Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

 

Daniel R. Levinson 

Inspector General 

October 2008 

OEI-03-08-00230 

 

OVERSIGHT OF PRESCRIPTION 

DRUG PLAN SPONSORS’ 

COMPLIANCE PLANS 
 

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. 
 

 

Δ EXECUTIVE SUMMARY 

OBJECTIVE

To determine what oversight the Centers for Medicare & Medicaid 

Services (CMS) has conducted of prescription drug plan (PDP) sponsors’ 

compliance plans. 

BACKGROUND 

The Medicare Prescription Drug, Improvement, and Modernization Act 

of 2003 established Medicare Part D to provide prescription drug 

benefits under the Medicare program beginning January 1, 2006. 

Part D prescription drug coverage is provided by private entities known 

as plan sponsors. 

An effective compliance plan helps PDP sponsors protect the integrity of 

Medicare funds by preventing and detecting fraud, waste, and abuse. 

Federal regulations in effect since March 22, 2005, require that PDP 

sponsors have compliance plans in place and that these compliance 

plans address eight elements. Chapter 9 of CMS’s “Prescription Drug 

Benefit Manual” includes the eight elements as well as additional 

requirements and recommendations for addressing each of these 

elements. 

The Office of Inspector General (OIG) released a report on PDP 

sponsors’ compliance plans in December 2006 that found that most 

sponsors’ compliance plans did not address all of the CMS requirements 

or recommendations. In comments on the report, CMS stated that 

account managers would follow up with PDP sponsors regarding 

deficiencies in their compliance plans. CMS also stated that it would 

conduct routine audits of PDP sponsors’ compliance plans beginning in 

January 2007. Routine audits are scheduled audits conducted to ensure 

compliance with program requirements. CMS can also conduct focused 

audits outside the routine audit process to confirm the correction of 

previously identified deficiencies. 

We collected documentation and interviewed CMS staff regarding their 

oversight activities related to PDP sponsors’ compliance plans. Data 

collection was conducted in April and May 2008. 

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EXECUTIVE SUMMARY 

FINDINGS 

CMS conducted one audit of a PDP sponsor’s compliance plan in 

2007. CMS conducted 17 routine audits and 2 focused audits of PDP 

sponsors in 2007. However, CMS did not include a compliance plan 

review in any of the 17 routine audits conducted. One of the two 

focused audits included a review of one PDP sponsor’s compliance plan. 

The audit found that the sponsor did not have a comprehensive plan to 

detect, correct, and prevent fraud, waste, and abuse. 

In April 2008, CMS reported that it plans to begin specific audits of 

compliance plans in the summer of 2008. However, as of early August 

2008, CMS had not yet conducted any specific audits of PDP sponsors’ 

compliance plans. 

PDP sponsors completed a compliance plan self-assessment but 

CMS did not verify sponsors’ responses. In response to OIG’s 

December 2006 report, CMS instructed all 91 PDP sponsors to complete 

a compliance plan self-assessment in June 2007. The self-assessment 

was based on Chapter 9 of the “Prescription Drug Benefit Manual”; 

however, CMS did not include all requirements from Chapter 9 in the 

self-assessment. In addition, CMS did not request documentation to 

support sponsors’ responses to the self-assessment. 

Twenty-three of the ninety-one PDP sponsors attested in June 2007 

that they had not implemented 1 or more of 11 compliance plan 

requirements included in the self-assessment. In April 2008, CMS had 

account managers follow up with these 23 PDP sponsors. Based on this 

followup, only one sponsor reported that it was not meeting all of the 

requirements included in the self-assessment. However, CMS did not 

instruct account managers to request supporting documentation to 

confirm that PDP sponsors made corrections to their compliance plans. 

RECOMMENDATION 

Effective compliance plans are a fundamental tool in preventing and 

detecting fraud, waste, and abuse in the Part D program. Although 

CMS originally planned to begin routine compliance plan audits in 

January 2007, as of early August 2008, CMS had not conducted any 

routine audits of PDP sponsors’ compliance plans. In addition, while 

CMS instructed all PDP sponsors to complete a compliance plan 

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EXECUTIVE SUMMARY 

self-assessment, the self-assessment did not include all requirements 

from Chapter 9 of the “Prescription Drug Benefit Manual.” Also, CMS 

did not ensure that PDP sponsors’ attestations were accurate by 

independently verifying their responses. Therefore, CMS has only 

self-reported information to determine whether PDP sponsors’ 

compliance plans are meeting Federal requirements. 

