Department of Health and Human Services

OFFICE OF

INSPECTOR GENERAL

RETAIL PHARMACIES WITH

QUESTIONABLE 

PART D BILLING

Daniel R. Levinson 

Inspector General

May 2012

OEI-02-09-00600
EXECUTIVE SUMMARY: RETAIL PHARMACIES WITH QUESTIONABLE 

PART D BILLING

OEI-02-09-00600

WHY WE DID THIS STUDY 

Under the Medicare Part D program, the Centers for Medicare & Medicaid Services 

(CMS) contracts with private insurance companies, known as sponsors, to provide 

prescription drug coverage to beneficiaries who choose to enroll. In the 6 years since

Part D began, the Office of Inspector General (OIG) has issued several reports that found 

that Part D had limited safeguards in place.

HOW WE DID THIS STUDY

We based this study on an analysis of prescription drug event records. Sponsors submit 

these records to CMS for each prescription dispensed to beneficiaries enrolled in their 

plans. Each record contains information about the pharmacy, prescriber, beneficiary, and 

drug. We analyzed all of the records for prescriptions billed by retail pharmacies in 

2009. We developed eight measures to describe Part D billing and to identify pharmacies 

with questionable billing.

WHAT WE FOUND

Retail pharmacies each billed Part D an average of nearly $1 million for prescriptions in 

2009. Over 2,600 of these pharmacies had questionable billing. These pharmacies had 

extremely high billing for at least one of the eight measures we developed. For example, 

many pharmacies billed extremely high dollar amounts or numbers of prescriptions per 

beneficiary or per prescriber. This could mean that a pharmacy is billing for drugs that 

are not medically necessary or were never provided to the beneficiary. Although some of 

this billing may be legitimate, pharmacies that bill for extremely high amounts warrant 

further scrutiny. The Miami, Los Angeles, and Detroit areas were the most likely to have 

pharmacies with questionable billing.

WHAT WE RECOMMEND

Together, the findings of this report and prior OIG reports call for a strong response to 

improve Part D oversight. Therefore, we recommend that CMS: (1) strengthen the 

Medicare Drug Integrity Contractor’s monitoring of pharmacies and ability to identify 

pharmacies for further review, (2) provide additional guidance to sponsors on monitoring 

pharmacy billing, (3) require sponsors to refer potential fraud and abuse incidents that 

may warrant further investigation, (4) develop risk scores for pharmacies, (5) further 

strengthen its compliance plan audits, and (6) follow up on the pharmacies identified as 

having questionable billing. CMS concurred with four of the recommendations and 

partially concurred with the other two.
TABLE OF CONTENTS

Objectives ....................................................................................................1

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

Methodology................................................................................................5

Findings........................................................................................................9

Retail pharmacies each billed Part D an average of nearly 

$1 million for prescriptions in 2009.................................................9

Over 2,600 retail pharmacies had questionable billing..................11

The Miami, Los Angeles, and Detroit areas were the most likely 

to have pharmacies with questionable billing................................15

Conclusion and Recommendations............................................................19

Agency Comments and Office of Inspector General Response.....22

Appendixes ................................................................................................23

A: Most Common Drugs Billed to Medicare Part D by Retail

Pharmacies, 2009 ...........................................................................23

B: Most Common Schedule II and III Drugs Billed to 

Medicare Part D by Retail Pharmacies, 2009 ................................24

C: Number of Pharmacies That Billed Extremely High 

Amounts by Number of Measures, 2009 .......................................26

D: Percentage of Pharmacies With Questionable Billing in Each 

Area That Exceeded the Threshold, 2009......................................27

E: Agency Comments ...................................................................28

Acknowledgments......................................................................................32
Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 1

OBJECTIVES

1. To describe Part D billing by retail pharmacies in 2009.

2. To identify retail pharmacies with questionable Part D billing in 2009.

BACKGROUND

The Medicare Part D program provides an optional prescription drug 

benefit to Medicare beneficiaries.1 The Centers for Medicare & Medicaid 

Services (CMS) contracts with private insurance companies, known as 

sponsors, to provide drug coverage to beneficiaries who choose to enroll 

in the program. In 2010, approximately 35 million beneficiaries were 

enrolled.2

In the 6 years since Part D began, the Office of Inspector General (OIG) 

and others have raised concerns about Part D billing. In several reports, 

OIG found that the program has limited safeguards in place and is 

vulnerable to fraud, waste, and abuse.3

Additionally, recent investigative cases have illustrated a variety of alleged 

fraud schemes by pharmacies. For example, a pharmacist who owned 

26 pharmacies was charged with health care fraud and drug diversion. 

The owner allegedly paid physicians to write prescriptions that were 

medically unnecessary and to direct patients to fill them at his pharmacies. 

The pharmacies purportedly billed $37.7 million to Medicare.

4

 In another 

case, the owners of two pharmacies were charged with fraudulently billing 

Part D for $3 million for drugs that were never purchased by their 

pharmacies or dispensed to beneficiaries.5

Concerns about program vulnerabilities have been further heightened by 

the growing prescription drug abuse problem in the Nation. The number 

1 The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, 

P.L. 108-173. 2 The Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical 

Insurance Trust Funds, 2011 Annual Report of the Boards of Trustees of the Federal Hospital 

Insurance and Federal Supplementary Medicare Insurance Trust Funds, p. 9. Accessed at 

https://www.cms.gov/ReportsTrustFunds/downloads/tr2011.pdf on June 28, 2011. 3 Examples include OIG, Medicare Drug Plan Sponsors’ Identification of Potential Fraud and 

Abuse, OEI-03-07-00380, October 2008; and OIG, Medicare Drug Integrity Contractors’ 

Identification of Potential Part D Fraud and Abuse, OEI-03-08-00420, October 2009. 4 United States Attorney’s Office, Eastern District of Michigan, Twenty-six Indicted in Drug 

Distribution Investigation That Led to Uncovering Massive Health Care Fraud,

August 2, 2011. Accessed at 

http://www.justice.gov/usao/mie/news/2011/2011_8_2_bpatel.html on August 4, 2011. 5 Department of Justice, Two Brooklyn, New York Pharmacists Charged in $3 Million Health 

Care Fraud Scheme, July 26, 2011. Accessed at http://www.justice.gov/opa/pr/2011/July/11-

crm-970.html on November 14, 2011.
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 2

of accidental deaths caused by prescription painkillers each year has 

increased substantially since 2000.6 In 2007, more people died from 

overdoses of prescription painkillers, such as oxycodone, than from 

cocaine and heroin combined.7

Despite these concerns, little information is currently available about 

Part D billing. There are no data about how pharmacies typically bill 

Part D, or about questionable billing. Identifying these data is an 

important first step in detecting potential fraud, waste, and abuse. 

This study provides a first look at Part D billing by pharmacies 

nationwide. It is part of the Health Care Fraud Prevention and 

Enforcement Action Team Initiative (HEAT), which focuses on detecting 

health care fraud through innovative data analysis and enhanced 

cooperation between the Department of Justice, OIG, and CMS.8

Medicare Part D

Medicare beneficiaries who choose to participate in the Part D program 

enroll in one of many plans offered by Part D sponsors. The sponsors may 

contract directly with pharmacies or they may contract with third-party 

entities, such as pharmacy benefit managers (PBM), which contract with 

pharmacies on the sponsors’ behalf.9 Pharmacies include retail, 

long-term-care, and mail-order; they may be independently owned or part 

of a chain. Retail pharmacies are the most common type of pharmacy 

participating in Part D. Currently, almost all retail pharmacies in the 

Nation participate in Part D.10

Types of Part D Fraud and Abuse

CMS has identified a number of potential pharmacy fraud schemes.

