Department of Health and Human Services

OFFICE OF

INSPECTOR GENERAL

 

NAPPROPRIATE EDICARE

PART D PAYMENTS FOR

SCHEDULE II DRUGS BILLED 

AS REFILLS

Daniel R. Levinson 

Inspector General

September 2012

OEI-02-09-00605

I M
EXECUTIVE SUMMARY: INAPPROPRIATE MEDICARE PART D PAYMENTS 

FOR SCHEDULE II DRUGS BILLED AS REFILLS

OEI-02-09-00605

WHY WE DID THIS STUDY 

Schedule II drugs have the highest potential for abuse of any prescription drugs legally 

available in the United States. They include narcotics commonly used to relieve pain and 

stimulants. Federal law prohibits the refilling of prescriptions for them. In addition, 

Schedule II drugs cannot be dispensed without a prescription that contains the name, 

address, and signature of the prescriber.

HOW WE DID THIS STUDY

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

these records to the Centers for Medicare & Medicaid Services (CMS) for each drug 

dispensed to beneficiaries enrolled in their plans. Each record contains information about 

the pharmacy, prescriber, and drug. We analyzed all of the records for refills of Schedule 

II drugs that were billed in 2009.

WHAT WE FOUND

Medicare Part D inappropriately paid $25 million for Schedule II drugs billed as refills in 

2009. Sponsors should not have paid for any of these drugs because Federal law 

prohibits the refilling of Schedule II controlled substances. Some of these drugs may 

have been inaccurately billed. It is possible that some long-term-care pharmacies 

incorrectly billed these drugs as refills when they were partial fills. Partial fills occur 

when a pharmacist does not dispense all doses of the prescribed medication at one time. 

Several concerns exist, however, if partial fills are inaccurately billed as refills. 

Moreover, over 25,000 Schedule II refills had invalid prescribers. Lastly, three-quarters 

of Part D sponsors paid for Schedule II drugs billed as refills, indicating that many 

sponsors do not have adequate controls to prevent these refills.

WHAT WE RECOMMEND

We recommend that CMS: (1) issue guidance to sponsors to prevent billing of 

Schedule II refills and to ensure accurate billing of partial fills; (2) exclude Schedule II 

refills when calculating payments to sponsors; (3) monitor sponsors to ensure that they 

validate prescriber numbers for Schedule II drugs; and (4) follow up on sponsors, 

pharmacies, and prescribers with high numbers of refills. CMS concurred with our 

recommendation to monitor sponsors to ensure they validate prescriber numbers and 

partially concurred with the other three recommendations. 
TABLE OF CONTENTS

Objective ......................................................................................................1

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

Methodology................................................................................................6

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

Medicare Part D inappropriately paid $25 million for Schedule II 

drugs billed as refills in 2009...........................................................9

Some of these drugs may have been inaccurately billed ...............10

Over 25,000 of the Schedule II drugs billed as refills had

invalid prescribers..........................................................................11

Three-quarters of Part D sponsors paid for Schedule II drugs

billed as refills................................................................................12

Conclusion and Recommendations............................................................13

Agency Comments and Office of Inspector General Response.....15

Appendix....................................................................................................17

A: Agency Comments...................................................................17

Acknowledgments......................................................................................21
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 1

OBJECTIVE

To determine the extent to which Medicare Part D paid for Schedule II 

drugs billed as refills in 2009.

BACKGROUND

Schedule II drugs have the highest potential for abuse of any prescription 

drugs legally available in the United States.1 They include narcotics

commonly used to relieve pain and stimulants. The Drug Enforcement 

Agency (DEA) regulates Schedule II drugs, and the Controlled Substance 

Act prohibits the refilling of prescriptions for them. In 2009, Medicare 

Part D paid $2.2 billion for Schedule II drugs.

Abuse of Schedule II and other prescription drugs is a serious problem. 

The Centers for Disease Control and Prevention (CDC) has characterized 

prescription drug abuse as an epidemic.2

 In fact, more deaths in 2007 

were caused by prescription painkillers, including several Schedule II 

drugs, than by cocaine and heroin combined.3

In addition to causing public health concerns, Schedule II drugs have been 

at the center of several schemes to defraud the Medicare Part D program. 

Schemes involving Schedule II drugs include forged prescriptions and 

diversion through “unscrupulous pharmacists, doctors, and dentists.”4 In a 

recent case, two Los Angeles-based doctors were charged with health care 

fraud for knowingly prescribing Schedule II drugs to individuals who did 

not have a medical need for them. Over an 18-month period, Medicare 

Part D paid more than $2.7 million for the Schedule II drugs prescribed by 

these doctors.5

There have also been several recent DEA settlements related to the 

dispensing of Schedule II drugs. A long-term-care pharmacy recently

1 21 U.S.C. § 812. Also see 21 CFR § 1308.12 for a listing of drugs identified as Schedule II 

substances.

