[Senate Hearing 112-455]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-455

    COSTS OF PRESCRIPTION DRUG ABUSE IN THE MEDICARE PART D PROGRAM

=======================================================================


                                HEARING

                               before the

                FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
                   INFORMATION, FEDERAL SERVICES, AND
                  INTERNATIONAL SECURITY SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 4, 2011

                               __________

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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  JERRY MORAN, Kansas

                  Michael L. Alexander, Staff Director
               Nicholas A. Rossi, Minority Staff Director
                  Trina Driessnack Tyrer, Chief Clerk
            Joyce Ward, Publications Clerk and GPO Detailee
                                 ------                                

 SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, 
              FEDERAL SERVICES, AND INTERNATIONAL SECURITY

                  THOMAS R. CARPER, Delaware, Chairman
CARL LEVIN, Michigan                 SCOTT P. BROWN, Massachusetts
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
CLAIRE McCASKILL, Missouri           RON JOHNSON, Wisconsin
MARK BEGICH, Alaska                  ROB PORTMAN, Ohio

                    John Kilvington, Staff Director
                William Wright, Minority Staff Director
                   Deirdre G. Armstrong, Chief Clerk

















                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Carper...............................................     1
    Senator Brown................................................     4
Prepared statements:
    Senator Carper...............................................    35
    Senator Brown................................................    37

                               WITNESSES
                        TUESDAY, OCTOBER 4, 2011

Gregory D. Kutz, Director, Forensic Audits and Special 
  Investigations, U.S. Government Accountability Office..........     6
Jonathan Blum, Deputy Administrator and Director, Centers for 
  Medicare and Medicaid Services, U.S. Department of Health and 
  Human Services.................................................     7
Louis Saccoccio, Executive Director, National Health Care Anti-
  Fraud Association..............................................     9

                     Alphabetical List of Witnesses

Blum, Jonathan:
    Testimony....................................................     7
    Prepared statement...........................................    51
Kutz, Gregory D.:
    Testimony....................................................     6
    Prepared statement...........................................    39
Saccoccio, Louis:
    Testimony....................................................     9
    Prepared statement...........................................    63

                                APPENDIX

Chart referenced by Senator Carper...............................    81
Questions and responses for the record from:
    Mr. Kutz.....................................................    82
    Mr. Blum.....................................................    87
    Mr. Saccoccio................................................    96

 
    COSTS OF PRESCRIPTION DRUG ABUSE IN THE MEDICARE PART D PROGRAM

                              ----------                              


                        TUESDAY, OCTOBER 4, 2011

                                 U.S. Senate,      
        Subcommittee on Federal Financial Management,      
              Government Information, Federal Services,    
                              and International Security,  
                      of the Committee on Homeland Security
                                        and Governmental Affairs,  
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:33 a.m., in 
Room SD-342, Dirksen Senate Office Building, Hon. Thomas R. 
Carper, Chairman of the Subcommittee, presiding.
    Present: Senators Carper and Brown.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. The Subcommittee will come to order--
although this is not a disorderly gathering here this morning. 
It is good to see all of you. Thanks to our witnesses for 
joining us. Thanks to our Ranking Republican for joining us. 
Good morning.
    Over the past several years, we have been engaged here in 
Washington and across the country in a conversation about our 
Nation's deficit and debt and the cost of Federal programs. The 
conversation has been serious and at times heated. 
Unfortunately, we have yet to reach a consensus on a plan to 
extract the country from the serious financial challenges that 
we face, but there is one thing, however, that I think we can 
all agree upon, and that is, we must stop the fiscal bleeding 
caused by waste, by fraud, and by abuse.
    This is a small Subcommittee, but for years we have been 
almost singularly focused on how the Federal Government can get 
better results for less money or better results for the same 
amount of money. Whether the Chairman is Tom Carper or Tom 
Coburn, this has been our singular focus and continues to be.
    Working together with partners such as the Government 
Accountability Office (GAO), the Office of Management and 
Budget (OMB), Inspectors General (IG) , and other Government 
watchdog groups, we have tried to maximize our oversight, and I 
believe that we have begun to make a real impact. We have 
drilled down on how the Federal Government wastes millions 
annually maintaining properties and buildings we neither want 
nor need. We have examined the billions that agencies waste, 
$125 billion, in avoidable improper payments made to 
contractors, to ineligible programs, to participants, and even 
to dead people. We have focused like a laser on Federal 
information technology projects that have gone billions of 
dollars over budget without ever delivering any real benefit.
    One issue we spent a lot of time taking a look at recently 
is the enormous amount of fraud and waste and abuse perpetrated 
within Medicare and Medicaid. These programs provide life-
saving benefits, as we know, to millions of our Nation's most 
vulnerable citizens. Unfortunately, too often criminals have 
figured out how to use Medicare and Medicaid for their own 
gain.
    Roughly 2 years ago, we held a hearing dealing with fraud 
and abuse in the Medicaid program in this room. At that hearing 
we learned that GAO had found tens of thousands of Medicaid 
beneficiaries and providers involved in fraudulent or abusive 
purchases of controlled substances through the program. After 
that hearing, we asked the Government Accountability Office to 
see whether or not something similar might be going on with the 
Medicare Part D prescription program. I was disappointed but 
not surprised to learn that GAO has found evidence that a 
number of Part D beneficiaries are likely abusing the system to 
obtain powerful drugs to fuel their own addictions or to sell 
them on the street.
    As part of their analysis, GAO auditors looked at all of 
the prescriptions paid for by Part D in 2008. Combing through 
over 1 billion prescription records, they found that over 
170,000 Part D beneficiaries apparently engaged that year in a 
practice commonly known as ``doctor shopping.'' These 
beneficiaries have gone to five or more doctors to obtain 
prescriptions for the same drug.
    In one case, GAO found a beneficiary who received 
prescriptions from 87 different medical practitioners in that 
one year, 2008. In another case, a beneficiary received 3 
years' worth of oxycodone pills from 58 different prescribing 
doctors in just one year.
    We need to be honest about what these findings mean. They 
mean that Federal dollars intended to address the health needs 
of the elderly and the poor are instead being used to feed 
addictions or to pad the wallets of drug dealers. This is 
clearly unacceptable.
    According to GAO, the controls that the Centers for 
Medicare and Medicaid Services (CMS) has put into place to stop 
this sort of abuse have not done the trick. Under the plan CMS 
has put in place to combat doctor shopping, if a Part D plan 
sponsor suspects a beneficiary is doctor shopping, they send a 
letter to the doctors who have been visited. The letter is sent 
along with a self-addressed envelope in which the doctors can 
send a response to the sponsor's concerns. In some cases, the 
doctors will stop giving the doctor-shopping patients 
prescriptions. In other cases, they will not. Sometimes the 
letters go unanswered.
    GAO has made several recommendations to CMS on how to 
tighten up controls of the program. Included among these 
recommendations is a suggestion that beneficiaries be limited 
to one doctor and one pharmacy, an approach that many States 
use in their Medicaid programs. I look forward to hearing more 
about this suggestion from our witnesses today.
    In addition, I understand that just last week, perhaps as a 
result of GAO's work, CMS has issued new guidance to Part D 
plan sponsors. This guidance suggests that plans begin denying 
beneficiaries at the point of sale if they suspect abuse. This 
is an important change, and, again, I want to hear more about 
that today as well.
    I have worked with Senator Tom Coburn, with Senator Brown, 
and with others on this panel to work on bipartisan legislation 
that curbs waste and fraud in both Medicaid and in Medicare. 
Our legislation, S. 1251, contains a set of important steps 
that will help rein in those trying to defraud our Federal 
health care programs. Our legislation has provisions that 
directly affect fraud in Medicare Part D, including 
strengthening the prescription drug monitoring programs (PDMP) 
and requiring closer coordination between CMS, their oversight 
contractors, Drug Enforcement Agency (DEA)--and State and local 
law enforcement. Our proposal also requires that the list of 
doctors who can prescribe controlled substances like 
painkillers be maintained up to date and accurate.
    As many of you know, 12 of our colleagues are currently 
serving on a bipartisan, bicameral Joint Committee that has 
been tasked by the rest of us with coming up with a plan to 
begin to put our fiscal house in order. If at some point that 
Committee and Congress as a whole are to come to agreement on a 
meaningful plan for addressing our country's fiscal challenges, 
we will need to address issues like the ones we are talking 
about here today.
    As I close this opening statement, I want to comment on 
prescription drug abuse. The dangers associated with the misuse 
of prescription drugs have become known in the past few years 
as celebrities and other public figures have succumbed to their 
lethal effects. However, less widely publicized are the 
millions of Americans, including children, who abuse the same 
drugs. Unfortunately, children are abusing prescription drugs 
at an alarming rate. One out of seven teenagers reportedly has 
abused or is abusing prescription drugs today. This is a drug 
problem that could impact any American home with a medicine 
cabinet.
    As a father, I find this news especially troubling, and I 
want to make this point so that it is clear. While there is a 
financial cost to the fraud and abuse of controlled substances 
paid for by Medicare--and we are mindful of that--we cannot 
ignore the fact that there is a human cost as well. 
Prescription drug abuse is the fastest-growing addiction in the 
United States. The difference between a street drug like 
cocaine and a prescription painkiller is that in many cases, as 
this hearing and this Subcommittee's previous work show, the 
Federal Government is often paying to feed this addiction with 
taxpayer money.
    Aside from our financial imperative, then, we have a moral 
imperative to ensure that our public health care system is not 
used or misused to further intensive and subsidize a public 
health crisis.
    Before I turn it over to Senator Brown, I do not have the 
full list of the illegal drugs whose cost, if you add up their 
street sales, actually are still less than the value of the 
prescription drugs, the controlled substances that are being 
shopped and sold. But it includes cocaine, heroin, and others 
combined. So think about it. When we think about how big is 
this problem, add up heroin and cocaine sales and a number of 
other illegal drugs, and add them all up and the total is less 
than is involved in the sale of these controlled substances. It 
is a big problem. It is a problem that we are beginning to 
address. We are going to learn a lot more today about how we 
can further address it.
    With that having been said, Senator Brown, you are on. 
Thanks.