11 

Many of these schemes include inappropriate billing practices, such as 

billing for nonexistent prescriptions, billing for brand-name drugs when 

6 Centers for Disease Control and Prevention (CDC), Office of the Director, Public Health 

Grand Rounds, February 17, 2011, p. 10. Accessed at http://www.cdc.gov/about/grandrounds/archives/2011/pdfs/PHGRRx17Feb2011.pdf on July 12, 2011. 7 CDC, Unintentional Drug Poisoning in the United States, July 2010. Accessed at 

http://www.cdc.gov/HomeandRecreationalSafety/pdf/poison-issue-brief.pdf on July 12, 2011. 8 U.S. Department of Health and Human Services and U.S. Department of Justice, HEAT Task 

Force Success. Accessed at http://www.stopmedicarefraud.gov/heattaskforce/index.html on 

January 11, 2011.

9 PBMs can provide a number of other services to sponsors, including processing prescription 

drug claims and managing formularies.

10 OIG, Retail Pharmacy Participation in Medicare Part D Prescription Drug Plans in 2006, 

OEI-05-06-00320, June 2007. 11 CMS, Prescription Drug Benefit Manual Chapter 9 – Part D Program to Control Fraud, 

Waste, and Abuse, April 2006. Accessed at 

http://www.cms.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_FWA.p

df on June 28, 2011.
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 3

generics were dispensed, and billing for prescriptions that were never 

picked up. Other schemes include drug diversion and kickbacks. Drug 

diversion occurs when a pharmacy dispenses a prescription drug for 

inappropriate or illegal purposes. A kickback occurs when a pharmacy 

pays a prescriber to write or a beneficiary to fill an unnecessary

prescription that is billed to Medicare.

These schemes have often involved Schedule II or III controlled 

substances. Schedule II drugs have a high potential for abuse and may 

lead to severe psychological or physical dependence if abused.12 They 

include drugs such as oxycodone and morphine. Federal law prohibits the 

refilling of prescriptions for Schedule II drugs. Schedule III drugs also 

have potential for abuse and include anabolic steroids, codeine with 

hydrocodone, and barbiturates. 

Detecting and Deterring Fraud and Abuse

CMS relies on sponsors to help safeguard the Part D program from fraud 

and abuse. CMS requires sponsors to have compliance plans that contain 

measures to detect, prevent, and correct fraud, waste, and abuse.13 As part 

of these plans, CMS expects that sponsors will monitor their contractors 

and subcontractors, including pharmacies.14 CMS also recommends that 

sponsors use data analysis to detect and prevent fraud, waste, and abuse.15 

Specifically, sponsors should use data analysis to recognize unusual trends 

and identify problem areas and to target their audits of contractors and 

subcontractors, including pharmacies. 

Additionally, CMS contracts with two Medicare Drug Integrity 

Contractors (MEDIC) to help identify vulnerabilities in the Part D 

program. One MEDIC’s responsibilities include, among other things, 

detecting, preventing, and investigating potential fraud, waste, and abuse, 

as well as referring potential cases to law enforcement. The other 

12 These are drugs regulated by the Controlled Substances Act, which established five 

schedules based on the medical use and the potential for abuse. The most restrictive is 

Schedule I, which includes drugs that have no currently accepted medical use and a high 

potential for abuse. Schedule V is the least restrictive. See 21 U.S.C. §§ 801-971. 13 42 CFR § 423.504(b)(4)(vi).

14 Part D regulations and CMS guidance refer to these contractors and subcontractors as firsttier and downstream entities. See 42 CFR §423.501(k) and CMS, Prescription Drug Benefit 

Manual Chapter 9 – Part D Program to Control Fraud, Waste, and Abuse § 40, April 2006. 

Accessed at 

http://www.cms.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_FWA.p

df on July 19, 2011. 15 CMS, Prescription Drug Benefit Manual Chapter 9 – Part D Program to Control Fraud, 

Waste and Abuse § 50.2.6.2, April 2006. Accessed at 

http://www.cms.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_FWA.p

df on July 19, 2011.
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 4

MEDIC’s responsibilities include performing special studies and 

providing technical assistance to CMS. 

CMS is responsible for overseeing the sponsors and MEDICs. CMS 

conducts onsite audits of sponsors’ compliance plans to assess the 

effectiveness of their fraud and abuse programs. CMS evaluates MEDICs’ 

performance annually.

Related Work

In a 2008 report, OIG found that in the first 6 months of 2007, 24 of the 

86 sponsors did not identify any potential fraud and abuse incidents.16 Of 

the incidents that were reported, inappropriate billing, such as submitting 

claims for drugs that were not provided, was the most common. OIG 

recommended that CMS determine why certain sponsors had identified 

especially high or low volumes of potential fraud and abuse incidents and 

determine whether sponsors were initiating inquiries and corrective 

actions, as required. CMS concurred with these two recommendations. 

In another 2008 report, OIG found that although CMS relied partly on 

audits to oversee sponsors’ compliance plans, CMS had conducted only 

one such audit in 2007.17 OIG recommended that CMS conduct routine 

audits of sponsors’ compliance plans to verify that they meet all Federal 

requirements. CMS concurred with this recommendation and stated that it 

would begin compliance plan audits in 2007 and that sponsors would be 

accountable for meeting all requirements.

In 2009, OIG issued a report that highlighted vulnerabilities in the 

MEDICs’ ability to identify Part D fraud and abuse.18 Specifically, the 

report found that the MEDICs did not typically use proactive data 

analysis, such as identifying pharmacies that billed the highest Part D 

amounts, to detect potential fraud and abuse. The report also found that 

the MEDICs may not be aware of some potential fraud and abuse 

incidents because sponsors are not required to refer them to the MEDICs. 

OIG recommended that CMS ensure that the MEDICs have access to 

accurate and comprehensive data and require sponsors to report all 

incidents that are referred to law enforcement to MEDICs as well. CMS 

concurred with these recommendations, but stated that it did not have the 

regulatory basis to require sponsors to report such incidents. 

16 OIG, Medicare Drug Plan Sponsors’ Identification of Potential Fraud and Abuse, 

OEI-03-07-00380, October 2008.

17 OIG, Oversight of Prescription Plan Sponsors’ Compliance Plans, OEI 03-08-00230, 

October 2008.

18 OIG, Medicare Drug Integrity Contractors’ Identification of Potential Part D Fraud and 

Abuse, OEI-03-08-00420, October 2009. 
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 5 

METHODOLOGY 

This study is based on an analysis of prescription drug event (PDE) 

records for all Part D drugs billed by retail pharmacies in 2009. We 

matched these records to data from the National Council of Prescription 

Drug Programs (NCPDP) and First DataBank to obtain descriptive 

information about the pharmacies and drugs, respectively. 

PDE Data 

We first identified all PDE records with dates of service from January 1 to 

19 December 31, 2009, for covered Part D drugs. In total, we identified 

1.07 billion PDE records. Sponsors submit a record, called a PDE, to 

CMS for each prescription dispensed to beneficiaries enrolled in their 

plans. Each PDE record contains information about the drug and 

beneficiary, as well as identification numbers for the pharmacy and 

prescriber. 