2 CDC, Press Release, Prescription Painkiller Overdoses at Epidemic Levels, 

November 1, 2011. Accessed at 

http://www.cdc.gov/media/releases/2011/p1101_flu_pain_killer_overdose.html on 

February 21, 2012. 

3 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. 4 DEA, Drugs and Chemicals of Concern: Oxycodone. Accessed at 

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

September 27, 2011.

5 Department of Justice (DOJ), Grand Jury Indicts 14 in Los Angeles-Based OxyContin Ring 

That Allegedly Distributed Over 1 Million Pills of the Highly Addictive Painkiller, 

October 13, 2011. Accessed at www.justice.gov/dea/pubs/states/newsrel/2011/la101311.html

on February 22, 2012.
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 2

agreed to pay $50 million to resolve Government claims that the pharmacy 

had dispensed controlled substances without written prescriptions and did 

not properly document partial fills of controlled substances.6 DEA also

reached a settlement with a pharmaceutical distributor for failing to 

maintain adequate controls to prevent the diversion of controlled 

substances, specifically oxycodone.7 In another case, a pharmacy benefits 

manager recently paid almost $3 million to settle claims that it did not 

have practices to prevent diversion of controlled substances and used 

invalid DEA numbers at its mail-order pharmacies.

8

Schedule II Drugs

The Controlled Substances Act establishes five schedules of drugs that are 

considered controlled.9 These schedules are based on medical use and the 

potential for abuse. The most restricted is Schedule I, which includes 

drugs that have a high potential for abuse and no currently accepted 

medical use in the United States. Schedule V is the least restricted.

Schedule II drugs have a high potential for abuse and may lead to severe 

psychological or physical dependence.10 These drugs include narcotics 

and narcotic substances such as morphine, opium, oxycodone 

(OxyContin), meperidine (Demerol), and fentanyl (Sublimaze or 

Duragesic). They also include stimulants such as amphetamine 

(Dexedrine, Adderall) and methylphenidate (Ritalin).11

Schedule II drugs are subject to a number of restrictions under Federal law 

and regulations. Specifically, Federal law prohibits the refilling of 

prescriptions for Schedule II drugs.12 In addition, Schedule II drugs 

cannot be dispensed without a prescription that contains the name, 

6 DEA, Omnicare in $50 Million Settlement—Largest Controlled Substance Settlement in 

History, May 11, 2012. Accessed at 

http://www.justice.gov/dea/pubs/states/newsrel/2012/det051112.html on May 15, 2012. 7 DEA, DEA Suspends for Two Years Pharmaceutical Wholesale Distributor’s Ability to Sell 

Controlled Substances from Lakeland, Florida Facility, May 15, 2012. Accessed at 

http://www.justice.gov/dea/pubs/pressrel/pr051512.html on May 24, 2012. 8 U.S. Attorney’s Office, Eastern District of Pennsylvania, “United States Settles With 

Express Scripts Over Diversion Of Controlled Substances And Use Of Improper DEA 

Numbers,” May 15, 2012. Accessed at 

http://www.justice.gov/usao/pae/News/2012/May/esi_release.htm on May 22, 2012. 9 21 U.S.C. § 801 et seq. 

10 21 U.S.C. § 812.

11 DEA, Pharmacist’s Manual, 2010, p. 5. Accessed at 

http://www.deadiversion.usdoj.gov/pubs/manuals/pharm2/pharm_manual.pdf on 

November 8, 2011.

12 21 U.S.C. § 829(a).
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 3

address, and signature of the prescriber.13 DEA regulations further require 

that Schedule II drugs be prescribed by individual practitioners who are 

registered with DEA.14

DEA guidance states that prescribing practitioners and pharmacists are 

responsible for ensuring that Schedule II drugs are dispensed properly. 

The guidance states that the practitioner is responsible for ensuring that 

the prescription conforms to all Federal and State laws and regulations.15 

It further states that “a pharmacist who deliberately fills a questionable 

prescription may be prosecuted, along with the issuing practitioner, for 

knowingly and intentionally distributing controlled substances.”16

In addition, Federal regulations limit the circumstances under which 

partial fills of Schedule II drugs are permissable.17 Partial fills occur when 

a pharmacist does not dispense all doses of the prescribed medication at 

one time; instead, the pharmacist dispenses the drug over multiple fills. 

Partial fills of Schedule II drugs must be completed within 72 hours, 

unless the patient is in a long-term-care facility or terminally ill. Partial 

fills are not considered refills.18

Medicare Part D

Medicare Part D provides an optional prescription drug benefit to 

Medicare beneficiaries. 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. These 

sponsors contract with a network of pharmacies to dispense drugs to the 

13 In 2009, Schedule II drugs could not be dispensed without a written prescription except in 

emergency situations and when dispensed directly to the ultimate user by a practitioner other 

than a pharmacist. A paper prescription could be transmitted to the pharmacy by the 

practitioner or his or her agent via facsimile machine. 21 CFR § 1301.11. Also see DEA, 

Practitioner’s Manual Section V – Valid Prescription Requirements, 2006. Accessed at 

http://www.deadiversion.usdoj.gov/pubs/manuals/pract/section5.htm on November 1, 2011. 

