[Senate Hearing 113-244]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 113-244

 
              CURBING PRESCRIPTION DRUG ABUSE IN MEDICARE

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

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS


                             FIRST SESSION

                               __________

                             JUNE 24, 2013

                               __________

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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                  THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan                 TOM COBURN, Oklahoma
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                  MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin             KELLY AYOTTE, New Hampshire
HEIDI HEITKAMP, North Dakota         JEFF CHIESA, New Jersey

                   Richard J. Kessler, Staff Director
               John P. Kilvington, Deputy Staff Director
            Peter P. Tyler, Senior Professional Staff Member
                    Walter S. Ochinko, GAO Detailee
               Keith B. Ashdown, Minority Staff Director
         Christopher J. Barkley, Minority Deputy Staff Director
      Josh Trent, Health Policy Advisor, Office of Senator Coburn
                     Trina D. Shiffman, Chief Clerk
                    Laura W. Kilbride, Hearing Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Carper...............................................     1
    Senator Coburn...............................................     3
    Senator Chisea...............................................     4
Prepared statements:
    Senator Carper...............................................    37

                               WITNESSES
                         Monday, June 24, 2013

Joseph T. Rannazzisi, Deputy Assistant Administrator, Office of 
  Diversion Control, Drug Enforcement Administration, U.S. 
  Department of Justice..........................................     6
Jonathan Blum, Acting Principal Deputy Administrator and Director 
  of the Center for Medicare, Centers for Medicare and Medicaid 
  Services, U.S. Department of Health and Human Services.........     8
Gary Cantrell, Deputy Inspector General for Investigations, 
  Office of Inspector General, U.S. Department of Health and 
  Human Services; and Stuart Wright, Deputy Inspector General for 
  Evaluation and Inspections, Office of Inspector General, U.S. 
  Department of Health and Human Services........................    10
Alanna M. Lavelle, Director, Special Investigations, WellPoint, 
  Inc............................................................    12

                     Alphabetical List of Witnesses

Blum, Jonathan:
    Testimony....................................................     8
    Prepared statement...........................................    56
Cantrell, Gary:
    Testimony....................................................    10
    Prepared statement...........................................    72
Lavelle, Alanna M.:
    Testimony....................................................    12
    Prepared statement...........................................    82
Rannazzisi, Joseph T.:
    Testimony....................................................     6
    Prepared statement...........................................    43
Wright, Stuart:
    Testimony....................................................    10
    Prepared statement...........................................    72

                                APPENDIX

List referenced by Senator Carper................................    41
Statement of the National Community Pharmacists Association......    97
Responses to post-hearing questions for the Record:
    Mr. Rannazzisi...............................................   100
    Mr. Blum.....................................................   103
    Mr. Cantrell and Mr. Wright..................................   117
    Ms. Lavelle..................................................   123


              CURBING PRESCRIPTION DRUG ABUSE IN MEDICARE

                              ----------                              


                         MONDAY, JUNE 24, 2013

                                     U.S. Senate,  
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 3:08 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Thomas R. 
Carper, Chairman of the Committee, presiding.
    Present: Senators Carper, Coburn, and Chiesa.

              OPENING STATEMENT OF CHAIRMAN CARPER

    Chairman Carper. Well, a room as quiet as this one probably 
does not need me to call everyone to order, but this hearing 
will come to order, and I want to welcome our witnesses. I 
apologize for running a few minutes late, but thank you for 
being here and for your preparation and attendance today for an 
important hearing.
    Our colleagues are coming in from across the country this 
afternoon, and we will be joined by a number of them as this 
hearing proceeds.
    Today we are going to hear from several witnesses about the 
Medicare Prescription Drug Program and its vulnerability to 
waste, to fraud, and to abuse.
    Medicare, as we all know, is a critical component of health 
care in our Nation, and the Prescription Drug Program, which we 
know as Part D, began about 7 years ago, in 2006. We are now in 
its seventh year. The overall reviews of the program have been 
generally positive, more than 31 million seniors participating. 
The lion's share of them like the program. However, Congress 
must ensure that the $60 billion a year program works 
effectively and efficiently. Unfortunately, Medicare, including 
Part D, is not as effective or efficient as it could or should 
be when it comes to preventing waste and fraud.
    Each year, the Federal Government lists the estimates of 
overpayments, underpayments, undocumented expenditures, and 
other kinds of mistakes made by each agency. The total for 
fiscal year (FY) 2012 was more than $100 billion. Medicare has 
the largest reported share of that total at $44.3 billion, and 
the amount wasted in Medicare's Prescription Drug Program alone 
is approaching $1.6 billion.
    In addition, health care is too often the focus of 
criminals who wish to take advantage of the system. Whether the 
care is provided through government programs or the private 
sector, attempts to defraud the health care system are on the 
rise. There are estimates for Medicare fraud in the tens of 
billions of dollars.
    We cannot afford to tolerate these levels of waste and 
fraud in our health care programs. As everyone in this room 
knows, we have faced record budget deficits in recent years, 
and while they are coming down, they are still way too large. 
Given the debt and deficit problems that our country faces and 
the tough work ahead of us as we attempt to address those 
challenges, we need to focus like a laser on the avoidable, 
expensive, and, frankly, unacceptable issues we will be 
discussing here today.
    During a Subcommittee hearing that I chaired in the fall of 
2011--and I might be mistaken, but I think Dr. Coburn was there 
as well. I am not positive. I think you were, because of your 
great interest. But the Government Accountability Office (GAO) 
that day testified that they identified about 170,000 
beneficiaries who acquired the same class of frequently abused 
drugs, primarily hydrocodone and oxycodone, from five or more 
medical practitioners at a taxpayer cost of almost $150 
million. In two egregious examples, individuals received 
prescriptions from 87 and 58 different medical practitioners. 
This followed a similar study by the GAO in 2009 showing the 
same problem in Medicaid.
    This fraud technique, called ``doctor shopping,'' involves 
recipients going to multiple doctors for the same type of drug. 
In these cases, beneficiaries are almost always either feeding 
an addiction or selling the drugs they do not use on the 
street. Drug dealers make the profits while the Federal 
Government foots the bill.
    But the problem of prescription drug fraud is about more 
than just a loss of taxpayer dollars. It is also about the toll 
that drug abuse takes on people. It is of great concern that 
one out of seven high school seniors in America has abused, or 
is abusing, prescription drugs. In fact, more Americans abuse 
prescription drugs than the number who abuse cocaine, heroin, 
hallucinogens, Ecstasy, and inhalants combined.
    The Department of--do we have a chart here anywhere?
    The Department of Health and Human Services (HHS), 
specifically the Centers for Medicare & Medicaid Services 
(CMS), has established a set of oversight procedures to protect 
the Medicare Prescription Drug Program and its beneficiaries 
from fraud and waste. This is a team effort involving Medicare 
officials, law enforcement at the Federal, the State, and the 
local level, the Medicare prescription drug plans (PDPs), 
pharmacies and doctors, and the beneficiaries themselves. 
Unfortunately, based on today's testimony by the Health and 
Human Services Office of Inspector General (HHS OIG), there is 
still a lot more work to do.
    On Thursday of last week, the Inspector General (IG) 
released a report detailing over 700 general care practitioners 
who had questionable Medicare Part D prescribing patterns. For 
example, while prescription drugs with a high abuse potential 
constitute on average only 2 percent of most general 
practitioners' prescriptions, they constituted 78 percent for 
one general practitioner identified in the report.
    This physician prescribed a year's supply of three 
painkillers, such as morphine and codeine, for just one 
Medicare beneficiary. Another general practitioner's 
prescriptions were filled at 872 pharmacies in 47 States, 
including Guam.
    Today we will learn about an even more clear failure of 
oversight. The Inspector General is reporting that Medicare is 
paying for prescription drugs prescribed not by physicians or 
others authorized to prescribe those drugs, but by people with 
no authority to prescribe at all. Apparently, 400,000 
prescriptions totaling some $31.6 million were prescribed by 
individuals who appear to be massage therapists, interpreters, 
music and art therapists, and contractors who perform health 
care-related home repairs. And you see the list\1\ there to my 
left.
---------------------------------------------------------------------------
    \1\ List referenced by Senator Carper appears in the Appendix on 
page 41.
---------------------------------------------------------------------------
    The most disturbing finding in the Inspector General's 
report is that 29,000 of the prescriptions were for controlled 
substances, including drugs with a high potential for abuse, 
such as oxycodone. One contractor alone wrote 79 prescriptions 
for commonly abused painkillers.
    Obviously, these numbers and examples show clear indication 
of abuse and fraud. As a recovering Governor, I understand the 
unique challenges that come along with running a major program 
like Medicare. However, we simply have to do a better job in 
overseeing the Medicare Prescription Drug Program.
    I will continue to work with Dr. Coburn and with our 
colleagues and the Administration to ensure that programs 
across the Federal Government are improving management 
functions, monitoring results, and finding ways to do more with 
less in almost everything that we do. A key part of these 
efforts will involve program managers sharpening their pencils 
and, in conjunction with our private sector partners, 
preventing expensive and harmful waste and fraud. We must use 
every tool available to make sure that our health care programs 
help those who need medications rather than feed drug 
addictions or fraudulent profiteering. By working together on 
this latest in a series of commonsense initiatives, we can take 
another important step forward in earning their trust once 
again.
    And with that, let me turn to our Ranking Member, Dr. 
Coburn, for any comments he might like to make. Dr. Coburn, 
welcome.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Thank you, Senator Carper. Welcome to each 
of you.
    This IG report is pretty revealing, and I am sitting here 
thinking about what we will be doing next year on the basis of 
the recommendations not being followed in the IG report, 
because that seems to be the case most often with CMS. And so 
my question is not is it happening. It is: What is wrong with 
the recommendations that the IG is making in this? It fits with 
common sense. And if we come back a year from now, Chairman 
Carper, and this stuff has not been done and the contractor is 
not either fired or made to do what they are supposed to do, 
what we ought to do is see about cleaning house everywhere at 
CMS. This is just another layer in a continuing saga of not 
applying common sense and OIG recommendations to fix problems.
    And so I look forward to hearing the testimony. The problem 
is real. It is not just a problem of wasted dollars. It is 
wasted lives that Medicare is allowing through CMS, and the 
fact that people have identification in Medicare and we have a 
contractor that is not catching the fraud, not revealing the 
fraud, not prosecuting the fraud just says that we are wasting 
that contract money based on what we have seen in the IG report 
versus what the contractor has done.
    So my hope is that we are not back here in a year, that we 
can say, ``Way to go, CMS, you actually followed what the IG 
did, recommended,'' and they actually put it into action and we 
will not see this happening again.
    Chairman Carper. We have a new member on board. This is the 
first hearing he has joined us. He comes from the State of New 
Jersey. He is my neighbor across the Delaware River. Jeff, we 
are honored to have you join us here in the U.S. Senate and 
delighted that you have ended up on our Committee. Normally 
only the Chair and Ranking Member give an opening statement, 
but since this is a special day for you. And you come to it I 
think as the Attorney General of your State, if I am not 
mistaken. Is that correct?
    Senator Chiesa. Yes, it is.
    Chairman Carper. If you would like to make just a brief 
statement, please feel free. We are happy to see you and happy 
to have you on our team.

