. Thanks. 

In closing, let me again thank each of you for joining us today, 

for your testimony, and for your responses. A special thanks to 

GAO for helping us with our oversight responsibilities. You are a 

great partner, and we are grateful to you and your colleagues on 

a broad range of issues. 

It is hard to believe that 10, 11 years ago we had balanced budgets in this country. We had three or four of them in a row at the 

end of the 1990s, and it is hard to believe that we find ourselves 

looking, instead of at a sea of black ink where we were 10, 11 years 

ago, at a sea of red ink. And I think this year the deficit is expected 

to come in around $1.3 trillion and there is red ink for just about 

as far as the eye can see. 

Some folks think that there may be two ways to reduce deficits. 

One of those is to cut spending and another is to raise taxes or increase revenues. I think there are at least two more, and one of 

them is just to grow the heck out of the economy, and we are actually going to do some good and, I think, thoughtful legislation in 

the next week or two which I think will help in that arena as we 

try to grow exports. 

Another way is to look at every nook and cranny of the Federal 

Government and look at every program. I like to say, and you have 

all heard me say it before, that every thing I do I know I can do 

better. The same is true of all of us, and the same is true of Federal programs. Whether they happen to be Medicare, Medicaid, defense programs, entitlement programs, tax expenditures, everything we do we could do better, and we have to take that attitude, 

almost a culture change, moving from a culture of almost spendthrift to a culture of thrift. And this is just one more piece of that. 

My boys are 21 and 23. They are pretty sure that Medicare or 

Social Security are not going to be there for them when they are 

65, 67, or 69 years old. And, frankly, a lot of young people in their 

generation feel the same way. I think part of my responsibility is 

to make sure that those programs, those benefits are there and 

that they are most cost-effective and providing the safety net that 

we need as we advance in our years. 

So I think there is a bit of a moral imperative here for us to get 

better results for less money, and we cannot continue to spend $1.3 

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33 

trillion a year that we do not have. The rest of the world will stop 

lending us the money, and they are finding that in places like 

Greece. 

So I appreciate the efforts that have begun at CMS, and we applaud those efforts. We want to do a whole lot better, and we want 

to help you do a whole lot better. I think we need to take a good 

look at Humana and WellPoint and some of those other outfits and 

see what we can learn from them. 

I have never been very good at holding ‘‘gotcha’’ hearings. We always like to hold hearings on this Subcommittee, always bipartisan, but we always like to hold hearings where we are looking for 

an answer or a series of answers, and we are looking for a way to 

get to better results for less money, and today I think we have 

taken some good progress in that direction. 

We thank you all, and let me ask our staffs, but I think our colleagues on the Committee, the Subcommittee, have a couple of 

weeks that they can still submit questions in writing, and I would 

just ask that you respond to them promptly. 

We are not going to go away on this issue. We are going to stay 

on this issue. And I am encouraged to know that you will, too, and 

we look forward to making great progress on this front. 

Thank you very much, and with that, this hearing is adjourned. 

[Whereupon, at 12:17 p.m., the Subcommittee was adjourned.] 

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