Beginning in 2010, practitioners were allowed to sign and transmit electronic prescriptions for 

controlled substances under certain circumstances. See 21 CFR § 1301.08.

14 Practitioners must be authorized to prescribe controlled substances by the jurisdiction in 

which they are licensed to practice. DEA maintains a registry of all these practitioners and

includes their assigned DEA numbers and information about which schedules of drugs each is 

allowed to prescribe. DEA registration grants practitioners Federal authority to handle 

controlled substances. See 21 CFR § 1301.11.

15 DEA, Pharmacist’s Manual, 2010, p. 29. Accessed at 

http://www.deadiversion.usdoj.gov/pubs/manuals/pharm2/pharm_manual.pdf on 

November 8, 2011.

16 Ibid., p. 30.

17 21 CFR § 1306.13.

18 Although Schedule II drugs cannot be refilled, practitioners may issue multiple 

prescriptions at one time, each authorizing a 90-day supply. 21 CFR § 1306.12.
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 4

beneficiaries enrolled in their plans. These pharmacies include, retail, 

long-term-care, specialty, and mail-order pharmacies, among others.19

Sponsors are required to safeguard Part D from fraud and abuse. CMS 

recommends that sponsors use claims processing edits to monitor their 

programs and to automatically deny payment, when appropriate.20 

Beginning in January 2012, CMS required sponsors to ensure that the 

prescriber identifiers on Prescription Drug Event (PDE) records are active 

and valid. They must also confirm that any controlled substances are 

consistent with the schedule of drugs that the provider is allowed to 

prescribe. To do this, sponsors must validate the DEA numbers on PDE 

records for Schedule II drugs or map the National Provider Identifiers 

(NPI) on the PDE records to the prescriber’s DEA number and then 

confirm that the controlled substance is consistent with the prescriber’s

registration.21 CMS also requires sponsors to have compliance plans that 

contain measures to detect, prevent, and correct fraud, waste, and abuse.22 

As part of these plans, CMS expects that sponsors will monitor their 

contractors and subcontractors, including their pharmacies.23 

CMS contractors are also charged with safeguarding Part D. CMS 

contracts with two Medicare Drug Integrity Contractors (MEDIC) to help 

identify Part D vulnerabilities. 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 MEDIC’s responsibilities include performing 

special studies and providing technical assistance to CMS. Additionally, 

CMS contracts with a Recovery Audit Contractor (RAC) for Part D. 

Beginning in 2012, the RAC will review excluded prescribers, excluded 

pharmacies, and duplicate payments.

19 A specialty pharmacy dispenses high-cost drugs to patients with chronic, complex illnesses. 20 CMS, Prescription Drug Benefit Manual Chapter 9 – Part D Program to Control Fraud, 

Waste, and Abuse, § 50.2.6.3.1, April 2006. Accessed at 

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

df on January 12, 2012. 21 CMS, Prescription Drug Manual – Chapter 5: Benefits and Beneficiary Protections, 

§§ 90.2 and 90.2.4, September 2011. Accessed at http://www.cms.gov/Medicare/PrescriptionDrug-Coverage/PrescriptionDrugCovContra/Downloads/Memo 

PDBManualChapter5_093011.pdf on May 8, 2012. 22 42 CFR § 423.504(b)(4)(vi).

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

Manual Chapter 9 – Part D Program to Control Fraud, Waste, and Abuse, Part D Sponsors 

Accountability and Oversight – Section 40, April 2006. Accessed at 

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

pdf on July 19, 2011.
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 5

Prescription Drug Event Records

Sponsors submit a PDE record to CMS for each prescription filled for 

their enrollees. CMS uses the records to administer the program and to 

calculate its payments to sponsors at the end of each year in a process 

known as reconciliation. 

Each PDE record contains a unique identification number for the 

prescriber.24 Most PDE records contain the prescriber’s NPI, which CMS 

issues to each health care provider. CMS maintains a registry of all 

assigned NPIs, along with the name and address of the health care 

providers. If an NPI does not appear in the registry, it has not been 

assigned to a health care provider. 

PDE records also include a field, called “Fill Number,” that indicates 

whether a prescription is a refill. This field is one of several on the PDE 

record that is standard throughout the industry. Industry standards are set 

by the National Council for Prescription Drug Plans (NCPDP). NCPDP 

instructs pharmacies to enter “0” for new prescriptions, “1” for a first 

refill, and “2” for a second refill.25 

Sponsors are required to provide certification of the accuracy, completion, 

and truthfulness of PDE data.26 In addition, CMS takes steps to ensure the 

accuracy of the PDE records. CMS performs edits on the PDE records 

before it accepts them from sponsors. For example, CMS determines 

whether certain data are missing and whether certain values are within 

acceptable ranges. CMS considers values between 0 and 99 to be within 

an acceptable range for the Fill Number field.