Therefore, we recommend that CMS: 

Conduct audits to verify that PDP sponsors’ compliance plans meet 

requirements. CMS should conduct routine audits of PDP sponsors’ 

compliance plans to ensure that these compliance plans meet all 

Federal requirements. Specifically, these audits should cover all 

compliance plan requirements contained in regulations as well as 

requirements included in Chapter 9 of the “Prescription Drug Benefit 

Manual.” CMS may also want to assess the degree to which PDP 

sponsors have implemented the recommendations described in 

Chapter 9. 

AGENCY COMMENTS 

CMS concurred with our recommendation that it should conduct audits 

of PDP sponsors’ compliance plans. CMS noted that due to critical 

funding shortfalls, it was not able to conduct compliance plan audits 

prior to the issuance of this report. However, CMS stated that it will 

begin audits of sponsors’ compliance plans in the near future. These 

audits will consist of a limited number of desk audits; however, as more 

resources become available, CMS stated that it will include more audits, 

onsite reviews, and other more comprehensive fraud prevention 

activities. 
 

Δ TABLE OF CONTENTS 

EXECUTIVE SUMMARY .....................................i

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

FINDINGS .................................................7 

 CMS conducted one audit of a PDP sponsor’s compliance plan. . . . 7 

 CMS did not verify PDP sponsors’ self-assessment responses . . . . 7 

 

RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 

 Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 

APPENDIX ................................................. 12

Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 

ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 
 

 

Δ INTRODUCTION 

OBJECTIVE 

To determine what oversight the Centers for Medicare & Medicaid 

Services (CMS) has conducted of prescription drug plan (PDP) sponsors’ 

compliance plans. 

BACKGROUND 

The Medicare Prescription Drug, Improvement, and Modernization Act 

of 2003 established Medicare Part D to provide prescription drug 

benefits under the Medicare program beginning January 1, 2006.1 

Part D prescription drug coverage is provided by private entities 

known as plan sponsors. Plans offered by sponsors include PDPs and 

Medicare Advantage prescription drug plans (MA-PD) that offer 

integrated coverage for both prescription drugs and other health care. 

As of August 2008, 26 million beneficiaries were enrolled in a Part D 

plan. Two-thirds of these beneficiaries were enrolled in a PDP.2

Medicare expenditures for Part D benefits were approximately 

$49.5 billion in 2007.3 

Compliance Plan Requirements 

An effective compliance plan helps PDP sponsors protect the integrity of 

Medicare funds by preventing and detecting fraud, waste, and abuse. 

Federal regulations in effect since March 22, 2005, require that PDP 

sponsors have compliance plans in place and that these compliance 

plans address eight elements.4 The eight elements PDP sponsors’ 

compliance plans must contain are: 

(1) written policies, procedures, and standards of conduct articulating 

the organization’s commitment to comply with all applicable 

Federal and State standards; 

(2) the designation of a compliance officer and compliance committee 

accountable to senior management; 

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

P.L. No. 108-173, Social Security Act § 1860D-1(a), 42 U.S.C. § 1395w-101(a). 

2 CMS, “Monthly Contract Summary Report,” August 2008. Available online at 

http://www.cms.hhs.gov/MCRAdvPartDEnrolData/MCESR. Accessed on August 28, 2008. 

3 The Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary 

Medical Insurance Trust Funds, “2008 Annual Report,” p. 111, March 2008. Available 

online at http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2008.pdf. Accessed on 

April 22, 2008. 

4 42 CFR § 423.504(b)(4)(vi). 

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INTRODUCTION 

(3) effective training and education between the compliance officer 

and organization employees, contractors, agents, and directors; 

(4) effective lines of communication between the compliance officer 

and the organization’s employees, contractors, agents, directors, 

and members of the compliance committee; 

(5) enforcement of standards through well-publicized disciplinary 

guidelines; 

(6) procedures for effective internal monitoring and auditing; 

(7) procedures for ensuring prompt responses to detected offenses and 

development of corrective action initiatives relating to the 

organization’s contract as a Part D plan sponsor; and 

(8) a comprehensive fraud and abuse plan to detect, correct, and 

prevent fraud, waste, and abuse. This fraud and abuse plan 

should include procedures to voluntarily self-report potential fraud 

or misconduct related to the Part D program to the appropriate 

Government authority. 

