Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MANUFACTURER SAFEGUARDS 

MAY NOT PREVENT 

COPAYMENT COUPON USE FOR 

PART D DRUGS 

Daniel R. Levinson 

Inspector General 

September 2014 

OEI-05-12-00540 
 

EXECUTIVE SUMMARY: MANUFACTURER SAFEGUARDS MAY NOT 

PREVENT COPAYMENT COUPON USE FOR PART D DRUGS 

OEI-05-12-00540 

WHY WE DID THIS STUDY 

Pharmaceutical manufacturers offer copayment coupons to reduce or eliminate the cost of 

patients’ out-of-pocket copayments for specific brand-name drugs. The anti-kickback 

statute prohibits the knowing and willful offer or payment of remuneration to a person to 

induce the purchase of any item or service for which payment may be made by a Federal 

health care program. Manufacturers may be liable under the anti-kickback statute if they 

offer coupons to induce the purchase of drugs paid for by Federal health care programs, 

including Medicare Part D. The anti-kickback statute applies to all Federal health care 

programs, but this study focused on Part D. The use of coupons by Medicare 

beneficiaries could impose significant costs on the Part D program because many 

coupons encourage beneficiaries to choose more expensive brand-name drugs over less 

expensive alternative drugs. In two surveys by outside groups, approximately 6 percent 

to 7 percent of seniors surveyed reported using coupons to purchase prescription drugs. 

HOW WE DID THIS STUDY 

To identify the safeguards pharmaceutical manufacturers employ to prevent their 

copayment coupons from being used for drugs paid for by Part D and to identify 

vulnerabilities in those safeguards, we surveyed 30 manufacturers of the top 100 Part D 

brand-name drugs with coupons and with the highest Medicare expenditures. We also 

reviewed selected safeguards offered for a purposive sample of those drugs. In addition, 

we interviewed staff at various organizations involved in pharmacy claims transactions to 

understand other vulnerabilities associated with coupon use in Part D. 

WHAT WE FOUND 

Pharmaceutical manufacturers’ current safeguards may not prevent all copayment 

coupons from being used for drugs paid for by Part D. All surveyed manufacturers 

provide notices directed to beneficiaries and pharmacists that coupons may not be used in 

Federal health care programs. Most surveyed manufacturers use pharmacy claims edits 

to prevent coupons from being processed for drugs covered by Part D. Most of these 

edits may not prevent all coupons from being processed for Part D-covered drugs. 

Finally, Part D plans and other entities cannot identify coupons within pharmacy claims. 

WHAT WE RECOMMEND 

The Office of Inspector General’s concurrent Special Advisory Bulletin affirms that 

pharmaceutical manufacturers are at risk of sanctions if they fail to take appropriate steps 

to ensure that their copayment coupons do not induce the purchase of Federal health care 

programs items or services, including but not limited to, drugs paid for by Medicare 

Part D. For this reason, manufacturers may engage industry stakeholders and the Centers 

for Medicare & Medicaid Services (CMS) in an effort to identify a solution to ensure that 

coupons are not used for drugs paid for by Part D. CMS should cooperate with industry 

stakeholder efforts to improve the reliability of pharmacy claims edits and make coupons 

transparent. CMS concurred with our recommendation. 
 

TABLE OF CONTENTS 

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

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

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

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

All surveyed manufacturers provide notices to beneficiaries and 

pharmacists that copayment coupons may not be used in Federal 

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

Most surveyed manufacturers use pharmacy claims edits to prevent 

copayment coupons from being processed for drugs paid for by 

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

Surveyed manufacturers’ pharmacy claims edits may not prevent 

copayment coupons from being processed for drugs paid for by 

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

Part D plans and other entities cannot identify copayment coupons 

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

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

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

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

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

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

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

 

 

 

 

OBJECTIVES 

1.	 To describe safeguards pharmaceutical manufacturers employ to 

prevent copayment coupon use for drugs paid for by Medicare Part D. 

2.	 To identify vulnerabilities in these safeguards. 

3.	 To identify any other vulnerabilities associated with copayment 

coupon use for drugs paid for by Medicare Part D. 

BACKGROUND 

Pharmaceutical manufacturers offer copayment coupons to reduce or 

eliminate the cost of patients’ out-of-pocket copayments for specific 

brand-name drugs and thereby induce the purchase of those drugs. 

Although coupons reduce individual patients’ immediate costs, coupons 

may increase the cost of prescription drugs for health insurers, including 

those offering Medicare prescription drug coverage through Part D plans.1 

The anti-kickback statute prohibits knowing and willful solicitation, 

receipt, offer, or payment of remuneration to induce the purchase of any 

item or service for which payment may be made in whole or in part under 

a Federal health care program.2 Pharmaceutical manufacturers may be 

liable under the anti-kickback statute if they offer coupons to induce the 

purchase of drugs paid for by Medicare Part D or any other Federal health 

care program.3 

Recent surveys by outside organizations found that approximately 

6 percent to 7 percent of surveyed seniors reported using manufacturer 

coupons toward their copayment for prescription drugs purchased through 

1

 Joseph S. Ross and Aaron S. Kesselheim, “Prescription Drug Coupons – No Such Thing 

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

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

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

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

2012. These articles describe how the use of coupons to encourage brand-name drug
 

utilization could increase insurers’ costs. This description applies to Medicare Part D, 

which uses an insurance model to provide prescription drug benefits.
 2 42 U.S.C. § 1320a-7b(b).
 3

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

program that provides health benefits, whether directly, through insurance, or otherwise,
 

which is funded directly, in whole or in part, by the United States Government (other 

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

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

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 1 
 

 

 

 

their Medicare prescription plans.4, 5 Applying these results to the 

population of 36 million Part D beneficiaries, the utilization of copayment 

coupons to obtain prescription drugs paid for by Part D could exceed 

2 million beneficiaries. 

Pharmaceutical manufacturers’ use of coupons to reduce the cost-sharing 

obligations for Medicare Part D drugs could impose significant costs on 

Federal health care programs and taxpayers. A 2013 study from The New 

England Journal of Medicine found that 58 percent of coupons were for 

brand-name drugs for which a lower cost generic alternative was 

available.6 If manufacturer coupons encourage Medicare beneficiaries to 

obtain more expensive brand-name drugs when lower cost alternatives are 

available, the coupon may reduce individual beneficiaries’ immediate 

out-of-pocket costs but Part D plans’ and the Part D program’s costs may 

increase, ultimately increasing costs to taxpayers.7 

Medicare Part D Cost Controls 

CMS contracts with private insurance companies, called sponsors, to 

provide Part D prescription drug benefits for approximately 36 million 

beneficiaries.8, 9 Sponsors use a variety of methods to control prescription 

drug coverage costs through the Part D program. 