27

24 PDE records allow four types of prescriber identification numbers: NPIs, DEA numbers, 

State license numbers, and Unique [Physician] Identification Numbers (UPIN). In 

May 2008, CMS issued guidance stating that plans and pharmacies “should make all 

reasonable efforts to obtain NPIs in the Prescriber ID field.” See CMS, Prescriber Identifier 

on Part D NCPDP Pharmacy Claims Transactions, May 1, 2008. Accessed at 

https://www.cms.gov/Medicare/Prescription-DrugCoverage/PrescriptionDrugCovContra/Downloads/MemoNPIPrescriberID_050108v2.pdf. on 

June 6, 2012.

25 Pursuant to the Health Insurance Portability and Accountability Act of 1996, the Secretary 

of Health and Human Services named the NCPDP Telecommunication Standards as the 

electronic transaction standards for retail pharmacies. These standards define a “Fill Number” 

of 0 to be the “original dispensing.” NCPDP’s Universal Claim Form Sample further defines 

Fill Number values of 1 and 2 as refills. See NCPDP, Universal Claim Form Sample and 

NCPDP, Telecommunication Standard Implementation Guide Version D.0, August 2010. 26 42 CFR § 423.505(k).

27 CMS, Medicare Part D Prescription Drug Event (PDE) Data Elements, April 8, 2008. 

Accessed at https://www.cms.gov/Medicare/Prescription-DrugCoverage/PrescriptionDrugCovGenIn/downloads//PDEDataElements.pdf on April 12, 2012.
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 6

Related Work

Four recent Office of Inspector General (OIG) audits found that the 

sponsors did not have adequate controls to ensure the accuracy of the PDE 

data they submitted to CMS.28 Three of these audits also found that the 

sponsors did not have adequate controls to prevent Schedule II refills. 

These reports recommended that the sponsors strengthen their controls and 

issue guidance to their pharmacies, clarifying Federal requirements.

Another OIG report found that approximately 228,000 PDE records for 

Schedule II drugs in 2007 did not contain valid prescriber identifiers.29 

CMS and sponsors performed edits on the prescriber identifier fields; 

however, these edits were insufficient. 

METHODOLOGY

Data Collection and Analysis

This report is based on analysis of PDE records for all drugs paid for by 

Part D in 2009. In total, we identified 1.07 billion PDE records for Part D 

prescriptions filled between January 1 and December 31, 2009. 

To identify the PDE records for Schedule II drugs, we matched the PDE 

records to First DataBank using the National Drug Code on the PDE 

records. First DataBank contains information about each drug, including 

its name; whether it is a controlled substance; and, if so, the schedule of 

the drug. We identified 20.1 million PDE records for Schedule II drugs 

billed by 61,472 pharmacies.30 To identify the PDE records that were 

refills for Schedule II drugs, we looked at the Fill Number field on the 

PDE record. The first time a prescription is filled the Fill Number should 

be 0. Any value greater than 0 is considered a refill. 

28 OIG, Review of Medicare Part D Prescription Drug Event Data for Schedule II Drugs at 

Health Net, Inc., A-09-10-02046, September 2011. OIG, Review of Medicare Part D 

Prescription Drug Event Data for Schedule II Drugs at CVS Caremark Corporation, 

A-09-11-02074, February 2012. OIG, Review of Medicare Part D Prescription Drug Event 

Data for Schedule II Drugs at Hawaii Medical Services Association, A-09-11-02028, 

December 2011. OIG, Review of Medicare Part D Prescription Drug Event Data for 

Schedule II Drugs at United HealthCare Medicare & Retirement, A-09-11-02023, July 2012. 29 OIG, Oversight of Prescriber Identifier Field in Prescription Drug Event Data for 

Schedule II Drugs, A-14-09-00302, February 2011. Accessed at 

http://oig.hhs.gov/oas/reports/other/140900302.pdf on November 1, 2011. Another OIG 

report looked at the prescriber identifiers for PDE records billed in 2007. It found that 

Medicare Part D paid $1.2 billion for drugs with invalid prescriber identifiers. See OIG, 

Invalid Prescriber Identifiers on Medicare Part D Claims, OEI-03-09-00140, June 2010. 30 To determine the total number of pharmacies, we used the NPI. If we were unable to 

identify the NPI for the pharmacy, we did not include the PDE record in our analysis. In total, 

we excluded less than 0.1 percent of all PDE records.
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 7

Next, we calculated the total number of Schedule II drugs billed to 

Medicare Part D in 2009. To calculate the cost of these refills, we

summed the three fields that indicate the gross drug costs—the ingredient 

cost, dispensing fee, and sales tax. These fields include the amount paid 

by Part D sponsors, the Government, and by or on behalf of beneficiaries. 

