Medicare criticized for $4 million drug overpayment

CMS suggests that the inspector general shift efforts to other areas of the program that might yield a higher return for the government.

By Charles Fiegl — Posted May 5, 2011

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The Centers for Medicare & Medicaid Services overpaid for dozens of drugs in 2009 by an estimated $4.4 million, the Dept. of Health and Human Services Office of Inspector General said in an April report.

The OIG examined payment levels for drug codes in 2009 and found that 34 of the 493 drugs in the Part B payment system exceeded the average manufacturing price by 5% or more during at least one quarter of that year.

For instance, Medicare paid $346.57 in October 2009 for the injection drug Dexrazoxane, exceeding the 105% mark. Payments had surpassed this threshold throughout the year, according to the report.

Medicare expenditures for Part B drugs would have been reduced by $4.4 million if CMS had paid 103% of the manufacturer's price, which the Medicare agency has the authority to do when prices exceed the 105% mark.

CMS concurred with just one out of four OIG recommendations in the report on drug prices, according to a memo from CMS Administrator Donald M. Berwick, MD. The Medicare agency agreed that it will continue to report manufacturers that fail to submit timely and accurate data when it tabulates drug prices. Missing data can influence the accuracy of prices, but CMS noted that it found instances where missing data had no such effect.

The agency did not concur with two main recommendations -- implement a price substitution policy, and expand manufacturing reporting requirements for Part B drugs. However, CMS said it would monitor how trends in manufacturing reporting of pricing data impacts payment policies.

In its response, the Medicare agency went on to question the OIG's focus on monitoring drug prices. The potential payoff from analyzing drug prices on a quarterly basis is low compared with reviewing other segments of the Medicare program, Dr. Berwick said.

"Given that annual Medicare spending is approximately $450 billion, of which roughly $15 billion [is spent] on Part B drugs, we respectfully suggest reducing the frequency of the reports in this series ... and redeploying those resources on activities that may have higher potential rates of return," he said.

Congress has required the inspector general to monitor drug payments since 2005. CMS consistently has not followed through with its recommendations for lowering payments for Part B drugs and has missed opportunities to save the program money, the OIG said.

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