To determine which PDE records were billed by retail pharmacies, we 

used the National Provider Identifier (NPI) for each pharmacy and 

20 matched the PDE records to the NCPDP database. This database 

contains descriptive information about each pharmacy, including its 

address, the type of pharmacy (e.g., retail), and ownership status (e.g., 

21 chain). We identified 59,307 retail pharmacies that billed a total of 

22 873.3 million PDE records. These records represented 82 percent of all 

PDE records and 90 percent (59,307 of 65,888) of all pharmacies that 

billed Part D in 2009. Other types of pharmacies billed the remaining 

196.2 million records. They included long-term-care pharmacies, 

mail-order pharmacies, and home infusion pharmacies. We excluded these 

pharmacies from our analysis because they offer different services and, 

therefore, may have billing patterns that are different from those of retail 

pharmacies. 

19 We used 2009 data because they were the most current full year of data available when we 

started the review. 

20 For almost all PDE records, the NPI of the pharmacy was included on the PDE record either 

by the sponsor or by CMS. We excluded 0.1 percent of the PDE records from our analysis 

because the NPI was missing, we could not determine whether the pharmacy that submitted 

the record was a retail pharmacy, or the pharmacy had multiple locations in the NCPDP. 

21 For the purposes of the report, we used the definitions of retail, chain, and independent 

pharmacies from the NCPDP. Accordingly, retail pharmacies are those in which the 

pharmacists store, prepare, and dispense prescription drugs for local patient populations. 

Chain pharmacies are part of a group of four or more pharmacies under common ownership. 

Independent pharmacies are one to three pharmacies under common ownership. We included 

franchise pharmacies with independent pharmacies because they are independently owned. 

22 We did not include 272 retail pharmacies that were alternate dispensing sites or 

Government pharmacies because they do not typically serve the public. 
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 6

Using the National Drug Code on the PDE record, we matched the 

873.3 million PDE records to data from First DataBank. First DataBank 

contains information about each drug, such as the drug name and whether 

the drug is brand name or generic.23 It also indicates whether a drug is a 

controlled substance and, if so, which schedule the drug is on 

(Schedule II or III). For the purposes of this study, we use the term 

“prescription” to mean one PDE record.

Measures of Pharmacy Billing

We calculated the total dollar amount and total number of prescriptions 

billed to Part D by retail pharmacies in 2009. 24 We also calculated the 

total number of beneficiaries who received Part D drugs from retail 

pharmacies in 2009 and the total number of prescribers who ordered these 

drugs.25 We then calculated the number of different types of drugs billed 

by retail pharmacies. For this analysis, we considered a type of drug to 

include all drugs with the same name, regardless of dosage or strength. 

Next, we developed eight measures to describe Part D billing and identify 

pharmacies with questionable billing. We developed these measures based 

on the results of past OIG analysis and fraud investigations of pharmacies, 

as well as input from CMS and contractor staff. 

The eight measures are:

(1) average amount billed per beneficiary, 

(2) average number of prescriptions per beneficiary, 

(3) average amount billed per prescriber, 

(4) average number of prescriptions per prescriber, 

(5) percentage of prescriptions that were for Schedule II drugs, 

(6) percentage of prescriptions that were for Schedule III drugs, 

(7) percentage of prescriptions that were for brand-name drugs, and 

23 First DataBank determines whether a drug is brand name or generic based on the drug’s 

name.

24 To calculate the total Part D amount billed, we summed three fields on the PDE records that 

represent the total gross drug costs: ingredient cost, dispensing fee, and sales tax. 25 To calculate the total number of beneficiaries, we identified the Health Insurance Claim 

Number (HICN) associated with each PDE record. To calculate the total number of 

prescribers, we identified the NPI for the prescriber on each PDE record. Because the PDE 

record can contain different types of identification numbers, such as an NPI or a Drug 

Enforcement Administration (DEA) number, we used a crosswalk developed by OIG analysts 

to identify the NPI associated with each prescriber identification number. We were able to 

identify the NPIs for 97 percent of the PDE records. For the remaining 3 percent, we used the 

alternative prescriber identification numbers included on the PDE records.
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 7

(8) percentage of prescriptions that were refills.26

We calculated these eight measures for each pharmacy. We then analyzed 

the distribution of all pharmacies for each measure and calculated the 

national averages for retail pharmacies.27

Identification of Pharmacies With Questionable Billing

For each measure discussed above, we set a threshold that indicated a 

pharmacy had billed an extremely high amount.28 We used a standard 

technique for identifying outliers, known as the Tukey method.29 Using 

this method, we set the threshold for each measure at the 75th percentile 

plus three times the interquartile range.30

Lastly, we determined whether the pharmacies with questionable billing 

shared certain characteristics. Specifically, we determined the proportion 

of pharmacies with questionable billing that were independent and the 

proportion that were part of a chain. We also determined whether the 

pharmacies with questionable billing were concentrated in certain 

metropolitan areas. To do this, we identified each pharmacy’s Core Base 

Statistical Area (CBSA) based on the pharmacy’s address. A CBSA is a 

region around an urban center that has at least 10,000 people.

 Values that exceeded these 

thresholds are extreme outliers. We considered all pharmacies that 

exceeded one or more of these thresholds to have questionable billing. 

31 CBSAs 

include the entire metropolitan area, not just the urban center. For 

example, the New York metropolitan area includes counties in New York 

and New Jersey. We focused our analysis on the 52 CBSAs that had at 

least 250 pharmacies because we wanted to concentrate on large 

metropolitan areas. These 52 CBSAs included 47 percent of all retail 

pharmacies nationwide that billed Part D in 2009. We then determined the 

26 Each PDE record indicates whether the drug is a refill.

27 The average number of prescriptions per beneficiary represents the average number of 

prescriptions one pharmacy billed per beneficiary. It does not represent the average number 

of prescriptions that each beneficiary received because beneficiaries can go to multiple 

pharmacies.

28 We focused our analysis of questionable billing on pharmacies that billed for at least 

100 PDE records and were paid at least $100,000 for Part D drugs in 2009. In total, 

3,344 retail pharmacies did not meet these criteria. We also identified 163 retail pharmacies 

that reported providing some specialty pharmacy services. Specialty pharmacies generally 

dispense high-cost drugs to patients with chronic, complex illnesses. Because we could not 

determine whether differences in their billing were due to their specialty services, we 

excluded them from this analysis. A total of 55,963 pharmacies and 870.9 million PDE 

records were included in this analysis.

29 See J.W. Tukey, Exploratory Data Analysis. Addison-Wesley, 1977.

30 The interquartile range is calculated by subtracting the value at the 25th percentile from the 

value at the 75th percentile. 

31 U.S. Census Bureau, Metropolitan and Micropolitan Statistical Areas. Accessed at 

http://www.census.gov/population/www/metroareas/aboutmetro.html on March 3, 2011.
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 8

proportion of pharmacies in each CBSA that had questionable billing and 

identified the CBSAs with the highest proportions. For these areas, we 

also calculated the percentage of pharmacies with questionable billing that 

billed extremely high numbers or amounts for each measure. We also 

determined the types of drugs these pharmacies billed most frequently. 