               OPENING STATEMENT OF SENATOR BROWN

    Senator Brown. Good to see you, Mr. Chairman. Again, thank 
you, and thank you for holding this hearing. This is something, 
Mr. Chairman, I am not sure if you are aware of, that I was 
working on a task force back in Massachusetts on these types of 
abuses, especially just the rampant drug problem amongst our 
youth and others with these types of substances. We really did 
not get into the fraud part of it, but we certainly got into 
the issue itself, and Maine Senator Steve Tolman and I and 
others tried to tackle this very real problem. And I know that 
we are trying also to address these difficult decisions, and we 
are trying to put our Nation on a path of fiscal stability.
    Folks, you all know what is going on. We are in a financial 
emergency and we are trying to find a way to do it better. It 
has been an honor to be on this Subcommittee and try to tackle 
a lot of these very real issues and try to find a way to do it 
better. And I do support, have very strong support for the 
Medicare prescription drug programs. They are important 
programs, we all know, that provide essential benefits to our 
seniors. That is why now more than ever, we must protect these 
programs because they are looking to be changed, and if we can 
weed out a lot of this fraud and abuse, we will have more money 
in the system, obviously, to give back to the people that need 
it the most.
    This Subcommittee is releasing a GAO report that I think 
was asked to be done by Senator Carper which exposes the 
outrageous practice, that taxpayer dollars are potentially 
funding, through the Medicare Part D program, illicit 
prescription drug dealing. The findings in the GAO report 
highlight this problem.
    As the Senator noted--I cannot remember if he said this, 
but one Medicare recipient, as you know, visited 58 different 
doctors to obtain 3,655 oxycodone pills equivalent to a 1,679 
day supply. These prescriptions equate to a street value of 
almost $300,000. And many of these highly addictive 
prescription narcotics will find their way onto the streets, 
hurting communities, kids, families, and the doctor shopping is 
the primary way that these abusers get around the lawful use of 
these medications.
    Only a very small percentage of Medicare Part D 
beneficiaries, approximately 1.8 percent, are engaging in this 
type of behavior. Though the percentage is small, we are still 
talking about approximately 170,000 people abusing the system 
according to the GAO, which costs the taxpayer approximately 
$148 million annually. That is real money, folks, and what I 
have tried to do since I have been here is to keep an open mind 
and try to find ways, without throwing bombs at all--you know, 
like where is the breakdown? And the key that we need to try to 
find out is where is the breakdown. Where can we try to fix it?
    This not only wastes taxpayer dollars by paying for huge 
amounts of unneeded prescription drugs and unneeded doctor's 
visits, but it also take a very high human toll, and we all 
know what that involves. This prescription drug abuse is one of 
the Nation's fastest-growing drug problem and is now 
categorized by the Centers for Disease Control (CDC) as an 
epidemic. We must do everything we can do to create stronger 
oversight of these controlled substances.
    In fact, in some cases our entitlement programs, which were 
established to benefit our country's most vulnerable, are 
instead being used to fuel addiction and abuse, and it is 
really, with all due respect, Mr. Chairman, unconscionable what 
is happening.
    We have held several important hearings. Some I think have 
been really just fascinating, the things that I have learned 
through your leadership. I commend the Chairman for holding 
them, but this one, I do not think there are any that are more 
important than this one, quite frankly.
    So I am looking forward to beginning with the hearing, and, 
Mr. Chairman, I appreciate you bringing it up. Thank you.
    Senator Carper. You bet, and thank you for your statement 
and for joining us today, Senator Brown.
    Senator Brown. I have not missed one yet, Mr. Chairman.
    Senator Carper. I know. You have a perfect attendance 
record here with me.
    I asked my staff, I said, let me have the sentence from our 
briefing memo about just how big a problem the abuse of 
prescription drugs is, and here is just a sentence from our 
briefing memo. It was not in my statement. I wish it had been, 
but it says: ``It is estimated that 7 million Americans abuse 
prescription drugs every year. That is more than the number who 
are abusing cocaine, heroin, hallucinogens, Ecstasy, and 
inhalants combined.'' Combined.
    We welcome our witnesses. How many of you have testified 
before this Subcommittee before? All right. Well, thanks for 
continuing to come back, and we appreciate that.
    Our first witness today, Greg Kutz, is Director of GAO's 
Forensic Audits and Special Investigations Unit. Mr. Kutz has 
spent over 20 years at GAO working to uncover abuse of 
government credit cards, abuse in the response to Hurricanes 
Katrina and Rita, problems with the U.S. border security, among 
many other issues. He has testified before this Subcommittee 
many times before, and I thank him for agreeing to be with us 
here today.
    I hope you do not start charging us on a per visit basis. 
We have a very large deficit. But, seriously, we are grateful 
for your help.
    Our next witness is Mr. Jonathan Blum, Deputy Administrator 
and Director at the Centers for Medicare & Medicaid Services. 
Mr. Blum is responsible for overseeing the Medicare 
prescription drug program and formerly worked as an adviser to 
one of our good friends and colleagues, Senator Max Baucus, on 
the Finance Committee staff. Thanks.
    Our final witness is Louis Saccoccio, who is Executive 
Director of the National Health Care Anti-Fraud Association 
(NHCAA). Mr. Saccoccio and his group work to increase awareness 
and improve the detection and prevention of health care fraud. 
I also understand that Mr. Saccoccio is a former Navy JAG 
lawyer and a graduate of the U.S. Naval Academy, and I am told 
he served for 8 years, including a tour as a legal officer on 
the carrier the USS Kitty Hawk. Is that correct? Good for you. 
Bravo Zulu. I am an old Navy guy, I have a JAG guy here next to 
me, so we are in good company, I think. Thank you for that 
service and thanks for being here today.
    Folks, the drill. I would ask that you take about 5 minutes 
for your statement. If you go a little bit over that, that is 
OK. If you go way over that, that is not OK, so we will rein 
you back in.
    Mr. Kutz, why don't you lead us off? Thank you.

TESTIMONY OF GREGORY D. KUTZ,\1\ DIRECTOR, FORENSIC AUDITS AND 
  INVESTIGATIVE SERVICE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Kutz. Mr. Chairman and Ranking Member Brown, thank you 
for the opportunity to discuss Medicare Part D. In 2009, I 
testified before this Subcommittee on doctor shopping in 
Medicaid. Today's testimony highlights the results of our 
investigation into doctor shopping in Medicare Part D. My 
testimony has two parts: first, I will discuss our findings; 
and, second, I will discuss our recommendations.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Kutz appears in the appendix on 
page 39.
---------------------------------------------------------------------------
    First, we found indications of doctor shopping for 14 
classes of frequently abused prescription drugs, including 
Vicodin, Ritalin, and OxyContin as examples. Specifically, 
170,000 beneficiaries acquired the same class of prescription 
drug from five or more prescribers during 2008. This represents 
about 1.8 percent of the beneficiaries acquiring these classes 
of drugs, and they showed indications, as I mentioned, of 
doctor shopping. The cost of these drugs was about $148 
million, which excluded the cost of office visits. We referred 
48 of the most egregious of these cases to the Medicare Drug 
Integrity Contractor (MDIC) for further investigation.
    Our report documents the facts related to 10 individuals 
that were doctor shopping. Many of these individuals had prior 
criminal histories. This was not a random sample, and the 
results from these 10 cases cannot be projected to all 170,000 
cases.
    Examples that you both mentioned from our work for these 10 
cases include:
    A California man received a 1,758-day supply of fentanyl 
patches, which is a narcotic painkiller, from 21 different 
prescribers.
    A Georgia woman received a 1,679-day supply of oxycodone, 
also a narcotic painkiller, and other drugs from 58 different 
prescribers and 45 different pharmacies.
    And a Maryland woman received a 1,450-day supply of 
oxycodone from 11 different prescribers.
    The graphic in your package, which I have in my hand here--
it looks like this--illustrates an actual case from our 
investigation. As you can see, between September 8 and 
September 19, this individual received three 30-day supplies of 
the painkiller hydrocodone. These prescriptions were obtained 
from three different prescribers and filled at three different 
pharmacies. In cases like this, the prescribers told us that 
they were unaware that their patients were receiving the same 
prescription drugs from other prescribers.
    Our recommendations to address doctor shopping are 
consistent with those used in the Medicaid program, as you 
mentioned, Mr. Chairman, and also in the private sector. First, 
we recommend that CMS consider the use of a restricted 
recipient program. This program would limit known system 
abusers to one prescriber, one pharmacy, or both. Since abusers 
generally face no criminal consequences and will not be removed 
from Part D, this lock-in program provides a valid mechanism to 
protect taxpayer interests.
    Second, if a restricted recipient program is implemented, 
CMS should consider enhancing the sharing of information on 
these doctor shoppers between the drug plans. This is necessary 
to prevent abusers from circumventing controls by simply 
switching drug plans.
    Third, and finally, because of CMS concerns about its legal 
authority to make these changes, we recommend that CMS consider 
seeking congressional authority as necessary to implement the 
recommendations.
    In conclusion, as you both mentioned, Medicare dollars are 
being used to finance prescription drug abuse in our Nation. 
GAO is hopeful that Congress and CMS will use this report to 
improve the integrity and the safety of the Medicare Part D 
program.
    Mr. Chairman and Ranking Member Brown, that ends my 
statement, and I look forward to your questions.
    Senator Carper. Thanks very much for that statement. Thanks 
very much for the work that backs it up. Mr. Blum.

    TESTIMONY OF JONATHAN BLUM,\1\ DEPUTY ADMINISTRATOR AND 
   DIRECTOR, CENTERS FOR MEDICARE & MEDICAID SERVICES, U.S. 
            DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Mr. Blum. Chairman Carper, Ranking Member Brown, I would 
like to thank you and the Subcommittee for your focus to ensure 
that the Medicare Part D program is as strong as possible.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Blum appears in the appendix on 
page 51.
---------------------------------------------------------------------------
    Today, the Medicare Part D program provides outpatient 
prescription drug benefits to more than 29 million Medicare 
beneficiaries. There are more than 3,400 Part D plans that 
provide drug benefits to Medicare beneficiaries, and Medicare 
beneficiaries may choose from a multitude of plans to deliver 
their benefits. The majority receives benefits in stand-alone 
Part D drug plans--that is, private plans that only provide 
outpatient drug benefits.
    By many measures, the Part D program has been a great 
success. Overall, costs have risen more slowly than the 
original Congressional Budget Office (CBO) and the Office of 
the Actuary (OACT) projections, and a majority of beneficiaries 
report being satisfied with its benefits. But we know that the 
benefit is not perfect.
    While the program is stronger today than ever before, we 
know there are vulnerabilities which must be addressed. I want 
to thank the GAO for its work highlighting the potential of 
fraud and abuse in the program specifically related to 
controlled substances. We have reviewed carefully the GAO's 
report and its recommendations, and we agree with the GAO that 
the misuse of controlled substances is a growing problem in the 
Medicare Part D program.
    It is difficult to quantify the extent of the problem, but 
we agree the program can do more to curb potential fraud and 
abuse. At a time of scarce resources and significant budget 
deficits, we must ensure that every Federal dollar is spent as 
wisely as possible.
    Since the Part D program is relatively new, to date our 
focus at CMS has been to ensure that Medicare beneficiaries 
receive the drugs they are entitled to. The Medicare Part D 
program pays private Part D plans a capitated payment and works 
to make sure that the Part D plans provide drugs consistent 
with the program's requirements.
    Our compliance efforts in recent years have been focused on 
the underutilization of drugs. We have placed significant audit 
and oversight resources to ensure that beneficiaries receive 
the drugs they need at the point of sale. We have placed 
significant sanctions on Part D plans that have failed to 
deliver benefits consistent with the law and our regulations.
    But the Part D program has reached a new state of maturity 
so that we now need to shift our oversight focus. We cannot 
just focus on the underutilization of Part D drugs. We must 
shift our focus on the overutilization of Part D drugs. To this 
end, we have recently taken the following steps:
    First, last week CMS put out new guidance to plans to 
ensure they are putting into place more comprehensive drug 
utilization review programs to ensure they are screening for 
misuse of controlled substances and other drugs. If clinical 
reviews reveal misuse, we will expect our Part D plans to stop 
payment and report the fraud to law enforcement.
    Yesterday, CMS proposed new proposed rules for the Part C 
and Part D programs that would ensure that the prescriber ID 
number is put on all Part D drug claims. This will ensure that 
we can produce more sophisticated data analyses and spot those 
prescribers that present vulnerabilities to the Part D program.
    CMS also shares concerns over the high use of antipsychotic 
medications given to beneficiaries in nursing homes. There is 
evidence that the financial relationships between long-term-
care pharmacies and drug manufacturers can lead to this 
overutilization. Our proposed rules put out last night suggest 
possible steps CMS could take to address this overprescribing.
    CMS is also using data much more proactively. Again, our 
data analyses and data mining to date have been primarily 
focused on plans that may discourage the appropriate 
prescribing, denying our beneficiaries needed drugs. Our data 
analysis will also include proactively focusing on drug 
overutilization. The GAO report suggests that CMS should 
consider a program whereby it restricts prescribing of 
controlled substances to a single physician dispensed by a 
single pharmacy. CMS does not believe that such a measure, 
which has been employed by State Medicaid programs, would work 
well in the Part D program. Part D in its current form cannot 
restrict a beneficiary to a single physician or a single 
pharmacy. CMS believes that the responsibility to prevent Part 
D drugs rests with Part D sponsors.
    We must also be very concerned that beneficiaries do not 
face undue restrictions to necessary medications. Beneficiaries 
seeing many doctors may have very complicated health care needs 
or may be victims to a dysfunctional health care delivery 
system. Any programs that are believed to curb overuse and 
misuse and overutilization must always involve strong clinical 
review and judgment to ensure that those in need do not go 
without or face arbitrary restrictions. CMS' response to this 
growing problem will continue to follow these principles.
    Thank you for the opportunity to testify today, and I look 
forward to your questions.
    Senator Carper. And we look forward to your questions. 
Thanks very much for that testimony. We look forward to asking 
you some questions.
    Mr. Saccoccio, please proceed.

