As a member-focused pharmacy benefit manager, CarelonRx works to protect our clients from fraud, waste, and abuse. Wasteful pharmacy claims impact not only members, but also payers. According to a 2019 study published in the Journal of the American Medical Association, the United States spends more on healthcare than any other country, and 30% of its healthcare spending is classified as waste. The estimated annual cost of waste in the U.S. healthcare system is as high as $935 billion.1
Unnecessary claims increase healthcare costs, and more importantly, may negatively affect health outcomes. Some of these outcomes were previously described in the CarelonRx 2020 Drug Trend Report. According to Niraj Sharma, Senior Clinical Pharmacist at CarelonRx, patients who fall victim to wasteful drug claims are “at greater risk for drug-drug interactions, polypharmacy [using multiple drugs to treat a single condition], overmedication, and less-than-optimal care.”
Common examples of wasterful pharmacy practices
One of the wasteful practices that pharmacy benefit managers face is called drug relabeling. Drug relabeling occurs when a drug, left in its original packaging, is relabeled under a new National Drug Code (NDC) and often sold at a higher price. CarelonRx has found no benefit to relabeling other than profit for those who engage in it. Even so, companies that relabel do so legally; they are registered with the Food and Drug Administration (FDA) as “labelers,” “relabelers,” “packagers,” “repackagers,” and even “manufacturers.” CarelonRx does not cover relabeled medications. To reduce waste, our team has created a program dedicated to identifying these products.
Another wasteful practice involves manufacturers marketing products such as scar gels and wound creams as “medical devices.” These gels and wound creams, like relabeled drugs, can be charged to benefit plans for higher prices, compared to similar products categorized as drugs.
Certain relabeled drugs and medical devices can reach members through third-party telemarketing companies. "We noticed these products were often the focus of telemarketers who were contacting our members and submitting claims to the pharmacy benefit manager for reimbursement," says Tracy Harrell, Director of CarelonRx's Clinical Pharmacy Strategies. The telemarketers' goal is to promote the use of targeted high-cost drugs that may not be in the best interest of the member.
Unfortunately, telemarketing tends to be most successful with a vulnerable audience — elderly people, who may not notice when a mysterious caller has personal information that only a provider or licensed pharmacist should have. The Federal Bureau of Investigation (FBI) notes, “Seniors are often targeted because they tend to be trusting and polite. Additionally, seniors may be less inclined to report fraud because they don’t know how, or they may be too ashamed of having been scammed.”2
How telemarketers gather personal information is not clear, but the U.S. Department of Health and Human Services periodically conducts audits to reduce potential fraud and waste. Last year, the Centers for Medicare & Medicaid Services (CMS) requested an audit of 30 mail-order pharmacies that collectively submitted 3.9 million Medicare Part D Eligibility Verification Transactions (E1 transactions). The audit revealed that 25 of those 30 providers used E1 transactions for some purpose other than to bill for a prescription or determine drug coverage billing order. 3 Furthermore, 15 providers submitted or hired other entities to submit E1 transactions for inappropriate purposes, which involved using a beneficiary's protected health information (PHI). 3 Since the audit, CMS has more closely monitored providers submitting a high number of E1 transactions, but their efforts alone cannot stop false pharmacy claims.
How we reduce waste
CarelonRx is proactively addressing wasteful pharmacy claims. “Our fraud, waste, and abuse teams diligently review drug claims and trends to identify any areas that may be fraudulent or wasteful and take action, if necessary,” says Sharma.
We closely review pharmacy dispensing patterns, including the frequency and combination of drugs being dispensed and to whom (i.e., local or out-of-state members). The CarelonRx team can also compare a pharmacy’s drug mix and reimbursement compared to those at similar pharmacies. “For example,” Sharma explains, “we track the dispensing of high-cost low-value products. If a pharmacy is dispensing a high rate of these products, we question why, and the pharmacy may be reviewed.”
In 2020, we created a new program targeting high-cost, FDA-classified medical devices. We updated our pharmacy coverage to ensure that these products were only covered under the medical benefit, as supported by our members’ benefit plans. We also look for unusual patterns in prescribing, such as a provider only prescribing select high-cost drugs and verify that patients have a legitimate diagnosis that matches the indication for the medications being dispensed.
Wasteful practices “drive everyone’s insurance premiums up,” says Harrell. Thankfully, our efforts to reduce and prevent unnecessary claims are paying off. By enhancing product policies and blocking wasteful claims, we saved our clients $13 million last year.
- Journal of the American Medical Association. Waste in the US Health Care System; Estimated Costs and Potential for Savings (January 2019).
- Federal Bureau of Investigation. Scams and Safety: Elder Fraud (accessed July 2021): fbi.gov.
- Department of Health and Human Services, Office of Inspector General. The Majority of Providers Reviewed Used Medicare Part D Eligibility Verification Transactions for Potentially Inappropriate Purposes (February 2020).