Limitations

We did not independently verify the accuracy of the PDE records or the 

data from the NCPDP or First DataBank. We based our analysis on the 

pharmacy type that each pharmacy reported in the NCPDP. As a result, 

our analysis of questionable billing may contain pharmacies that neglected 

to report providing specialty services. Providing such services may make 

a pharmacy more likely to exceed certain billing thresholds. 

We designed this study to identify pharmacies that warrant further 

scrutiny. None of the measures we analyzed confirm that a particular 

pharmacy is engaging in fraudulent or abusive practices. Some 

pharmacies may be billing extremely high amounts for legitimate reasons. 

For example, a pharmacy located in a rural area with few physicians may 

bill for an extremely high average number of prescriptions per prescriber. 

Alternatively, a pharmacy located next to a pain clinic may bill for an 

extremely high percentage of Schedule II or III drugs. 

Standards

This study was conducted in accordance with the Quality Standards for 

Inspection and Evaluation issued by the Council of the Inspectors General 

on Integrity and Efficiency.
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 9

FINDINGS

Retail pharmacies each billed Part D an average of 

nearly $1 million for prescriptions in 2009

In total, 59,307 retail pharmacies billed Medicare Part D in 2009. These 

pharmacies billed Part D for a total of 873.3 million prescriptions for 

24.4 million beneficiaries.32 Part D paid $56.9 billion for these 

prescriptions.33

On average, retail pharmacies billed almost $1 million each for Part D 

prescriptions in 2009. Half of them billed more than $750,000, while 

10 percent billed more than $1.8 million. In total, retail pharmacies billed 

for 3,804 different types of drugs; however, some drugs were more 

common than others. Twenty drugs accounted for one-third of all Part D 

prescriptions billed. See Appendix A for more information about these 

drugs. 

Two-thirds of the retail pharmacies that billed Part D were chain 

pharmacies, while one-third were independent pharmacies. In all, 

39,401 chain pharmacies and 19,906 independent pharmacies billed Part D 

in 2009. 

Retail pharmacies billed about $1,500 per beneficiary and 

$1,800 per prescriber, on average

As shown in Table 1, retail pharmacies billed an average of $1,576 for 

each beneficiary they served. On average, they served 648 beneficiaries 

and billed for 24 prescriptions per beneficiary. Additionally, most 

(90 percent) pharmacies billed for fewer than 38 prescriptions per 

beneficiary.

Also, as shown in Table 1, retail pharmacies billed an average of 

$1,818 per prescriber. They had an average of 587 prescribers and billed 

for an average of 28 prescriptions per prescriber. Additionally, most 

pharmacies billed for fewer than 54 prescriptions per prescriber.

Schedule II and III drugs were a relatively small percentage of 

the prescriptions billed

On average, 2 percent of each pharmacy’s Part D prescriptions were for 

Schedule II drugs. Schedule II drugs have a high potential for abuse and 

may lead to severe psychological or physical addiction. The most 

common Schedule II drugs billed were all painkillers and included 

32 For the purposes of this report, we use the term “prescription” to mean one PDE record.

33 This includes the amount paid by sponsors, the Government, and by, or on behalf of, 

beneficiaries.
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 10

oxycodone-aceteminophen, oxycodone hydrochloride, morphine sulfate, 

and fentanyl.

On average, 3 percent of each pharmacy’s Part D prescriptions were 

Schedule III drugs. Schedule III drugs also have potential for abuse. The 

most common drugs billed were hydrocodone-acetaminophen, 

acetaminophen-codeine, hydrocodone bitartrate-ibuprofen, and AndroGel. 

See Appendix B for the most common Schedule II and III drugs billed to

Part D.

Table 1: Distribution of Part D Billing by Retail Pharmacies, 2009

National Average 

for Retail 

Pharmacies

10th 

Percentile*

50th 

Percentile

90th 

Percentile

Average Amount Billed per Beneficiary $1,576 $799 $1,390 $2,333

Average Number of Prescriptions per Beneficiary 24 13 22 38 

Average Amount Billed per Prescriber $1,818 $650 $1,335 $3,232 

Average Number of Prescriptions per Prescriber 28 10 21 54 

Percentage of Schedule II Drugs 2.2% 0.3% 1.7% 4.2%

Percentage of Schedule III Drugs 3.1% 1.0% 2.8% 5.3%

Percentage of Brand-Name Drugs 30.9% 24.9% 30.0% 37.9%

Percentage of Refills 55.4% 40.7% 57.9% 66.8%

*The 10th percentile indicates that 10 percent of all pharmacies fell below this value. The 50th percentile (also known as the median) indicates 

that half of all pharmacies fell below this value. The 90th percentile indicates that 90 percent of all pharmacies fell below this value.

Note: For the purposes of this report, we considered a prescription to be one PDE record. 

Source: OIG analysis of Part D data, 2011.

Brand-name drugs and refills were common

On average, almost one-third of the prescriptions pharmacies billed for 

were for brand-name drugs. Brand-name drugs are typically more costly 

than generics. Lipitor, Plavix, Nexium, and Diovan were the most 

common brand-name drugs in 2009. For most pharmacies, 38 percent or 

less of their prescriptions was for brand-name drugs. At the same time, 

refills accounted for 55 percent of the prescriptions billed by retail 

pharmacies, on average. The remaining were new prescriptions, not 

refills.
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 11

Over 2,600 retail pharmacies had questionable billing

In total, 2,637 retail pharmacies had questionable Part D billing. Each of 

these pharmacies exceeded the threshold that indicated extremely high 

billing for at least one of the eight measures we developed. See Table 2 

for these thresholds. These pharmacies represented 4 percent of all retail 

pharmacies nationwide. Together, they billed $5.6 billion to Part D in 

2009. While some of this billing may be legitimate, all pharmacies that 

bill for such extremely high amounts warrant further scrutiny. 

More than one-third of the pharmacies with questionable billing exceeded 

the thresholds for multiple measures. Specifically, 949 pharmacies did so 

for 2 or more measures; 54 did so for 4 or more measures. See 

Appendix C. 

Table 2: Number of Pharmacies That Billed Extremely High Amounts by Measure, 2009

National Average 

for Retail 

Pharmacies

Threshold for 

Extremely 

High Amounts

Number of Pharmacies 

That Billed Extremely 

High Amounts

Average Amount Billed per Beneficiary $1,576 $4,050 778

Average Number of Prescriptions per Beneficiary 24 66 133

Average Amount Billed per Prescriber $1,818 $5,977 850

Average Number of Prescriptions per Prescriber 28 102 559

Percentage of Schedule II Drugs 2.2% 8.1% 871

Percentage of Schedule III Drugs 3.1% 10.1% 276

Percentage of Brand-Name Drugs 30.9% 51.5% 439

Percentage of Refills 55.4% 99.1% 6 

 Total Number of Pharmacies 2,637*

*A number of pharmacies exceeded multiple thresholds. As a result, the sum does not equal 2,637.

Note: For the purposes of this report, we considered a prescription to be one PDE record.

Source: OIG analysis of Part D data, 2011.

Almost 800 pharmacies billed extremely high dollar amounts 

per beneficiary; a smaller number billed for an extremely high 

number of prescriptions per beneficiary

Although some of this billing may be legitimate, billing high dollar 

amounts per beneficiary or for a high number of prescriptions per 

beneficiary could mean that a pharmacy is billing for drugs that were not 

medically necessary or were never provided to the beneficiary.