 TESTIMONY OF LOUIS SACCOCCIO,\1\ EXECUTIVE DIRECTOR, NATIONAL 
               HEALTH CARE ANTI-FRAUD ASSOCIATION

    Mr. Saccoccio. Thank you. Good morning, Chairman Carper, 
Ranking Member Brown.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Saccoccio appears in the appendix 
on page 63.
---------------------------------------------------------------------------
    The amount of health care dollars spend on prescription 
drugs in this country continues to grow. National health 
expenditure data reveal that in 2009 $250 billion was spent on 
prescription drugs, and that by the year 2020 that spending is 
projected to more than double, reaching more than $500 billion. 
NHCAA believes that the amount of health care dollars spent on 
prescription drugs continues--as that amount continues to grow, 
the problem of prescription drug diversion and fraud will also 
continue to grow as a segment of the total health care fraud 
problem.
    While doctor shopping by patients is the primary focus of 
the GAO report released today, NHCAA believes it important to 
acknowledge that prescription drug fraud and diversion can take 
many forms. At its most complex, perpetrators of drug diversion 
undertake a multi-faceted criminal enterprise directed at 
reselling drugs in high volume and for large profit on the 
streets, with the cost of the drugs fraudulently billed to 
health insurers, both public and private.
    Significantly, the money lost to prescription drug fraud 
through the payment of unnecessary or bogus pharmacy claims is 
only part of the financial impact of this problem. In the 
process of obtaining a prescription, a patient typically will 
generate claims for related medical services. Insurers often 
find that they have paid not just for unnecessary drugs but 
also for related emergency room visits, inpatient hospital 
stays, visits to physician offices and clinics, and diagnostic 
testing--all based on injuries, illnesses, and conditions 
feigned in order to obtain a prescription. Then there are the 
additional costs associated with treating the addictions and 
the overdoses arising from this behavior.
    More importantly, the financial losses due to prescription 
drug fraud are compounded by instances of patient harm and 
sometimes death--insidious side effects of this fraud. The 
Office of National Drug Control Policy calls prescription drug 
abuse ``the Nation's fastest-growing drug problem,'' and the 
Centers for Disease Control and Prevention classifies 
prescription drug abuse as an epidemic. Of course, prescription 
drug abuse in itself does not necessarily indicate fraud. 
Nevertheless, in many instances the drugs are obtained through 
fraud.
    A cogent example of the human toll of this problem was all 
too clear in a recent case arising in Kansas. In October 2010, 
a Kansas physician and his wife, a licensed practical nurse who 
also acted as the office manager of her husband's pain 
management clinic, were sentenced to 30 and 33 years in Federal 
prison, respectively, for illegally distributing prescription 
pain medications to patients who overdosed. A 4-year 
investigation of this pill mill uncovered evidence of extensive 
overprescribing of controlled substances. More than 100 drug 
overdoses requiring visits to Wichita area emergency rooms and 
the deaths of at least 68 persons are linked to this case, as 
well as more than $4 million in Medicaid and private insurance 
claims. After an 8-week trial, the jury convicted the couple, 
finding that they directly contributed to the deaths of several 
patients. This case demonstrates that prescription drug fraud 
is a dangerous crime that can yield tragic results, including 
death.
    Private insurers have acknowledged drug diversion and 
doctor shopping as a fraud trend for the last several years, 
and their anti-fraud efforts regularly identify dangerous 
prescription drug abuse by patients. In my written testimony, 
we provide examples of how two insurers, Humana and WellPoint, 
are using monitoring, letter notification to prescribers, and 
restricted recipient programs with success.
    NHCAA also supports State prescription drug monitoring 
programs that help both to identify fraud and to ensure patient 
safety. NHCAA recommends that State investments in those 
monitoring programs be incentivized whenever possible. Also, 
NHCAA recommends taking full advantage of interoperability 
opportunities and information sharing among prescription drug 
monitoring programs for States sharing borders with one 
another.
    For instance, in August 2011, Kentucky Governor Steve 
Beshear announced the formation of an interstate task force 
with border States Ohio, Tennessee, and West Virginia committed 
to targeting fraudulent or abusive prescription drug activities 
in those States.
    NHCAA also is encouraged by the memorandum dated September 
28th issued by CMS to Medicare Part D sponsors asking for their 
comments on how the Medicare Part D program can more 
successfully exert control over payment for inappropriate 
overutilization of drugs. In addition to responding to the 
ideas outlined in the memo, NHCAA suspects that many Part D 
sponsors will suggest that a restricted recipient program be 
considered to curb drug-seeking behavior due to drug abuse or 
diversion.
    Thank you for the opportunity to testify this morning, and 
I look forward to any questions you may have.
    Senator Carper. Great. Thanks very much. That was great 
testimony, Mr. Saccoccio.
    Let me start off by saying that one of the things that we 
focus most on in this Subcommittee is finding out results. We 
are not interested in process. We are interested in having the 
ability to actually measure results, and we focus on success 
and how do we measure success.
    Senator Brown probably remembers me mentioning, not in this 
room but in the Finance Committee hearing room--a couple of 
months ago, we were having a hearing on deficit reduction. We 
had four or five really smart people there as our witnesses. 
One of them was Dr. Alan Blinder, who now teaches at Princeton. 
He used to be the Vice Chairman of the Federal Reserve when 
Alan Greenspan was Chairman. And he was before us to testify on 
deficit reduction, and he said in his testimony, he said, the 
800-pound gorilla in the room in health care cost explosion--in 
deficit explosion is health care costs. And he said unless you 
do something about that, everything else is sort of window 
dressing.
    And when it came around to my turn to ask questions, I 
said, Dr. Blinder, you talked about how health care costs is 
the 800-pound gorilla in the room with respect to the deficit 
and how it was imperative that we do something about that. And 
I said, ``Do you have any advice for us today as to what we 
might do?'' And he said, ``I am not a health economist. I am 
not an expert in that stuff. Let me just say here is my advice: 
Find out what works, do more of that.'' That is all he said. 
``Find out what works, do more of that.'' And I said, ``Well, 
is the corollary to that find out what does not work and do 
less of that?'' And he said, ``That would be true.''
    So in the spirit of finding out what works and do more of 
that, let us talk about what works, and I think, Mr. Saccoccio, 
you mentioned in your testimony about Humana and WellPoint, 
some of the steps that they are taking. We have the experiences 
in Medicaid where some States are saying one doc--if you are 
taking these controlled substances, use one doc, maybe one 
pharmacy, to try to control it. Talk to us about what is 
working and how we might take those ideas and incorporate them 
into whatever we might do in terms of legislation or a 
regulatory approach.
    Mr. Kutz, would you lead us off?
    Mr. Kutz. Well, you mentioned restricted recipient. That 
has been successful in Medicaid. There are 30 to 40 States that 
have some variety of the one prescriber/one pharmacy or both or 
some different--some are two, actually. And that has been 
proven in those States to be successful in Medicaid.
    Senator Carper. Let me just interrupt for just a moment. 
Mr. Blum, in your testimony you said you did not think that the 
success that has been realized in Medicaid in addressing this 
problem would necessarily work in Medicare Part D. Just take a 
minute--and then I will come back to you, Mr. Kutz. Just take a 
minute and explain that.
    Mr. Blum. Sure. State Medicaid pharmacy benefits tend to 
work very differently than the Part D drug benefit. The State 
Medicaid program generally has one fee-for-service program 
where they can have a complete view of pharmacy benefits. The 
Part D program by statute works very differently than State 
Medicaid pharmacy benefits. We have 3,400 different Part D 
plans that provide the kind of day-to-day transactions of the 
pharmacy benefit. To our view, because of the wide diffusion to 
Part D benefits designed by statute, to our minds we have to 
have the Part D plans themselves provide the kind of review, 
the oversight to ensure that drugs are being dispensed 
consistent with the law.
    Senator Carper. OK. That is fine. Just stop right there.
    Mr. Kutz, just briefly respond to what Mr. Blum has said on 
this point, if you would.
    Mr. Kutz. Well, we agree with Medicare that there needs to 
be a comprehensive fraud prevention plan in place, and their 
documents, their Chapter 7 and Chapter 9 of the regulations, 
state that. And to me that includes prevention, monitoring, and 
some consequence at the end of the day for people that beat the 
system. So if you do not have a restricted recipient program in 
place, I see a hole in the comprehensiveness of their fraud 
prevention plan in that what are the deterrents to people 
actually doing this. Their belief is probably they are not 
going to get caught, and if they get caught, there are no 
consequences.
    So I believe it is important that in any fraud prevention 
program--and I testify across Congress on these things--you 
have to have some consequences at the end of the day for people 
that might deter them.
    Senator Carper. All right. Thanks.
    Go ahead. What else in terms of the spirit of what works?
    Mr. Kutz. One of the things we have seen in some of the 
States is the prescription drug monitoring plans have real-time 
data that doctors can actually access so that they could 
potentially know before they actually write the prescription 
that their patient is seeing other doctors or prescribers for 
the same thing. So if you think about the first step in the 
process, which is the writing of the prescription, you could 
perhaps prevent some of the prescriptions being written by 
having real-time data available for the prescribers to look at 
for their patients.
    The next step is the point of sale at the pharmacy, and I 
know that CMS agrees with us on this, that it is very important 
to focus on information the pharmacist has before the drug is 
dispensed to see doctor-shopping activity. The issue really is, 
when they are getting alerts at the pharmacy, what are they 
doing with it? Are they actually using it to deny someone or is 
someone walking out with the drugs? Even though there was an 
indicator set, it is called a ``soft edit,'' which can be 
overridden.
    Senator Carper. Called what? ``Soft edit''?
    Mr. Kutz. ``Soft edits,'' where basically they get an 
alert, but they do not have to do anything with it, and someone 
can walk out the door. So to me that is important.
    I will just quickly mention a third thing, which is 
monitoring. Once you have--and, again, CMS promotes this--data 
mining and data matching, similar things we have done here but 
much more comprehensive is to me another important element of a 
comprehensive fraud prevention plan.
    Senator Carper. All right. Good. Mr. Blum.
    Mr. Blum. I totally agree with everything that Mr. Kutz 
said. We need to make sure that we are providing very strong 
guidance to our Part D plans to take a more complete and 
holistic picture of a beneficiary and that they are given the 
pain medication they need. I think to date we have systems that 
are set up that are much more transactional in nature at the 
point of sale, that there are edits in place, and we need to 
look--or to encourage the Part D plans to take a more complete 
picture so they can figure out whether or not beneficiaries are 
being prescribed medications that exceed good sound clinical 
judgment.
    I think it is important to point out that a beneficiary who 
is seeing many physicians could have very legitimate needs. 
They also could be going to the ER. They could also be going to 
a clinic setting and just being bounced around the health care 
system, through no fault of their own. So to our minds, any 
system in place that will stop doctor shopping and stop abuse 
needs to be based upon sound clinical judgment to make sure 
that we are stopping the bad behavior but also preventing harm 
to beneficiaries who have very legitimate needs who are being 
bounced around the health care system through no fault of their 
own.
    Senator Carper. All right. Mr. Saccoccio, go ahead. What is 
working? What is working out there?
    Mr. Saccoccio. Well, I think it is a combination of several 
things. No single thing works by itself.