Part D Formularies. Sponsors can establish formularies, or lists of 

covered drugs, to give preference to more effective drugs over less 

effective drugs or less expensive drugs over more expensive drugs that 

treat the same condition. To drive utilization toward equally effective but 

less expensive drugs, formularies are generally organized into tiers, which 

have different beneficiary copayments for a prescription drug. Drugs in 

lower tiers are typically the least expensive and have the lowest 

beneficiary copayments. Drugs in the subsequent and ascending tiers are, 

4

 National Coalition on Health Care (NCHC), “Seniors’ Awareness And Use of 

Prescription Co-pay Coupons in Medicare,” Survey. March 26-30, 2012. 5

 Pharmaceutical Care Management Association (PCMA), “Survey of Seniors Enrolled in 

the Medicare Prescription Drug Plan,” Survey. February 15-17, 2011. 

6

 Joseph S. Ross and Aaron S. Kesselheim, “Prescription Drug Coupons – No Such Thing 

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

http://www.nejm.org/doi/pdf/10.1056/NEJMp1301993. Accessed on August 30, 2013. 7

 Joseph S. Ross and Aaron S. Kesselheim, “Prescription Drug Coupons – No Such Thing 

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

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

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

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

2012. 

8

 The Part D program was established as part of the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003, P.L. 108-173 § 101; Social Security Act, 

§ 1860D-1 and it was codified at 42 U.S.C. § 1395w-101 et seq. 

9 42 U.S.C. § 1395w-101 et seq. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 2 
 

 

 

in general, relatively more expensive and have increasing beneficiary 

copayments. For example, a lower tier drug is typically a low-cost generic 

drug for which a beneficiary might have a $5 or $10 copayment, while a 

higher tier drug is likely to be a more expensive brand-name drug for 

which a beneficiary might have a $45 copayment. 

Generic Substitution. Sponsors can control prescription drug costs by 

requiring less expensive, chemically equivalent generic drugs to be 

substituted for costlier brand-name drugs. Generic substitution may 

reduce the amounts that both Part D plans and beneficiaries pay for 

covered drugs. For instance, the average brand-name drug prescription 

costs $89, while the average generic drug prescription costs $23, a 

difference of $66.10 

Beneficiary Copayments in Part D 

Beneficiaries, Part D plans, and CMS share Part D prescription drug 

coverage costs. Beneficiary cost sharing begins in the initial benefit stage, 

which beneficiaries reach after paying their deductible. Beneficiaries’ 

cost-sharing responsibilities for covered drugs then change as they move 

through different stages of the Part D benefit.11 

During the initial benefit stage, beneficiaries pay copayments for 

prescription drugs on the basis of factors such as whether the drug is a 

generic or a brand, which formulary tier the drug is on, and whether the 

pharmacy is preferred or nonpreferred by the Part D plan.12, 13, 14 

After reaching an initial coverage limit set in statute, beneficiaries 

typically enter the coverage gap stage where their cost-sharing 

increases.15, 16 In this stage, in 2013, pharmaceutical manufacturers 

provided beneficiaries a 50-percent discount on applicable drugs 

(generally, covered brand-name drugs) at the point of sale.17 For most 

generic drugs, in 2013, beneficiaries were responsible for 79 percent of the 

cost as their copayment.18 

10 Congressional Budget Office, Effects of Using Generic Drugs on Medicare’s 

Prescription Drug Spending, September 2010, p. 8. 11 42 CFR § 423.104.
 12 See, e.g., CMS, Copayment/coinsurance in drug plans, http://www.medicare.gov/partd/costs/copayment-coinsurance/drug-plan-copayments.html. Accessed on April 24, 

2014. 

13 42 CFR § 423.104(d)(2)(ii). 

14 42 CFR § 423.120(a)(9).
 15 42 U.S.C. § 1395w-102(b)(2)(A). 16 See, e.g., CMS, Costs in the coverage gap, http://www.medicare.gov/partd/costs/coverage-gap/part-d-coverage-gap.html. Accessed on April 30, 2014. 17 42 U.S.C. § 1395w-114a. 18 42 U.S.C. § 1395w-102(b)(2)(C). 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 3 
 

 

 

 

The coverage gap continues until beneficiaries’ true out-of-pocket 

(TrOOP) spending reaches the annual TrOOP threshold.19 Generally, for 

brand-name drugs, the full amount of drug costs, including the 

out-of-pocket amount beneficiaries paid, counts toward their TrOOP.20 For 

generic drugs, only the out-of-pocket amount counts toward beneficiaries’ 

TrOOP thresholds. 

After reaching the TrOOP threshold, beneficiaries enter the catastrophic 

benefit stage.21 During catastrophic coverage, the Part D program pays the 

majority of beneficiaries’ drug costs and beneficiaries are generally 

responsible for limited cost sharing through copayments. 

Copayment Coupons 

Pharmaceutical manufacturers typically offer copayment coupons to 

insured patients to reduce or eliminate patients’ out-of-pocket costs for 

specific brand-name drugs. Manufacturers may contract with coupon 

vendors to create and administer coupon programs on their behalf. 

(“Manufacturers” includes all manufacturers or vendors acting on their 

behalf.) A manufacturer may offer a coupon for a brand-name drug that 

reduces the copayment for that drug and makes it cheaper than the 

copayment for a competitor drug. For example, a coupon may reduce a 

patient’s copayment for Brand Drug A from $20 to $4, making the 

copayment for the brand drug cheaper than the copayment for a generic 

equivalent, which may be $10. In some cases, the coupon eliminates the 

copayment altogether. 

Pharmaceutical manufacturers may offer copayment coupons for several 

reasons. It has been reported that manufacturers may use coupons to try to 

retain market share when generic and other brand-name drugs that treat 

the same condition become available to patients. It also has been reported 

that manufacturers may use coupons to attract new patients who may be 

using an alternative therapy. Additionally, manufacturers indicate that 

they offer coupons to encourage patients to adhere to their prescription 

drug regimen. Finally, it has been reported that manufacturers may offer 

19 For 2013, the TROOP threshold was $4,750. Generally, TrOOP spending includes all
 

beneficiary payments (excluding monthly premiums) and any payments made by other
 

approved payers, such as health savings accounts and certain charities. 42 CFR §
 

423.104(d)(5)(B)(iii); CMS, Medicare Prescription Drug Benefit Manual, 

Pub. No. 100-18, ch. 5, § 30. 

20 See, e.g., CMS, Costs in the coverage gap, http://www.medicare.gov/partd/costs/coverage-gap/part-d-coverage-gap.html. Accessed on April 30, 2014. 21 See, e.g., CMS, Catastrophic coverage, http://www.medicare.gov/partd/costs/catastrophic-coverage/drug-plan-catastrophic-coverage.html. Accessed on 

May 9, 2014. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 4 
 

 

coupons to offset the high cost of specialty and biologic drugs, which may 

not have generic alternatives.22 

Copayment coupons have become increasingly prevalent. In recent years, 

the number of coupons has increased from 86 in July 200923 to 525 in 

December 2012.24 This increase may be related to competition from 

generic drugs. From 2009 to 2012, numerous “blockbuster” drugs—drugs 

that have generated $1 billion in sales—lost their patent protection. For 

many of those drugs, generic versions became available. The number of 

generic drugs the Food and Drug Administration (FDA) approved 

increased 27 percent between 2009 and 2012.25 

Copayment Coupon Formats. Copayment coupons typically are available 

in four formats: (1) print coupons, (2) electronic coupons, (3) debit cards, 

and (4) direct reimbursements. Print coupons are printed cards or 

documents that the patient physically takes or sends to the pharmacy to 

purchase a prescription drug. Electronic coupons are cardless programs 

that evaluate prescription drug claims as they are submitted through the 

pharmacy claims transaction system, which applies copayment reductions. 