              OPENING STATEMENT OF SENATOR CHIESA

    Senator Chiesa. Well, thank you so much for that warm 
welcome, Mr. Chairman. I would just say that we took a lot of 
steps in New Jersey because we recognize how catastrophic the 
prescription drug issue is.
    I think the Chairman talked about the fact that we think 
about heroin and we think about cocaine as things that kill 
people, and we are realizing now that prescription drug abuse 
is killing more people than those drugs are. So while we live 
in a State that tells us that these drugs are safe, they are 
only safe if we use them exactly as we are supposed to and if 
the people that are giving us the drugs are doing it for the 
right reasons.
    So I also look forward to this conversation today, a 
continuing conversation that is incredibly important to the 
safety of everybody who lives here.
    Thank you, Mr. Chairman.
    Chairman Carper. Thank you very much. And, again, a warm 
welcome.
    Our first witness is a witness whose name is probably 
frequently butchered, and I am going to try not to do it today, 
but is it ``Rannazzisi''?
    Mr. Rannazzisi. That would be perfect.
    Chairman Carper. OK. I am not often perfect. Joseph T. 
Rannazzisi, Drug----
    Senator Coburn. I second that.
    Chairman Carper. Pardon?
    Senator Coburn. I second that.
    Chairman Carper. Dr. Coburn said he can second that. He 
sure can. [Laughter.]
    Drug Enforcement Administration (DEA), Deputy Assistant 
Administrator of the Office of Diversion Control at the Drug 
Enforcement Administration. As the Deputy Assistant 
Administrator, he is responsible for overseeing and 
coordinating major diversion investigations, drafting and 
promulgating regulations, and working with the pharmaceutical 
industry, international governments, State governments and 
other Federal agencies, and with local law enforcement. He 
holds a B.S. degree in pharmacy from Butler University and a 
J.D. from the Detroit College of Law at Michigan State 
University. We are delighted to see you today. Thanks for 
joining us.
    Jonathan Blum very nice to see you--Acting Principal Deputy 
Administrator and Director of the Center for Medicare at the 
Centers for Medicare & Medicaid Services. He is responsible for 
overseeing the regulations and payment of Medicare providers 
and plans, including the private plans that participate in the 
Medicare Prescription Drug Program. During the development of 
the Medicare prescription drug benefit, Mr. Blum was an adviser 
to the Senate Finance Committee working on prescription drugs 
and other Medicare policies. He was also a Medicare program 
analyst at the Office of Management and Budget (OMB). He has 
testified before this Committee before, as well as the Finance 
Committee before, and we welcome your appearance and testimony 
today.
    I think I have to introduce the two OIG witnesses together, 
and I believe you are going to be splitting your testimony 
time. One is Gary Cantrell, Mr. Cantrell, nice to see you, and 
the other is Stuart Wright. We welcome both of you. They are 
from the Health and Human Services Office of Inspector General, 
where Mr. Cantrell serves as the Deputy Inspector General for 
Investigations. Mr. Cantrell has served in various leadership 
positions within the Office of Investigations where he advanced 
the office's use of data analysis in health care fraud 
detections. Mr. Cantrell has B.A.s in criminal justice from 
Georgia State and in computer and information science from the 
University of Maryland (UMD).
    Mr. Wright is the Deputy Inspector General for Evaluations 
and Inspections. Mr. Wright joined the Office of Inspector 
General in 1987 and has held a variety of positions, including 
Chief of Medicare and Medicaid Branch and Director of the 
Program Evaluation Division, and is a graduate of the 
University of Rochester where he earned a B.S. in economics and 
political science and a master's in public policy. Thank you 
both for joining us today.
    Finally, Alanna Lavelle from WellPoint is the last witness, 
Director of Special Investigations for WellPoint, a large 
health care company that also participates in the Medicare 
Prescription Drug Program. She joined WellPoint in 2004 after 
24 months of service with the Federal Bureau of Investigations 
(FBI)--no, I am just kidding. [Laughter.]
    Twenty five years of service with the FBI, including 
experience fighting health care fraud and bioterrorism. In 
addition to her duties at WellPoint, she also serves as the 
Chair of the National Health Care Anti-Fraud Association, which 
brings together the private and public sectors. Her resume 
suggests that she is eminently well qualified to testify, and 
we are grateful to you for being here today.
    With that having been said, others of our panel are going 
to join us here throughout the afternoon. We start voting at 
5:30. I expect we will be done by then. We appreciate your 
being here.
    I am going to ask you to take about 5 minutes to summarize 
your testimony. If you want to go a little beyond that, that is 
OK. If you go way beyond that, it is not. So please proceed, 
Mr. Rannazzisi.

    TESTIMONY OF JOSEPH T. RANNAZZISI,\1\ DEPUTY ASSISTANT 
 ADMINISTRATOR, OFFICE OF DIVERSION CONTROL, DRUG ENFORCEMENT 
           ADMINISTRATION, U.S. DEPARTMENT OF JUSTICE

    Mr. Rannazzisi. Good afternoon, Chairman Carper, Ranking 
Member Coburn, Senator Chiesa. On behalf of Administrator 
Michele Leonhart and the men and women of the Drug Enforcement 
Administration, thank you for the opportunity to appear today 
to discuss the epidemic of pharmaceutical controlled substance 
abuse and the diversion of pharmaceutical controlled 
substances.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Rannazzisi appears in the 
Appendix on page 43.
---------------------------------------------------------------------------
    The abuse of prescription drugs continues to plague the 
Nation at an alarming rate, crossing all age, gender, race, and 
socioeconomic boundaries. Studies show substantially high 
levels in the abuse of these drugs and the adverse consequences 
resulting from abuse. According to the most recent National 
Survey on Drug Use and Health (NSDUH), in 2011 there were 
approximately 6.1 million people over the age of 12 who used 
prescription-type psychotherapeutic drugs for non-medical 
reasons during the past month. The devastating effects of this 
statistic can be demonstrated by a report released in 2013 by 
the Drug Abuse Warning Network, which revealed a 153-percent 
increase in emergency room (ER) visits from 2004 to 2011 
attributable to narcotic pain relievers. Oxycodone and 
hydrocodone were the two opiates most frequently implicated in 
these ER visits.
    As these substances are increasingly diverted and abused, 
the number of pharmaceutical overdose deaths has 
correspondingly increased. A Centers for Disease Control (CDC) 
analysis revealed 38,329 people died from a drug overdose in 
the United States in 2010. Nearly 60 percent of the drug 
overdose deaths involved pharmaceuticals. Again, opioid 
analgesics, oxycodone, hydrocodone, and methadone were involved 
in about three of every four pharmaceutical overdose deaths. 
Oxycodone and hydrocodone, by the way, are the top two diverted 
drugs in the United States.
    The diversion and abuse of pharmaceutical controlled 
substances is a problem that cannot be addressed through law 
enforcement action alone. A multidisciplinary approach is 
necessary to address the threat. The Office of National Drug 
Control Policy's 2011 Prescription Drug Abuse Prevention Plan 
has outlined a multipronged approach that includes education, 
prescription monitoring, disposal, and enforcement to 
comprehensively address the national epidemic. DEA plays an 
important role in education, disposal, and enforcement.
    DEA participates in and hosts numerous education programs 
for registrants, health care providers, and community groups. 
In 2011, we began a program to educate health care 
professionals on the front lines of diversion, pharmacies and 
pharmacy techs, on diversion trends and their role in 
preventing diversion. These Pharmacy Diversion Awareness 
Conferences (PDACs), have been held in nine States thus far, 
providing continuing education to nearly 4,000 pharmacists and 
techs. We just finished a controlled substance manufacturer, 
importer, and exporter conference last week, training almost 
400 corporate representatives. We also continue to present at 
State and local community meetings and law enforcement programs 
throughout the country.
    The accumulation of unwanted and unused prescription drugs 
in the household medicine cabinet continues to provide easy 
access to non-medical users for abuse, accidental ingestion, 
and illegal distribution. This easy access to drug seekers, 
especially teenagers, has undoubtedly contributed to the 
increase in the abuse of these substances. DEA has responded by 
coordinating national take-back events with our law enforcement 
partners since September 2010. These events have resulted in 
the destruction of approximately 2.8 million pounds of unwanted 
prescription drugs. DEA is finalizing regulations implementing 
the Secure and Responsible Drug Disposal Act of 2010, which 
authorizes additional ways for Americans to dispose of their 
unwanted and expired controlled substance medications in a 
secure and responsible manner.
    The diversion of controlled substances occurs at all levels 
of the supply chain, and we continue to identify, target, and 
investigate violators who cause millions of dosage units of 
controlled substances to be diverted due to noncompliance with 
the Controlled Substances Act (CSA) and its implementing 
regulations. Noncompliance is allowing dangerous 
pharmaceuticals to pour into the illicit market, posing an 
imminent danger to public health and safety.
    Pharmaceutical diversion can be prevented if DEA 
registrants fulfill their obligations under the Controlled 
Substances Act. When the system breaks down, massive diversion 
occurs, as seen in domestic Internet drug distribution schemes 
a few years ago and the rogue pain clinics operating in 
Florida, Georgia, and Tennessee today. DEA rigorously pursues 
criminal, administrative, and civil actions against registrants 
who fail to comply with the CSA and their implementing 
regulations.
    On June 11, 2013, Walgreens Corporation, the Nation's 
largest drug store chain, agreed to pay the largest civil fine 
in DEA history, about $80 million, resolving DEA's 
administrative actions and a civil investigation by DEA and the 
United States Attorney regarding the Jupiter, Florida, 
Distribution Center and six retail pharmacies in Florida. This 
is only the latest in a series of enforcement and regulatory 
operations focused on all levels of the registrant population 
within the drug delivery system. They were not complying with 
the CSA. All levels of the distribution chain, from 
manufacturing, wholesalers, retailers, pharmacies, and 
practitioners, are being closely scrutinized to ensure 
compliance with the act.
    Controlled substance pharmaceuticals that are illegally 
obtained through health care fraud or abuse of the Medicaid 
program is yet another method of diversion that ultimately 
weakens the integrity of the closed system of distribution. 
While these violations generally occur outside of DEA's 
jurisdiction, there are occasions when, while investigating 
violations of the Controlled Substances Act, DEA agents and 
investigators uncover violations involving health care fraud. 
This information is shared with investigators from the 
Department of Health and Human Services, the Federal Bureau of 
Investigation, and other State and local enforcement and 
regulatory bodies with relevant Federal and State authorities.
    The importance of these cooperative and information-sharing 
relationships is reflected in the fact that HHS OIG and the FBI 
and others have investigated assigned or are working on an ad 
hoc basis with some of the Tactical Diversion Squads (TDSs) 
throughout the country. This collaborative effort facilitates 
information sharing between all the involved agencies and 
allows investigators to easily draw upon each other's expertise 
when conducting investigations and avoiding duplication of 
effort.
    In conclusion, I want to assure you that DEA is working 
closely with our Federal, State, and local partners in 
combating drug diversion and, when encountered, health care 
fraud as part of the administration's comprehensive approach to 
combating prescription drug abuse. DEA is committed to 
balancing the need for diversion control and the enforcement 
with the need for access to these important medications by 
legitimate users.
    Thank you for the opportunity to appear today, and I look 
forward to your questions.
    Chairman Carper. Thanks very much for that testimony.
    Mr. Blum, you are recognized. Welcome.