    First, you need to analyze data. You need to take a look at 
what is happening out there. CMS in the fee-for-service 
Medicare area is moving towards predictive modeling. You need 
to be able to do that so you could figure out what is going on. 
Then you need to take some action. Now, the action should 
include notification to the physicians that are prescribing the 
drugs, also notification to the patients themselves, and then 
looking to those patients to see if they do have a problem, 
maybe trying to get them into programs that address the 
problem.
    But I think the other big piece of it is a restricted 
recipient program, a lock-in program, where under certain 
circumstances, allowing for utilization for certain types of 
conditions that may need a lot of pain medication, that you 
lock those folks in. And that does not mean they do not have 
access to those drugs. For example, in the Humana example that 
we give, Humana may lock them into a pharmacy that has multiple 
locations, so it is not just, hey, you have to go to this one 
pharmacy down the street. You could go to different locations, 
but you are locked into that one pharmacy. So I think that 
should seriously be considered.
    Given the right circumstances with the right patients that, 
hey, we are not making any dent in this, otherwise, we need to 
take that additional step.
    Senator Carper. All right. Good. Thanks very much. Senator 
Brown.
    Senator Brown. Thank you, Mr. Chairman.
    Mr. Kutz, in your report you cite a case, amongst others, 
where in 2008 alone a beneficiary received 5,923 oxycodone 
pills after going to 11 different doctors. That is a 1,450-day 
supply in one year. I know as your report indicates that the 
beneficiary stated to his or her doctor that the pattern of 
abuse was a case of mistaken identity. But that, in fact, was 
not the case, and it is doubtful that the person could consume 
that amount of narcotics in that time frame. So what was really 
going on here?
    Mr. Kutz. Well, we did not interview all of these people, 
the reason being 8 of the 10 had prior criminal histories, and 
our criminal investigators do not carry weapons. So we do not 
go interview people that could potentially be dangerous. But 
certainly drug abuse is going on and potentially drug dealing 
is going on in that case.
    Senator Brown. Well, I agree because I hear the word 
``diversion,'' and diversion is drug dealing. It is clear what 
is happening. The person is shopping around, getting the drugs, 
and selling them, and taking advantage of basically a tax-free 
public benefit program and receiving government-funded health 
care. And as you can see from our chart,\1\ Case 1, the street 
value is almost $500,000. In Case 2, it is almost $300,000. 
Obviously, there is a breakdown.
---------------------------------------------------------------------------
    \1\ The chart referenced by Senator Brown appears in the appendix 
on page 00.
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    I do not know about you, Mr. Chairman, but I have kids, and 
I remember those ear infections. You have to go get the 
Zithromax or whatever there was, and God forbid you left it 
somewhere. It was like getting Federal Bureau of Investigation 
(FBI) clearance to go and get another prescription of Zithromax 
for an ear infection. Yet you have instances where you have 
people like this that are going around doctor shopping. I mean, 
aren't these people paying co-pays or taking--I mean, isn't 
there like a system in place where there is a main record 
locator that says, hey, this person has been to 11 doctors for 
the same issue? Isn't there something in place like that?
    Mr. Kutz. There is, and as was mentioned by the other 
witnesses, there are prescription drug monitoring plans, and 
actually the plan sponsors that send letters--and we saw this 
in several of our cases--to the doctors. However, all the 
doctors can do really is kick the patient out. Some of them 
that even got the letters said, ``Well, I know the person is in 
pain. I kept prescribing even though I know they were going to 
10 other doctors.''
    Senator Brown. That makes no sense.
    Mr. Kutz. That does not prevent it from continuing.
    Senator Brown. It makes no sense. A letter is sent out, and 
the doctor sees the letter, and yet he or she continues to 
prescribe the medication because the person is in pain. I mean, 
isn't there a realization that, gosh, these people are abusing 
drugs and they could potentially be dealing drugs? Isn't there 
an affirmative obligation for the doctors to find out what is 
going on? And isn't there an affirmative obligation once those 
letters are sent to take it a step further, call the doctor, 
refer it to law enforcement? I mean, a letter, I mean, gosh, 
they get so many papers every day. Is it really working?
    Mr. Kutz. I would say mixed results, but not really working 
to prevent it from happening. Several of them kicked the people 
out of their programs because they had violated their pain 
management agreement. Other ones kept prescribing. At the end 
of the day, Senator, we did not look at the culpability of the 
doctors because some of these doctors are potentially part of 
the problem in what they are doing, because if you look at the 
actual quantity of drugs that they were prescribing, it does 
raise questions. And it raises questions about the pharmacies, 
too. If you get the printouts at the pharmacy of how many drugs 
these people are getting, it was not just Medicare supplying 
it. They were going in with other prescriptions and paying cash 
for others and getting it from other sources. So typical doctor 
shoppers, they are looking for multiple sources, and as you 
said, that would indicate potential dealing.
    Senator Brown. The findings do not come as a surprise to 
CMS. In 2009, the Department of Health and Human Services (HHS) 
Office of Inspector General (OIG) report cited that drug 
diversion by beneficiaries or drug dealing, as I referenced it, 
as the top type of potential fraud and abuse referred to the 
Inspector General's office. And in your investigation, what did 
you find with CMS' guidance to plan sponsors in response to a 
beneficiary who was doctor shopping?
    Mr. Kutz. Well, some of the sponsors--we mentioned a 
restricted recipient program. Some of the sponsors have 
actually asked CMS if they could to it, and it is right in CMS' 
Chapter 7 of the regulations that a lock-in program like that 
is prohibited at this point. Whether that is a legal or a 
policy issue, I think Mr. Blum could answer that question.
    Senator Brown. He is next.
    Mr. Kutz. I believe it still is a valid part of a 
comprehensive plan, and I agree with the other witness that 
said not one thing alone does it. You have to have stuff at the 
beginning, the monitoring at the end, and people have to 
believe there is a chance they will get caught, and if they get 
caught, that there will be consequences.
    Senator Brown. The thing I find amazing since I have been 
here is there is always an angle. Everyone has always got an 
angle to kind of screw the government, out of taxpayer money. 
Whether it is dealing with waste, fraud, and abuse in 
contracting, whether it is dealing with these sorts of things, 
whether it is selling government property or holding it back, 
we are just doing things so inefficiently it is mind-boggling.
    Mr. Blum, just following up on you, knowing that according 
to OIG and GAO about the possible drug dealing as a result of 
the prescription drug abuse, CMS' primary response to a case 
where a beneficiary is found to have inappropriately obtained 
the abused drug is to have plan sponsors issue an educational 
letter to the doctor. And since issuing this guidance to plan 
sponsors to send an educational letter, have you seen a decline 
in cases of beneficiaries' doctor shopping or prescription drug 
dealing? And if so, what is the decline? What has the result 
been?
    Mr. Blum. I think quite honestly, Senator, we are hearing 
about an overall increase in potential overutilization and 
misuse of controlled substances.
    Senator Brown. So even though the letter has gone out, it 
has increased?
    Mr. Blum. I think that CMS fully agrees that our response 
must be stronger.
    Senator Brown. So the letter is not working.
    Mr. Blum. That is why we put out guidance----
    Senator Brown. Is the letter not working?
    Mr. Blum. I believe that we are seeing more complaints 
coming into our fraud and abuse contractor. We are having more 
reports----
    Senator Brown. So if the letter went out and the cases are 
increasing, then it is not working.
    Mr. Blum. I believe that we----
    Senator Brown. Yes or no. Is it working or not?
    Mr. Blum. I do not know, to be honest. What I do know is 
that there are more complaints coming into our MDIC of 
potential doctor shopping. Those cases get referred to law 
enforcement, and we are very concerned regarding the potential 
overuse of controlled substances.
    Senator Brown. Let me tell you, it is not working. OK? That 
is kind of the reason we are here, because it is not working. 
And I would encourage you to do more than just send a letter 
that is going to be lost in the shuffle.
    Mr. Blum. We are, Senator.
    Senator Brown. And if you need help or guidance or 
additional help from us, great, let us know. But sending a 
letter when we are talking about millions of taxpayer dollars 
just makes no sense to me.
    Mr. Kutz, as you know, the DEA administers special licenses 
to doctors which enables them to prescribe these narcotic 
drugs. In preparing for this hearing, my staff talked with the 
DEA about their relationship with CMS and the effort to curb 
this real tragic abuse and found that the DEA had very little 
relationship with CMS and did not even know who the Medicare 
Drug Integrity Contractor was, much less share information with 
them. How important is it for CMS and the MDIC to be working 
with the DEA or sharing information about potential doctor 
shopping with the DEA?
    Mr. Kutz. I would hope someone in DEA knows who the MDIC 
is. Apparently the person you talked to did not, but there 
certainly would seem to be some relationship and coordination 
since DEA looks at large cases, and DEA is typically looking, I 
think, at Schedule I, which is not what we are talking about 
here--cocaine and marijuana and heroin and those types of 
things. But certainly better coordination with them, if it is 
not happening, is something that--some of these could be big 
cases. Even our individuals we found out of these 10, they 
might be part of some bigger network, and so sharing of 
information would seem to potentially be useful here.
    Senator Brown. We ran into problems about 10 years ago when 
we failed to share information. This is obviously different, 
but it still bears to learn the lesson that, we need to provide 
this information if the DEA and no one seems to be really 
putting their foot down, so I would encourage whoever is not 
communicating to start to do it.
    I would like a second round, if we could.
    Senator Carper. We will have maybe three. All right. Thanks 
very much.
    I want to come back to you, if I could, Mr. Blum. We talked 
a bit earlier about your office putting out a memo to the 
Medicare Part D plan sponsors that is intended to tamp down on 
doctor shopping in the program. I think it is probably in 
response to the GAO study that was released last week, and for 
the hearing that we are having today.
    I am told that the memo that went out last week does not 
actually direct the plan sponsors to make changes. The memo, I 
am told, only asks for ideas and suggestions. I am also told 
that the memo left many potential experts and stakeholders out 
of the process. For example, I do not believe it was 
distributed to pharmacies or to law enforcement.
    Let me just say, Mr. Blum, I think it is critical that we 
put into place concrete steps to stop this form of abuse and 
waste, to the extent that we can. When do you plan to complete 
the guidance by establishing a change of rules or other new 
procedures?
    Mr. Blum. I think it is a fair statement that we put out 
our guidance to plans as an opportunity to solicit comments, 
and I think we want to understand from our Part D plan sponsors 
themselves how best to implement the policy goals that we have 
to address and to respond very quickly, more quickly than in 
the past, to the overuse and the misuse of controlled 
substances and other drugs.
    As I said during my testimony, we have to strike the 
careful balance, and so in stopping the behavior that Senator 
Brown points out in his chart, that is clear fraud, that needs 
to be stopped. But at the same time, there are legitimate 
beneficiaries who have legitimate pain needs, and so we need to 
find the right balance. We need to stop the egregious behavior 
that makes no clinical sense, but at the same time some 
beneficiaries who are seeing four and five physicians may have 
very legitimate health care needs.
    We are open to all ideas, and your suggestion to share our 
guidance with others is a good one that we will follow up on, 
but we need to make sure that law enforcement best supports our 