Debit cards include any prepaid and/or bank-authorized card that is 

processed at the point of sale to pay for some predetermined portion of the 

copayment. Direct reimbursements are any payments by a manufacturer 

offered directly to a patient for all or part of the patient’s out-of-pocket 

cost for a purchased prescription drug. Direct reimbursements occur after 

a prescription drug is purchased and generally do not involve pharmacies. 

Most coupons offered by manufacturers are typically in the format of print 

coupons. Manufacturers offer electronic coupons to a lesser extent. A 

small number of coupons are offered in the format of debit cards and 

direct reimbursements. See Table 1, on the next page, for a breakdown of 

the prevalence of coupon formats among 30 manufacturers surveyed by 

the Office of Inspector General (OIG). 

22 Biologics are among the most expensive drugs available. The average cost of a 

biologic drug is about 22 times that of nonbiologic drugs. “Health Policy Brief: 

Biosimilars,” Health Affairs, October 10, 2013, 

http://healthaffairs.org/healthpolicybriefs/brief_pdfs/healthpolicybrief_100.pdf. 

Accessed on December 6, 2013. 

23 Cleveland Research Company, “Co-Pay Cards: The Past, Present, and Future,” March 

2012. 

24 OIG analysis of drugs available on http://www.internetdrugcoupons.com. 25 OIG analysis of 2009 to 2012 FDA Abbreviated New Drug Approvals (ANDAs) by 

month available at 

http://www.accessdata.fda.gov/scripts/cder/drugsatfda/index.cfm?fuseaction=Reports.Re 

portsMenu. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 5 
 

 

 

 

Table 1: Coupon Formats for Manufacturers Surveyed by OIG 

Coupon Format Number of Manufacturers 

Offering 

Percentage of All Coupons 

Offered by Manufacturers 

Print 27 71% 

Electronic 22 26% 

Debit Card 9 2% 

Direct 

Reimbursement 16 1% 

Source: OIG analysis of pharmaceutical manufacturer survey responses, 2013. 

Accessing Copayment Coupons. Patients commonly access copayment 

coupons in four ways. Patients may access or receive coupons from their 

prescribing physicians. Patients also may access coupons through Web 

sites and toll-free telephone numbers managed by manufacturers or 

companies hired to manage their coupon programs. Finally, patients may 

be given coupons by pharmacists filling their prescriptions. 

Redeeming Copayment Coupons. Patients typically redeem copayment 

coupons at pharmacies when they purchase prescription drugs. However, 

patients do not always redeem coupons at pharmacies and may request 

reimbursements directly from the manufacturer after purchasing 

prescription drugs. 

Copayment Coupons and Pharmacy Claims Processing 

Copayment coupon claims are typically processed in the same way as 

payments received from a secondary insurance source using the National 

Council for Prescription Drug Programs (NCPDP) Telecommunication 

Standard D.0 for pharmacy claims. Using this standard format, all 

pharmacy claims, including coupon claims, are electronically routed from 

the pharmacy to various payers by companies known as “switches.” Once 

a claim is routed to a payer, the payer sends coverage and payment 

information back to the pharmacy through the switch. 

The processing of primary insurance and coupon claims occurs in real 

time and involves several steps to coordinate payment for a single claim. 

First, a patient’s primary insurance claim is processed, and the patient’s 

copayment amount is determined. Second, the coupon claim is processed, 

and how much of the copayment the manufacturer will pay is determined. 

Finally, the patient pays the remaining copayment balance, if any. See 

Figure 1, on the next page, for an illustration of how primary insurance 

and coupon claims are processed. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 6 
 

 

 

   

   

   

Figure 1: Processing of Primary Insurance and Coupon Claims 

Switch

1 Primary

insurance claim

processed

2 Coupon claim

processed

Switch

Primary

Insurance /

Part D

Coupon Pharmacy

Source: OIG analysis of interview responses, 2013. 

The coordination of primary insurance and coupon or secondary payers is 

facilitated by unique identifiers that route the claim to the entity 

responsible for paying the claim. One identifier is the Bank Identification 

Number (BIN), which identifies the responsible payer. Primary insurers, 

including Part D plans, have BINs that route primary insurance claims to 

them for payment. Manufacturers also have BINs that route their coupon 

claims to them for payment. The Processor Control Number (PCN) is a 

secondary identifier that is internal to an insurance company or 

manufacturer and further routes the claim within that company. 

To attempt to determine a patient’s Part D enrollment status before 

submitting a coupon claim, a pharmacist may submit an optional 

enrollment verification request, called an E1 transaction, to the Part D 

Transaction Facilitator. CMS contracts with the Transaction Facilitator to 

track Part D beneficiaries’ benefit stages and to conduct E1 transactions, 

which provide pharmacists with information about a patient’s Part D 

enrollment status.26 The pharmacist submits the patient’s identification 

information to the Transaction Facilitator, which compares it to patient 

information in CMS’s Medicare enrollment database to determine whether 

the patient is enrolled in Part D. Pharmacies pay less than 1 cent per 

transaction to submit this verification request.27 

26 CMS, Medicare Prescription Drug Benefit Manual, Pub. No. 100-18, ch. 14, § 30.4. 27 CMS, Changes Involving Medicare Eligibility Queries (E1) and Other TrOOP 

Facilitator-related Transactions, December 9, 2010, 

http://www.cms.gov/Medicare/Prescription-DrugCoverage/PrescriptionDrugCovContra/Downloads/MemoE1ChangesTipSheet_120910.p 

df. Accessed on November 30, 2012. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 7 
 

METHODOLOGY 

Scope 

The anti-kickback statute applies to all Federal health care programs, but 

this study focused on Medicare Part D. This study analyzed the 

copayment coupon safeguards of pharmaceutical manufacturers for the 

most costly brand-name Part D prescription drugs with coupons covered in 

2012. These prescription drugs were covered under stand-alone 

prescription drug plans and Medicare Advantage prescription drug plans. 

The study did not include coupons for generic drugs because copayment 

coupons are not commonly offered for generic drugs. This study did not 

estimate the use of coupons by Part D beneficiaries. It also did not 

estimate the overall cost of coupons to Part D plans and the Part D 

program. 

Data Collection and Analysis 

We collected information on safeguards pharmaceutical manufacturers 

employ to prevent copayment coupon use for drugs paid for by Medicare 

Part D through a survey of manufacturers and a review of copayment 

coupons and coupon Web sites. We collected information on other 

vulnerabilities through interviews with a variety of industry stakeholders. 