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

    Mr. Blum. Chairman Carper, Ranking Member Coburn, Senator 
Chiesa, thank you for inviting CMS to testify at this hearing 
and for your focus on the Part D program. I want to assure this 
Committee that CMS takes very seriously the concerns being 
raised today. Not only does inappropriate prescribing weaken 
the fiscal integrity of the Part D program, but it places our 
beneficiaries in harm's way.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Blum appears in the Appendix on 
page 56
---------------------------------------------------------------------------
    CMS sincerely thanks the OIG for its work, and we welcome 
further oversight to help us improve the Part D program. We 
have taken many steps to reduce waste, fraud, and abuse in the 
Part D program, but clearly we can and should do more to take 
further steps.
    To be sure, the Medicare Part D program is stronger than 
ever. It has dramatically lowered Medicare beneficiaries' out-
of-pocket costs since 2006. Due to strong management by CMS and 
our plan partners, its total costs are lower than what the 
Congressional Budget Office (CBO) and our actuaries projected 
when the benefit was passed in 2003. In many respects, Part D 
sets the standard for all payers for cost containment measures. 
However, its statutory construct of operating the program 
through hundreds of Part D plan sponsors presents 
vulnerabilities, and like all payers, public and private, Part 
D has seen rapid growth in payments for Schedule II pain 
medications.
    We know that no one agency can solve these challenges, and 
that it will take resources from all levels of the government, 
Federal and State, and the private sector to solve this 
problem.
    CMS sees its role as the following:
    No. 1, to leverage CMS' data resources of complete Part D 
claims to spot outlier prescribing and share this information 
with our partners in as real time as possible.
    No. 2, to hold sponsors, prescribers, pharmacies, and our 
contractors accountable for prescribing that is consistent with 
our goals and values. Those that violate our standards should 
expect to no longer have a relationship with the Medicare 
program.
    No. 3, to support this Committee and the Congress in 
crafting further legislation to give the Federal Government 
more tools to address prescribing fraud.
    Over the past several years, CMS has made some important 
changes to our policies and operations not reflective in 2009 
claims files. Specifically, CMS has changed our rules to 
require all Part D drug claims to have a valid national 
provider number attached to it. Already in the first quarter of 
2013, 99.6 percent of all Part D claims were compliant with 
this requirement. CMS now requires all claims for controlled 
substances to be checked for a valid DEA number.
    CMS now requires all Part D plans to conduct more 
comprehensive drug utilization reviews for beneficiaries taking 
controlled substances. Part D plans must now verify that 
beneficiaries who exceed certain levels of prescribing are, 
one, being managed by a physician or, two, cutoff at the point 
of sale. To date, this program has cutoff 37 beneficiaries. We 
expect this number to grow, and we also expect to expand this 
program to other medications.
    We have now begun to leverage the fraud prevention system 
(FPS) to identify outlier prescribers and pharmacies much 
earlier in the process. For example, last week, CMS provided to 
all Part D plans a comprehensive list of high-risk pharmacies 
for further review and scrutiny.
    While we feel these actions will help curb Part D fraud, we 
also plan to take more action. For example, CMS is now 
considering proposing new regulations that would require all 
Part D prescribers be validated as Medicare providers.
    CMS is considering new regulations that would expand the 
scope of our Part D fraud contract, the Medicare Drug Integrity 
Contractor (MEDIC), to provide greater access to Pharmacy 
Benefit Management (PBMs'), pharmacies', and prescribers' 
records at the physical premises. CMS will expand its Part D 
plan compliance reviews. Part D plans that submit claims for 
controlled substances greater than norms should expect further 
compliance actions and potential financial penalties.
    In closing, I do believe further legislation may be needed 
to curb controlled substance abuse. Some plan sponsors have 
recommended locking in some patients to one pharmacy to receive 
controlled substances. We believe it is time for Congress to 
consider this potential change. CMS stands ready to help this 
Committee to continue to make the Part D program as strong as 
possible.
    Chairman Carper. We are interested in exploring that and 
other ideas that require our action, because this is a shared 
responsibility, and it is an all-hands-on-deck initiative.
    Mr. Cantrell, please proceed. Mr. Wright, you guys figure 
this out.

  TESTIMONY OF GARY CANTRELL,\1\ DEPUTY INSPECTOR GENERAL FOR 
INVESTIGATIONS; AND STUART WRIGHT, DEPUTY INSPECTOR GENERAL FOR 
 EVALUATION AND INSPECTIONS, OFFICE OF INSPECTOR GENERAL, U.S. 
            DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Mr. Cantrell. Good afternoon, Chairman Carper, Ranking 
Member Coburn, and Senator Chiesa. We appreciate the 
opportunity to speak to you today about prescription drug 
diversion in the Medicare program.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Cantrell and Mr. Wright appears 
in the Appendix on page 72.
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    In addition to the Medicare dollars stolen, there are few 
areas of health care fraud where we see such a direct and 
devastating impact to patients. The CDC has characterized 
prescription drug abuse as an epidemic, and too much of the 
time the bill is being paid by Medicare. This is a drug trade 
subsidized by the taxpayers. Bringing these criminals to 
justice is a top priority for OIG, and over the last 5 years, 
our prescription drug fraud investigations have nearly 
quadrupled.
    Of particular concern are those prescription drug schemes 
that result in patient deaths. These are often associated with 
sham pain clinics or pill mills. One particular clinic was 
associated with the deaths of over 60 patients. The doctor and 
his wife, who was a nurse and the office manager, were 
sentenced to over 30 years in prison and ordered to pay back 
$114 million for their crimes.
    Prescription drug fraud also often involves sophisticated 
criminal enterprises. One case involved a licensed pharmacist 
who owned 26 pharmacies. He was the mastermind of a scheme that 
enlisted physicians, pharmacists, and patient recruiters to 
defraud Medicare, Medicaid, and private health insurance. He 
paid kickbacks and other inducements to physicians to write bad 
prescriptions. The pharmacist responsible for this egregious 
scheme was sentenced to 17 years in prison and ordered to pay 
back $17 million.
    Prescription drug schemes are not limited to controlled 
substances. OIG also investigates matters that involve 
expensive non-controlled substances. In one example, a pharmacy 
billed for medically unnecessary and very expensive 
antipsychotic, respiratory, and cardiac drugs but never 
dispensed the drugs. The perpetrators of this scheme were 
sentenced to nearly 5 years in prison and ordered to pay $4.9 
million.
    These cases illustrate what happens when greed and profit 
trump patient care. And now my colleague Stuart Wright will 
discuss how better oversight will help curb these problems.
    Mr. Wright. Good afternoon. I am Stuart Wright, Deputy 
Inspector General for Evaluation and Inspections in the Office 
of Inspector General. I appreciate the opportunity to talk 
about our most recent work examining Medicare prescription drug 
billing as well as our body of work related to Part D. Our 
written statement outlines this work in more detail.
    A basic safeguard in paying for medical care is ensuring 
that the care is ordered by an appropriate medical 
professional. A report that we released today shows that this 
safeguard is not always operating effectively. Nationwide, 
Medicare Part D paid more than $5 million in 2009 for 
prescriptions ordered by individuals who clearly did not have 
the authority to prescribe. These individuals included massage 
therapists, athletic trainers, dental hygienists, and 
contractors responsible for home repairs. We even found that 
interpreters, lodging companies, and veterinarians ordered 
prescriptions.
    In addition, we reviewed 10 States in depth and found that 
Medicare inappropriately paid for drugs ordered by other types 
of unauthorized prescribers, such as counselors, social 
workers, and chiropractors. Medicare paid more than $26 million 
for these drugs. Senator Carper, as you indicated in your 
opening remarks, tens of thousands of these prescriptions were 
for controlled substances.
    Vulnerabilities in Part D are not limited to unauthorized 
prescribers. In our report issued last week, we identified 
questionable prescribing patterns by 736 general care 
physicians. In total, Medicare paid $352 million for drugs 
ordered by these physicians in 2009. These physicians were 
extreme outliers and prescribed very differently than their 
peers. Some ordered extremely high percentages of certain 
controlled substances, such as oxycodone and morphine. In one 
example, Medicare paid $9.7 million for one California 
physician's prescriptions. This is 151 times more than the 
average prescriber. We also found 24 doctors who ordered more 
than 400 prescriptions for at least one of their patients.
    In another review, we found approximately 2,600 retail 
pharmacies that billed far outside the norm. Medicare paid a 
total of $5.6 billion in 2009 to these pharmacies.
    While some of these billings may be appropriate or may be 
due to billing errors, these patterns raise flags that warrant 
further review. This demonstrates that basic checks need to be 
done routinely by Medicare administrators and contractors.
    In addition to conducting claims analysis, since the 
inception of Part D, we have examined CMS's oversight program 
and identified vulnerabilities. Notably, we found that some 
plan sponsors did not identify any fraud and abuse cases, and 
the MEDIC has not fully utilized data analytics to identify 
potential fraud and abuse.
    Taken together, our findings consistently demonstrate the 
need to strengthen Part D monitoring and oversight. Our written 
statement highlights a number of recommendations, including: 
Require sponsors to verify that prescribers have the authority 
to prescribe drugs; strengthen the MEDIC's and sponsors' 
monitoring of prescribers and pharmacies; require sponsors to 
refer potential fraud and abuse incidents to CMS; develop a 
mechanism to recover payments for inappropriate Part D claims; 
and provide education and training for prescribers, including 
issuing reports to prescribers with information about their 
prescribing patterns.
    In conclusion, more needs to be done to ensure patient 
safety and to prevent fraud, waste, and abuse. CMS, the MEDIC, 
and plan sponsors need to conduct rigorous oversight and 
monitoring. The OIG will continue to bring all of the oversight 
and enforcement tools at our disposal to protect Part D and its 
beneficiaries.
    Thank you for your interest in this important issue and for 
the opportunity to present the results of our most recent work. 
We would be happy to answer any questions.
    Chairman Carper. Thanks, Mr. Wright, and we will have some, 
believe me.
    Ms. Lavelle, welcome. Please proceed.