work, that the pharmacists and the physician community are at 
the front line to these transactions; but I think it is fair to 
say we are open to every idea that strikes the right balance 
between stopping the behavior that is clearly fraudulent and 
illegal, but at the same time making sure beneficiaries have 
access to the medications they need. And it is not just 
controlled substances that we are concerned about. We are also 
concerned about antipsychotics and other drug classes. And to 
our minds, we cannot just focus only on controlled substances, 
but on all drug classes that could have potential misuse.
    Senator Carper. All right. I appreciate that response. In 
that case, it sounds like CMS is prepared to distribute that 
memo that you put out last week to others, including law 
enforcement and pharmacies.
    Mr. Blum. They are public documents, and so I think we have 
to do a better job to make sure that the entire public can see 
it. But they are public documents, and we will do our best to 
make sure that they are shared more widely than just our Part D 
plan sponsors.
    Senator Carper. I would encourage you to at least include 
those two areas, law enforcement and pharmacies.
    Mr. Blum. Absolutely.
    Senator Carper. Having said that, I also want to note that 
the Centers for Medicare & Medicaid Services I think just 
yesterday--finalized some new rules that take in----
    Mr. Blum. Proposed rules.
    Senator Carper. Is it proposed rules? OK. That take one 
important step to help curb fraud in Medicare prescription 
drugs. And I think starting next year Part D plan sponsors 
would have to confirm that a prescription was written by a 
valid physician, something we discussed at a similar hearing I 
think last year here. It is a good example, I think, of CMS 
taking action, and I hope that it can be repeated with many of 
the ideas that we are talking about here today. So that is good 
news.
    A question, if I can, maybe for Mr. Kutz and Mr. Blum, if I 
could. I understand the Medicare Part D benefit is made up of 
two types of beneficiaries: those who are eligible because they 
are over 65 and eligible for Medicare, and those who are 
eligible because of a disability or low income and they can be 
under the age of 65. I am told that the GAO found that nearly 
70 percent of those Part D beneficiaries suspected of doctor 
shopping were low-income or disabled individuals. Is that 
correct?
    Mr. Kutz. Yes, it was 120,000 of the 170,000, and I want to 
make sure that those are indicators. They are not all 
necessarily doctor shopping, as Mr. Blum said, but they were 
disability. They were SSI and DI participants.
    Senator Carper. Just take a moment and let us drill down on 
that. What do you think those findings might mean? What are the 
implications of that?
    Mr. Kutz. Well, one of the things is it is not typically 
the over-65's that are doing this, which is something that one 
would look at Medicare and maybe assume that without digging 
into the numbers.
    Senator Carper. Is it true that for folks in the Medicare 
Part D program, if they are 65 and over, they are not there 
because they are disabled and unable to work, but they are 
there because they are 65 and over, traditional Medicare, they 
can only change their benefit plan--is it annually?
    Mr. Kutz. If they are not in the low-income subsidy (LIS), 
my understanding is they can only change annually.
    Senator Carper. Annually. But for the folks that are in the 
low-income category or population or those in the disabled 
population, they can change their plans monthly, can't they?
    Mr. Kutz. Right.
    Senator Carper. All right. That would seem to be ripe for 
abuse.
    Mr. Kutz. Right, and that is a risk here of, if you 
actually stop it happening in one plan, we recommended that 
sharing between the plans of the known abusers is something for 
CMS to consider.
    Senator Carper. Let me just ask you, Mr. Blum, if I could, 
does CMS believe the ability to change plans monthly for those 
particular beneficiaries is an idea that the Congress should 
revisit? Did we do that in the law? I presume that is in the 
actual law that we adopted 5 or 6 years ago.
    Mr. Blum. My understanding is that the ability for low-
income beneficiaries to change plans month to month was through 
CMS guidance, not through the legislation. The history is that 
when CMS set up the new Part D program authorized by the 
Congress, there were lots of concerns regarding low-income 
beneficiaries being transitioned from pretty open drug 
formularies offered by State Medicaid programs over to more 
restricted Part D drug formularies that mirrored commercial 
formularies. As a beneficiary protection, the agency now allows 
low-income beneficiaries to change plans month to month. Given 
that they have oftentimes very complicated health care needs 
and very complicated drug regimens, the agency's goal is not to 
interfere with those health care needs.
    That being said, this policy----
    Senator Carper. Could we have an unintended consequence 
here?
    Mr. Blum. I think that is one unintended consequence, 
potentially, that the operational framework that we operate 
under, those who might be out to game the system could change 
plans month to month. I think we have to find the right balance 
between protecting consumer access and also stopping those that 
intend to defraud the program. But the current policy that the 
agency has is to permit low-income beneficiaries to change 
plans month to month.
    Senator Carper. As you consider this, just keep in mind--I 
am going to read the same statement I gave earlier. It is 
estimated that 7 million Americans abuse prescription drugs 
every year, more than the number who are abusing cocaine, 
heroin, hallucinogens, Ecstasy, and inhalants combined. And the 
point you had made, Mr. Kutz, did you say 70 percent----
    Mr. Kutz. Seventy-one percent were disability. They were in 
the program through disability, SSI and DI.
    Senator Carper. All right. Well, let us explore this a bit 
more and see if this is something that maybe has not worked as 
intended and if we ought to make some changes. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman. I am going to go to 
the floor after this. This will be my last round. But I 
appreciate you holding this.
    Mr. Blum, you said we have to strike a careful balance. I 
do not think we are--I think we are too careful, to be honest 
with you. I think that, we have 170,000 people abusing the 
system, according to my information. It could be more, it could 
be a little less. But, clearly, there is an issue, and I know 
that in a September 28 memo to Medicare Part D sponsors CMS 
admits that the MDIC contractor, the contractor responsible for 
identifying and investigating Medicare Part D fraud, has, in 
fact, identified excessive utilization of drugs, opioids and 
drugs, and that CMS considers these patterns highly indicative 
of drug abuse or diversion, a/k/a drug dealing.
    Since the MDIC contractor has identified this outrageous 
fraud, how many cases have actually been referred by MDIC to 
the Inspector General for prosecution?
    Mr. Blum. I will have to defer to law enforcement, but my 
understanding is that every case that was revealed by the GAO 
of true patterns of illegal behavior--somewhere in the 
neighborhood of, I think, 50 to 60 cases--was referred to the 
MDIC. Those cases were all investigated. Some of those cases 
were referred to the IG, and the IG I think has decided to 
pursue a handful of those cases through law enforcement 
channels. But according to the data that I have from our MDIC, 
they continue to receive growing complaints regarding misuse, 
and they continue to fulfill their obligation to refer those 
cases to law enforcement.
    I think it is also important to break down the 170,000 
figure that you cite. There are four potential reasons for that 
number. One is that there is diversion or drug dealing going 
on. Two is that beneficiaries are fueling their own addiction. 
Three is they have a legitimate clinical need. And fourth is 
they are just the victims to a dysfunctional health care 
system. I do not believe the GAO report has broken down that 
170,000 number into those four categories.
    Senator Brown. Can you just repeat that? What did you say, 
a dysfunctional health care system? What do you mean?
    Mr. Blum. Beneficiaries bouncing around from one ER to 
another ER, that we have a very uncoordinated health care 
system today that we are working hard to reform. But 
beneficiaries who are seeing multiple physicians might be going 
to the ER, might be going to different physicians because they 
do not have a regular source of primary care. So that is not 
the fault of the beneficiary.
    Senator Brown. When are you going to implement edits that 
will capture if a beneficiary is acquiring more drugs that are 
actually clinically necessary? When will those safeguards be 
put in?
    Mr. Blum. Our strategy right now is to solicit comment, 
take that comment, and then work as far as we can to----
    Senator Brown. Here is a comment for you. Just fix it. We 
are talking hundreds of millions of dollars of taxpayer money. 
We need the money for other things, quite frankly.
    Mr. Blum. And my understanding is that some of the cases 
that have been pointed out by the GAO are true fraud and 
illegal behavior, and some of those cases are very legitimate 
health care needs. CMS has to find that right balance between--
--
    Senator Brown. Wait a minute. You just said fraud and 
illegal behavior, but you need to balance it with the health 
care needs. The people that need some care and coverage, I 
understand that. But we are talking clearly about taxpayer-
funded Medicare prescription drugs that are probably being used 
to care for that individual, but the rest of it is being sold 
on the black market or, just being sold to friends or neighbors 
or whatever. So I get the fact we have to treat everybody, 
reasonably and make sure the care--but, obviously, if they are 
doing that, there is a deeper problem that I think supersedes 
the actual pain that they are in. And I think you have to take 
the gloves off a little bit. Instead of seeking and requesting, 
you have to dictate and actually come out with some suggestions 
of your own as to how to fix it. It seems pretty 
straightforward how to fix it. You have to have a check and 
balance. You have to have a top-to-bottom review of everything 
you are doing, have a check and balance, and when you have any 
indication that there is any type of abuse, you have to go 
right for the jugular and make sure that it does not happen. 
There has to be a sharing of information.
    I would encourage your Department and the people that are 
responsible. And I know there are good people over there, hard-
working people. I get that. But, we have a real problem here. 
We would not be here--if we did not have a problem. Right, Mr. 
Chairman. So, I mean, we are all ears. I think out of probably 
all the Senators here, you have the two guys who work together 
the best in trying to find solutions. We are not just throwing 
bombs. We are trying to find out where the problems are and try 
to find a way to kind of get to the bottom of it to put money 
back into the system that can be used for people who 
legitimately care and respect the care and coverages that they 
are getting from the American taxpayer, because, quite frankly, 
there are other folks that do not have those luxuries and 
benefits and they are hurting and they need help, too.
    So I do not want to preach. I think you know where I am at, 
and I know you know where the Chairman is at, too. We just have 
to do it better. We are in this together.
    I appreciate your bringing this forward, Mr. Chairman. Once 
again, you are on it. So I appreciate it, and I am going to 
head to the floor.
    Senator Carper. And we appreciate very much the work of our 
staffs and certainly the work of GAO.
    Senator Brown. Yes, a great job, both of them.
    Senator Carper. We are very grateful for that.
    We have a place at Rehoboth Beach called ``Funland.'' I do 
not know if anybody in the audience--I see the audience 
reaction, people that have been there with their kids. It is 
great fun. Great fun for children of all ages, including our 
age. But one of the games they have at Funland is called 
``Whack-a-Mole.'' The idea is like if something pops up, you 
knock it down, and another one pops up.
    Senator Brown. It is all Republicans that come out and 
they---- [Laughter.]
    Senator Carper. In any event, in terms of whether the issue 
happens to be abuse of prescription drugs, feeding the drug 
trade and hooking people on controlled substances, or whether 
it happens to be surplus property or it happens to be waste in 
IT systems, you name it, there is plenty out there. We will 
stay busy in this Subcommittee for as long as I get to serve on 
it and continue to focus on these.
    I want to come back, if I can, to Mr. Saccoccio. You 
mentioned Humana and WellPoint. Let us just come back and let 
us talk a bit more about what are they doing there to address 
these particular challenges?