We sent an online survey to 34 pharmaceutical manufacturers of drugs 

with coupons, and 30 responded. We selected these manufacturers by 

identifying the manufacturers offering the top 100 Part D-covered 

brand-name drugs with coupons by cost to Part D. The 30 complete 

surveys we received represented an 88-percent response rate. We 

analyzed survey responses to determine the extent to which manufacturers 

surveyed had safeguards in place to prevent the use of coupons for drugs 

paid for by Part D. 

We also reviewed safeguards in place for a subset of the top 100 

Part D-covered brand-name drugs with coupons. We attempted to obtain 

50 coupons to determine the extent to which manufacturers had safeguards 

directed to beneficiaries and pharmacists in place. We reviewed these 

safeguards for the 40 coupons that we obtained. 

In addition, we conducted structured interviews with staff at organizations 

involved in the pharmacy claims transaction process, including 

pharmacists, coupon vendors, a switching company, and NCPDP, to 

understand other vulnerabilities associated with coupon use in Part D. 

For a discussion of our data collection and analysis, see Appendix A. 

Data Limitations 

Although we did not verify manufacturers’ survey responses, we selected a 

sample of coupons offered by surveyed manufacturers to review 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 8 
 

safeguards on or associated with coupons. We used this information to 

confirm the accuracy of manufacturers’ responses. We could not review 

safeguards that were not on coupons or on coupon Web sites. For these 

safeguards, this report relies on self-reported data. 

Standards 

This study was conducted in accordance with the Quality Standards for 

Inspection and Evaluation issued by the Council of the Inspectors General 

on Integrity and Efficiency. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 9 
 

FINDINGS 

All surveyed manufacturers provide notices to 

beneficiaries and pharmacists that copayment 

coupons may not be used in Federal health care 

programs 

All manufacturers surveyed report providing notices directed to Federal 

health care program beneficiaries or pharmacists for at least one of the 

coupon formats they offer. These notices state that copayment coupons 

may not be used to purchase drugs paid for by Federal health care 

programs, including Medicare Part D. Notices to beneficiaries and 

pharmacists are more prevalent for print coupons, which is the most 

commonly offered coupon format according to manufacturers surveyed. 

Notices are still widely used for other formats, but to a lesser extent. See 

Table 2 for the percentages of surveyed manufacturers that report using 

notices for the coupon formats they offer. 

Table 2: Notices by Coupon Format 

Notice 

Print 

n = 27 

Electronic 

n = 22 

Debit Card 

n = 9 

Direct 

Reimbursement 

n = 16 

Any Format 

n = 30 

Beneficiary Notices 27 (100%) 16 (73%) 8 (89%) 13 (81%) 30 (100%) 

Pharmacist Notices 18 (67%) 7 (32%) 2 (22%) N/A28 20 (67%) 

Source: OIG analysis of pharmaceutical manufacturer survey responses, 2013. 

Notices Directed to Beneficiaries. Manufacturers’ notices directed to 

beneficiaries are typically printed on coupons or on materials associated 

with coupons, such as coupon brochures, Web sites, or advertisements. 

Notices also can be triggered by eligibility questions asked online or over 

the telephone. Eligibility questions may ask patients: “Do you purchase 

your prescription medication through Medicare, Medicaid, or a similar 

Federal or State prescription drug program?” If patients indicate that they 

are enrolled in Federal health care programs, these manufacturers notify 

them that they are not eligible to access the coupon. 

OIG’s review of 40 coupons offered by surveyed manufacturers found 

results similar to the survey responses. Nearly all of the coupons OIG 

obtained had a notice printed on them, and 80 percent had a notice printed 

on the coupon Web site. Further, 75 percent had an eligibility question 

online or over the phone. However, only 3 percent had a tracking 

mechanism on their Web sites to prevent a patient from changing his or 

her answer to the eligibility question to obtain the coupon. 

28 Notices to pharmacists do not pertain to direct reimbursements because direct 

reimbursements are not adjudicated by the pharmacy. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 10 
 

 

 

Manufacturers’ notices to beneficiaries are typically printed in small font. 

In some instances, notices are printed on the back of a coupon. See 

Figure 2 for an example of a coupon with a notice printed in small font on 

the back. This coupon is approximately the size of a credit card. 

Figure 2: Example of a Coupon With a Notice Printed in Small Font on 

Back of Coupon

Notice to 

beneficiaries 

 Source: OIG review of manufacturers’ copayment coupon safeguards, 2013. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 11 
 

 

In some instances, notices to beneficiaries, particularly those downloaded 

and printed from the Internet, are on pages following the coupons and not 

on the coupons themselves. See Figure 3 for an example of a coupon and 

a notice on the following page. The actual size of each page below is 

81⁄2 by 11 inches. 

Figure 3: Example of a Coupon With a Notice Printed on Following Page 

LIPITOR $4 Co-Pay Card TERMS AND CONDITIONS 

By using the LIPITOR $4 Co-Pay Card (the “Card”), you acknowledge that you currently meet the eligibility criteria 

and will comply with the terms & conditions described below: 

This Card is not valid for prescriptions that are eligible to be reimbursed, in whole or in part, by Medicaid, Medicare or 

other federal or state healthcare programs (including any state prescription drug assistance programs and the 

Government Health Insurance Plan available in Puerto Rico [formerly known as “La Reforma de Salud”]). 

The Card is not valid for prescriptions that are eligible to be reimbursed by private insurance plans or other health or 

pharmacy benefit programs which reimburse you for the entire cost of your prescription drugs. 

Notice to 

beneficiaries 

Source: OIG review of manufacturers’ copayment coupon safeguards, 2013. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 12 
 

 

Notices Directed to Pharmacists. Two-thirds of manufacturers surveyed 

report providing notices to pharmacists for at least one of the coupon 

formats they offer. See Table 2, on page 9, for the percentage of survey 

manufacturers that report using notices to pharmacists broken out by 

coupon format. 

Manufacturers’ notices to pharmacists typically include reminders to 

pharmacists not to accept coupons for drugs paid for by Federal health 

care programs. These notices may include statements such as “Do not 

process coupon if Government beneficiary.” Or, they may include more 

specific language, such as “Pharmacist: When you use this card, you are 

certifying that you have not submitted and will not submit a claim for 

reimbursement under any Federal, State, or other Governmental programs 

for this prescription.” Notices to pharmacists can be printed on coupons 

or on associated materials. They also may appear as alerts to pharmacists 

through the pharmacy claims transaction system. 

OIG’s review of the 40 coupons obtained found that slightly more than 

half, or 58 percent, of coupons we reviewed had notices with specific 

language directed to pharmacists. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 13 
 

Manufacturers’ notices to pharmacists, in some instances, are printed in 

small font among other types of information, such as instructions on how 

to process the coupon. See Figure 4 for an example of a coupon with a 

notice printed among instructions to pharmacists. The actual size of the 

coupon below is 81⁄2 by 11 inches. 