As shown in Table 2, 778 pharmacies billed extremely high dollar 

amounts, each with an average of at least $4,050 per beneficiary. This 
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 12

amount was 21⁄2 times the national average of $1,576 per beneficiary. In 

one case, a pharmacy billed an average of $23,145 for each beneficiary it 

served.

One hundred and thirty-three pharmacies billed for an extremely high 

number of prescriptions per beneficiary, each with an average of at least 

66 prescriptions per beneficiary. Again, this number is more than 

21⁄2 times the national average of 24. More than half of these pharmacies 

billed for more than 300 prescriptions for at least 1 beneficiary. One of 

these pharmacies billed for 946 prescriptions for a single beneficiary in 

1 year.

Eight hundred and fifty pharmacies billed extremely high 

dollar amounts per prescriber, while 559 billed for an 

extremely high number of prescriptions per prescriber

Billing high dollar amounts per prescriber or billing for a high number of 

prescriptions per prescriber may indicate that a pharmacy has relationships 

with certain prescribers. Although in some cases they may be legitimate, 

these relationships are a concern because the pharmacy and prescriber may 

be working together to bill for drugs that were not medically necessary or 

were never provided to the beneficiary.

The 850 pharmacies that billed extremely high dollar amounts per 

prescriber each averaged at least $5,977 per prescriber. This amount was 

about three times the national average of $1,818. Some of these 

pharmacies billed considerably more per prescriber on average. For 

example, five of these pharmacies each billed more than $90,000 per 

prescriber.

Additionally, 559 pharmacies billed for an extremely high number of 

prescriptions per prescriber; each averaged at least 102 prescriptions per 

prescriber. This number was about 31⁄2 times the national average of 

28 prescriptions per prescriber. 

For many of these 559 pharmacies, a large percentage of the prescriptions 

were ordered by just a few prescribers. At one third of these pharmacies, 

one or two prescribers ordered more than half of the prescriptions. At 

1 pharmacy, a single prescriber ordered 46,868 prescriptions. In another 

case, a single prescriber ordered 85 percent of the 20,186 prescriptions 

billed by 1 pharmacy during the year. 

Over 1,000 pharmacies billed for an extremely high percentage 

of Schedule II or III drugs, which have potential for addiction 

and abuse

Schedule II and III drugs have a high risk for abuse. Although there may 

be valid reasons why some pharmacies bill for high percentages of 
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 13

Schedule II and III drugs, all of these pharmacies warrant further scrutiny. 

Billing for a high percentage of these drugs may indicate that a pharmacy 

is billing for medically unnecessary drugs, which may be used 

inappropriately or diverted and resold for a profit. Misuse of these drugs 

has serious human and financial costs. 

A total of 1,067 retail pharmacies billed for Schedule II or III drugs for an 

extremely high percentage of their prescriptions. Specifically, 

871 pharmacies billed for a high percentage of Schedule II drugs. At least 

8 percent of each of these pharmacies’ Part D prescriptions were for

Schedule II drugs. This was four times the national average of 2 percent. 

The most common Schedule II drugs among these 871 pharmacies were 

oxycodone hydrochloride, OxyContin, morphine sulfate, and Endocet. 

Several pharmacies billed over half their prescriptions as Schedule II 

drugs. Notably, about 75 percent of one pharmacy’s prescriptions were 

billed as Schedule II drugs, and most of these prescriptions were ordered 

by one physician. 

In addition, 276 pharmacies billed for Schedule III drugs for a high 

percentage of their prescriptions. More than 10 percent of each of these 

pharmacies’ prescriptions were Schedule III drugs. This was more than 

three times the national average of 3 percent. The most common 

Schedule III drugs among these pharmacies were hydrocodoneacetaminophen, acetaminophen-codeine, Suboxone, and Lortab. In one 

case, almost one-third of the pharmacy’s prescriptions were for 

Schedule III drugs. Eighty pharmacies had an extremely high percentage 

of prescriptions for both Schedule II and III drugs. 

Over 400 pharmacies billed for an extremely high percentage 

of brand-name drugs, while a few pharmacies billed for an 

extremely high percentage of refills

Billing for a high percentage of brand-name drugs may indicate that a 

pharmacy is billing for brand names but dispensing generics or is billing 

for prescriptions never dispensed. A high percentage of refills could mean 

that a pharmacy is automatically billing for refills even when beneficiaries 

have not requested them or is billing for prescriptions that beneficiaries 

never picked up. 

A total of 439 pharmacies billed for brand-name drugs for an extremely 

high percentage of their prescriptions. More than half of each of these 

pharmacies’ prescriptions were for brand-name drugs, compared to the 

national average of 31 percent. The most common brand-name drugs 

billed by these pharmacies were Lipitor, Plavix, and Nexium. For one 

pharmacy, 99 percent of its prescriptions were for brand-name drugs. 
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 14

Additionally, six pharmacies billed for an extremely high percentage of 

refills. More than 99 percent of each of these pharmacies’ prescriptions 

for Part D drugs were refills, compared to the national average of 

55 percent. One of these pharmacies billed for 5,297 prescriptions, all of 

which were refills.

Independent pharmacies were eight times more likely than 

chains to have questionable billing

Independent pharmacies were far more likely than chain pharmacies to 

have extremely high billing on one of more of the eight measures. As 

shown in Figure 1, almost 11 percent of independent pharmacies had 

questionable billing, compared to just over 1 percent of chain pharmacies. 

Although independent pharmacies made up 34 percent of all retail 

pharmacies that billed Part D, they accounted for 80 percent of the 

pharmacies with questionable billing. Of the 2,637 pharmacies with 

questionable billing, 2,120 were independent. 

Examples of Questionable Part D Billing

• One suburban pharmacy had particularly concerning billing. It 

billed more than $8.4 million to Part D in 2009, which is nine times 

the national average. Also, it billed for an average of 

116 prescriptions per beneficiary and 132 prescriptions per 

prescriber. These are both almost five times the national average.

• One midwestern pharmacy billed for over 1,000 prescriptions each 

for 2 beneficiaries. One physician ordered almost all the 

prescriptions for one of these beneficiaries. 

• A third pharmacy billed an average of $132,845 per prescriber, 

which is 73 times the national average. Virtually all of these 

prescriptions were for brand-name drugs.
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 15

Figure 1: Percentage of Independent and Chain Pharmacies With Questionable Billing, 2009

10.7% 

1.3% 

0%

5%

10%

15%

Independent

(N=19,906)

Chain

(N=39,401)

Percenage of Pharmacies

With Questionable Billing

Type of Retail Pharmacies

Source: OIG analysis of Part D data, 2011.

The Miami, Los Angeles, and Detroit areas were the 

most likely to have pharmacies with questionable 

billing

Certain metropolitan areas had a higher percentage of pharmacies with

questionable billing than the Nation, which had 4 percent. The percentage 

of pharmacies with extremely high billing on one or more of the eight 

measures was four times higher in the Miami area than in the Nation as a 

whole. The percentages in the Los Angeles area and the Detroit area were

about 21⁄2 times the national percentage. Percentages in other metropolitan 

areas, including New York, Baltimore, and Tampa, were about two times 

the national percentage. See Figure 2.

Together, these six metropolitan areas accounted for almost 28 percent of 

all pharmacies with questionable billing in 2009. Ninety-three percent of 

the pharmacies with questionable billing in these six areas were 

independent pharmacies. 