    Mr. Saccoccio. Well, they do several things. The first 
thing that they do is they take a look at their prescription 
drug claims in certain categories for the controlled type 
substances, and Humana, from has a three-three-three program, 
so it----
    Senator Carper. Has a what?
    Mr. Saccoccio. A three-three-three program.
    Senator Carper. A lot of threes.
    Mr. Saccoccio. A lot of threes. To the extent that you had 
three prescribers, three pharmacies, and three actual 
prescriptions filled over the course of a year, they will then 
take a closer look at that particular case and, if necessary, 
send out notifications to the physicians involved letting them 
know that there could be potentially abusive behavior going on 
here; and then after a further look at those cases, maybe 
putting those folks into a lock-in type program where they are 
restricted to one particular pharmacy in order to obtain those 
types of drugs. And they seem to have some success with that. 
Talking to Humana, they have seen a decrease in the amount of 
prescription drugs for these particular patients when they do 
that.
    WellPoint had a similar program. They also have a program 
now where they will look at individuals that have 10 
prescriptions over a 90-day period, and they carve out, again, 
when they are looking at that--going to Mr. Blum's point about, 
cases where patients do need those particular drugs, so they do 
carve out things like oncology or MS, and they carve those out. 
But then they look at those prescriptions over the 90 days, 
and, again, they notified the prescribers in those cases, and 
then they also put those individuals on a lock-in type program.
    The other thing that they do is they look at geography, 
because even with the prescription drug monitoring programs 
that the States have, it is important folks that are living in 
States where they can cross the border and avoid those types of 
programs that the States have, they will do that. If they need 
to travel outside a certain geographic area to go to other 
physicians to get drugs, they will do that. So one of the 
things that they do is they look at is the patient traveling a 
long distance in order to see a provider in order to get a 
prescription.
    They also look at things like prescribers prescribing 
outside their area of expertise, so if you have, a certain type 
of doctor that is prescribing a lot of pain medication drugs 
that is not really working in an area where you expect that 
type of prescribing, they take a look at that.
    I am sure CMS probably has similar edits, and to the extent 
that the sponsors in Part D have those types of edits, but, 
again, it gets back to a combination of things. And what we 
were told is that companies like Humana and WellPoint that are 
Part D sponsors would like to use those lock-in programs but 
are not allowed to in Medicare Part D.
    Senator Carper. OK. Mr. Blum and then Mr. Kutz, I am going 
to ask you just to react, if you will, to what Mr. Saccoccio 
just explained about what they are doing at Humana and 
WellPoint.
    Mr. Blum. I think what is encouraging about the examples 
that are raised in the testimony is the notion that Part D 
plans can look more comprehensively regarding the entire case 
of a beneficiary. That is very consistent with where we would 
like the program to go, our Part D sponsors taking into account 
much more comprehensive drug utilization reviews so they are 
seeing the history of the patient's care to make sure that the 
total drugs being dispensed over the course of a given benefit 
period are consistent with sound clinical judgment.
    We understand that oncology patients and other patients 
have very legitimate care needs, and also many of our 
beneficiaries have very unique geographic circumstances that at 
this time we do not believe that a restrictive program would 
work well in the Part D program. To our strategy and our 
belief, we have to have clinical judgment, clinical review 
drive those behaviors, and when our Part D sponsors--our hope 
is that when our Part D sponsors see prescribing that cannot be 
justified by any means through clinical review and judgment, 
those payments are cut off. Our Part D sponsors do not carry 
guns. CMS does not carry guns. So we have to refer those cases 
to law enforcement. But our responsibility is, number one, to 
make sure there is good clinical judgment, and then two is to 
make sure that we are providing the necessary direction to our 
plans for clear cases to law enforcement for investigation and 
for follow-up.
    Senator Carper. Mr. Kutz, would you just respond to what 
Mr. Saccoccio has been saying?
    Mr. Kutz. Right, and I would agree that some of these 
170,000, as we mentioned before, are not necessarily doctor 
shopping. Some are. And there are some people that go to two, 
three, or four that would meet the definition of doctor 
shopping. So that number is a soft number. You would have to 
really investigate all 170,000 to know what really is 
happening.
    I think the sponsors told us the same thing, that they 
would like several to do a lock-in if they have the 
infrastructure in place. So, again, I still think that CMS 
should at least consider this as a valid part of the back end 
of the process, which really, if you think about it, feeds into 
the front end, too. If you are only allowed to go to one 
pharmacy, it is kind of hard. We had people that went to 45 
pharmacies. So if you are locked into one pharmacy--we are not 
denying you the drugs. We are just actually trying to better 
control your behavior. And, again, you have to have a safety 
net for the legitimate people so you do not lock legitimate 
people out of the program. We certainly agree with that.
    Senator Carper. All right. Mr. Blum, is it CMS' position 
that restricted recipient programs are a proven mechanism to 
minimize program issues in Medicaid but would not minimize 
program issues in Medicare Part D? We talked a bit about that. 
That seemed to be what you were saying. And in response to the 
request for comments from the plan sponsors that CMS put out, I 
believe last week, do you think that there is a chance that the 
plan sponsors would ask that a restricted recipient program 
actually be put into place? It sounds like some might be. And 
if so, would CMS' position change?
    Mr. Blum. We are certainly open to all ideas, and I think 
based upon the conversation and the testimony today, we will 
certainly take a second look to make sure that we are thinking 
about restricted programs correctly. If our Part D sponsors 
feel confident they can put these programs into place in a way 
that prevents fraud but does not restrict necessary care, we 
will consider being open to this idea. I think, again, our 
current judgment is that we think that more comprehensive drug 
utilization review is the best strategy right now, and we agree 
that broader data sharing, broader data analytics would give us 
new tools to help support law enforcement. But CMS will 
continue to stay open to all ideas, and we are very much 
committed to making sure that taxpayer dollars are being spent 
as wisely as possible.
    Senator Carper. All right. Thank you for that.
    Back to Mr. Kutz, if I could. According to the report 
released by GAO today, the costs of drugs that were likely 
obtained through doctor shopping was close to $150 million. I 
think that was for one year?
    Mr. Kutz. 2008.
    Senator Carper. Yes, 2008. Could you talk further with us 
about that figure? How did GAO come up with it?
    Mr. Kutz. It really was using--I guess we had the 2008 
claims data. We have information from the NPIs, the national 
identifiers for prescribers. We had Social Security data, 
national drug code information that we used for those 14 
classes. Remember, it is limited to 14 classes of drugs. We 
simply went in and did the data mining to see who was going to 
five or more prescribers for the same class of drug, whether it 
was a generic brand or a name brand, within--like oxycodone, 
oxycodone versus OxyContin, they would be within that same 
class, is our understanding. So that was how we actually 
organized the data, and then the information was for five or 
more. And, again, we got that five or more. There are a lot of 
people that have used three, four, five, six. It seems that 
there is a consensus in the three to six area. We actually used 
six when we did Medicaid before, but other State audits, the 
PDMPs, and the plan sponsors I think all would--five is in the 
ballpark for an indicator that there is a potential further 
review necessary.
    Senator Carper. OK. Is there any way to factor in those 
costs to arrive at the true taxpayer price of this abuse?
    Mr. Kutz. Well, it is not all taxpayer. This also affects 
the beneficiaries who are not doctor shoppers and are not 
abusing the program. That would presumably increase their share 
of paying for this. And then we did not include the office 
visit. I think it was mentioned that some of these people 
actually went to emergency rooms to get their drugs.
    Senator Carper. I think, Mr. Saccoccio, didn't you mention 
that?
    Mr. Kutz. Right, and we saw evidence of that also, and we 
saw it in Medicaid also, that in some cases they would go to 
the emergency room. It is just another way to doctor shop, is 
to go get several--they will not usually give you a full month, 
but they might give you enough to get you through a few days. 
Then I would assume Medicare has to pay for the cost of the 
emergency room visit in that particular case.
    Senator Carper. And talking about $148 million in 2008, 
does that include doctor's office visits? Does it include----
    Mr. Kutz. No, it does not include office visits or 
emergency room visits, no.
    Senator Carper. OK. Mr. Saccoccio, I have no idea how much 
that would add up to, but are we talking about several millions 
of dollars or maybe more than that?
    Mr. Saccoccio. Yes, I think there is a ratio. Some 
information we had seen is for every prescription drug, say, 
that was obtained for abusive purposes, you may have as many as 
$14 behind that, and emergency----
    Senator Carper. Say that again.
    Mr. Saccoccio. It is 14:1. Say the drug costs $20 to 
obtain. Between the office visits, emergency room visits, those 
kinds of things, you are talking about a ratio of, say, 14:1. 
So for every abusive drug that you may have seen, the cost 
could be that much higher.
    Senator Carper. Fourteen times higher?
    Mr. Saccoccio. Well, because of those additional services 
that go along with obtaining that drug. So if you go to an 
emergency room and say, ``I hurt my leg and I need to get the 
drug,'' I mean, there is the cost--either Medicare or Medicaid 
or commercial insurer is paying for that emergency room visit 
that goes along with that little prescription that you get as 
you walk out the door to go get that drug.
    Senator Carper. Even if it were four times higher, that 
would be a heck of a lot money. That would be like $600 million 
in a year.
    Mr. Kutz. We did not pick these drugs because of their 
cost, and as you mentioned, the cost in society in perhaps the 
bigger issue. We picked them because the street value of 
OxyContin is several thousand dollars for one prescription. So 
that gets into some of the other factors to consider here in 
why we picked them. But in working with you and your staff, we 
looked at the 14 drugs that we thought were the most dangerous 
and most highly abused in our country right now.
    Senator Carper. All right. Mr. Blum, if I could, as you 
know, I worked with Senator Brown and others, Tom Coburn, 
Senator Coburn, and others on our Subcommittee to try to write 
legislation that is aimed at curbing waste and fraud in both 
Medicare and Medicaid. We have introduced bipartisan 
legislation, S. 1251--I mentioned it earlier in my statement--
the Medicare and Medicaid Fighting Fraud and Abuse to Save 
Taxpayer Dollars Act. That is a mouthful, isn't it? And there 
is no good acronym for that one, you will be pleased to know. 
But the legislation contains a number of ideas that I think 
directly impact the diversion of drugs from the Medicare 
prescription drug program.
    For example, the legislation aims to help States establish 
and strengthen prescription drug monitoring programs. It also 
helps to stop identity theft of physicians who prescribe 
controlled substances. One of the terms I have learned this 
year is what is called the ``Master Death File.'' People say, 
``Well, what is the Master Death File?'' And I say, ``That is 
the list you do not want your name to appear on because it 
means you are dead.'' And yet we have doctors whose names 
appear on the Master Death File because they are dead, and they 
are still writing prescriptions. And we have beneficiaries 
whose names paper on the Master Death File, and they are still 
receiving benefits even though they are dead. And we know that 
in reality that doctors cannot be writing prescriptions and the 
beneficiaries cannot be receiving benefits.
    One of the cornerstones of our bill is to require closer 
coordination and better information sharing among Medicare 
officials and their staff, Medicare oversight contractors, or 