     TESTIMONY OF ALANNA M. LAVELLE,\1\ DIRECTOR, SPECIAL 
                INVESTIGATIONS, WELLPOINT, INC.

    Ms. Lavelle. Thank you. Chairman Carper, Ranking Member 
Coburn, and Senator Chiesa, I am Alanna Lavelle, Director of 
Special Investigations for WellPoint. I also serve as the Chair 
of the National Health Care Anti-Fraud Association. Thank you 
for the opportunity to provide input and recommendations on 
prescription drug abuse in the health care delivery system.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Lavelle appears in the Appendix 
on page 82.
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    One of the significant strengths that we and other health 
plans bring to the fight against prescription drug abuse is the 
data available from our integrated health care delivery 
systems. This allows the ability to see the entire health care 
spectrum and to spot trends and outliers, such as an 
overprescribing physician or a patient receiving several 
prescriptions from several providers or pharmacies.
    To combat fraud and abuse, WellPoint has a dedicated fraud 
and abuse prevention team known as the Special Investigations 
Unit (SIU). I am one of their lead investigators, overseeing a 
team in the Southeast region. The SIU is staffed with former 
Federal and State law enforcement agents and medical 
professionals. We also have a data analysis team.
    Today some of the top fraud and abuse schemes we currently 
see in prescription drug coverage include:
    The practice often referred to as ``doctor shopping,'' 
whereby individuals obtain prescriptions for frequently abused 
drugs from multiple prescribers and then fill them at different 
pharmacies. Oftentimes providers as well as pharmacies are 
involved in the scheme;
    Bogus providers: these are the providers that, although 
they may have National Provider Identifier numbers (which are 
usually stolen or purchased), do not actually perform services 
for real patients but bill insurers;
    And pain management doctors overprescribing pain 
medications.
    WellPoint currently has 160 investigations open involving 
Medicare Part D. WellPoint refers every Part D case to the 
MEDIC, Medicare's Part C and D anti-fraud contractor, and 
WellPoint currently has the second highest number of referrals 
to the MEDIC nationwide.
    Our goal at WellPoint is to prevent health care fraud and 
abuse for the benefit of our members' health. To meet this 
goal, we have developed a number of different programs.
    First we have our Controlled Substance Utilization 
Monitoring (CSUM) Program and Medicaid Restricted Recipient 
Program. Through these programs, we are helping identify those 
who are engaged in or contributing to prescription drug abuse 
or drug diversion.
    For our Medicaid plans, we have implemented a Restricted 
Recipient Program. Through this program we identify a member 
who, within a 3-month period, visited three or more prescribing 
providers, three or more pharmacies, and filled ten or more 
controlled substance prescriptions without a confirmed 
underlying medically necessary condition.
    To combat fraud and abuse of Schedule II narcotics, such as 
OxyContin, they are locked into using only one primary care 
physician, one retail pharmacy of their choice, and one 
hospital. Our case managers work directly with providers and 
members, and to date, this program has saved lives and many 
millions of dollars in emergency department visits alone for 
the drug-seeking behavior.
    Second, we have a Prepayment Review Program to identify 
irregular provider practice patterns through data mining and 
analytics. WellPoint has implemented two such prepaid provider 
review programs in which the most egregious billers who, after 
being educated and refusing to modify their billing behavior, 
are placed on flagged prepayment review. In that case, 
providers must bill us with paper claims accompanied by paper 
medical records so that we can determine whether the procedures 
billed for are reflected in the records.
    And, third, we have recently contracted with a vendor to do 
predictive modeling. This program uses advanced neural network 
technology from FICO to identify previously unknown and 
emerging fraud and abuse provider or member schemes. Suspect 
providers and claims are reviewed to identify potential fraud, 
waste, or abuse and investigated thoroughly. Since we began 
using this tool 6 months ago, the SIU has opened 200 
investigations.
    We will prevent this year, in 2013, over $13 million in 
inappropriate payments by having placed a system edit for urine 
drug testing abuse by providers, which is one of the largest 
collateral abuses spawned by the prescription drug abuse in the 
United States. The overall return on investment at this time is 
well over 15:1.
    And, finally, we take a multifaceted approach to 
identifying bogus providers who do not actually perform 
services for real patients. Our provider database teams alerts 
the investigator to the presence of new labs, pharmacies, and 
durable medical equipment (DME) suppliers, and we perform a 
full background check as well as a drive-by of the provider's 
office space.
    In just the last 6 months, we have identified and stopped 
payment to 63 bogus pharmacies through our collaboration with 
our PBM Express Scripts, resulting in a savings of $2.1 
million.
    Based on our experience in combating health care fraud and 
abuse, we offer the following recommendations:
    First, we are supportive of giving CMS the authority to 
establish a Restricted Recipient Program in Medicare Part D for 
those beneficiaries displaying a pattern of misutilization.
    Second, we recommend----
    Chairman Carper. Is that another way of saying the lock-in 
program?
    Ms. Lavelle. Yes, that is correct.
    Chairman Carper. OK.
    Ms. Lavelle. Second, we recommend that dually eligible 
beneficiaries with evidence of drug-seeking behavior should be 
locked into one managed care plan rather than continue to be 
allowed to switch plans on a monthly basis to evade detection.
    Third, we support better coordination and cooperation among 
CMS, the Department of Justice (DOJ), and all stakeholders.
    And, finally, all expenses for health insurer anti-fraud 
and abuse programs should be included as ``activities that 
improve health care quality'' in the medical loss ratio (MLR) 
calculation for both commercial health insurers as well as 
Medicare Advantage since they reduce waste, reduce the cost of 
health care, and enhance patient safety by helping identify and 
remove providers engaging in unsafe and fraudulent practices.
    In conclusion, I would like to thank the Committee for the 
opportunity to testify today on behalf of WellPoint on this 
critical issue and pledge our support in any efforts to make 
the health care system financially viable and safer for our 
members.
    Chairman Carper. Thanks. Ms. Lavelle.
    Just to put this in some context, Dr. Coburn and I focus 
on--and I will just say to our new colleague, whose name I 
believe is pronounced ``Key-ay-sa,'' not----
    Senator Chiesa. ``Chee-ay-sa.''
    Chairman Carper. Has it ever been mispronounced?
    Senator Chiesa. Has it ever been? Never. [Laughter.]
    Chairman Carper. All right. Well, I will work on that.
    To put this in context, our budget deficit is down. We are 
down from about $1.4 trillion maybe 4 years ago. We are told 
this year it is only going to be about $650 billion. It was 
$1.4 trillion about 4 years ago. That is an improvement. The 
biggest piece of our deficit--and we are going to actually get 
closer to a balanced budget--is health care costs, and the 800-
pound gorilla in the room is probably Medicare. And rather than 
cutting benefits that people actually need that are doing a lot 
of good, what we have to do is to look for every bit of money 
that is just wasted, spent inefficiently, fraudulently, and 
that brings us to today's hearing.
    We have some numbers up here on this board. These are 2009 
numbers. It is money that Medicare paid apparently 
inappropriately for prescription drugs that year. About 417,000 
prescriptions that year, some 29,000 controlled substance 
prescriptions, involving maybe 15,000 or so prescribers, cost a 
loss to taxpayers of $31.6 million. My fear is that this 
understates the situation.
    We never conduct ``gotcha'' hearings here. We never do 
that, and we are not going to do that today. I just want to 
impart a sense of urgency. We do not have the money to be 
wasting, whether it is $31 million, $131 million, or $231 
million. We do not have the money to spend wastefully.
    I supported the Medicare Prescription Drug Program. I voted 
for it. Not many Democrats did. I voted for it. A lot of people 
were concerned it was not going to be a good benefit. They did 
not like the way the program was crafted. They were afraid it 
would run way over budget and that the folks who would use it 
would not like it. As it turns out, it has not run way over 
budget. And what does it cost? About $60 billion a year or so, 
something like that, a little more than that. And I think about 
85 percent of the folks who use it like it. Those are better, 
favorable numbers than I have at home, and probably for my 
colleagues as well.
    Having said that, we have to figure out how to save some 
money in this program. We have to continue. Everything we do, 
we have to look at and say how do we save some money in this 
program.
    Ms. Lavelle has just given us a little bit of a to-do list 
here. What was the first one? And what I am going to do is ask 
everybody on the panel just to react to it and figure out who 
is responsible for doing that. I think the first one may 
involve some responsibility for us on this side of the dais. 
But go ahead, Ms. Lavelle, just go through the first one, and 
then we will have some discussion on each of these.
    Ms. Lavelle. Sure. The first one was to establish a 
Restricted Recipient Program in Medicare Part D or a lock-in 
program.
    Chairman Carper. All right. OK. Don't we have that in 
Medicaid? Don't we have that in most States in Medicaid where 
you basically say to someone who is thought to be maybe an 
abuser, they say ``You are going to have one doctor--one 
pharmacy, you are going to have one doctor, and that is it.'' 
And maybe that requires the assent of the Federal Government. I 
do not know that it does. It seems strange to me that we have 
that provision, a lock-in provision, in Medicaid but not in 
Medicare.
    So let us just talk--start off with Mr. Rannazzisi, your 
reaction to that recommendation.
    Mr. Rannazzisi. Well, again, that is a little outside the 
scope of my authority, but----
    Chairman Carper. In that case, just be very brief.
    Mr. Rannazzisi. As far as diversion goes, I think it is a 
fantastic idea. If I am not mistaken, that lock-in program is 
being used in Ohio, if I am not mistaken, and the Ohio Board of 
Pharmacy, the investigators, the Ohio Board of Pharmacy believe 
in that program.
    Chairman Carper. I am told it is used in a number of 
States, not just Ohio but in a number of States, and we will 
find out how many.
    Mr. Blum, please?
    Mr. Blum. I think that many State Medicaid programs do have 
a lock-in program. I do not believe that it is a Federal 
requirement, but I know that States on their own do put in 
place lock-in programs. The Part D program in its current 