In December 2007, CMS issued a final rule that revises Federal 

regulations and clarifies that the elements relating to training and 

education and effective lines of communication must include PDP 

sponsors’ first tier, downstream, and related entities (e.g., contractors). 

In addition, this final rule removes the eighth compliance plan element 

regarding a fraud and abuse plan effective January 1, 2009.5 Although 

this element is being removed, CMS has added language to the 

regulation which specifies that PDP sponsors’ compliance plans must 

include measures to detect, correct, and prevent fraud, waste, and 

abuse. Also, CMS is working on additional regulatory changes to make 

self-reporting of potential fraud or misconduct mandatory rather than 

voluntary.6

Chapter 9 of CMS’s “Prescription Drug Benefit Manual” includes 

additional requirements and recommendations for addressing each of 

the required compliance plan elements.7 CMS is currently updating 

2 

5 72 Fed. Reg. 68700, 68705 (Dec. 5, 2007). 

6 72 Fed. Reg. 68700 (Dec. 5, 2007). 

7 CMS, “Prescription Drug Benefit Manual,” Rev. 2, April 25, 2006, ch. 9, § 50.1. 

Available online at 

http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_F

WA.pdf. Accessed on January 18, 2008. 

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INTRODUCTION 

Chapter 9 in response to the recent regulatory changes and will publish 

the revised chapter when all of the additional changes are finalized. 

Oversight Strategy 

Audit procedures. CMS uses audits as part of its oversight strategy to 

ensure compliance with program requirements. In November 2006, 

CMS issued a memorandum outlining its plans for auditing Part D 

sponsors.8 CMS stated in this memorandum that it would conduct 

regularly scheduled (i.e., routine) program audits of PDP sponsors using 

selected chapters of the “Prescription Drug Plan Sponsor Part D Audit 

Guide” (hereafter referred to as the “Audit Guide”). For these audits, 

CMS requires PDP sponsors to provide supporting documentation to 

demonstrate their compliance with Federal requirements. 

The Audit Guide contains 14 chapters corresponding to various program 

areas, such as enrollment and disenrollment, claims processing, and 

compliance plans. Each chapter has individual components that can be 

reviewed. Chapter 10 of the Audit Guide covers compliance plans and 

includes components that correspond with the eight required 

compliance plan elements.9 For example, one component states that 

PDP sponsors’ compliance plans must include a comprehensive plan to 

detect, correct, and prevent fraud, waste, and abuse. 

CMS can also conduct focused audits to confirm the correction of 

previously identified deficiencies or in response to indications of 

noncompliance. Focused audits are conducted outside of the routine 

audit process. 

Request for PDP self-assessment. As part of its activities to monitor the 

implementation of the Part D program, CMS instructed PDP sponsors 

to complete a self-assessment regarding their compliance plans in 

June 2007.10 CMS indicated that it would use this self-assessment to 

determine the extent to which PDP sponsors had implemented the 

8 CMS, “Final MA-PD and PDP Part D Audit Guides for Part D Program Audits,” 

November 13, 2006. Available online at 

http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/MemoAuditGuides.pdf. 

Accessed on January 24, 2008. 

9 CMS, “Medicare Prescription Drug Plan Sponsor Part D Audit Guide,” Version 1.0, 

April 10, 2006. Available online at 

http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/PDPAuditGuide.pdf. 

Accessed on January 18, 2008. 

10 CMS, “Compliance Plan Best Practices Self-Assessment Tool,” June 11, 2007. 

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INTRODUCTION 

requirements and recommendations outlined in Chapter 9 of the 

“Prescription Drug Benefit Manual.” 

Account managers. Account managers within CMS perform the 

day-to-day oversight of PDP sponsors. Account managers serve as the 

primary point of contact for PDP sponsors and ensure PDP sponsors’ 

compliance with program rules and guidance. Account managers also 

coordinate all audits of PDP sponsors. 