Miami

Three-quarters of the pharmacies with questionable billing in the Miami 

area billed extremely high amounts per beneficiary. Some of these 

pharmacies billed exorbitant amounts. For example, 10 pharmacies billed 

an average of $8,000 or more per beneficiary, which is five times the 

national average per beneficiary. See Appendix D for more information 

. Nineteen percent of Miami area pharmacies had questionable 

billing in 2009. This is more than four times the percentage of pharmacies 

with questionable billing in the Nation as a whole. 
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 16

about the pharmacies with extremely high billing in the Miami area and 

the other metropolitan areas.

Brand-name drugs made up an extremely high percentage of prescriptions 

in 40 percent of the Miami area pharmacies with questionable billing. 

These pharmacies also billed for certain brand-name drugs at a much 

higher rate than pharmacies nationally. For example, they billed for Sure 

Comfort brand insulin needles 50 times more often than pharmacies 

nationwide. They also billed for Prevacid, a brand-name drug used to treat 

acid reflux, five times more often than pharmacies nationwide. 

Figure 2: Percentage of Pharmacies in Each Area With Questionable Billing, 2009

Los Angeles

4.4%

19.4%

12.1%

10.5% 9.6% 9.0% 8.8%

0%

5%

10%

15%

20%

Nation Miami Los 

Angeles

Detroit Baltimore New

York

Tampa

Percentage of Retail Pharmacies

With Questionable Billing

Source: OIG analysis of Part D data, 2011.

Most commonly, pharmacies billed for extremely high percentages of 

brand-name drugs; over half of the pharmacies with questionable billing in 

the Los Angeles area did this. Like pharmacies in the Miami area, these 

pharmacies billed for certain brand-name drugs at a much higher rate than 

pharmacies in the Nation as a whole. For example, they billed for 

Celebrex, a brand-name drug used to treat arthritis, three times more often 

than pharmacies nationwide. 

. Twelve percent of Los Angeles area pharmacies had 

questionable billing in 2009, which is over 21⁄2 times the percentage of 

pharmacies with questionable billing in the Nation as a whole. 
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 17

In addition, almost half the pharmacies with questionable billing in the 

Los Angeles area billed for extremely high dollar amounts per prescriber. 

In fact, three pharmacies billed an average of more than $20,000 per 

prescriber.

Detroit. Almost 11 percent of the pharmacies in the Detroit area had 

questionable billing in 2009. This is almost 21⁄2 times the percentage of 

pharmacies with questionable billing in the Nation as a whole. 

Schedule III drugs were the biggest problem in the Detroit area. Over 

60 percent of pharmacies with questionable billing billed for an extremely 

high percentage of Schedule III drugs. Hydocodone acetaminophen, an 

addictive painkiller, was the most common Schedule III drug billed by 

these pharmacies.

New York. Nine percent of the pharmacies in the New York area had 

questionable billing in 2009, which is twice the percentage of pharmacies 

with questionable billing in the Nation as a whole. By far, the two most 

common problems in the area were billing for high dollar amounts per 

beneficiary and billing for a high percentage of brand-name drugs.

Seventy percent of the pharmacies with questionable billing in the 

New York area billed for extremely high average dollar amounts per 

beneficiary. Eight of these each billed an average of at least $10,000 per 

beneficiary.

Sixty-three percent of the area’s pharmacies with questionable billing 

billed for extremely high percentages of brand-name drugs. In fact, more 

than one-third of all pharmacies in the Nation that billed for brand-name 

drugs for an extremely high percentage of their prescriptions were in the 

New York area. The three most common drugs they billed for were 

Plavix, Lipitor, and Nexium, which were the drugs most commonly billed 

for in the Nation as a whole. However, they also billed for an unusually 

high percentage of the Lidoderm patch, a local anesthetic (numbing 

medication) used to relieve postshingles pain. 

Baltimore and Tampa. Like New York, both the Baltimore and Tampa 

areas had twice the percentage of pharmacies with questionable billing as 

the Nation as a whole.

Baltimore and Tampa both had a problem with Schedule II drugs. Over 

80 percent of the pharmacies with questionable billing in each area billed 

for extremely high percentages of Schedule II drugs. For Tampa 

pharmacies with questionable billing, the most common drug was 

oxycodone hydrochloride, a narcotic painkiller that is frequently abused 
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 18

for its euphoric effects.34 It accounted for almost 4 percent of the 

prescriptions billed by these pharmacies. This is 15 times higher than the 

percentage billed nationally, which is less than 1 percent. Oxycodone 

hydrochloride was also among the most common drugs billed by 

pharmacies in the Baltimore area.

34 See DEA, Drugs and Chemicals of Concern: Oxycodone, October 2000. Accessed at 

http://www.deadiversion.usdoj.gov/drugs_concern/oxycodone/summary.htm on 

October 19, 2011. Oxycodone is often used to alleviate or prevent the onset of opiate 

withdrawal by street users of heroin and methadone. Products with large amounts of 

oxycodone are highly attractive to opioid abusers.
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 19

CONCLUSION AND RECOMMENDATIONS

Thousands of pharmacies nationwide have questionable billing. While 

some pharmacies may be billing extremely high amounts for legitimate 

reasons, all warrant further scrutiny. Specifically, we found that many 

pharmacies billed for extremely high dollar amounts or numbers of 

prescriptions per beneficiary or per prescriber. Many also billed for 

extremely high amounts of Schedule II or III controlled substances, 

brand-name drugs, or refills. In addition, these pharmacies were more 

likely to be independent and to be in certain metropolitan areas, such as 

Miami, Los Angeles, and Detroit.

Our findings further indicate vulnerabilities in the oversight of the Part D 

program. Prior OIG reports have also found evidence of these 

vulnerabilities. For example, a 2009 OIG review revealed that the 

MEDICs may not be aware of some potential fraud and abuse incidents 

because sponsors are not required to refer these incidents to the MEDICs. 

Another report found that more than one-quarter of stand-alone Part D 

plan sponsors did not identify any potential fraud and abuse in 2007, even 

though CMS requires sponsors to have programs to detect, correct, and 

prevent fraud and abuse. A subsequent OIG report found that CMS’s 

oversight of sponsors’ compliance plans was extremely limited.

Together, these findings call for a strong response to improve Part D 

oversight. OIG is committed to continuing to conduct investigations and 

audits of pharmacies with questionable billing and to monitor pharmacy 

billing. CMS must also use all of the tools at its disposal to more 

effectively identify and fight fraud, waste, and abuse in Part D. 

Therefore, we recommend that CMS:

Strengthen the MEDIC’s Monitoring of Pharmacies and Ability 

To Identify Pharmacies for Further Review

One of the MEDICs is responsible for detecting, preventing, and 

investigating potential fraud, waste, and abuse. CMS should ensure that 

this MEDIC does more to systematically monitor pharmacies and to 

identify those with questionable billing. On an ongoing basis, the MEDIC 

should monitor pharmacy billing and identify those that need further 

review. It should use the measures presented in this report, as well as 

others it deems appropriate. It should also focus on independent 

pharmacies and those in the metropolitan areas we identified as having 

high percentages of pharmacies with questionable billing. 
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 20

Provide Additional Guidance to Sponsors on Monitoring 

Pharmacy Billing

Part D sponsors are responsible for monitoring and auditing pharmacies, 

which are critical steps in fighting fraud, waste, and abuse. CMS should 

update its Part D manual or issue guidance reminding sponsors of the 

importance of conducting pharmacy-level data analysis. As part of this 

effort, CMS should solicit input from sponsors and the MEDIC on other 

ways to effectively monitor pharmacy billing and include this information 

in the updated guidance. CMS should also recommend that sponsors 

routinely generate and review reports on pharmacy billing to identify 

pharmacies for further review.