construct runs the benefit through many different Part D plans, 
so I think this is an area that Congress would have to 
authorize. I do think it is time that Congress consider this 
change. I think the Congress would have to set out clear 
thresholds for which beneficiaries are required to be locked 
in, but we are happy to work with this Committee. And I think 
the Drug Utilization Review (DUR) Program that CMS put in place 
this year could serve as a model for which beneficiaries hit 
that threshold.
    Chairman Carper. All right. Mr. Cantrell.
    Mr. Cantrell. Yes, I think any legislation that would help 
us explore ways to prevent doctor shopping--and some of the 
patients that we encounter in our cases actually are paid 
kickbacks to participate in these schemes. So in situations 
like that, I think we would be interested in exploring ways to 
prevent that kind of activity.
    Chairman Carper. Mr. Wright.
    Mr. Wright. I agree, and I think there may be two different 
kinds of lock-ins that are under discussion. One is to lock 
beneficiaries in a particular plan, and the other would be to 
lock them within a specific prescriber or pharmacy. We think 
that both of those should be considered.
    Chairman Carper. All right. Good.
    What was your second point, Ms. Lavelle?
    Mr. Lavelle. That was indeed the dual eligibles with 
evidence of drug-seeing behavior that bounce from one managed 
care plan to another on a monthly basis. And we at WellPoint 
are not allowed to tell Cigna or Aetna that someone that is 
coming from our plan is going to be a problem for them as well 
just because of the Health Insurance Portability and 
Accountability Act (HIPAA) requirements.
    Chairman Carper. All right. What can we do within the 
constraints of HIPAA? Anyone, please, what can we do?
    Mr. Blum. I think Congress can clearly provide greater 
authority for that data to be shared. I think there is always a 
balance between privacy and controlling payment, but this is 
another area that I would suggest that Congress can give more 
permission for that data sharing to happen.
    Chairman Carper. All right. Thank you.
    What was No. 3?
    Ms. Lavelle. The third was we support better coordination 
and cooperation among CMS, DOJ, and all stakeholders.
    Chairman Carper. All right. Our friends from the OIG, react 
to that for us, if you would.
    Mr. Cantrell. We are very much in favor of better 
coordination and communication. We are coordinating very well. 
We have the Health Care Fraud Prevention Partnership that has 
been established. It is in its infancy, but we are very much 
supportive of private-public data sharing and public 
partnerships where we can.
    Chairman Carper. All right. No. 4?
    Ms. Lavelle. The last one was to recommend that all 
expenses for health insurance anti-fraud and abuse programs be 
included as activities that improve health care quality in the 
medical loss ratio. Right now they are not.
    Chairman Carper. Would you all react to that? Anyone. Who 
wants to react to that? Mr. Blum. Is it Dr. Blum? It is Mr. 
Blum, isn't it? I always want to call you ``Doctor.''
    Mr. Blum. Thank you, but it is Mr. Blum. CMS believes, and 
I think it is consistent with the State insurance 
commissioners, that strong fraud and abuse is part and parcel 
to what a plan should be doing, that it is not part of benefit 
costs but it is the cost to run a well-managed program. CMS in 
its rules does permit collections to count toward the MLRs. We 
think we have found the right balance between requiring plans 
to set up procedures that is part and parcel to running a plan, 
but we do allow plans to count the collections toward the 
benefit side of the MLR.
    Chairman Carper. OK. Well, Ms. Lavelle, you have given us a 
pretty good start on a to-do list from our side, and this is 
one of those deals where there is work to be done on both 
sides, and not just the Federal Government, not just the 
legislative branch, not just CMS, but a bunch of us, including 
folks that are not in Congress and not at CMS.
    Dr. Coburn, thank you.
    Senator Coburn. So, Mr. Blum, let me just kind of get you 
on the record a little firmer here. CMS supports the 
modification of the Part D program to establish a lock-in?
    Mr. Blum. What I can say to you, Senator, is that we have 
no official position, but I believe that it is time for 
Congress to consider this change.
    Senator Coburn. CMS does not have a position on that?
    Mr. Blum. I am speaking for CMS, and I believe it is time 
for Congress to consider it, that it is not part of the 
President's 2014 budget submission, but I do think it is time 
for Congress to make this change.
    Senator Coburn. So would your recommendation back up the 
chain at CMS that would go along with Congress writing the bill 
that would do that?
    Mr. Blum. Yes. And we are happy to support this Committee 
in that change.
    Senator Coburn. The second point: Would CMS also go back up 
the chain and support a loosening of the HIPAA rules so that 
insurers can protect patients and their long-term well-being by 
allowing them to transfer data on drug-seeking behavior 
patients?
    Mr. Blum. I think one of the principles that CMS strongly 
believes is that we have to have greater data sharing to spot 
outliers, both beneficiaries, pharmacies, and physicians, and 
CMS would support that change.
    Senator Coburn. So if I wrote a bill that would allow just 
a little bitty hole for the insurance industry that is managing 
this to share the data on drug-seeking behavior to the next 
managed care plan, there would not be an objection from CMS to 
that?
    Mr. Blum. We would have to see the details, obviously, 
but----
    Senator Coburn. In principle.
    Mr. Blum. In principle, yes.
    Senator Coburn. All right. Tell me, do you think that CMS 
gets $14 million worth of value a year from the MEDIC program?
    Mr. Blum. I think the MEDIC program can be improved, and I 
think we want the MEDICs to be active, we want the MEDIC to be 
proactive, and the MEDIC is just one piece of a strong CMS 
oversight practice. But I do think that the MEDIC process can 
be improved, and to be more proactive and to take more action.
    I think data analysis is just one piece. It is what you do 
with the data. And we have to have action. We have to have many 
steps beyond just law enforcement action. But, I agree with you 
that we can improve the performance.
    Senator Coburn. So they had 21 referrals last year for $14 
million for prosecution, and you just heard WellPoint talk 
about the hundreds that they have done in the last 6 months. 
Explain to me why we are not getting more value out of the 
MEDIC program.
    Mr. Blum. Well, my understanding is that the way the 
program works today, once the referral is made, it has to meet 
certain thresholds for law enforcement to take action. And what 
I think we want to see is the same problem that we have in the 
Part B program. There are different levels. And so for behavior 
that does not meet the law enforcement prosecutable threshold 
but is still outlier behavior, that I believe that the program 
should suspend that physician, move to paper claims, and the 
same kinds of processes that WellPoint talked about, CMS will 
be holding our plans and our contractors to that standard. But 
I think one change that we can consider is rather than having 
prescribers self-declare what their backgrounds are, according 
to the chart that was shown, to have them formally be enrolled 
in the Medicare program similar to Part B, and that is a change 
that we plan to make.
    Senator Coburn. When do you plan to make that change?
    Mr. Blum. Well, typically we put out rules in the fall, and 
that is in process right now.
    Senator Coburn. So we are going to put out rules, so this 
time next year we might see a change?
    Mr. Blum. My hope and my promise to this Committee is that 
in data for 2012-13 we will see a lower number than what the 
OIG found, and CMS will continue to make changes to our rules 
to bring that number down close to zero. But my hope is that 
given the changes CMS has made that I talked about, including 
requiring the Medicare Provider Inventory (MPIs) to be on the 
Part D claim, to holding our contractors to higher degrees of 
accountability, we will see lower numbers. And that will 
continue through further policy change and operational details.
    Senator Coburn. So I have no firm date. People are going to 
continue to die--right?--under this program. And we are going 
to put out rules in the fall. Why wouldn't we put out rules now 
based on the recommendations of the OIG?
    Mr. Blum. Well, I think we are taking action steps to 
respond to the OIG's findings. So, for example, we have shared 
those pharmacies that are outliers with all our Part D plans 
for action today. CMS needs to balance the burdens that are 
going to be placed on prescribers who are not part of the 
Medicare program today that need to come into the Medicare 
program for validation and further oversight, and that is a 
process we cannot turn on overnight. We have to go through 
proposed rulemaking. But that to me is one more step the agency 
can take to achieve better results.
    Senator Coburn. You have plenty of paperwork to do; I 
understand that. Would you commit to this Committee, based on 
the recommendations of the OIG, to give us a report every 3 
months for the next four quarters on where you are in complying 
with their recommendations since you readily accept that their 
recommendations are things you ought to do?
    Mr. Blum. Absolutely. My understanding is that we have, and 
we are happy to commit to whatever process would be helpful to 
this Committee.
    Senator Coburn. And will you publish that report so that it 
does not just come to the Committee?
    Mr. Blum. We will defer to how you want the report 
published.
    Senator Coburn. Well, if we get it, I will make it public, 
because I think, one of our problems in government is we see a 
problem, and then our rules of government make it to where we 
cannot save the lives of the next 1,600 people who are going to 
die from a prescription drug overdose because we are not 
managing the Medicare Part D program through CMS effectively. 
And that is really not a very good excuse for us to--and I am 
not talking about you. I am talking about us, too--to wait 
until tomorrow to start making these changes, when you are 
talking about lives, you are talking about money. And you are 
also talking about not just lives that are snuffed out, you are 
talking about lives that are destroyed and people going to 
prison because we have made it easy to game the system. So I 
hope your commitments will be there.
    As you can tell from my opening statement, I am pretty 
disgusted with the MEDIC program because I do not think we are 
getting that much from it. And I plan on sending you a few 
letters and to the OIG to followup on that, because I do not 
think we are getting value out of the $14 million. And my hope 
will be that you will ride the contractors to where we actually 
get values and change the program to what it should be.
    My time is up.
    Chairman Carper. Senator Chiesa.
    Senator Chiesa. Thank you, Mr. Chairman, and thanks to all 
of you for your testimony here today.
    I know from my experience as Attorney General what a 
catastrophic impact this epidemic has on the people that live 
