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CMS Wants to Know: Are You Overcharging Members for Drugs?


By Yvonne Tso, PharmD, MBA


All Medicare Advantage and Prescription Drug Plans (collectively, Sponsors) submit prescription drug event (PDE) data to Medicare at least monthly, if not more frequently. PDE are the foundation for Part D revenue reconciliation[1]. Sponsors are attuned to making sure they attain optimal acceptance rates (100% or close to it) consistently. Many Sponsors retain external help to validate pricing reported in the PDE. Pricing validation serves at least two purposes: a) the Pharmacy Benefits Manager (PBM) is billing the Sponsor according to contract rates; and b) members’ cost shares are correctly adjudicated in the various Part D benefit phases. The latter is now a new focus for the Centers for Medicare & Medicaid Services (CMS).


CMS has begun a process to review PDE to determine whether Sponsors are charging accurate cost sharing to Medicare members, called the Cost Sharing Administration Analysis (CSAA). In a July 22, 2022 HPMS memo, CMS reported findings from the 2020 CSAA. The results are re-assuring. Of the 97,544 PDE analyzed with dates of service from 7/1/2020 to 12/30/2020, 1.19% or 1,159, were found to have cost share discrepancies. Of those, 1.01% (980 claims) were underpaid, while 0.18% (179 claims) were overpaid. The highest overpaid amount was $1,104, the lowest, $0.02, and the median, $0.91. Over- and underpayments need to be corrected for regulatory and financial reasons, which Sponsors will soon find out from CMS notification.[2] Another CSAA is planned for late fall 2022. CSAA results are yet one more data point CMS has at its disposal to evaluate plan performance.


Pricing and cost share validation for Part D drugs is more complex than what meets the eye. Firstly, drug prices change. Although prices typically change in January and July every year, some may change more often. The changes are mostly upward, not down. A report from the American Association of Retired Persons (AARP) shows 75 of 100 brand name drugs with the highest Medicare Part D spending in 2020 had their list prices (usually mean Average Wholesale Price or AWP) increase in January 2022; none experienced a decrease. The average increase was 5%, with some drug prices (12 of 75) growing by nearly 8%. In 2020, these 75 drugs were used by more than 19 million Part D enrollees and accounted for nearly half of all Medicare Part D prescription drug spending ($93.2 billion out of $198.7 billion).[3] Secondly, member cost share varies from phase to phase in the Part D benefit cycle depending on the Sponsor’s plan design. Straddled claims[4] present the biggest risks for errors in calculation. Thirdly, members’ Extra Help status can be adjusted and for some, retroactively.


To mitigate the pitfalls described above, Sponsors should:

  1. Make sure the PBM updates pricing tables[5] timely and accurately;

  2. Regularly monitor members’ cost share for select drugs from the Part D formulary. CMS chose seven target drug categories for use in the analysis: medication-assisted therapy (MAT) drugs[6], brand drugs for cancer treatment, brand drugs for behavioral health (antipsychotics), the top five brand antiretrovirals (ARV for treatment of HIV) by utilization, biosimilars, multiple sclerosis agents, insulins, and drugs that could be covered under Medicare Part B or Part D; e.g., anti-nauseants post-chemotherapy, immunosuppressant drugs for organ transplant prophylaxis (some of these drugs may be used for anti-inflammatory conditions which would be covered under Part D);

  3. Select members’ cost share in different benefit cycles for analysis;

  4. Select low-income subsidy members who may have had retroactive changes to their subsidy levels, from low to high or vice versa.


In a busy work environment, all of the above procedural steps are easier said than done. It is well worth the cost of retaining an external resource with the technical know-how, regulatory knowledge and Part D benefit expertise to emulate the analyses conducted by CMS. Once the configuration and logics are built, monthly or quarterly scanning of final action PDE data is much more manageable than manipulating in an Excel spreadsheet. For large plans, Excel has a capacity constraint; desktop manipulation of PDE may not even be feasible in excess of 1 million records.


Integritas Medicare has a team of specialists who have supported Sponsors’ compliance monitoring since inception of the program. They have deep expertise to help Sponsors conduct analyses similar to CMS and can also train Sponsors’ staff to perform the analyses. Call 415-596-5277 to learn how we can help your healthcare organization meet compliance requirements and financial objectives.

[1] An annual process whereby Sponsors must refund CMS if their capitation payments exceeded their drug expenses, taking into consideration reinsurance for risk corridor and direct and indirect remunerations. Conversely, Sponsors receive additional payments if their capitation payments fall below the threshold after taking into account the above. [2] CMS will provide Sponsors with a file containing the claims where CMS has identified a high-value discrepancy. [3] https://www.medicarerights.org/medicare-watch/2022/03/10/drug-prices-already-rising-in-2022 [4] Claims that cross over from one phase to another. [5] It is common for PBMs to have multiple pricing tables for adjudication for different Sponsor clients. [6] MAT drugs are used to treat opioid use disorder or OUD.



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