Require Sponsors To Refer Potential Fraud and Abuse 

Incidents That May Warrant Further Investigation

As we have previously recommended for Medicare Advantage 

organizations, CMS should require all Part D sponsors to report incidents 

of potential fraud and abuse that may warrant further investigation to CMS 

or other appropriate entities.35

Develop Risk Scores for Pharmacies

 If necessary, CMS should seek statutory 

authority to implement this change. Current regulations stipulate that 

Part D sponsors should have procedures to voluntarily report this 

information. Because sponsors are on the front line of detecting fraud, 

waste, and abuse in Part D, a significant vulnerability exists when 

sponsors are not required to report this information. 

As it does for other parts of Medicare through its National Fraud 

Prevention Program, CMS should analyze billing data to detect 

pharmacies with a high risk for fraud. To do this, CMS should work with 

the MEDICs and sponsors to develop measures of pharmacy risk and 

assign each pharmacy a risk level, such as high, moderate, or low. CMS 

should provide this information to sponsors routinely so that they can use 

it to target pharmacies for audits and further review.

Further Strengthen Its Compliance Plan Audits

CMS is responsible for conducting onsite audits of sponsors’ compliance 

plans to assess the effectiveness of their fraud and abuse programs. CMS 

has recently improved its audit process. As it continues these efforts, 

CMS should ensure that its audits include an in-depth review of how 

sponsors monitor and oversee pharmacies. As part of these audits, CMS 

should review the extent to which sponsors are effectively using data 

analysis to detect aberrant billing patterns. CMS should also review what 

35 OIG, Medicare Advantage Organizations’ Identification of Potential Fraud and Abuse 

(OEI-03-10-00310), February 2012.
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 21

actions sponsors take when they identify aberrant patterns and potential 

fraud, waste, and abuse. 

Follow Up On the Pharmacies Identified as Having 

Questionable Billing

In a separate memorandum, we will refer the pharmacies with 

questionable billing to CMS for appropriate action. 
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 22

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL

RESPONSE 

In its comments on the draft report, CMS concurred with four of the 

recommendations and partially concurred with the other two. CMS 

concurred with our first recommendation, to strengthen the MEDIC’s 

monitoring of pharmacies and ability to identify pharmacies for further 

review. Specifically, CMS stated that it and the MEDIC will continue to 

refine the MEDIC’s data analysis based on emerging trends and best 

available data. CMS also concurred with our second recommendation, to 

provide additional guidance to sponsors on monitoring pharmacy billing, 

stating that it has already issued guidance and will issue additional 

guidance in the 2013 Parts C and D Call Letter. In addition, CMS 

concurred with our fifth recommendation, to further strengthen 

compliance plan audits. It stated that it will continue to insist that an 

effective compliance program include the use of data analysis to detect

potential fraud, waste, and abuse. Finally, CMS concurred with our sixth

recommendation, to follow up on the pharmacies identified as having 

questionable billing, stating that the MEDIC will review the cases referred 

by OIG and conduct peer-to-peer comparisons and other analysis. 

CMS partially concurred with our third recommendation, to require 

sponsors to refer potential fraud and abuse incidents that may warrant 

further investigations and stated that it will explore this option. CMS also 

concurred in part with our fourth recommendation, to develop risk scores 

for pharmacies. It stated that it will consider developing a risk assessment 

for pharmacies and sharing this information with sponsors. OIG supports 

CMS’s efforts to explore requiring sponsors to report potential fraud and 

to develop pharmacy risk scores. 

The full text of CMS’s comments is provided in Appendix E. We made 

minor changes to the report based on technical comments. 
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 23

APPENDIX A

Most Common Drugs Billed to Medicare Part D by Retail Pharmacies, 2009

Rank Drug Common Treatment

Number of 

Prescriptions 

Billed 

Percentage 

of All 

Prescriptions 

Billed

1 Simvastatin High cholesterol 28,099,312 3.2%

2 Lisinopril High blood pressure 24,642,289 2.8%

3 Hydrocodone-acetaminophen Pain 23,006,544 2.6%

4 Amlodipine besylate High blood pressure 19,086,682 2.2%

5 Levothyroxine sodium Hypothyroidism 19,068,278 2.2%

6 Furosemide Swelling and fluid retention 18,183,668 2.1%

7 Omeprazole Gastroesophageal reflux disease 16,562,103 1.9%

8 Metoprolol tartrate High blood pressure 14,866,523 1.7%

9 Metformin HCl Type 2 diabetes 14,331,451 1.6%

10 Hydrochlorothiazide High blood pressure 14,011,233 1.6%

11 Lipitor* High cholesterol/heart disease 13,849,439 1.6%

12 Atenolol High blood pressure 13,045,879 1.5%

13 Plavix* Heart disease 12,767,221 1.5%

14 Warfarin sodium Blood clots 10,438,471 1.2%

15 Metoprolol succinate High blood pressure 9,537,572 1.1%

16 Alendronate sodium Osteoporosis 9,228,818 1.1%

17 Gabapentin Seizures 8,839,510 1.0%

18 Zolpidem tartrate Insomnia 8,037,495 0.9%

19 Potassium chloride Potassium deficiency 7,697,500 0.9%

20 Nexium* Gastroesophageal reflux disease 7,259,495 0.8%

 Total 292,559,483 33.5%

* Indicates that this is a brand-name drug.

Note: For more information on the common use for each drug, see National Institutes of Health, National Center for 

Biotechnology Information Pub Med Health, Drugs and Supplements. Accessed at 

http://www.ncbi.nlm.nih.gov/pubmedhealth on July 12, 2011.

Source: Office of Inspector General analysis of Part D data, 2011.
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 24

APPENDIX B

Most Common Schedule II Drugs Billed to Medicare Part D by Retail Pharmacies, 2009

Rank Drug Common Treatment

Number of 

Prescriptions 

Billed 

Percentage of 

All Schedule II 

Prescriptions 

Billed

1 Oxycodone-acetaminophen Pain 3,560,637 21.1%

2 Oxycodone HCl Pain 2,065,483 12.3%

3 Morphine sulfate Pain 2,038,891 12.1%

4 Fentanyl Pain 1,756,646 10.4%

5 OxyContin* Pain 1,358,823 8.1%

6 Oxycodone HCl-acetaminophen Pain 1,252,833 7.4%

7 Endocet* Pain 1,166,799 6.9%

8 Methadone HCl Pain 1,143,404 6.8%

9 Hydromorphone HCl Pain 564,687 3.4%

10 Amphetamine salt combo Attention deficit hyperactivity disorder 310,460 1.8%

 Total 15,218,663 90.4%

* Indicates that this is a brand-name drug.