in my State and I am sure throughout the country. What I do not 
appreciate as much is the impact it has on seniors and the 
different ways I think they are particularly vulnerable to 
people who are trying to game the system, as Dr. Coburn has 
talked about.
    And what I would like to find out--and I open this question 
to any of you who feel competent to answer it--is: What are the 
particular focuses on a population that is clearly vulnerable 
to this? They trust their doctors. They want to get better. 
Some of them have long-term illnesses that they are dealing 
with, and in some cases, it is just easier to try to medicate 
your way out of those illnesses than it is to try to talk with 
the family and get to the heart of what is going on.
    Are there relationships between, for example, assisted care 
facilities or nursing homes that are particularly problematic 
in this area that lead to this kind of abuse?
    Mr. Wright. I do not know that I can directly answer the 
question, but with regard to the vulnerable population of the 
elderly being in nursing homes and some of these drugs being 
very powerful, we did do a review of antipsychotic drugs as 
used in the nursing home setting, and we found that 88 percent 
of them were prescribed against the black box warning, clearly 
raising health concerns. And based on the medical record 
review, we found 51 percent of the claims should not have been 
paid by Medicare.
    So when we did that kind of in-depth review in that 
vulnerable setting, we did, in fact, find substantial problems.
    Senator Chiesa. OK. Ms. Lavelle, we talked about doctor 
shopping as a part of this problem, and I know, again, in my 
own experience seeing some of the typical populations that 
engage in this behavior, is that a problem? Do we see that 
among the senior population as well?
    Ms. Lavelle. Frankly, when I speak of the doctor shoppers, 
the majority of what we are seeing are those that are under 65. 
They are dual eligibles, usually Social Security disability. We 
just referred eight cases last week, and all of them are under 
65.
    Senator Chiesa. OK. And do you have any statistics or 
information that is available to tell us what percentage, or in 
your experience that you see, are over 65 that are engaging in 
this behavior?
    Ms. Lavelle. I do not have any exact, but I can get that 
for you.
    Senator Chiesa. OK. Pain clinics and pill mills. Mr. 
Rannazzisi, I know that you are experienced with the DEA. 
Again, talking about the senior population, are they being 
exposed to a greater extent in those settings than we find 
other patients are?
    Mr. Rannazzisi. I do not believe so. The pain clinic cases 
that I reviewed are generally a younger population of drug 
seekers that are going--remember, they are not going there, 
these rogue pain clinics, they are not going to get medical 
treatment. They are going to get medication to feed their 
addiction. So it is not really medical care. It is more of drug 
distribution illegally.
    Senator Chiesa. OK. And, Mr. Blum, I would like to ask you 
about the enrollment process. What factors do you think provide 
the greatest deterrence to keeping out the kinds of physicians 
that we do not want involved in these programs?
    Mr. Blum. I think what we have learned from our fraud 
prevention system is that we have to do two things at the same 
time: We have to validate physicians' credentials, and that has 
to be periodic. And one of the most important changes that the 
Congress made is to direct CMS to require this process. That is 
not true in the Part D program. There are many prescribers who 
are legitimate but are not formally part of the Medicare 
system. For example, dentists are one of the most commonly--
frequent prescribers of pain medications. So I believe that 
every physician who is writing scripts for the Part D program 
needs to be enrolled in the Medicare system so we can validate. 
We are not reliant on self-reported databases. We can verify 
those who are truly massage therapists versus those who are 
just self-reporting as massage therapists. That is a change 
that I believe that the program needs to make. It is going to 
place new burdens on physicians, and I am sure this Congress 
will hear pushback from the physician community that it is 
burdensome, that for those prescribers that do not provide 
medical services that they should not be enrolled. But I do 
believe that it is time that we move to a different framework.
    Senator Chiesa. OK. Mr. Rannazzisi, we worked in New Jersey 
with the DEA to establish drop-box programs where people can 
take their unused prescription medications to those locations 
and get rid of them, no questions asked, in a secure location 
so that other family members cannot abuse them. In your 
experience, how effective do you think those programs have been 
at getting at the potential problem of the legitimately 
prescribed prescription drugs to a grandparent being then used 
inappropriately by one of the younger members of their 
household?
    Mr. Rannazzisi. Well, we have taken the position that those 
medications, once they are expired or unneeded, need to get out 
of that household. That is why we have these nationwide take-
back programs. In April, we took in almost 376 tons of 
pharmaceuticals, the last take-back program.
    I think that we are in the process of drafting the final 
regulations for take-back, so we may have these drop boxes 
available across the country in certain authorized locations, 
and I think that will go a long way to preventing such 
tragedies as what we have seen in the past.
    Senator Chiesa. And nationwide, what percentage of the 
States participate in these programs, the drop-box programs?
    Mr. Rannazzisi. Well, currently, the only drop-box programs 
that are allowed are ones in law enforcement facilities, either 
precinct houses or headquarters places. But I cannot tell you 
exactly how many because law enforcement agencies are exempt 
from the statute, so they could put their drop boxes in the 
facilities without reporting to DEA.
    Senator Chiesa. OK. But, anecdotally--I know, for example, 
we have talked about it actively in New Jersey--do you get the 
sense that many States are getting involved in these programs 
or not?
    Mr. Rannazzisi. Yes. I believe quite a few States are 
getting involved in the program. Some States have their own 
program. I believe North Dakota has their own program now.
    Senator Chiesa. OK. Well, thank you.
    Thank you, Mr. Chairman.
    Chairman Carper. Thank you very much. Dr. Coburn.
    Senator Coburn. [Presiding.] Mr. Blum, is CMS aware of 
actions by State medical boards and restricting of licensing or 
disciplinary procedures?
    Mr. Blum. To some degree, but I think one thing that we 
need to do is to improve that data sharing.
    Senator Coburn. Does CMS share with providers--and I am 
talking insurance providers--when you have taken somebody off 
their eligibility to be able to prescribe, or treat Medicare 
patients?
    Mr. Blum. That is a vulnerability that I concede that we 
need to do a better job, but----
    Senator Coburn. But do you do it?
    Mr. Blum. We will be doing it.
    Senator Coburn. But you do not do it now?
    Mr. Blum. Not to the fullest degree.
    Senator Coburn. Do you ever give the other providers a list 
of problematic providers--I am talking insurance providers--a 
list of problematic people that are under review or that are 
under suspicion of being a bad actor? Do you ever share that 
information, not just the ones that have gone off but the ones 
that you are suspecting of fraud?
    Mr. Blum. That CMS is?
    Senator Coburn. Yes.
    Mr. Blum. One change that we have made, Senator, is that we 
now share those outlier pharmacies, for example, CMS will be 
expanding that list.
    Senator Coburn. How about outlier physicians?
    Mr. Blum. That is going to be a change that CMS moves 
forward on.
    Senator Coburn. You have to do a rulemaking on that? So 
there are some things that you can do immediately----
    Mr. Blum. Absolutely.
    Senator Coburn [continuing]. To share with the other 
providers, the Part D providers as well as other insurers.
    Mr. Blum. And CMS pledges to this Committee that CMS will 
make those kinds of changes--certain changes require 
rulemaking, such as requiring all physicians to enroll in the 
Medicare program that prescribe through Part D. Some changes 
are management changes that CMS has and will continue to act 
on.
    Senator Coburn. OK. Ms. Lavelle, we just had this 
conversation, and in your testimony you said that plan sponsors 
are rarely informed of the ultimate result of actions that are 
taken and information collected by the agency is rarely shared 
with the private payers and CMS does not share information on 
revoked Medicare providers with private payers. You just heard, 
I think, some good news and a commitment to this Committee.
    WellPoint's Special Investigation Unit refers every Part D 
case to the MEDIC, and WellPoint has the second highest number 
of referrals to the MEDIC.
    Ms. Lavelle. That is correct.
    Senator Coburn. What have you seen from that?
    Ms. Lavelle. That is one of the issues we have with the 
MEDIC. We are very collaborative with them, often refer cases 
over, but then we are never advised as to what type of action 
is ever taken.
    Senator Coburn. So that is something that needs to be fixed 
as well.
    Ms. Lavelle. That would be very helpful to us.
    Senator Coburn. Mr. Blum, what do you think about that?
    Mr. Blum. I think a small fraction of those cases that get 
referred to law enforcement are taken. Oftentimes there is a 
beneficiary who is complicit, and I think we all, the Federal 
Government, are hesitant to take action against beneficiaries 
who are complicit. I think it is time that we change, and I 
think it is time that we share that information. I think it is 
time that we hold the Part D MEDIC to a higher degree of 
accountability. And I think part of the issue is that the 
process now relies on that referral to be taken by law 
enforcement, but that is not sufficient.
    Senator Coburn. Well, just because they choose not to 
prosecute does not mean somebody has not violated the law.
    Mr. Blum. Correct.
    Senator Coburn. And it does not mean somebody should not be 
banned from having Medicare provider status. So you agree with 
that?
    Mr. Blum. I do.
    Senator Coburn. How often do you see Medicare participants 
running in this program as far as pill mills? It was asked a 
little bit ago by my colleague from New Jersey, but how often 
are older patients used as part of the scam, not wanting the 
drugs but buying the drugs, using their Medicare number and 
their provider to get the drugs? How often are we seeing that?
    Mr. Cantrell. More and more we see that they are not even 
aware that this is happening. Through identity theft, their 
beneficiary numbers are used to bill Medicare, and they are not 
even aware of it. So that is often the case.
    Similar to the DEA and WellPoint's experience, we see lots 
of younger beneficiaries involved in some of the pill mill-type 
investigations who are interested in getting the drugs.
    Senator Coburn. So all you have to have is a Social 
Security number, right?
    Mr. Cantrell. In essence and another letter that you tack 
on the end.
    Senator Coburn. Yes, which you can fraudulently provide. So 