private partners such as the prescription drug plan sponsors, 
as well as local, State, and Federal law enforcement. And I 
would ask you, if I could, Mr. Blum, do you think that these 
provisions of our legislation would help to curb, at least to 
some extent, drug diversion from Medicare? And, second, do you 
believe that such steps as better communication and data 
sharing with law enforcement can prove beneficial?
    Mr. Blum. I had a chance to carefully review the 
legislation that you introduced, and I think there are some 
very good ideas that will improve both the Part D program and 
the Medicare program overall. And I think that it is fair to 
say that any barriers that can be taken down for data sharing 
and data analysis will prove very beneficial to the program. 
The program has been built in silos. We have physician data 
systems and hospital data systems and Part D data systems 
historically that have prevented very sophisticated data 
analysis. We do not always have the feedback loops between the 
program and law enforcement, and law enforcement back to the 
program. And those are barriers that we need to break down--
that your legislation, I think, would be helpful to continuing 
that effort.
    But now we have much more sophisticated data systems. We 
have Part A and Part B and Part D claims, the common data sets. 
We are moving to making sure that the prescriber's ID number is 
part of the drug claim so we can see where prescriptions start 
from much more easily. And I think any effort that we can use 
to be much more proactive in our focus and to put into place 
procedures up front will serve the program well, and also to 
facilitate the feedback between the programs and law 
enforcement and the oversight agencies to make sure that we are 
acting when we can.
    I think the report that came to our attention through the 
great work of the GAO led us to take steps. The more that we 
can continue that feedback, the program will be better off.
    Senator Carper. Mr. Saccoccio, do you want to comment as 
well on that question, please?
    Mr. Saccoccio. Yes, I think we have always stood for the 
proposition that information sharing is critical to being 
successful against health care fraud, whether that information 
sharing is between Federal agencies, between Federal agencies 
and State agencies, or between the private and public sector. 
So to the extent that the legislation endorses that idea and 
creates an environment where that type of information sharing 
could take place, I think that is critical.
    Data analysis is important and looking at data and 
analyzing that is all well and good, but once you get that 
information, you need to do something with it. And it is 
important not only to just keep it in the little silo that it 
is in, but to share that information with others that are 
involved in the fight. So I think that is critically important.
    Senator Carper. OK. Well, as some of you know, when we hold 
these hearings, I describe the way I try to give speeches, and 
I like to tell people what I am going to tell them, and then at 
the end I tell them again what I have told them. It is almost 
like a diamond here. I do not do that as well as I ought to, 
but at least that is what I try to do. And at these hearings I 
like to give each of you a chance to make some comments at the 
end given what you may have learned or thought of or just want 
to react to. And I am going to do that here in a little bit.
    Another question I oftentimes like to ask is: What 
implications flow from this hearing for those of us in the 
Legislative Branch? A lot of times we talk here about our 
responsibility to provide oversight, good oversight, and in 
many cases to work with GAO in order to find behavior that is 
financially wasteful and to put a spotlight on that. In some 
cases we like to put a spotlight on good behavior, too, and to 
positively reinforce that behavior.
    Let me just ask each of you, in terms of what we are doing 
or are not doing, what should we maybe be doing more of on the 
legislative side or less of in order to get us to the point we 
are actually getting better results for less money? Mr. Kutz.
    Mr. Kutz. With respect to you, I think, having constructive 
hearings like this, talking about concrete solutions, this is a 
drill-down from the normal improper payment where you talk at a 
little bit higher level in general. Having drill-downs like 
this periodically I think is good to actually see what is 
really going on out there behind the numbers. This is a teeny 
little piece of your bigger fraudulent and improper payments 
story, and each one of those little pieces of that has concrete 
solutions that can be implemented. And so this is an example of 
that, and so I commend you for having this hearing. I think it 
is very good.
    Legislatively, if it is determined that a restricted 
recipient is something they are considering, they may or may 
not need your assistance with legislation on that. That is just 
something from a standpoint of what you might need to help 
with.
    And then just there is no one piece of a solution to the 
discussion today. It is a comprehensive solution. A fraud 
prevention program includes front-end monitoring and something 
happening at the back end, and all those things working 
together in a feedback loop so that if someone rips off the 
program, you utilize that so that they do not do it again at 
the front end.
    So I think that there is a combination of things that could 
be done to address doctor shopping here.
    Senator Carper. All right. Thank you.
    Mr. Blum, implications for us in the Legislative Branch, 
what can we do that would be helpful? What should we do more of 
or less of?
    Mr. Blum. Well, I think we as an agency overall, our 
strategy is to be much more proactive with data analysis and 
with more sophisticated monitoring and oversight to our data to 
find clues and to find trends that are troubling. We do not 
have all the resources that we could to do this kind of 
monitoring. The more that we can have outside experts and the 
oversight agencies sharing in that analysis to kind of bring 
things to our attention that our work does not necessarily 
highlight, but I think the more that we can have other analytic 
shops go into our data, mine our data, find relationships that 
are troubling, that is better for the program, and I think that 
is the best thought I have right now.
    Senator Carper. All right. Mr. Saccoccio, what can we be 
doing on our side over here?
    Mr. Saccoccio. Well, the first thing with respect to this 
particular issue, again, gets back to the restricted recipient 
program. I do not know if there is some sort of statutory 
restriction with respect to that. If there is, then I would 
think, to the extent there is, a legislative fix may be the way 
to go in order to allow CMS--we believe that once CMS has now 
asked the sponsors. I think the sponsors are going to come back 
and recommend some sort of lock-in program. So, will CMS have 
the authority to do that?
    But beyond that, on the broader question of health care 
fraud, I think one of the critical things is simply resources, 
the funding for the Inspector General's office, for the FBI, 
for CMS to implement the type of predictive modeling that they 
are doing now and to continue to fund them in such a way that 
allows them to do that job effectively, because it is an effort 
that you just cannot do in 1 or 2 years. It has to be an effort 
that continues over the course of many years if you are going 
to start driving this stuff down, because it is not going to 
happen overnight.
    So I think, the funding, I think the Affordable Care Act 
provided some solid funding in the anti-fraud area for, again, 
the FBI Inspector General, both at the front end with respect 
to data analytics and preventing the money from going out the 
door in the first place, and then to the extent it has, to 
investigating that and taking the appropriate judicial and 
legal action on the back end.
    Senator Carper. All right. I sometimes use the example of 
my mom when we are talking about better outcomes for less 
money. My mom is now deceased. She died about 5 years ago, 
about the time that the Part D program was introduced. But for 
a number of years, she--she outlived my dad, but she lived down 
near Clearwater, Florida, and she had dementia in her later 
years. She had dementia, arthritis, congestive heart failure, 
just a number of problems that sometimes happen to us when we 
get older. She was seeing about five or six doctors. My sister 
and I would take turns every other month going down to visit 
with her, and we had folks literally with her in her home 
around the clock near the latter part of her life. But we found 
out that five or six doctors were prescribing maybe as many as 
15 different prescriptions, and none of the doctors ever talked 
to each other. They did not have electronic health records for 
my mom, people like in her situation, so no one was really 
monitoring to see which medicines were compatible with other 
medicines and, frankly, which ones were not.
    We are at a point now--I was in a pharmacy, I actually 
visited Walgreen's, like pharmacy of the future. I was in 
Chicago a couple of weeks ago. And they are doing pretty 
amazing things in that pharmacy. And they, along with other 
pharmacies, especially the chain pharmacies, have gotten very 
good at being able, before they fill a prescription, to look at 
the other medicines that a person is taking and deciding which 
ones are compatible and which ones are not. And we are doing a 
better job, a lot better work now with electronic health 
records, some of which we funded through the stimulus act and 
some of which we are funding through the Affordable Care Act.
    Talk to us a little bit, if you will, about how can we do a 
better job of using electronic health records as they become 
more common and more widespread. How can that help us in 
dealing with this particular issue?
    Mr. Kutz. I will just start. My team is the Forensic Audit 
Team in GAO. That is what we do. We deal with data, and so data 
is very powerful. Over the years we have identified hundreds of 
thousands of potential cases of fraud and abuse across the 
government, so I would just say data is a powerful tool not 
just for investigators but for management to actually oversee 
and manage a program, and in this particular case to prevent 
and identify fraud.
    Senator Carper. Aside from the fact that this stuff that is 
being done is illegal, aside from the fact that we are running 
out of money in the Medicare trust fund and are going to run 
out of money I think by about 2020, maybe even sooner, if we 
just sort of leave things on autopilot, but how do we--what is 
the interest, the financial interest, of the prescription 
benefit managers that are offering all these--what is their 
financial interest here in reducing the incidence of this kind 
of activity? Are they better off if it continues or not? For 
the doctors, who--I like to harness market forces rather than 
maybe pass legislation or to have regulations. How do we 
harness market forces in this situation to reduce this kind of 
illegal behavior? Or can we?
    Mr. Blum. I think one of our challenges of the Part D 
program is that most of the beneficiaries who are in the Part D 
benefit receive drug benefits from stand-alone drug plans that 
do not have the same financial relationships to other parts of 
the benefits. Beneficiaries who are in comprehensive health 
plans like the Medicare Advantage plans have a more 
comprehensive benefit structure. And I think the challenge for 
the program and the Congress is for us to think about ways to 
incent Part D plans, the stand-alone Part D plans, to think 
about consistent goals that the program has. We know that care 
coordination not just for pharmacy benefits but for all of our 
health care benefits is the best strategy we have to reduce 
costs but also to improve care for our beneficiaries. We are 
trying to accomplish that through accountable care 
organizations and new payment reforms to provide stronger 
incentives for care coordination and primary care medical 
homes. But I think a challenge with that is the fact that we 
have stand-alone Part D plans providing the bulk of the 
benefits to our beneficiaries, and so we have to build much 
stronger relationships with our stand-alone Part D plans to 
ensure that they are providing benefits that are consistent 
with the overall strategies that we have for the Medicare 
program.
    Senator Carper. Mr. Saccoccio, in terms of harnessing 
market forces to incentivize, without regulations, maybe 
without laws, how might we do that in this instance?
    Mr. Saccoccio. Well, I think, coordination of care is 
critical, and to Mr. Blum's point, to the extent that you have 
a stand-along Part D plan that is administering a drug benefit 
in Medicare and maybe using a PBM to do that, but is not at the 
same time--does not necessarily pay out anything or monitor any 
of the other care that the individual is receiving, then you 
have a disconnect between perhaps the prescription side of 
things and the actual medical care that the person is 