Figure 4: Example of a Coupon With a Notice Printed Among Instructions to Pharmacists 

Notice to 

pharmacists 

Instructions to 

pharmacists 

about coupon 

processing 

Source: OIG review of manufacturers’ copayment coupon safeguards, 2013. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 14 
 

 

Additionally, manufacturers’ notices may be sent through alert messages 

within the pharmacy claims transaction system. Studies show that 

pharmacists may experience “alert fatigue” because of the high volume of 

drug alert notices that appear through the pharmacy claims transaction 

system.29 A notice to check enrollment status in Federal health care 

programs may be one of the many notices that pharmacists receive. 

Manufacturers’ notices to beneficiaries and pharmacists only communicate 

information stipulating the terms and conditions of copayment coupons. 

These notices cannot necessarily stop coupons from being processed to 

purchase drugs paid for by Federal health care programs. 

Most surveyed manufacturers use pharmacy claims 

edits to prevent copayment coupons from being 

processed for drugs paid for by Part D 

Most surveyed manufacturers report having edits in the pharmacy claims 

transaction system to prevent the use of copayment coupons for drugs paid 

for by Part D. Twenty-eight of thirty manufacturers surveyed use claims 

processing edits for at least one of the coupon formats they offer. Of these 

manufacturers, 13 offered specific information about their edits. More of 

these manufacturers report using edits for print coupons than for other 

coupon formats. See Table 3 for information about a breakdown of these 

edits by coupon formats offered. 

Table 3: Claims Processing Edits by Coupon Format 

Edit 

Print 

n = 27 

Electronic 

n = 22 

Debit Card 

n = 9 

Direct 

Reimbursement 

n = 16 

Any Format 

n = 30 

Primary Insurance 

Information 7 (26%) 3 (14%) 1 (11%) 2 (13%) 9 (30%) 

Benefit Stage Information 5 (19%) 3 (14%) 0 (0%) 1 (6%) 6 (20%) 

Patient Date of Birth 4 (15%) 1 (5%) 0 (0%) 0 (0%) 5 (17%)

 Source: OIG analysis of pharmaceutical manufacturer survey responses, 2013. 

All of the manufacturers that offered specific information about their 

claims processing edits use proxies to approximate Part D coverage. The 

data these manufacturers’ edits use as proxies are routinely transmitted on 

pharmacy claims and include information about a patient’s primary 

insurance, Part D benefit stage, and date of birth. Manufacturers rely on 

proxies to approximate Part D coverage because they lack access to Part D 

enrollment status. CMS indicated that Part D enrollment data are not 

29 John R. Horn and Philip D. Hantse, “Making Computerized Screening Work for You,” 

Pharmacy Times, February 2006, p. 26. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 15 
 

 

available to manufacturers because they contain sensitive health care 

information.30 

Thirty Percent of Manufacturers Use Edits Relying on Primary Insurer’s 

BIN. These manufacturers report having a claims processing edit that uses 

the primary insurer’s BIN for at least one of the coupon formats they offer. 

The primary insurer’s BIN is the only information identifying a patient’s 

primary insurance that is transmitted to manufacturers on the coupon 

claim. Manufacturers attempt to determine which BINs are used by 

insurance companies that offer Part D plans by assembling lists of BINs 

from previously adjudicated primary insurer pharmacy claims and other 

sources, such as payer sheets.31 The edit compares the primary insurer’s 

BIN on the coupon claim to the list of collected BINs. If the edit identifies 

that the primary insurer’s BIN represents an insurance company that offers 

a Part D plan, the claims processing system may automatically stop the 

coupon from being processed and/or send a message to the pharmacist that 

the patient is not eligible to use the coupon. 

Four surveyed manufacturers report using an edit that relies on the 

primary insurer’s BIN and PCN, the secondary identifier specifying 

unique insurance plans offered by the same insurance company. The PCN 

must be obtained from the primary insurance claim because it is not 

transmitted on the coupon claim. These edits use the BIN and PCN in 

combination to determine whether the primary insurance claim is being 

submitted to a Part D plan or a commercial plan within the same insurance 

company. 

Twenty Percent of Manufacturers Use Edits Relying on the Part D Benefit 

Stage. These manufacturers report having a claims processing edit that 

uses Part D benefit stage information for at least one of the coupon 

formats they offer. Benefit stage fields contain data only if the claim is for 

a Part D beneficiary. If the edit identifies data in these fields, the edit 

either automatically stops the coupon from being processed or sends a 

message to the pharmacist to reverse the claim. 

Seventeen Percent of Manufacturers Use Edits Relying on Patient Date of 

Birth. These manufacturers report having an edit that uses the patient’s 

date of birth for at least one of the coupon formats they offer. 

Manufacturers use edits relying on patient’s date of birth to calculate a 

30 Because Part D enrollment status is unavailable to manufacturers, those manufacturers 

that did not offer specific information about their edits likely use proxies and face the 

same challenges outlined in this report. 

31 Payer sheets are templates created to help claims processors communicate necessary 

claims processing information to pharmacies, vendors, and other entities. Information on 

payer sheets can vary by insurance plan but generally contains the BIN.

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 16 
 

patient’s age. Manufacturers may require pharmacists to submit the 

patient date of birth as part of the coupon claim. If a pharmacy claim 

indicates that the patient is at or older than a certain threshold—typically 

age 62 or 65—these edits will either stop the coupon from being processed 

or send a message to the pharmacist to verify Part D enrollment. 

Surveyed manufacturers’ pharmacy claims edits may

not prevent copayment coupons from being 

processed for drugs paid for by Part D 

Pharmaceutical manufacturers’ claims processing edits currently in use 

may not stop all coupons from being processed for drugs paid for by 

Part D because manufacturers cannot accurately identify a beneficiary’s 

Part D enrollment status. Manufacturers’ claims processing edits use 

proxies that are substitutes for but do not replicate actual enrollment 

information. These proxies use data that may be unreliable or cannot be 

obtained by all manufacturers. 

Claims Processing Edits Using Primary Insurance BINs Cannot Always 

Accurately Identify Part D Coverage. Manufacturers’ claims processing 

edits that use primary insurers’ BINs cannot always identify Part D 

coverage because they may be unreliable proxies. These edits may not be 

reliable because they use BIN lists that are collected at a point in time and 

may not be accurate or current. Further, BINs may not provide the 

specificity needed to determine whether a patient is enrolled in a Part D 

plan. Coupon vendors report that the BIN indicates the insurance 

company but does not, in most cases, distinguish a company’s Part D plan 

from other commercial plans the company offers. To avoid stopping 

coupon claims associated with commercial plans, manufacturers’ BINs 

lists may contain only BINs known to be exclusively for insurance 

companies’ Part D plans. For instance, one manufacturer reported that its 

BIN edit relies on a list of BINs dedicated to Part D plans. Thus, this 

manufacturer’s claims processing edit would allow coupons to be 

processed for claims containing BINs for insurance companies that offer 

both Part D and commercial plans. 