that is another reason why we should take Social Security 
numbers off the Medicare roll since that is what is at risk.
    Mr. Chairman, thank you for this hearing. I have to be on 
the floor, but I would just tell you, we need, our staff needs 
to followup on this. We have a commitment from Mr. Blum in 
terms of quarterly reports on the OIG's recommendations. My 
hope is that they make great changes, and I look forward to 
working with you on two things that I think we can write very 
simple legislation and solve some problems.
    Chairman Carper. [Presiding]. You bet. Thank you, Dr. 
Coburn.
    I want to back up just a little bit. We have been talking 
about what we can do in the legislative branch, what you all 
can do at CMS, what we can do in the law enforcement community. 
We have not talked at all about the roles of parents in this, 
and parents or family members, extended family members, talk a 
little bit about that. And are you aware of some States or some 
communities that are doing an especially good job in that kind 
of parental involvement or family involvement? Anybody know? 
Because it cannot just be the government. When it is all hands 
on deck, we mean all hands, including the hands of parents.
    Mr. Wright. When we did the work on antipsychotic drugs 
that I referenced earlier, we certainly made as part of that 
story that families needed to be more involved, especially when 
beneficiaries are in nursing homes and families are not 
necessarily aware of everything that is being prescribed on 
their behalf. We did very much make the point that this was 
something where everybody needed to contribute to correct.
    Chairman Carper. Others? Raise your hands. How many of you 
are parents? OK. Everybody. You can speak. You do not have to 
have your professional hat on. You can put on your parent hat 
if you want.
    Mr. Blum. I think from a Medicare perspective, Medicare 
beneficiaries take many drugs, and I think the average is 12 
scripts per beneficiary right now. I think Part D plans do a 
lot to do polypharmacy reviews. That is not sufficient. 
Beneficiaries themselves, we encourage through the annual new 
wellness visit that Congress authorized in the Affordable Care 
Act (ACA) that medication be part of the annual wellness visit. 
And I think having the independent screen and check on the 
multitude of prescriptions beneficiaries take is one important 
step in the overall process.
    I do think there are voices here that should be at this 
table to speak to overprescribing, I think having the physician 
community to get much more engaged, I think having the 
pharmaceutical manufacturers getting much more engaged. One of 
the reasons that payers are seeing so much growth in these 
medications is because the marketplace is being flooded, if you 
will, with these medications. And so payers can only do so 
much, beneficiaries can only do so much, Congress can only do 
so much. But there are other voices that I think need to be 
part of this conversation--the physician community, the 
pharmacy community, pharmaceutical manufacturers--to ensure 
that a multifaceted strategy is developed.
    Chairman Carper. I do not think I heard you mention 
parents.
    Mr. Blum. Parents, too. Absolutely.
    Chairman Carper. Go ahead, anybody else, please. Mr. 
Rannazzisi?
    Mr. Rannazzisi. I think one of the biggest problems we are 
encountering right now is that parents do not understand the 
dangers of these drugs, and they are not talking to their 
children about these drugs. Just 2 years ago, we attempted to 
do a parents program at the second largest school district in 
the country. We made sure that it was adequately marketed with 
e-mail blasts and news reports, and we had 11 parents--or 14 
parents show up to a huge venue.
    I am not so sure that they understand and I am not so sure 
parents are willing to understand how bad these drugs are and 
how bad the abuse of these drugs are. We work with community 
coalitions all the time. We partner with community coalitions 
on the take-back programs. We hand out literature. We try to go 
to every community meeting that we are invited to, to present. 
But in the end, I think you are right; if the parents do not 
get involved, we are going to see tragedy over and over again.
    Chairman Carper. All right. Others, please? Anybody else? 
Ms. Lavelle.
    Ms. Lavelle. I had a daughter who was a lacrosse player, 
tore her ACL. She had surgery, was sent home with a script for 
hydrocodone, and her first day back in school as a sophomore 
she had several students approach her and asked if they could 
buy her pills. So it is in our backyard, and it is very 
insidious.
    So we went in the school and did some parent-teacher 
conferencing and we actually partnered with FBI and DEA agents 
and did some awareness type of workshops, because even if you 
have a babysitter over, they look in the prescription cabinet 
now, it is that pervasive out in society right now.
    Chairman Carper. Any other parents want to say anything on 
this one? Mr. Cantrell.
    Mr. Cantrell. Yes, I think it is education and outreach to 
parents, as Mr. Rannazzisi has mentioned before. I think we 
would welcome the opportunity to join them in some of these 
outreach efforts, whether they be parents or the prescriber 
community. I think that is the front line of defense in 
preventing these problems from happening in the first place.
    Chairman Carper. The good news here is that parents maybe 
do not have to worry as much about their kids being on heroin 
or maybe they do not have to worry as much about their kids 
being on cocaine or Ecstasy. The bad news is, as you say, this 
is pretty insidious.
    One of the reasons why we are having this hearing is to 
figure out what we can do collectively, folks in law 
enforcement, CMS, insurance companies, providers, the PBMs, the 
legislative branch, what we can do. But we also need to send a 
message to parents. It is not good. It is not good for our 
kids. I say that as a father of three boys--men--and the 
parents just need to get their heads wrapped around this and 
understand what is going on here. And they have an obligation 
here as well. The government cannot just do it all. We have to 
be a partner, but they have to be a partner as well.
    I want to go back to some of the steps that CMS has already 
taken, steps that you have taken, steps you are about to take, 
and then the third area would be steps that are called for in 
the President's 2014 budget proposal. Can you just briefly run 
through those? What have you already done that you think is 
helping? What are you about to do or are undertaking? And, 
finally, what would you like to do under the President's 
budget?
    Mr. Blum. So I think a couple of things. I think our focus 
so far has been to put in place our requirements for our Part D 
plans to do much more comprehensive drug utilization reviews, 
that it is not sufficient to just simply look at the point-of-
sale pharmacy claim, you need to do the complete look over the 
course of a year to see the full spectrum of beneficiaries' 
uses.
    For those beneficiaries that exceed a certain clinical 
threshold, we require the Part D plans to contact the patients' 
physicians to make sure they are being well managed. If they 
are not, then Part D plans are expected to put in place point-
of-sale edits on those beneficiaries that could be doing drug-
seeking behaviors.
    CMS, consistent with changes in the law and changes that 
this Committee has urged, now requires every drug claim paid by 
any Part D plan to have the provider's number on it so we can 
track, we can do analyses, we can verify that those scripts are 
legitimate. We also hold our Part D plans to a higher degree of 
accountability. That is the current work that we are doing.
    In addition to the outlier analysis that we are now sharing 
with our Part D sponsors and other stakeholders, CMS is moving 
to new areas. So I do believe that it is time for us to build a 
bigger universe of oversight on all prescribers, not just those 
that bill the Part B program but all prescribers in the Part D 
program as well. CMS will be upholding our MEDIC to a higher 
degree of accountability, but also giving it greater authority 
to do much more intensive reviews with PBMs, pharmacies, and 
physicians to do more comprehensive looks.
    The President's budget has called for ways to promote 
greater Part D data sharing. I think one of the limitations 
right now with State monitoring programs is they are all 
separate systems that do not talk to each other. We know that 
drug-seeking behavior crosses State boundaries. We know that it 
crosses health insurance plans. Many are cash-paying customers, 
so Part D changes alone will not stop the cash-paying 
customers.
    One proposal in the President's budget is to provide 
greater assistance to drug monitoring programs run by States to 
share data and build common data sets.
    Chairman Carper. Thank you.
    A couple of questions, if I could, for Mr. Rannazzisi and 
Mr. Cantrell, and these pertain more to the law enforcement 
side, and I know you and your agencies are doing a lot to 
identify, to investigate, and to try to bring to justice those 
that are defrauding Medicare.
    But let me just ask you if you could comment on some of the 
challenges facing law enforcement and some of the steps that, 
whether it is Congress, whether it is the Centers for Medicare 
& Medicaid Services, or, frankly, others, steps that we could 
take, individually, collectively, that would help you and your 
colleagues in your work. So that would be the first question.
    Second, the followup, can law enforcement alone curb the 
diversion and the abuse of prescription drugs? I think 
obviously not, and we have already talked about that. This is 
all hands on deck, and it includes not just you sitting at the 
table and others; it includes us and it also includes parents 
and families.
    But let me just go back to the first question. What can 
those of us at CMS, those of us in the legislative branch, or 
maybe within the Administration do to provide some help for you 
in your work? It is a little bit like swimming against the 
tide, I think.
    Mr. Rannazzisi. As an investigator, one of the most 
frustrating things I see is when there are tools available to 
the registrant community, the prescribers and the dispensers, 
and they are not using them. They could help us in the long run 
by just using those prescription drug monitoring programs 
(PDMPs). If there is any way Congress could push the States to 
do that, because right now some very good programs have less 
than 15 percent of the prescribers using them.
    Chairman Carper. Why do you think that is?
    Mr. Rannazzisi. There are all sorts of reasons. One of the 
reasons I always hear is, ``I do not have enough time.'' And 
that statement tells me you do not have enough time to provide 
patient care, because in the end this is just like another 
diagnostic tool. Wouldn't you want to know if your patient is 
seeing two or three or four different doctors? Wouldn't you 
want to know if you are prescribing methadone and you have two 
other doctors prescribing a depressant, a benzodiazepine, two 
drugs that might affect how the drug is distributed in the 
body, how it is eliminated? Wouldn't you want to know that?
    It seems to me that if this tool is available--and in 49 