In addition, we determined the most common Schedule II drugs that were 

refilled. For the purpose of this report, we considered drugs with the same 

name as the same drug, regardless of dosage or strength.

We then determined the total number of pharmacies that billed for refills 

of Schedule II drugs and the type of pharmacy, i.e., retail, long-term-care, 

or other type, that billed for each refill.31 We used the NPI for each 

pharmacy and matched it to the NCPDP database to identify the type of 

pharmacy. We calculated the percentage and the average number of refills 

of Schedule II drugs that were billed by each type of pharmacy. 

Next, we determined the total number of prescribers who were associated 

with Schedule II refills and whether the prescriber identifiers were valid.32 

To do this, we checked the NPI or DEA identification number on the PDE 

records against CMS and DEA files.33 In October 2010, we obtained 

CMS’s registry of active NPI numbers through its National Plan and 

Provider Enumeration System and accessed a file of active DEA 

registrants. We also obtained lists of inactive NPI numbers and retired 

DEA registration numbers. We compared the NPI and DEA prescriber 

identifiers on the PDE records to these registries. We considered a 

prescriber identifier to be invalid if it had never been assigned or if it had 

been deactivated or retired before January 1, 2009. We also considered a 

prescriber identifier to be invalid if it was assigned to a pharmacy, i.e., the

pharmacy’s NPI was listed as the prescriber.

Lastly, to identify the sponsors that paid for Schedule II refills, we 

matched the contract number on the PDE records with data from CMS’s 

Health Plan Management System. We used this information to calculate

the total number of Schedule II refills paid for by each sponsor.

34 

31 We could not identify the pharmacy type for 2,585 refills. 

32 Prescribers can use multiple identifiers to prescribe drugs, such as a DEA number or an 

NPI. This analysis is based on the identifier on the PDE record. We did not aggregate all 

identification numbers for each individual prescriber. 33 Less than 1 percent (0.92 percent) of refills were billed using other types of prescriber 

identifiers, such as UPINs and State license numbers. In these cases, we assumed the 

prescriber identifiers were valid. 34 We identified two invalid sponsor identification numbers. We did not include these invalid 

numbers in our analysis of sponsors. In total, these two numbers accounted for 477 refills.
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 8

Limitations

This review is based on an analysis of PDE data; we did not review 

documentation from the pharmacies or prescribers to verify the data. We 

also did not independently verify the accuracy of the data from First 

DataBank or NCPDP. 

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.
Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 9

FINDINGS

Medicare Part D inappropriately paid $25 million for 

Schedule II drugs billed as refills in 2009

In 2009, Medicare Part D inappropriately paid for 397,203 Schedule II 

drugs billed as refills. These drugs amounted to $24.6 million and 

accounted for 2 percent of all Schedule II drugs dispensed in 2009. 35 

Sponsors should not have paid for any of these drugs because Federal law 

prohibits the refilling of Schedule II drugs. Schedule II drugs can be 

highly addictive and are commonly abused. Also, they are often diverted 

and resold for profit. CMS relies on sponsors to ensure that Part D does 

not pay for Schedule II refills.

Fentanyl and oxycodone-acetaminophen were the Schedule II drugs most 

commonly billed as refills. These two drugs accounted for more than half 

of all Schedule II refills. See Table 1. Fentanyl is a painkiller with effects 

similar to those of heroin, but hundreds of times more potent.36 

Oxycodone with acetaminophen is a commonly abused painkiller that 

provides a euphoric high.37 According to DOJ, a 100-tablet bottle of 

40-milligram OxyContin (the brand-name version of oxycodone) sells for 

approximately $2,000 to $4,000 on the street.38

35 The total includes the amounts paid by Part D sponsors, the Government, and by or on 

behalf of beneficiaries. 

36 DEA, Briefs and Backgrounds: Fentanyl. Accessed at 

http://www.justice.gov/dea/concern/fentanyl.html#fentanyl on September 27, 2011. 37 DEA, Oxycodone. Accessed at 

http://www.deadiversion.usdoj.gov/drugs_concern/oxycodone/oxycodone.pdf on 

June 6, 2012.

38 DOJ, National Drug Intelligence Center, OxyContin Diversion and Abuse, January 2001.

Accessed at http://www.justice.gov/ndic/pubs/651/abuse.htm on November 10, 2011.
 

Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 10

Table 1: Refills of Schedule II Drugs Paid by Medicare Part D, 2009

Drug Name Number of Refills Percentage of All 

Schedule II Refills Total Amount Paid

Fentanyl 123,102 31% $11,624,163

Oxycodone-acetaminophen 80,202 20% $852,634

Morphine sulphate 45,580 11% $1,565,523

Oxycodone HCl 42,063 11% $2,121,718

OxyContin 20,522 5% $4,432,056

Methadone HCl 19,592 5% $254,755

Oxycodone HCl-acetaminophen 14,034 4% $698,090

Methadone insensol 14,020 4% $230,683

Hydromorphine HCl 10,134 3% $353,840

Endocet 6,911 2% $339,387

Other drugs 21,043 5% $2,098,310

 Total 397,203 100%* $24,571,159 

*Total does not equal 100 percent because of rounding.

Source: OIG analysis of Part D data, 2012.

Some of these drugs may have been inaccurately 

billed

A total of 12,356 pharmacies billed for refills of Schedule II drugs in 

2009.39 Six percent of these pharmacies were long-term-care pharmacies. 

These pharmacies billed for 75 percent of the Schedule II refills. In 

comparison, retail pharmacies billed for 17 percent of the Schedule II 

refills.

40 Long-term-care pharmacies billed for more refills on average 

than other types of pharmacies. On average, long-term-care pharmacies 

billed for 423 refills each, while retail pharmacies billed for 6 each. 

It is possible that some long-term-care pharmacies incorrectly billed these 

drugs as refills when the drugs were actually dispensed as partial fills. 

Partial fills for Schedule II drugs are allowed for beneficiaries in longterm-care facilities when certain conditions are met. For example, if a 

physician prescribes a 28-day supply of a Schedule II drug, the pharmacy 

39 These pharmacies represent 20 percent of all pharmacies and 44 percent of long-term-care 

pharmacies that billed for Schedule II drugs in 2009.

40 The remaining refills were billed by other types of pharmacies, which included mail-order, 

institutional, and home-infusion pharmacies. 
 

Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 11

does not have to dispense all 28 days at one time. Instead, it can dispense 

four 7-day supplies or two 14-day supplies. 

The data from long-term-care pharmacies provide further evidence that 

these refills may have actually been partial fills. Notably, the Schedule II 

drugs billed as refills were often for shorter supplies than nonrefills of 

Schedule II drugs. For example, 82 percent of Schedule II drugs billed as 

refills were for less than a month’s supply, while 42 percent of nonrefills 

were for less than a month’s supply. 

CMS officials noted that, according to their industry contacts, long-termcare pharmacies do not have a consistent approach to billing partial fills. 

They further explained that long-term-care pharmacies may bill partial 

fills differently depending upon the sponsor they are billing and the 

software they use.

Inaccurate billing of partial fills as refills raises several concerns. First, 

beneficiaries may be paying multiple copayments instead of one for these 

drugs. If the beneficiary receives the low-income cost-sharing subsidy, the 

Government pays these additional costs.41 Second, incorrect billing 

affects the accuracy of PDE data. As noted earlier, four recent OIG audits 

found problems with the accuracy of PDE data.42 These audits found that 

the sponsors did not have adequate controls to ensure the accuracy of the 

PDE data they submitted to CMS. Data accuracy is important because it is

the basis on which sponsors are paid. Also, sponsors, CMS, and OIG use 

PDE data to detect and prevent fraud, waste, and abuse. Poor data can 

hinder these efforts. 

Over 25,000 of the Schedule II drugs billed as refills

had invalid prescribers

Medicare paid for 25,836 refills of Schedule II drugs that did not have 

valid prescriber information. As noted earlier, Schedule II drugs cannot be 

dispensed without a prescription that contains the name, address, and 

signature of the prescriber. These refills accounted for 7 percent of 

41 Most beneficiaries are responsible for paying certain costs, such as coinsurance, under 

Part D. However, certain low-income beneficiaries are eligible to receive assistance to pay 

some or all of these costs. The low-income cost-sharing subsidy refers to the Government’s 

portion of cost-sharing payments for these beneficiaries. 42 OIG, Review of Medicare Part D Prescription Drug Event Data for Schedule II Drugs at 

Health Net, Inc., A-09-10-02046, September 2011. OIG, Review of Medicare Part D 

Prescription Drug Event Data for Schedule II Drugs at CVS Caremark Corporation, 

A-09-11-02074, February 2012. OIG, Review of Medicare Part D Prescription Drug Event 

Data for Schedule II Drugs at Hawaii Medical Services Association, A-09-11-02028, 

December 2011.
 

Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 12

Schedule II refills billed. Medicare Part D paid a total of $1.4 million for 

these refills.

Specifically, 2,360 of the Schedule II refills billed had no prescriber 

number. Another 11,491 had numbers that had not been assigned to a 

provider, such as “AB0000000.” The remaining 11,985 listed the 

identification numbers of pharmacies, not the numbers of individual 

prescribers.

Being able to identify the prescriber helps ensure that Schedule II drugs 

are prescribed and dispensed properly. When the prescriber number is 

unknown or invalid, it creates significant vulnerabilities and hinders 

efforts by sponsors, CMS, and OIG to safeguard the program. CMS has 

recently made several changes to ensure that prescriber numbers are valid. 