Source: Office of Inspector General analysis of Part D data, 2011.
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 25

Most Common Schedule III Drugs Billed to Medicare Part D by Retail Pharmacies, 2009

Rank Drug Common Treatment

Number of 

Prescriptions 

Billed 

Percentage of All 

Schedule III 

Prescriptions Billed

1 Hydrocodone-acetaminophen Pain 23,006,544 86.9%

2 Acetaminophen-codeine Pain 2,215,838 8.4%

3 Hydrocodone BIT-ibuprofen Pain 220,915 0.8%

4 AndroGel* Low testosterone 213,796 0.8%

5 Suboxone* Opioid dependence 198,129 0.7%

6 Testosterone cypionate Low testosterone 114,081 0.4%

7 Butalbital compound-codeine Tension headache 63,229 0.2%

8 Butalbital-caff-APAP-codeine Tension headache 59,242 0.2%

9 Testim* Low testosterone 58,533 0.2%

10 Dronabinol Nausea and vomiting 57,003 0.2%

 Total 15,218,663 90.4%

* Indicates that this is a brand-name drug.

Source: Office of Inspector General analysis of Part D data, 2011.
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 26

APPENDIX C

Number of Pharmacies That Billed Extremely 

High Amounts by Number of Measures, 2009

Number of Measures

Number of Pharmacies That 

Billed Extremely High 

Amounts

1 1,688

2 685

3 210

4 46

5 8 

 Total 2,637

Source: Office of Inspector General analysis of Part D 

data, 2011.
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 27

APPENDIX D

Percentage of Pharmacies With Questionable Billing in Each Area That Exceeded the 

Threshold, 2009

Measures Miami

(N=119)

Los 

Angeles

(N=197)

Detroit

(N=52)

New 

York

(N=256)

Baltimore

(N=51)

Tampa

(N=56)

Average Amount Billed per 

Beneficiary 76% 43% 31% 70% 18% 9%

Average Number of Prescriptions 

per Beneficiary 21% 16% 6% 9% 2% 2%

Average Amount Billed per 

Prescriber 20% 48% 19% 8% 8% 9%

Average Number of Prescriptions 

per Prescriber 7% 22% 4% 2% 4% 7%

Percentage of Schedule II Drugs 6% 5% 6% 5% 82% 86%

Percentage of Schedule III Drugs 0% 8% 62% 0% 0% 0%

Percentage of 

Brand-Name Drugs 40% 53% 6% 63% 0% 2%

Percentage of Refills 0% 0% 0% 0% 0% 2%

Note: We considered a pharmacy to have questionable billing if it exceeded the threshold on one or more of the eight 

measures. This table shows the percentage of pharmacies with questionable billing that exceeded the threshold for a particular 

measure. For example, 76 percent of the pharmacies in Miami that had questionable billing exceeded the threshold for average 

amount billed per beneficiary. See Table 2 for the national averages and the thresholds for each measure. 

Source: Office of Inspector General analysis of Part D data, 2011.

 
APPENDIX E 

Agency Comments 

(:J- DEPARTMENT OF HEALTH & HUMAN SERVICES Cenl,,", fOt Medicare & Medicaid Sennces

Administrator 

Washinglon. DC 20201 

MAR 2 12012 DATE: 

TO: 	 Daniel R. I.e inson 

Insp'.!Clor General 

FROM: 	 Marllyn Tavarmer 

Acting Admj~trator 

SUBJECT: 	 Office of Inspector General Draft Report: '"Retail Pharmacies with Questionable 

Part D Billing" (OEI-02-09-00600) 

The Centers f<)r Medicare & Mcdicaid Services (eMS) appreciates the opportunity to review and 

comment on the Office of Inspector General (OIG) draft report entitled, "Retail Pharmacies with 

Questionable Part D Billing." This study provided a look at Part D billing by pharmacies 

nationwide. It is a part of the Ilealth Care fraud Prevention and Enforcement Action Team 

Initiative. which focuses on detecting health care fraud through thc use of innovative data 

analysis and cnhanced cooperation among the Department ofJustice {DOJ}. 010. and eMS. 

The CMS concurs in large part with OIO's recommendations. In fllct. eMS already has in place 

actions thaI address a number ofOIO's recommendations. For example, eMS will continue 10 

monitor pharmacy-related projects conducted by the Medicare drug integrity contractor 

(MEDIC). enhance its relationship with plan sponsors, and provide guidance on the regulatory 

requirements regarding Prescription Drug Plan (PDP) sponsors' and Medicare Advantage (MAl 

organizatioos' obligatinos tn prevent, detect, and correct Parts C and D program noncompliance 

and fraud, waste. and abuse. We believe it is important to note that 010 report identified what 

appeared to be questionable billing based on its own data analysis but did not determine any 

actual fraud committed by the pharmacies. 

-Ibe CMS appreciates OIO's efforts in developing this study and Will consider using select 

aspects ofOIG's methodology in our own ongoing data analysis. In particular, we will work 

with our MEDIC to assess the underlying reasons for the questionable billing 010 has identified. 

We will assess whether the indicators developed for the study point to actionable items. as well 

as determine if the results might be improVed by the application of certain adjustment factors the 

MEDIC hus applied in previous datil analyses. 

We appreciate OIO's efforts in working with eMS to help identity retail pharmacies with 


questionable Part 0 billing. Our response to each oflhe OIG recommendations follows. 


Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 28 
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 29
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 30
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 31
 

Retail Pharmacies With Questionable Part D Billing (OEI-02-09-00600) 32

ACKNOWLEDGMENTS

This report was prepared under the direction of Jodi Nudelman, Regional 

Inspector General for Evaluation and Inspections in the New York regional 

office, and Nancy Harrison and Meridith Seife, Deputy Regional 

Inspectors General.

Miriam Anderson served as the team leader for this study. Other principal 

Office of Evaluation and Inspections staff from the New York regional 

office who contributed to this report include Jenell Clarke, Jason Kwong, 

and David Rudich; central office staff who contributed include 

Eddie Baker Jr., Kevin Farber, Rob Gibbons, and Rita Wurm. 
Office of Inspector General

http://oig.hhs.gov

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 

amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components:

Office of Audit Services

The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 

audits with its own audit resources or by overseeing audit work done by others. Audits 

examine the performance of HHS programs and/or its grantees and contractors in carrying 

out their respective responsibilities and are intended to provide independent assessments of 

HHS programs and operations. These assessments help reduce waste, abuse, and 

mismanagement and promote economy and efficiency throughout HHS.

Office of Evaluation and Inspections

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on significant 

issues. These evaluations focus on preventing fraud, waste, or abuse and promoting 

economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI 

reports also present practical recommendations for improving program operations. 

Office of Investigations

The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 

of fraud and misconduct related to HHS programs, operations, and beneficiaries. With 

investigators working in all 50 States and the District of Columbia, OI utilizes its resources 

by actively coordinating with the Department of Justice and other Federal, State, and local 

law enforcement authorities. The investigative efforts of OI often lead to criminal 

convictions, administrative sanctions, and/or civil monetary penalties.

Office of Counsel to the Inspector General

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support for OIG’s internal operations. OCIG represents OIG in all civil and 

administrative fraud and abuse cases involving HHS programs, including False Claims Act, 

program exclusion, and civil monetary penalty cases. In connection with these cases, OCIG 

also negotiates and monitors corporate integrity agreements. OCIG renders advisory 

opinions, issues compliance program guidance, publishes fraud alerts, and provides other 

guidance to the health care industry concerning the anti-kickback statute and other OIG 

enforcement authorities.