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Part D Fraud, Waste and Abuse Scams

by Yvonne Tso, Senior VP, PharmD, MBA

It has been said many times and in many ways – fraud, waste and abuse (FWA) prevention, detection and correction is everyone’s responsibility, which the Centers for Medicare & Medicaid Services (CMS) has reminded health plans since inception of the Medicare Advantage (MA) program in 2003.

CMS has a history of initiating audits to delve into some potentially suspicious areas as a result of their internal analyses of encounter data submitted by health plans (Plan Sponsors). On December 18, 2023 CMS announced a National Audit of Medicare Part D payments for medical supplies associated with the administration of insulin for beneficiaries with no evidence of insulin use in Medicare Parts B, C, or D. The audit will be conducted in collaboration with the Plan Program Integrity Medicare Drug Integrity Contractor (PPI MEDIC) to start in February 2024. [1] This initiative is based on preliminary evidence from an analysis of prescription drug encounter (PDE) records for cotton balls, alcohol swabs and gauze, supplies which would be eligible for Part D coverage for insulin users; for non-insulin users, they are not. The audit will cover dates of service from January 1, 2020, through December 31, 2022.

Keeping surveillance of claims data and looking out for FWA is not only best practice but also a Medicare requirement. Duplicate or fraudulent billing for the same service in order to obtain reimbursement is a potentially vulnerable area. Some injectables administered in physicians’ offices can be self-administered. Part B covers drugs that are furnished "incident to" a physician's service if the drugs are not usually self-administered by the recipients.[2] On May 15, 2002, CMS issued guidelines to be used by Medicare Administrative Contractors (MAC) to determine whether a drug or biological is usually self-administered and should be excluded from payment.[3] For the purposes of applying this exclusion, the term "usually" means more than 50 percent of the time for all Medicare beneficiaries who use the drug[4] i.e., if a drug is self-administered by more than 50 percent of Medicare beneficiaries, the drug is excluded from coverage under Part B. The MACs are advised to use a 3-step process to determine if a drug can be self-administered; if so, then the drug is not eligible for coverage under Part B.[5][6]

Increasingly, Pharmacy Benefit Managers (PBM) are placing some injectables on the Part D formulary even when they have to be administered by providers in their offices. Examples include: drugs given intra-ocularly for age-related macular degeneration (AMD) and injections for rheumatoid arthritis. A beneficiary picks up the prescribed drug from a pharmacy and brings the drug to the physician office for the injection, a process known as “brown bagging”.[7] However, the physician’s billing office may submit claims for the drugs that were “brown-bagged” as well as the injection fees, sometimes unbeknownst to the providers. Usually, providers order the injectable drugs from their suppliers who ship to the providers’ offices to administer to the patient.[8]

When a provider submits a claim with a HCPCS [9] code (or “J code”) to the health plan for payment, and the pharmacy submits a claim to the PBM for the same drug using an NDC, the adjudication processes are separate and do not intersect. Mistakes occur because the provider’s billing office has no knowledge that the drug was “brown-bagged”. The Plan Sponsor thus paid twice for the same drug.

The above scenario is especially vulnerable when the payer is a Medicare Advantage plan that does not offer prescription drugs, i.e., it is not an MAPD (Medicare Advantage Prescription Drug) plan and does not have Part D claims data. To identify mistakes, MA plans should consider monitoring and auditing medical claims submitted with J codes for drugs which can be self-administered.

In CMS program audits, FWA is popular for tracer selection to evaluate Compliance Program Effectiveness (CPE). Failure to detect, prevent and correct FWA can render a Plan Sponsor non-compliant in an audit and can also result in significant financial losses.

To effectuate FWA surveillance, Plan Sponsors should:

  1. Regularly monitor “high cost” drug claims and brand drugs that have generic equivalent;

  2. Follow CMS’ FWA reports to track trends in the industry and services and drugs which are most prone to FWA;

  3. Include cross walking Parts B and D claims to look for duplicate billing (if both are available);

  4. Report to CMS via the HPMS FWA reporting module any suspicious activities in the plan’s service areas as fraudulent activities are borderless, especially when fraud is associated with telemarketing scams; and

  5. Train your staff in all functional areas including the Call Center to be alert to calls from members who report some drugs appearing in their Explanation of Benefits (EOBs) that they have not heard of or did not receive. Training of new employees within 90 days of hire and annually thereafter is a Medicare requirement.[10] Depending on the employee’s function, more refresher courses could be useful.


On December 19, 2023, CMS published the 2024 Program Audit Updates for both routine and focused audits. CPE is in both. Plan Sponsors should be prepared to demonstrate their compliance program effectiveness in the prevention, detection and correction of FWA as well as in other program elements. CMS will begin sending engagement letters for focused audits in January 2024 and in late February 2024 for routine program audits similar to prior years.

Integritas Medicare has professionals who have assisted Plan Sponsors prepare for their CMS program audits and conducted Independent Validation Audits of conditions identified in audits. Integritas professionals are well versed in Medicare compliance requirements.

If you think you are due for a routine audit or might be a candidate for a focused audit and would like to be well prepared, help is only a phone call away. Please contact us at 415.596.5277.


[1] Upcoming National Audit - Analysis of Prescription Drug Event (PDE) Records for Medical Supplies Associated with the Delivery of Insulin for Beneficiaries with No Evidence of Insulin Use in Medicare Parts B, C, or D

[2] A52800 Self-Administered Drug Exclusion List: (SAD List) revised November 30, 2023

[3] Program Memorandum AB-02-072/Change Request 2200

[4] Prescription Drug Benefit Manual Chapter 6 Appendix C

[5] A52800 Self-Administered Drug Exclusion List: (SAD List) revised November 30, 2023

[6] A53893 Self-Administered Drugs - Process to Determine Which Drugs Are Not Usually Self-administered By the Patient, 10/1/2015

[7] Brown bagging” refers to the dispensing of a medication from a pharmacy directly to a patient, who then transports the. medication(s) to the physician's office for administration.

[8] This process is known as “white begging”.

[9] HCPCS=Healthcare Common Procedure Coding System

[10] Section 50.3.2 Fraud, Waste and Abuse Training Medicare Managed Care Manual Chapter 21.

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