Medicare Drug Integrity Contractors. Medicare Drug Integrity 

Contractors (MEDIC) are responsible for many Part D oversight 

activities. According to the MEDICs’ umbrella statement of work, their 

responsibilities may include analyzing claims and other data, 

investigating complaints, and reviewing the fraud and abuse 

components of PDP sponsors’ compliance plans.11 CMS issues 

individual task orders to define the specific responsibilities of MEDICs. 

CMS has contracted with three companies to serve as MEDICs. 

MEDICs’ early efforts focused on processing complaints regarding Part 

D fraud, waste, and abuse. 

Previous Office of Inspector General Work 

In December 2006, the Office of Inspector General (OIG) issued a report 

entitled “Prescription Drug Plan Sponsors’ Compliance Plans” 

(OEI-03-06-00100).12 The report found that most PDP sponsors’ 

compliance plans did not address all of the CMS requirements or 

recommendations. For example, 71 of 79 PDP sponsors’ compliance 

plans reviewed did not address all requirements related to internal 

monitoring and auditing. OIG recommended that CMS take steps to 

ensure that PDP sponsors’ compliance plans address all requirements. 

In its comments on the report, CMS stated that account managers 

would follow up with the PDP sponsors identified in the report 

regarding deficiencies in their compliance plans. In addition, CMS 

stated that in January 2007, it would begin routine audits that would 

include PDP sponsors’ compliance plans. 

11 CMS, “MEDIC Statement of Work,” § 3.2, Rev. 1, January 3, 2006. 

12 OIG, “Prescription Drug Plan Sponsors’ Compliance Plans,” OEI-03-06-00100, 

December 2006. Available online at http://oig.hhs.gov/oei/reports/oei-03-06-00100.pdf. 

Accessed on March 11, 2008. 

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INTRODUCTION 

METHODOLOGY 

Data Collection and Analysis 

We collected documentation and interviewed CMS staff regarding the 

following oversight activities: 

• all audits of PDP sponsors conducted between January 1, 2007, and 

March 31, 2008; 

• any planned audits of PDP sponsors’ compliance plans scheduled for 

2008; 

• PDP sponsors’ self-assessment of their compliance plans and any steps 

taken to address deficiencies; 

• CMS’s followup with PDP sponsors regarding the findings of OIG’s 

December 2006 report; and 

• any other oversight conducted to ensure that PDP sponsors’ 

compliance plans meet Federal requirements. 

We collected this information from CMS officials with responsibility for 

oversight of PDP sponsors’ compliance plans. CMS respondents 

included representatives from the Center for Beneficiary Choices’ 

Medicare Drug Benefit Group and Plan Oversight and Accountability 

Group as well as the Office of Financial Management’s Program 

Integrity Group. Data collection was conducted in April and May 2008. 

We reviewed CMS staff responses to our interview questions to 

determine what oversight has been conducted or planned regarding 

PDP sponsors’ compliance plans. In addition, CMS provided data on 

audits of PDP sponsors conducted in 2007. We analyzed the data to 

determine the number and types of audits conducted and whether any 

audits included a review of compliance plans. CMS did not provide data 

on audits conducted between January and March 2008 because no PDP 

sponsors were audited during this time. 

CMS also provided data on the results of the June 2007 self-assessment 

and the followup to the self-assessment conducted by account managers 

in April 2008. We reviewed these results to determine which 

compliance plan requirements PDP sponsors reported that they had not 

implemented and what steps were taken to address compliance plan 

deficiencies. In addition, we reviewed Chapter 9 of the “Prescription 

Drug Benefit Manual” and the self-assessment to determine which 

requirements were included in both documents. 

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INTRODUCTION 

Standards 

This study was conducted in accordance with the “Quality Standards for 

Inspections” issued by the President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency. 

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FINDINGS 

CMS reported that it would begin 

routine audits of PDP sponsors in 

January 2007 that would assess the 

effectiveness of sponsors’ compliance plans. CMS conducted 19 audits of 

PDP sponsors in 2007: 17 routine audits and 2 focused audits. CMS did 

not include a compliance plan review in any of the 17 routine audits. 