Claims Processing Edits Using Patient Date of Birth Cannot Identify All 

Part D Beneficiaries. Manufacturer claims processing edits that rely on 

patient date of birth cannot always approximate Part D coverage. These 

edits may not identify all Part D beneficiaries because not all Medicare 

beneficiaries fit a specific age demographic. In fact, 17 percent of 

Medicare beneficiaries are disabled and under age 65.32 Additionally, 

32 Henry J. Kaiser Family Foundation, “Medicare at a Glance,” November 14, 2012, 

http://kff.org/medicare/fact-sheet/medicare-at-a-glance-fact-sheet/. Accessed on 

November 27, 2013. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 17 
 

 

some individuals who are eligible for Medicare may be enrolled in 

commercial plans and not in Part D. 

Some Claims Processing Edits Use More Accurate Proxies To Identify 

Part D Coverage, but Cannot Be Used by All Manufacturers. Claims 

processing edits that more accurately determine Part D enrollment are 

imperfect because these edits use information that cannot be obtained by 

all manufacturers. These edits rely on the more accurate proxies of 

BIN/PCN and benefit stage information. 

While edits that rely on the primary insurer’s BIN/PCN are more accurate 

proxies, access to this combination of information is limited. To access 

the BIN/PCN, a manufacturer’s coupon vendor needs to have access to 

primary insurance claims because the PCN is not transmitted as part of the 

coupon claim. OIG identified one entity with such access to the 

BIN/PCN. This entity plays a dual role as a coupon vendor and a 

switching company that electronically routes claims, giving it access to the 

primary insurance claim containing the BIN/PCN that indicates Part D 

insurance. 

For other manufacturers’ coupon vendors to access the PCN, NCPDP 

would need to revise its pharmacy claims transaction standards to enable 

the PCN to be transmitted as part of the coupon claim. Revising the 

NCPDP standards is an industrywide process that typically takes years to 

complete and requires all involved entities to update their claims 

transaction systems to comply with the new standards. The current 

NCPDP standards were updated and released in 2009. 

Edits that rely on benefit stage information also are more accurate proxies, 

but access to this information also is limited. Although some 

manufacturers report having this edit, it is unclear how they obtain benefit 

stage information. As cited by NCPDP guidance, only entities that report 

Part D beneficiaries’ financial TrOOP amounts are allowed to request or 

receive this information, such as insurance companies that offer Part D 

plans.33, 34 

Other Vulnerabilities in Claims Processing Edits Exist. In addition to the 

vulnerabilities associated with the proxies manufacturers use for edits, 

there may be implementation errors in claims processing edits. Most 

surveyed manufacturers have no way to verify that edits are being applied 

33 NCPDP, “NCPDP WG9 Medicare Part D Questions and Answers,” Version 3.0, 

August 2013, p. 12. Accessed at 

http://www.ncpdp.org/members/wg09/NCPDP_WG9_Medicare_Part_D_FAQ_Documen 

t_v3.0.pdf on January 30, 2014.
 34 Entities that can obtain benefit stage information may include State pharmaceutical 

assistance programs.
 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 18 
 

 

correctly because they do not audit claims processing edits. Only 

30 percent of manufacturers surveyed report having auditing practices in 

place to analyze claims processing edits. These audits may include 

reviews of processes used to identify and reject claims for Part D 

beneficiaries or retrospective reviews that assess the number of coupons 

processed and rejected as a result of the edits. 

Part D plans and other entities cannot identify

copayment coupons within pharmacy claims 

It is difficult for entities other than manufacturers to identify coupons as 

they are processed through the pharmacy claims transaction system or after 

they are adjudicated. Coupons are not transparent in the pharmacy claims 

transaction system to entities other than manufacturers. This vulnerability 

impedes other entities, including Part D plans, other primary insurers, and 

pharmacies, from preventing the use of coupons for drugs paid for by 

Part D and oversight entities, like CMS and OIG, from monitoring the use 

of coupons. 

Primary insurers, including Part D plans, cannot identify coupons as they 

are processed or after they are adjudicated because of the way coupons are 

processed. Coupons are typically processed as secondary insurance claims, 

after a patient’s primary insurance claim, including Part D, has been 

processed. Because of this, Part D plans, like other primary insurers, cannot 

identify when a coupon is used. See Figure 5, on the next page, for an 

illustration of how, as a coupon claim is processed, it is not submitted to 

primary insurers. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 19 
 

   

   

     

       

   

     

       

     

   

   

     

     

       

       

     

     

Figure 5: Transmission of Information Among Payers and Entities Coordinating Coupon 

Claims Processing 

Source: OIG analysis of interview responses, 2013. 

Switch

Coupon

Vendor

Primary

Insurance /

Part D Plans

1 Pharmacy Pharmacy submits

claim for payment to

primary insurance

via switch

4 Vendor receives request

for payment and returns

copayment amount to

pharmacist via switch

3 Pharmacy submits

claim for coupon

payment to coupon

vendor via switch

2 Primary Insurer receives

request for payment and

returns copayment amount

to pharmacist via switch

Further, specific coupon formats may be difficult, or impossible, for 

pharmacists dispensing to beneficiaries on behalf of Part D plans to identify 

as coupon claims are processed through the pharmacy claims transaction 

system. When pharmacies cannot identify coupons, they do not know to 

attempt to verify Part D enrollment to prevent the use of coupons to 

purchase drugs paid for by Part D. Coupon formats that are difficult to 

identify include electronic coupons, debit cards, and direct reimbursements. 

Electronic coupons may be difficult for pharmacists to identify because 

they are automatically applied as prescriptions are submitted through the 

pharmacy claims transaction system rather than being presented by 

patients at the point of sale as with print coupons. Debit card coupons 

may be difficult to identify because patients may use them to pay their 

copayments without handing the card to the pharmacist. Finally, direct 

reimbursements cannot be identified by pharmacists because they are 

offered directly to patients and processed outside of the pharmacy claims 

transaction system. 

It is also difficult to identify coupons after they are adjudicated. As 

previously stated, it not always possible to distinguish coupon claims from 

secondary insurance claims because both manufacturers and insurers use 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 20 
 

BINs to route claims within the pharmacy claims transaction system. 

Manufacturers currently do not disclose the BINs associated with their 

coupons to outside entities. Compiling an accurate and comprehensive list 

of BINs that route coupon claims without manufacturer involvement would 

be challenging because coupons expire and BINs, while typically on print 

coupons, are not generally found on other coupon formats. Because BINs 

that route coupon claims are not distinguishable from BINs that route 

insurance claims, entities that conduct oversight, such as CMS and OIG, 

cannot analyze pharmacy claims to determine whether manufacturer 

safeguards to prevent the use of coupons for drugs paid for by Part D are 

effectively stopping the coupons. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 21 
 

 

 

CONCLUSION AND RECOMMENDATION 

The anti-kickback statute prohibits knowing and willful solicitation, 

receipt, offer, or payment of remuneration to induce the purchase of any 

item or service for which payment may be made in whole or in part under 

a Federal health care program. Pharmaceutical manufacturers may be 

liable under the anti-kickback statute if they offer coupons to induce the 

purchase of drugs paid for by Medicare Part D or any other Federal health 

care program. 