As of January 2012, CMS required sponsors to ensure that the prescriber 

identifiers on the PDE records are active and valid.

Overall, in 2009, 38,979 prescribers were associated with Schedule II 

drugs billed as refills. Most of these prescribers were associated with one 

or two refills each; however, a number were associated with hundreds of 

refills. 

Three-quarters of Part D sponsors paid for Schedule II

drugs billed as refills

In total, 270 Part D sponsors paid for at least one Schedule II drug in 

2009. Of these, 194 paid for Schedule II drugs billed as refills. Each of 

these sponsors paid for between 1 and 81,576 refills. Twenty-four 

sponsors paid for more than 1,000 Schedule II refills each; three of these 

sponsors were responsible for almost half of all Schedule II refills billed.

These findings indicate that many sponsors do not have adequate controls 

to prevent refills of Schedule II drugs. As noted earlier, recent audits of 

three sponsors found that these sponsors did not have controls to prevent 

these refills.
 

Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 13

CONCLUSION AND RECOMMENDATIONS

Federal law prohibits the refilling of Schedule II drugs. Despite this, 

Medicare Part D inappropriately paid $25 million for Schedule II drugs 

billed as refills in 2009. Some of these drugs may have been incorrectly 

billed. In addition, we found that numerous refills of Schedule II drugs 

had invalid prescribers, despite requirements that Schedule II drugs cannot 

be dispensed without a prescription that contains the name, address, and 

signature of the prescriber. Further, three-quarters of all sponsors paid for 

Schedule II drugs billed as refills, indicating that many sponsors do not 

have adequate controls to prevent these refills. 

These findings raise a number of concerns. Under no circumstances 

should Medicare pay for refills of Schedule II drugs. Paying for such 

drugs raises public health concerns and may contribute to the diverting of 

controlled substances and their being resold on the street. The findings 

also raise questions about the accuracy of Part D data. Data accuracy is 

important because it is the basis on which sponsors are paid and CMS, 

OIG, and others use the data to detect and prevent fraud, waste, and abuse 

in Part D. Also, if some of these refills are actually partial fills and are not 

accurately billed as such, beneficiaries and the Government may be 

overpaying for copayments. 

We recommend that CMS:

Issue Guidance to Sponsors To Prevent Billing of Schedule II 

Refills and To Ensure Accurate Billing of Partial Fills

CMS should work with sponsors and pharmacies to determine why many 

sponsors do not have controls to prevent refills and why certain 

pharmacies, particularly long-term-care pharmacies, are billing for 

Schedule II refills.

CMS should use this information to develop guidance to sponsors to 

prevent Schedule II refills and to ensure accurate billing of partial fills. 

The guidance should clarify what controls sponsors need to have and how 

to bill for partial fills, including how to bill for copayments so that 

beneficiaries are not overcharged and the Government does not overpay 

for these drugs.

Exclude Schedule II Refills When Calculating Payments to 

Sponsors

CMS should put edits in place to identify refills of Schedule II drugs 

submitted by sponsors. CMS should exclude these PDE records when 

calculating its final payments to sponsors at the end of each year. 
 

Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 14

Monitor Sponsors To Ensure That They Validate Prescriber 

Numbers for Schedule II Drugs

CMS has made a number of recent changes to ensure that prescriber 

identification numbers are valid. Beginning in 2012, sponsors must 

validate the prescriber number on the claim and confirm that the 

controlled substance is consistent with the schedule of drugs that the 

provider is allowed to prescribe. CMS should monitor sponsors closely to 

ensure that they are complying with the new requirements.

Follow Up on Sponsors and Pharmacies With High Numbers of 

Refills

In a separate memorandum, we will refer the sponsors and pharmacies 

with high numbers of Schedule II refills to CMS for appropriate action. 
 

Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 15

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with one of our recommendations and partially concurred 

with the other three. In addition, CMS stated that it is highly likely that 

OIG is misinterpreting partial fills dispensed to patients in long-term-care 

facilities as refills of Schedule II drugs. In response, we note that this is 

not an issue of misinterpretation of the data; the data clearly show that 

these Schedule II drugs were billed as refills. We cannot assume that all 

drugs billed as refills by long-term-care pharmacies are partial fills, 

especially when the claims data offer no evidence to that effect. We 

further note that not all long-term-care pharmacies bill for Schedule II 

refills. As a result, we acknowledge in the report that some long-term-care 

pharmacies may be incorrectly billing these drugs as refills; however, 

under no circumstances should CMS pay for Schedule II drugs that are 

billed as refills. 

CMS concurred with our recommendation to monitor sponsors to ensure 

that they validate prescriber numbers for Schedule II drugs. CMS stated 

that it began validating the format of the prescriber identifiers that are 

coded as NPIs and will exclude from payment reconciliation PDEs with 

invalid NPIs.