One of the two focused audits included a review of one PDP sponsor’s 

compliance plan. This focused audit was of a PDP sponsor that had 

deficiencies in several other program areas. The audit reviewed the 

PDP sponsor’s compliance plan for one required component and found 

that the sponsor did not have a comprehensive plan to detect, correct, 

and prevent fraud, waste, and abuse. 

CMS conducted one audit of a PDP 

sponsor’s compliance plan in 2007 

Δ FINDINGS 

In April 2008, CMS staff reported that they plan to have the MEDICs 

conduct specific audits of compliance plans. CMS originally intended to 

have the MEDICs start the compliance plan audits in the fall of 2007; 

however, CMS did not begin the audits at that time because of budget 

constraints. CMS reported that the MEDICs would begin conducting 

these compliance plan audits in the summer of 2008. However, as of 

early August 2008, the MEDICs had not yet audited any PDP sponsors’ 

compliance plans. 

 

In response to OIG’s December 2006 

report, CMS stated that it would 

have account managers follow up 

with sponsors identified in the report 

to ensure that sponsors corrected their compliance plan deficiencies. 

CMS staff reported in April 2008 that, rather than follow up specifically 

with PDP sponsors identified in OIG’s report, they had requested all 

PDP sponsors to complete a compliance plan self-assessment. The 

self-assessment was the only followup conducted by CMS in response to 

OIG’s report. 

PDP sponsors completed a compliance plan 

self-assessment but CMS did not 

verify sponsors’ responses 

CMS developed the self-assessment and sent it to all 91 PDP sponsors 

in June 2007. All 91 PDP sponsors completed the self-assessment. The 

self-assessment included 50 questions, 11 regarding required 

compliance plan items and 39 regarding recommended items. CMS did 

not request that PDP sponsors submit documentation to verify their 

responses. 

Results of self-assessment. Twenty-five percent of PDP sponsors 

(23 of 91) attested that they did not implement 1 or more of the 

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FINDINGS 

11 requirements included in the self-assessment. For example, 

14 percent of PDP sponsors (13 of 91) attested that they did not have 

documented procedures for internal monitoring and auditing of their 

Part D compliance programs. Nine percent (8 of 91) attested that they 

did not provide training and education between the compliance officer 

and employees, contractors, subcontractors, agents, and directors. Five 

percent of PDP sponsors (5 of 91) attested that they did not have a 

documented comprehensive plan to detect, correct, and prevent Part D 

fraud, waste, and abuse. 

The other 39 questions in the self-assessment pertained to 

recommendations, according to CMS. While not required by regulation, 

CMS drafted these recommendations to assist PDP sponsors in 

implementing an effective compliance plan. For example, CMS 

recommends that PDP sponsors have a process in place to identify 

claims for drugs prescribed by excluded or deceased providers and a 

process to report and properly repay any overpayments. However, 

45 percent of PDP sponsors (41 of 91) attested that their plans for 

preventing fraud, waste, and abuse did not include such processes. 

CMS also recommends that PDP sponsors distribute their code of 

conduct to first tier, downstream, and related entities. However, 

52 percent (47 of 91) attested that they did not do so. 

Self-assessment did not include all compliance plan requirements. CMS 

stated that the self-assessment was based on Chapter 9 of the 

“Prescription Drug Benefit Manual.” Chapter 9 includes the eight 

regulatory compliance plan elements as well as additional requirements 

and recommendations for addressing these elements. Chapter 9 states 

that statutory or regulatory program requirements are reflected by use 

of the terms “must” or “shall.” CMS’s self-assessment included 

11 requirements. However, our review of Chapter 9 identified an 

additional 12 items that were referred to using the words “must,” 

“shall,” or, in one case, “will” that were not included in the 

self-assessment as requirements. Six of these twelve items were 

included in the self-assessment as recommendations, but the remaining 

six were not included as part of the self-assessment. For example, the 

Chapter 9 requirement that a PDP sponsor “must ensure the Part D 

Compliance Officer does not hold other responsibilities that could lead 

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FINDINGS 

to self-policing of his/her activities”13 was not included in the 

self-assessment. 

CMS followed up with 23 PDP sponsors but did not request documentation 

to ensure that sponsors corrected deficiencies identified through the 

self-assessment 

In April 2008, CMS asked account managers to follow up with 

23 PDP sponsors regarding the June 2007 self-assessment. These 

23 PDP sponsors attested in June 2007 that they had not implemented 

1 or more of 11 compliance plan requirements included in the 

self-assessment. 