Pharmaceutical manufacturers report that they employ safeguards directed 

at preventing the use of copayment coupons for drugs paid for by Part D. 

All surveyed manufacturers provide notices to beneficiaries and 

pharmacists that coupons may not be used in Federal health care programs 

for at least one of the coupon formats they offer. In addition, most 

surveyed manufacturers have implemented pharmacy claims edits to 

prevent coupons from being processed for drugs paid for by Part D. 

However, manufacturers’ edits may not reliably prevent coupons from 

being processed for drugs paid for by Part D. In particular, most 

manufacturers’ claims edits only approximate Part D coverage using proxy 

data that may be unreliable. Additionally, the proxy data that are currently 

available may not be obtained by all manufacturers. 

In addition to potentially implicating the anti-kickback statute, 

manufacturers’ use of coupons to reduce the cost-sharing obligations for 

drugs paid for by Medicare Part D could impose costs on Part D plans, on 

the Part D program, and ultimately on Part D beneficiaries. While 

coupons provide an immediate financial benefit to beneficiaries by 

reducing their out-of-pocket costs, they may increase the cost of 

prescription drugs for Part D plans.35 Coupons may increase costs for 

Part D plans because they may encourage the purchase of more expensive 

brand-name drugs instead of less expensive alternative treatments, such as 

generic drugs. 

To protect themselves from excessive costs, Part D plans may have an 

interest in preventing the use of coupons for drugs paid for by their plans. 

35 Manufacturers that desire to assist Federal health care program beneficiaries who 

cannot afford their copayments have the option of donating to independent charities that 

provide copayment support without regard for the particular medication a patient may be 

using. For OIG’s guidance specifically related to such charities, see OIG Special 

Advisory Bulletin on Patient Assistance Programs for Medicare Part D Enrollees, 

70 Fed. Reg. 70623 (Nov. 22, 2005), available at 

http://oig.hhs.gov/fraud/docs/alertsandbulletins/2005/2005PAPSpecialAdvisoryBulletin.p 

df, and OIG Supplemental Special Advisory Bulletin: Independent Charity Patient 

Assistance Programs, available at 

http://oig.hhs.gov/fraud/docs/alertsandbulletins/2014/independent-charity-bulletin.pdf. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 22 
 

 

However, a lack of coupon transparency impedes Part D plans from 

distinguishing coupon claims from secondary insurance claims as they are 

processed. Because entities other than manufacturers cannot identify 

coupons within pharmacy claims, Part D plans cannot implement their 

own edits to stop coupon claims as they are processed. 

Concurrently with the issuance of this report, OIG is issuing a Special 

Advisory Bulletin on Pharmaceutical Manufacturer Copayment Coupons. 

This document affirms that the offerors of coupons ultimately bear the 

responsibility to operate these programs in compliance with Federal law. 

Pharmaceutical manufacturers that sponsor copayment coupons may be 

subject to sanctions if they fail to take appropriate steps to ensure that such 

coupons do not induce the purchase of Federal health care program items 

or services, including, but not limited to, drugs paid for by Medicare 

Part D. Failure to take such steps may be evidence of intent to induce the 

purchase of drugs paid for by these programs, in violation of the 

anti-kickback statute. 

Improving the reliability of pharmacy claims edits and making coupons 

transparent within pharmacy claims will likely require the coordination 

and cooperation of multiple stakeholders within the pharmacy claims 

transaction process, including CMS. For this reason, pharmaceutical 

manufacturers may engage industry stakeholders, including CMS, in an 

effort to identify a solution to ensure that coupons are not used for drugs 

paid for by Part D. 

We recommend that CMS: 

Cooperate with industry stakeholder efforts to identify a 

solution to prevent coupons from being used to purchase 

drugs paid for by Part D 

As the oversight entity of the Part D program and the custodian of Part D 

enrollment data, CMS should cooperate with industry stakeholder efforts 

to improve the reliability of pharmacy claims edits and make coupons 

transparent. For example, CMS could consider all options to facilitate 

verification of Part D enrollment status before a coupon is processed. Or 

CMS could explore the possibility of making any feasible changes to the 

Part D program to facilitate Part D enrollment verification. Additionally, 

CMS could explore with all involved entities how best to make coupons 

universally identifiable and transparent in pharmacy claims transactions. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 23 
 

 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with our recommendation. CMS specifically noted that it 

concurs with our recommendation to work with relevant stakeholders to 

improve the reliability of pharmacy claims edits that facilitate verification 

of Part D enrollment and to explore how best to make coupons universally 

identifiable and transparent in pharmacy claims data. 

For the full text of CMS’s comments, see Appendix B. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 24 
 

 

 

APPENDIX A 

Discussion on Data Collection and Analysis 

We collected information about pharmaceutical manufacturer safeguards 

directed at preventing the use of coupons for drugs paid for by Medicare 

Part D through a survey of manufacturers and a review of copayment 

coupon safeguards. We collected information about other vulnerabilities 

associated with coupon use from interviews with staff at organizations 

involved in the pharmacy claims processing system. 

Drug Selection. We selected the top 100 Part D-covered brand-name 

drugs by cost that have copayment coupons for the study. These 100 

drugs with coupons represent approximately 59 percent of all Part D drug 

costs. 

To select the top 100 Part D-covered brand-name drugs with coupons, we 

first identified brand-name drugs that were paid for by Part D as of 

June 2012 using Prescription Drug Event (PDE) data and First DataBank 

data.36, 37 Using these data, we matched the NDCs for brand-name drugs in 

First DataBank data to NDCs in PDE data. Because multiple NDCs exist 

for a single brand-name drug, we collapsed brand-name drugs by the 

HICL_SEQNO identifier.38 Next, we summed the total cost for each drug 

in PDE data by the HICL_SEQNO and the brand name. We then ranked 

each drug by its total cost. 

Next, we compiled a list of 520 coupons from 

www.internetdrugcoupons.com as of December 2012. Internet Drug 

Coupons publishes a list of pharmaceutical manufacturer coupons and is 

recognized by the industry as a reliable listing for coupons. 

Finally, we matched the list of coupons to the list of the Part D-covered 

brand-name drugs. We selected the first 100 Part D-covered brand-name 

drugs—ranked by total drug cost—with coupons. Because coupons are 

offered by drug and generally are not unique by package size, dosage 

form, or route of administration, we matched the common brand name for 

the drugs associated with these coupons to the brand names and the 

HICL_SEQNO identifiers in First DataBank. 

36 The PDE data represent each purchase of a Part D drug by a beneficiary and contain 

the National Drug Code (NDC), a universal identifier that specifies the pharmaceutical 

manufacturer, drug name, dosage form, strength, and package size. 

37 First DataBank data provide product information, including drug name, standard 

therapeutic class, and whether the drug is a brand-name drug or a generic drug. 

