In what observers say is the largest such fine in the Medicare Part D program’s six-year history and a clear message to the industry, CMS last month informed UnitedHealth Group that it intends to impose a $2,175,000 “civil money penalty” (CMP) for alleged violations related to access to prescription drugs.

“United failed the formulary and benefit administration portion of the October 2011 audit” the agency conducted at the company’s Minnetonka, Minn., headquarters, CMS said in a June 19 letter to UnitedHealthcare Medicare & Retirement CEO Tom Paul.

The letter from Gerald Mulcahy, acting director of the agency’s program compliance and oversight group, said “United’s violations of Part D requirements are significant enough to warrant the imposition of a civil money penalty.” In most but not all previous findings of Part D problems, CMS has opted instead for corrective action plans (CAPs).

While United may seek a hearing about the penalty, observers suggest this is unlikely. All United itself tells MAN is that “we will continue to work with CMS to proactively identify ways to improve our Part D administration, and to ensure our members receive seamless access to their prescription drug benefits. We have made and will continue to make significant operational improvements in our Part D program for our members.”

In outlining the findings of violations that it said “have directly adversely affected” or “have the substantial likelihood” of doing so for enrollees in all of United’s 87 Part D contracts, including Medicare Advantage drug plans, CMS said the company:

• “Improperly rejected prescriptions at the point of service as non-formulary when, in fact, the drugs are on United’s formulary”;

• Failed to provide timely and appropriate point-of-service claims adjudication;

• Did not meet CMS requirements regarding transition supplies of prescription drugs, including failing to provide for the “appropriate transition of new enrollees and existing beneficiaries prescribed Part D drugs that are not on United’s formulary”;

• Failed to cover “protected class drugs”; and

• “Improperly applied step therapy and prior authorization criteria in point-of-service edits” as well as “quantity limits (including those for protected class drugs) that were not approved by CMS.”

The agency added that it found United had “limited oversight” of its contracted pharmacy benefit managers (PBMs), failed to monitor adequately for inappropriately rejected claims, and failed to implement quality assurance measures to ensure system edits are appropriate.

Part D consultant Mike Flagstad, CEO of Visante, Inc., tells MAN he is “a little bit surprised” about the violations found, especially since they involve “some of the usual suspects.” Given that Part D began in 2006, says Flagstad, “if I was CMS, I’d be a little frustrated to see the same issues” still appearing. He says Part D plans should have followed the findings CMS has posted on audits of other drug plans and avoided the same problems.

The exception, he adds, is “transition fills” of prescriptions, which Flagstad calls an ongoing industry issue with which most Part D plans have had problems. He notes that CMS has come out with at least three guidance documents on that — in August 2010, December 2010 and December 2011 — and has given plans time to fix problems.

One difficulty Part D plans have had on this, he says, is that most PBM claims adjudication systems could not support CMS transition requirements because of “hard edits” at the point of sale.

Like other observers queried by MAN, Flagstad is not aware of any previous Part D CMPs in the millions of dollars. In past years, he explains, sponsors with the kind of problems CMS alleges at United might have gotten just a CAP. Why the change now? “Maybe it’s CMS trying to send a message,” Flagstad replies.

Part of any step-up in enforcement may relate to enhanced CMS IT capabilities, according to Flagstad. The agency now has integrated databases in which it can simultaneously track such aspects as step therapy, formularies and the Prescription Drug Event (PDE) transaction reports that must be filed for Part D, he notes, “so they know what’s happening at the point of sale.”

Part of Problem Is With PBMs

Many PBMs, though, he adds, have had problems adapting their commercial-market adjudication systems to Part D and have not allowed adequate time for testing. Flagstad asserts that since CMS now has the capability to pick a problem-prone area (e.g., specific drugs) and track that through a plan’s system, it can conduct “targeted samples” that it couldn’t do before. And the agency has said it will do 2012 Part D audits into December, he says, well beyond its usual late-September to mid-October end of a year’s audits.

There now is additional clarity on what CMS is looking for, says Steve Arbaugh, managing principal in ATTAC Consulting, Inc., which also has drug plan clients. He points out that CMS recently unveiled protocols it is using in formulary and benefit administration audits.

“This focus is nothing new,” explains Arbaugh, but it takes a lot of analysis to review rejected claims, and that traditionally has not been an area on which Medicare plans had focused. Arbaugh notes that Health Net, Inc. in November 2010 incurred marketing and enrollment suspensions because CMS contended the company was operating its Part D plan in a way the agency said “poses a serious risk to the health and safety of its enrollees” (MAN 11/25/10, p. 1). Earlier that year, CMS imposed similar sanctions on Aetna Inc. related to transition access to drugs when formularies changed (MAN 4/15/10, p. 5).

There are new prescription drugs or packaging or dose changes coming online daily, so it’s a “huge task” and a complex one to keep track of them all, Arbaugh maintains. Moreover, plans traditionally have compensated PBMs based on paid claims, not rejected ones. But he says the big pending fine for United should underline for Part D plans that they need appropriate monitoring of “delegated and downstream” entities, including on rejected claims, “and PBMs should be No. 1.”

View the CMS letter to United at http://tinyurl.com/7dhetnq.

© 2012 by Atlantic Information Services, Inc. All Rights Reserved.

Get instant Medicare Advantage news! Follow AISMedicare on Twitter or “Like” AISHealth on Facebook.