As followup, CMS asked the 23 PDP sponsors whether they had come 

into compliance since responding to the self-assessment, or whether 

they misunderstood a question and had actually been in compliance 

from the beginning. All 23 PDP sponsors responded to CMS’s request 

for follow-up information. 

We reviewed a summary of the 23 PDP sponsors’ follow-up responses to 

CMS’s request regarding the implementation of the compliance plan 

requirements. Based on CMS’s followup, only one sponsor reported that 

it was not meeting all of the requirements included in the 

self-assessment. However, CMS did not instruct account managers to 

request supporting documentation to confirm that PDP sponsors made 

corrections to their compliance plans. 

In addition, CMS did not follow up with PDP sponsors that attested that 

they had not implemented one or more of the recommended items 

included in the self-assessment. This included six items that were 

requirements in Chapter 9 of the “Prescription Drug Benefit Manual” 

but were considered recommended items in the self-assessment. 

9 

13 CMS, “Prescription Drug Benefit Manual,” Rev. 2, April 25, 2006, ch. 9, § 50.2.2.1. 

Available online at 

http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_F

WA.pdf. Accessed on January 18, 2008. 

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ΔFINDINGS BANNER 2ND PAGE FINDINGS RECOMMENDATIONS RECOMMENDATION 

Effective compliance plans are a fundamental tool in preventing and 

detecting fraud, waste, and abuse in the Part D program. OIG’s 

December 2006 report on PDP sponsors’ compliance plans found that 

many PDP sponsors’ compliance plans did not meet all of the 

requirements. In response to that report, CMS indicated that it would 

conduct routine audits of PDP sponsors’ compliance plans and have 

account managers follow up with PDP sponsors identified in the report 

as having compliance plan deficiencies. 

Although CMS originally planned to begin routine compliance plan 

audits in January 2007, as of early August 2008, CMS had not 

conducted any routine audits of PDP sponsors’ compliance plans. In 

addition, while CMS instructed all PDP sponsors to complete a 

compliance plan self-assessment, the self-assessment did not include all 

requirements from Chapter 9 of the “Prescription Drug Benefit 

Manual.” Also, CMS did not ensure that PDP sponsors’ attestations 

were accurate by independently verifying their responses. Therefore, 

CMS has only self-reported information to determine whether PDP 

sponsors’ compliance plans are meeting Federal requirements. 

Therefore, we recommend that CMS: 

Conduct Audits To Verify That PDP Sponsors’ Compliance Plans Meet 

Requirements 

CMS should conduct routine audits of PDP sponsors’ compliance plans 

to ensure that these compliance plans meet all Federal requirements. 

Specifically, these audits should cover all compliance plan requirements 

contained in regulations as well as requirements included in Chapter 9 

of the “Prescription Drug Benefit Manual.” CMS may also want to 

assess the degree to which PDP sponsors have implemented the 

recommendations described in Chapter 9. 

AGENCY COMMENTS 

CMS concurred with our recommendation that it should conduct audits 

of PDP sponsors’ compliance plans. CMS noted that due to critical 

funding shortfalls, it was not able to conduct compliance plan audits 

prior to the issuance of this report. However, CMS stated that it will 

begin audits of sponsors’ compliance plans in the near future. These 

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RECOMMENDATION 

audits will consist of a limited number of desk audits; however, as more 

resources become available, CMS stated that it will include more audits, 

onsite reviews, and other more comprehensive fraud prevention 

activities. The full text of CMS’s comments are included in the 

Appendix. 

 

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12 

Agency Comments 

Δ APPENDIX 

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APPENDIX 
 

 

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Δ ACKNOWLEDGMENTS 

This report was prepared under the direction of Robert A. Vito, Regional 

Inspector General for Evaluation and Inspections in the Philadelphia 

regional office, and Linda M. Ragone, Deputy Regional Inspector 

General. 

Tara J. Bernabe served as the team leader for this study. Other 

principal Office of Evaluation and Inspections staff from the 

Philadelphia regional office who contributed to the report include 

Nancy J. Molyneaux; central office staff who contributed include 

Rita Wurm.