38 The HICL_SEQNO identifies a drug’s unique combination of active ingredients, 

irrespective of the package size, dosage form, route of administration, or strength. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 25 
 

 

Survey of Pharmaceutical Manufacturers. In May 2013, we conducted an 

online survey of the 34 pharmaceutical manufacturers of the top 100 

Part D-covered brand-name drugs with copayment coupons. 

We identified these manufacturers through information on the coupons and 

Internet searches. We also asked manufacturers to verify this information. 

We made one followup attempt by email. We received 30 complete 

surveys, an 88-percent response rate. 

The survey asked manufacturers to provide responses about the safeguards 

in place for the coupons they offer. We asked manufacturers to report the 

coupon formats they offer and distribution methods through which 

patients obtain coupons. We also asked manufacturers about the types of 

safeguards they have in place for each coupon format they offer. We 

asked them questions about coupon safeguards directed to Part D 

beneficiaries, safeguards directed to pharmacists, and safeguards within 

the pharmacy claims transaction system. We did not ask manufacturers to 

specify the particular safeguards in place for each of the top 100 

Part D-covered brand-name drugs. 

We analyzed survey responses to identify specific manufacturer 

safeguards and determine the extent to which manufacturers surveyed had 

safeguards in place. For each type of safeguard identified, we calculated 

the number of manufacturers using the safeguard for at least one of their 

coupon formats. We also calculated the number of manufacturers with 

each safeguard by coupon format. 

OIG Review of Coupon Safeguards. We reviewed copayment coupon 

safeguards for a subset of the top 100 Part D-covered brand-name drugs 

with coupons to determine whether safeguards directed to beneficiaries 

and pharmacies existed. OIG attempted to obtain 50 coupons, and we 

reviewed safeguards for the 40 coupons that we obtained. The coupons 

we attempted to obtain were associated with 24 manufacturers, all of 

which were included in the population of manufacturers that OIG 

surveyed. We reviewed coupon safeguards that manufacturers had in 

place from February to June 2013. 

We reviewed and determined the extent to which manufacturers had 

safeguards directed to beneficiaries on the Internet, over the telephone, 

and on the print coupons. For safeguards on the Internet and over the 

telephone, we determined whether: (1) there was a notice about coupon 

use in Federal health care programs and (2) the notice was triggered by an 

eligibility question for Part D coverage. For safeguards on the coupons, 

we determined whether there was a notice directed to beneficiaries about 

coupon use in Federal health care programs. For each of these safeguards, 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 26 
 

 

we calculated the number of manufacturers using it and identified 

vulnerabilities. 

We reviewed and determined the extent to which manufacturers had 

safeguards directed to pharmacists on the coupons. For these safeguards, 

we determined whether: (1) there was a general notice on the coupons 

about coupon use in Federal health care programs and (2) there was a 

specific notice on the coupons that pharmacists will not submit a claim to 

a Federal health care program for the prescription with the coupons. We 

considered a general notice to be any other language directed to 

pharmacists stating that Federal health care beneficiaries are ineligible to 

use coupons. We considered a specific notice to be any language that 

indicates the pharmacist agrees or certifies that he or she will not submit a 

claim for reimbursement under any Federal health care program or 

certifies that the patient is not enrolled in any Federal health care program. 

For each of these safeguards, we calculated the number of manufacturers 

using the safeguard and identified vulnerabilities. 

As part of our review, we attempted to obtain the coupons for which we 

reviewed safeguards. For coupons available online, we attempted to 

download coupons and obtained 40 of them. For coupons available over 

the telephone, we attempted to receive coupons through the mail but 

obtained none of them. 

Structured Interviews. We conducted structured interviews with staff at 

organizations involved in the pharmacy claims transaction process, 

including pharmacists, coupon vendors, a switching company, and 

NCPDP, regarding their experience processing pharmacy claims and 

coupon claims. We conducted these interviews from February to 

August 2013. 

We reviewed structured interview responses to understand other 

vulnerabilities associated with coupon use. In particular, we discussed the 

pharmacy claims transaction system and the extent to which coupons are 

identifiable within it. We also reviewed interview responses to identify 

vulnerabilities in current safeguards. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 27 
APPENDIX 8 

Agency Comments 

/S(.KVIct;s- 1'\­

( DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid Services 

<~~ Administrator 

Washington, DC 20201 

DATE: JUL 30 2014

TO: 	 Daniel R. Levinson 


Inspector General 


FROM: 	 Marflyn Tavenner 


Administrat.or 


SUBJECT: 	 Office oflnspector General (OIG) Draft Report: "Manufacturer Safeguards May 

Not Prevent Copayment Coupon Use for Part D Drugs" (OEI-05-12-00540) 

The Centers for Medicare & Medicaid Services (CMS) appreciate the opportunity to provide 

comments on the above mentioned draft report. This draft report assesses the vulnerability of the 

Part D program to the use ofmanufacturer's copayment coupons. We are also concerned about 

the appropriate use of manufacturer's copayment coupons and agree with the OIG that the use of 

manufacturer's coupons to reduce cost-sharing obligations for drugs paid for by Medicare Part D 

could impose costs on Part D plans, the Part D program, and ultimately Part D beneficiaries. 

OIG Recommendation 

The CMS should cooperate with industry stakeholder efforts to identify a solution to prevent 

coupons from being used to purchase drugs paid for by Part D. 

Specifically, the OIG noted that CMS should cooperate with industry stakeholder efforts to 

improve the reliability of pharmacy claim edits, including considering all options and any 

feasible changes to the Part D program, to facilitate verification of Part D enrollment status 

before a coupon is processed. The OIG also suggested that CMS could explore with all involved 

entities how best to make coupons universally identifiable and transparent in pharmacy claims 

transactions. 

CMS Response 

The CMS concurs with the recommendation to work with all relevant stakeholders to find a 

meaningful solution to prevent inappropriate use of manufacturers' copayment coupons for drugs 

paid for by Part D. CMS concurs with OIG's suggested recommendation to work with relevant 

stakeholders to improve the reliability of pharmacy claim edits that facilitate verification of Part 

D enrollment and to explore how best to make coupons universally identifiable and transparent 

in pharmacy claims data. 

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

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 28 
 

ACKNOWLEDGMENTS 

This report was prepared under the direction of Ann Maxwell, Regional 

Inspector General for Evaluation and Inspections in the Chicago regional 

office, and Laura Kordish, Deputy Regional Inspector General. 

Melissa Baker served as the team leader for this study, and Jonathan Jones 

served as the lead analyst. Central office staff who provided support 

include Clarence Arnold and Meghan Kearns. 

Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs (OEI-05-12-00540) 29 
Office of Inspector General

http://oig.hhs.gov 

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

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

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

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

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

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

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

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

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

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

mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

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

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

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

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

reports also present practical recommendations for improving program operations. 

Office of Investigations 

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

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

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

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

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

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

Office of Counsel to the Inspector General 

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

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

legal support for 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.