CMS partially concurred with our recommendation to issue guidance to 

sponsors to prevent billing of Schedule II refills and to ensure accurate 

billing of partial fills. CMS stated that it has already provided guidance 

regarding partial fills and will consider releasing further guidance with 

respect to copayments on partial fills, if it is determined to be necessary. 

CMS did not agree to work with individual sponsors and pharmacies to 

determine why sponsors do not have controls to prevent such refills; it will 

instead explore the use of PDE edits to prevent such billing practices. 

CMS partially concurred with our recommendation to exclude Schedule II 

refills when calculating payments to sponsors. It agreed that edits should 

be in place to prevent billing of Schedule II drugs as refills and that it will 

explore modifying PDE edits to alert Part D sponsors to inappropriate 

refills of Schedule II drugs. CMS did not agree with excluding 

Schedule II drugs billed as refills when calculating payments to sponsors. 

It stated that it will cite the results of this report in guidance to plans and, 

as indicated above, will examine placing PDE edits to alert sponsors to 

inappropriate refills, which should eliminate any future reconciliation 

issues associated with the billing of Schedule II drugs as refills. 

Lastly, CMS partially concurred with our recommendation to follow up 

with sponsors and pharmacies with high numbers of refills. CMS agreed 
 

Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 16

that it should follow up with industry through NCPDP to determine 

whether there is another acceptable use of the standard that could be used 

to distinguish legally dispensed partial fills of Schedule II drugs in longterm care from illegally dispensed refills. If there is, CMS will explore 

options for either encouraging or requiring the use of that alternative 

process to improve controls over fraud, waste, and abuse. 

We support CMS’s efforts to address these issues. For the full text of 

CMS’s comments, see Appendix A.
APPENDIX A 

Agency Comments 

,.!>f:ll\'10~ 

Centers for Medicare & Med1caid Services 

('' .~ DEPARTMENT OF HEALTH & HUMAN SERVICeS OffiCe of Strategsc Operations and Regulatory Alfa1rs 

200 Independence Avenue SW 

Washington, DC 20201 

'··~::-z~ 

DATE: AUG o2 2012

TO: 	 Daniel R. Levinson 


Inspec.nu General 


FROM: 	 M\mlyn 't'!Wcnner 


Actin~ 1'-;dm\nistrator 


SUBJECT: 	 Office of Inspector General (OIG) Draft Report: ''Inappropriate Medicare Part D 

Payments for Schedule II Drugs Billed as Refills" (OEI-02-09-00605) 

Thank you for the opportunity to review and comment on this OIG draft report to determine the 

extent to which Medicare Part D paid for Schedule II drugs billed as refills in 2009. The Centers 

for Medicare & Medicaid Services (CMS) appreciates the OIG's concern for the potential fraud 

and abuse associated with Schedule II drugs. Nevertheless, CMS is concerned that the OIG's 

interpretation of prescription drug event (PDE) data does not support its finding that Medicare 

inappropriately paid for Schedule II drugs billed as refills. Given the known limitation of the 

National Council of Prescription Drug Program (NCPDP) electronic pharmacy billing standard 

(the HIPAA standard) for billing partial fills of Schedule II drugs appropriately dispensed to 

patients in long-term care facilities, it is highly likely that OIG is misinterpreting partial fills 

dispensed to long-term care facility residents as refills of Schedule II drugs. 

In long-term care facilities, 21 C.F.R. 1306.13(b) allows for the partial filling of prescription 

Schedule II drugs in order to reduce the quantity of drugs on hand. However, the dispensing 

status field on the NCPDP electronic phannacy billing standard may not be used to indicate this 

type of partial fill for Schedule II drugs. The standard limits the use of this field to situations 

where inventory shortages do not allow the full quantity to be dispensed. Use of this field in 

contravention of the standard would be a Health Insurance Portability and Accountability Act 

(HIPAA) violation. Consequently, phannacics u~e the fill number field to distinguish multiple 

partial fills of Schedule II controlled substances in long-term care tor billing purposes (to avoid 

rejection as a duplicate claim) and, therefore, the fill number cannot be relied upon to identify 

illegal refills. 

The OIG reports that "refills" of Schedule II drugs were identified using the fill number field on 

the PDE record. The PDE data show that 75 percent of these claims in question were billed by 

long-term care pharmacies. A~ discussed above, we believe these claims more likely represent 

legally dispensed partial fills as opposed to illegal refills. The OIG also reports that retail 

phannacies billed for 17 percent ol the claims in question. Yet, we point out that these could still 

represent partial fills for patients in long-term care facilities. Although a national provider 

Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 17 
 

Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 18
 

Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 19
 

Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 20
 

Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills (OEI-02-09-00605) 21

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 the report include Jenell Clarke and Jason 

Kwong; central office staff who contributed include Eddie Baker, Jr., 

Kevin Farber, Meghan Kearns, Debra Roush, 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. 

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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.