receiving, that may be receiving it through simple Medicare 
fee-for-service.
    One of the advantages, I think, of the Part C program, 
Medicare Advantage, is that the person is in a health plan that 
can look at all aspects of what is happening and be able to 
control that. So, to the extent that--and what you see in the 
States with Medicaid is a lot of States moving away from 
Medicaid fee-for-service to managed care for Medicaid as well 
so that you get that coordination of care.
    I think that coordination of care is critical, and I think 
maybe the ACOs under the Affordable Care Act are trying to move 
in that direction as well to try to put folks in situations 
where care is at least coordinated, where providers are 
speaking to each other. And your example about your mother, I 
know my mother as well now is on--we keep a list of all the 
medications she is on, because if she ever has to go to a 
hospital or anything, we show that list because it is up to 
about 10 or so. And she sees probably five or six different 
doctors.
    Senator Carper. Sounds familiar.
    Mr. Saccoccio. And it is not clear to me that anybody is 
talking--that they are not really talking to each other. She is 
simply in Medicare fee-for-service.
    Senator Carper. All right. Mr. Kutz, talk to us a little 
bit about is there some way we can be harnessing market forces 
and using that as a way to reduce this incidence of abuse.
    Mr. Kutz. Well, I am not an expert at that issue, but, when 
we did our work, we did see some--we were not looking at it, 
but some of the pharmacies seemed somewhat culpable in what was 
happening in that if you actually got a printout of an 
individual who had gone to that pharmacy and all the different 
drugs they had gotten, all the different prescribers, and, in 
fact, they were going in with cash, because it was noted in the 
system that they got their drugs with cash, they did not seem 
too concerned in some of the pharmacies with what was going on, 
and so perhaps it is because that would be a revenue source cut 
off if you kick someone out of your pharmacy.
    Senator Carper. So the financial incentives might be 
working just the opposite.
    Mr. Kutz. The opposite. It would seem the opposite. Now, 
again, I cannot say that. I am just saying it was an 
observation. We did not report on that, but it is just 
something we saw. When I looked at these printouts, it was 
pretty striking. You would think someone would have noticed.
    Senator Carper. Good point.
    Mr. Kutz. And the same thing with the doctors. Some of the 
doctors, even though they got the letters from the PDMPs and 
the drug sponsors that their patients were going to numerous 
other doctors for the same drug, they kept on prescribing and 
they did not do anything about it. So that was just another 
observation. I do not know what their incentives are, what 
their malpractice kind of liability is, but that was another 
observation.
    Senator Carper. All right. Good. Thanks.
    We are getting close to the end, but I think before I ask 
you just to give a closing statement, I want each of you, if 
you will--we will start with you, Mr. Saccoccio. Given what you 
have heard--you bring a whole lot of knowledge and just great 
insights into these issues, anyway, but just tell us where you 
think there is consensus. One of the things I like to do is try 
to develop consensus at a hearing like this. But where do you 
think there is consensus on what is working now and next steps 
forward to address this problem? Where do you think the 
consensus lies in this arena?
    Mr. Saccoccio. Well, I think there is consensus that, first 
of all, there is an enormous problem. I think the problem may 
be even greater than what the GAO report reveals, especially 
since if you look at it from a national perspective, certainly 
Medicare Part D, looking at that piece. But from a national 
perspective, prescription drug fraud and diversion is an 
enormous issue, so I think there is consensus there.
    I think there is consensus on the concept that you cannot 
go after this problem with just one solution. You have to be 
monitoring closely. You have to have up-front solutions to try 
to keep it from happening in the first place, and then to the 
extent that you have found the problem, you need to notify the 
prescribers, you need to notify the patient, you need to try to 
get that patient, if you think there is an addiction problem, 
the treatment that patient needs. And then you need to do 
something to control it, and I think the lock-in programs and 
restrict recipient programs are probably, again, what CMS is 
going to hear a lot of from the Part D sponsors.
    So, I think you could do those lock-in programs in such a 
way that it does not interfere with the receiving of drugs that 
are needed by patients that actually need them.
    Senator Carper. Good. Mr. Blum, where do you think the 
consensus lies? And feel free to repeat almost verbatim what 
Mr. Saccoccio said if you agree with him, or add to that or 
take away.
    Mr. Blum. I do agree with the prior statement. I think 
there is consensus that we have a growing problem within the 
Part D program of misuse and abuse. I think there is consensus 
within CMS and I think at this table that we need stronger 
responses.
    I think there is consensus that we need to work with our 
plan sponsors to figure out the best strategies to put in place 
so we are not cutting off access to those beneficiaries who 
have need.
    I think there is consensus that we need to explore some of 
the recommendations from the GAO more fully, but from CMS' 
perspective, there is no lack of concern that this is a growing 
problem for the Medicare Part D program, and hopefully, Mr. 
Chairman, there is no concern that we are not going to do 
everything we can to ensure that we are stopping the misuse and 
abuse while permitting those in need to have access to the 
drugs they need.
    Senator Carper. Thank you.
    Mr. Kutz, where do you think the consensus lies?
    Mr. Kutz. That there is a problem; the problem is not just 
in Medicare Part D. This is a nationwide problem. You have 
pointed that out very clearly in some of the statistics so this 
goes beyond that. And we saw evidence of that. The sources of 
the drugs these people are getting was not just Medicare Part 
D.
    That a comprehensive approach is necessary that includes 
more than just one type of activity, the importance of data 
mining and data to this and breaking down the silos we have in 
our government within the health care system so the data can 
more freely be shared.
    And then with respect to the restrict recipient program, I 
do not think we have agreement on that, but we have agreement 
that if you have a program in place, you need to make sure you 
have a safety net for the individuals that have legitimate 
needs to make sure they do not get shut out of the program, and 
that is----
    Senator Carper. Give us an example of that.
    Mr. Kutz. Well, you would not want to put someone on a 
restricted recipient program if they are going to five or more 
doctors for legitimate reasons. You have to have proven the 
case that they are, in fact, doctor shopping in an abusive way. 
So I think that is what we are talking about. We all agree on 
that.
    Senator Carper. OK. All right. You all are welcome to take 
a minute or two just to help me with the benediction, a closing 
statement just as kind of a summary of what you are taking out 
of here and what you would have us take away from this hearing. 
It has been quite a good hearing, I think. Mr. Saccoccio.
    Mr. Saccoccio. Well, again, I think that a hard look should 
be taken at restricted recipient programs. I think they could 
be done in such a way that they take into account the valid 
needs of folks that need those pain medications. I think we 
have come a long way with respect to treating folks, 
recognizing pain as a major issue and to be able to manage pain 
for patients with certain conditions. But at the same time, I 
think we could do it in such a way that cuts down significantly 
on the abuse. Obviously, you are not going to take away all the 
abuse, but you could cut down on it, and I think these types of 
programs have a lot of promise.
    Senator Carper. Mr. Blum.
    Mr. Blum. Just in closing, just to thank you and the 
Subcommittee for having this hearing. I think from our 
perspective at CMS oversight helps us understand 
vulnerabilities and where we can improve the Part D program. I 
think the Part D program, to our belief, is stronger for 
beneficiaries than it has been during its 5- or 6-year history. 
But at the same time, there are vulnerabilities. We have to 
make sure those vulnerabilities are closed down while also 
maintaining the goals that we have for the Part D program to 
ensure that beneficiaries have drug benefits that will improve 
their health and to provide access.
    So, in closing, thank you for the attention, and thank you 
for commissioning the GAO report. It was very helpful for us, 
and there are some definite to-do's for us to follow up on 
following this conversation. I look forward to working with you 
and your staff to report back on that follow-up.
    Senator Carper. Good. We will welcome that. Mr. Kutz.
    Mr. Kutz. Thank you for inviting us to this, and we enjoyed 
working in a bipartisan fashion with you and Senator Brown's 
staff, and I appreciate the constructive nature of the hearing.
    Senator Carper. All right. Thanks.
    In closing, let me again thank each of you for joining us 
today, for your testimony, and for your responses. A special 
thanks to GAO for helping us with our oversight 
responsibilities. You are a great partner, and we are grateful 
to you and your colleagues on a broad range of issues.
    It is hard to believe that 10, 11 years ago we had balanced 
budgets in this country. We had three or four of them in a row 
at the end of the 1990s, and it is hard to believe that we find 
ourselves looking, instead of at a sea of black ink where we 
were 10, 11 years ago, at a sea of red ink. And I think this 
year the deficit is expected to come in around $1.3 trillion 
and there is red ink for just about as far as the eye can see.
    Some folks think that there may be two ways to reduce 
deficits. One of those is to cut spending and another is to 
raise taxes or increase revenues. I think there are at least 
two more, and one of them is just to grow the heck out of the 
economy, and we are actually going to do some good and, I 
think, thoughtful legislation in the next week or two which I 
think will help in that arena as we try to grow exports.
    Another way is to look at every nook and cranny of the 
Federal Government and look at every program. I like to say, 
and you have all heard me say it before, that every thing I do 
I know I can do better. The same is true of all of us, and the 
same is true of Federal programs. Whether they happen to be 
Medicare, Medicaid, defense programs, entitlement programs, tax 
expenditures, everything we do we could do better, and we have 
to take that attitude, almost a culture change, moving from a 
culture of almost spendthrift to a culture of thrift. And this 
is just one more piece of that.
    My boys are 21 and 23. They are pretty sure that Medicare 
or Social Security are not going to be there for them when they 
are 65, 67, or 69 years old. And, frankly, a lot of young 
people in their generation feel the same way. I think part of 
my responsibility is to make sure that those programs, those 
benefits are there and that they are most cost-effective and 
providing the safety net that we need as we advance in our 
years.
    So I think there is a bit of a moral imperative here for us 
to get better results for less money, and we cannot continue to 
spend $1.3 trillion a year that we do not have. The rest of the 
world will stop lending us the money, and they are finding that 
in places like Greece.
    So I appreciate the efforts that have begun at CMS, and we 
applaud those efforts. We want to do a whole lot better, and we 
want to help you do a whole lot better. I think we need to take 
a good look at Humana and WellPoint and some of those other 
outfits and see what we can learn from them.
    I have never been very good at holding ``gotcha'' hearings. 
We always like to hold hearings on this Subcommittee, always 
bipartisan, but we always like to hold hearings where we are 
looking for an answer or a series of answers, and we are 
looking for a way to get to better results for less money, and 
today I think we have taken some good progress in that 
direction.
    We thank you all, and let me ask our staffs, but I think 
our colleagues on the Committee, the Subcommittee, have a 
couple of weeks that they can still submit questions in 
writing, and I would just ask that you respond to them 
promptly.
    We are not going to go away on this issue. We are going to 
stay on this issue. And I am encouraged to know that you will, 
too, and we look forward to making great progress on this 
front.
    Thank you very much, and with that, this hearing is 
adjourned.
    [Whereupon, at 12:17 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

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