States right now we have either PDMPs or an infrastructure in 
place, legislation in place to create a PDMP, that as a 
practitioner, be it a mid-level practitioner, a physician, or a 
pharmacist, you would want to know what your patient is doing.
    Mr. Blum is absolutely right. It is not just payments 
through Medicare. These people might be getting payments 
through Medicare, and they are also paying cash. And if you are 
a true doctor shopper, you are going to go to five, six, seven 
doctors at a time for the same illness. If I was that 
practitioner, I would want to know exactly what that patient is 
doing. Yet in many States, with the exception, I believe, of 
New York, Kentucky, and I believe Tennessee now has mandatory 
review of the PDMP before prescribing. The other States, they 
are just not using them.
    Chairman Carper. OK. Anyone else? Mr. Cantrell, do you want 
to respond to that as well, please?
    Mr. Cantrell. Well, we certainly agree that we should 
explore increased utilization of prescription drug monitoring 
programs and even the potential for a lock-in to stop the 
overprescribing and the doctor shopping that is taking place. 
We have seen people leave the State, cross State lines in order 
to find places where it is easier to get the drugs. We see that 
fairly routinely in our investigations. And we are also very 
encouraged by some of the data sharing and additional data 
analytics that Mr. Blum has committed to today, and we think 
that is going to pay dividends down the road as well.
    I would like to mention that our office, which is 
responsible for overseeing this huge program, is shrinking in 
the face of the growth in Medicare and Medicaid. Based on some 
expiring funding streams, we are set to lose roughly 400 bodies 
out of a total of 1,800 at our peak in 2012. And that is really 
limiting our ability to expand our oversight in some of these 
areas.
    Chairman Carper. That is a reduction from 1,200 to 400?
    Mr. Cantrell. Excuse me, 1,800 to around 1,400.
    Chairman Carper. And, again, the reason for that is what?
    Mr. Cantrell. Some expiring funding streams. Certainly 
sequestration has added to that. But before sequestration, we 
were already facing expiring funding streams through the 
Medicaid Integrity Program and others. So we are operating with 
a reduced budget in the face of the growing program, and just 
last year alone, our office closed down 1,200 complaints due to 
lack of resources. Those are complaints that came through the 
door that we did not have the resources to investigate further 
to determine whether it was a viable criminal case or not. And 
that number does not appear to be going down.
    Chairman Carper. OK. The next question I have is really for 
the entire panel, and it focuses on State efforts to combat 
prescription drug abuse and diversion. Some of you have 
mentioned in your testimonies today the serious efforts being 
made to combat prescription waste and fraud at the State level. 
We just talked about it here again. For example, the 
prescription drug monitoring programs established and operated 
by State governments have had a fair amount of success in 
rooting out fraud in Medicare as well as Medicaid and in the 
private sector. These monitoring programs track prescriptions 
filled by pharmacies across a State in order to help identify 
and prevent illegal diversion or abuse.
    I was encouraged to hear from today's testimony that 46 
States have operational monitoring programs and an additional 3 
States have enacted legislation to establish one. I think when 
we first got into this issue a couple years ago, we found out 
that there are a lot more States that did not have this kind of 
monitoring program. One of them was my own State, and to the 
credit of our Governor and the legislature, they jumped all 
over it. But that is the good news. I think it was not that 
long ago, maybe 4 years ago, maybe two-thirds of the States, 
maybe about 33, 34 of the States had these programs 
operational.
    Could each of you today just comment on the importance and 
effectiveness of the State-run prescription drug monitoring 
programs in combating prescription drug waste and fraud? And, 
also, what are some of the important next steps to ensure that 
the monitoring programs become, over time, even more effective?
    Ms. Lavelle, do you want to go first?
    Ms. Lavelle. Sure. One of our biggest pain points in 
WellPoint is a little corner of the State of Virginia known as 
Roanoke. That----
    Chairman Carper. ``Star city of the South? ''
    Ms. Lavelle. Yes.
    Chairman Carper. Where I grew up.
    Ms. Lavelle. Really?
    Chairman Carper. In Danville and Roanoke.
    Ms. Lavelle. Oh, my goodness. We have pharmacies where we 
often see up to 15 license plates from outlying States. We know 
that they are pill mills. We know that they are impacting Part 
D and our commercial plans as well as our Medicaid plans. And 
we have been working with the State law enforcement agencies to 
get them prosecuted. We have been pretty successful in a lot of 
referrals, but it is, again, a major problem in that part of 
the State of Virginia, and we are really focusing on that.
    Los Angeles County is our other hot spot and----
    Chairman Carper. Why do you suppose Roanoke, Virginia, 
would be a hot spot? I could see maybe L.A., but why----
    Ms. Lavelle. We have often asked that, and maybe the 
gentleman from DEA knows more than I. But I have often been 
told that it is a spillover from the coal mining days. It is 
hard to say, but we have a real pain point in that part of the 
world. So we are trying to lock in as many as we can in the 
Medicaid program and to refer all the pill mills for 
prosecution.
    Chairman Carper. And when you are referring them for 
prosecution, who do you refer them to? What entity do you refer 
them to?
    Ms. Lavelle. It depends. Usually the State troopers, 
Virginia State troopers will pick up those cases. The U.S. 
Attorney's Office has taken quite a few of the pain management 
providers, which we often refer to as ``drug dealers in white 
lab jackets.'' Some very egregious. We have even had calls from 
the coroner's office advising us that the 14th body has come in 
from a particular prescriber, and they did not know who else to 
call, but they knew they had Blue Cross insurance. So it is 
that big of a problem there.
    Chairman Carper. OK. Thank you. Mr. Wright.
    Mr. Wright. In terms of next steps, we do plan additional 
evaluation work looking at Medicaid drug utilization review 
programs. That is not something that we have directly reviewed 
at this date, but we are planning on doing reviews that will 
determine how they operate, how they are reviewed, which ones 
are effective. We think this is an important place for us to 
go, building on the work that we have discussed today.
    In addition to that, we continue to look at issues 
associated with Medicaid data overall. It is very important 
from a national standpoint that there be complete and accurate 
Medicaid data, which historically there have been difficulties 
in building. So we plan on continuing to work on that issue, 
hopefully getting to the point at a future date when we have a 
comprehensive Medicaid data set that will enable us to look at 
Medicaid holistically and not just State by State.
    Chairman Carper. OK. Thank you. Mr. Cantrell.
    Mr. Cantrell. I will just reiterate that we think that the 
prescription drug monitoring programs do serve in many States 
as a great deterrent to this type of activity, and if all 
States had a similar level of program, then we might prevent 
some of this crossing State lines in order to avoid them.
    I will also just mention that we have the Medicaid Fraud 
Control Units, who we work with quite frequently, and their 
involvement in this effort is also important.
    Chairman Carper. Thank you. Mr. Blum.
    Mr. Blum. I think given the steps we are taking at CMS to 
reduce the probability that Part D is paying for inappropriate 
medications, I do not believe that is going to stop the 
problem. I think the drugs are very inexpensive, and if CMS 
takes further steps to bring the rate down to zero, those shift 
to cash-paying transactions, which means that other data 
sources will be necessary to spot drug-seeking behaviors, and I 
think that the State drug programs provide a tremendous 
resource. Data has to be shared. Data has to be cross-analyzed 
because beneficiaries and schemes do cross State lines. But 
just focusing on the Part D program will not solve the problem 
given the cost of these drugs. They are very inexpensive and 
they will just shift to cash.
    Chairman Carper. All right. Thank you. Mr. Rannazzisi.
    Mr. Rannazzisi. Again, going back to the PDMPs, one of the 
most important things involving the PDMPs is Internet 
connectivity between the States. If the States are not 
interconnected, you are not going to get a full picture of 
doctor shopping. The National Association of Boards of Pharmacy 
is currently connecting States. I think they have 15 States 
interconnected right now. That way it prevents these people 
from going cross-border. If you are going cross-border from 
Indiana to Kentucky, Kentucky to Ohio, it will show up on your 
PDMPs.
    As far as why the pill mills are going into rural areas, it 
is because they are comfortable there. Pill mills, when they 
started in Florida, were very comfortable because Florida did 
not have a PDMP and they did not really have a regulatory 
infrastructure to prevent them from spreading. As soon as law 
enforcement, the regulatory infrastructure in the State of 
Florida started passing statutes, they felt heat and started to 
move. They moved up into Georgia, rural areas off I-75. Now 
Georgia is giving them heat, and they are up in Tennessee. They 
move to rural areas because they are comfortable because they 
do not believe that law enforcement and the regulatory bodies 
will find them in those rural areas. It is not that those areas 
have a lot of pain patients. It is that this is where they are 
comfortable. And you are absolutely right. If you look at a 
very active pain clinic, a rogue pain clinic, you are going to 
see license plates from all over the place. When we were doing 
the Florida pain clinics, there were license plates as far as 
Massachusetts down into Florida.
    And you made one other statement before about heroin and 
parents not having to worry about heroin because of 
prescription drugs. The fact is that we are seeing more and 
more throughout the country where children, young adults, 
cannot afford the prescription drugs anymore, because, 
remember, the street value for hydrocodone is only $5 or $7, 
even the oxycodone combination products, $5 to $7 a tablet. But 
when you start talking about the single-entity, 30-milligram, 
immediate release oxycodone 30s or OxyContin or oxymorphone, 
you are talking between $30 and $80 a tablet. And once you are 
addicted, you cannot afford that, especially if you are on 
multiple tablets a day. So what we are seeing throughout the 
country in both rural and urban areas is kids moving to heroin, 
and that is well documented, both in the literature and by law 
enforcement reports. Heroin is going to be a problem if we do 
not get a handle on the opiate abuse in the United States.
    Chairman Carper. OK. Can I followup, Mr. Rannazzisi, with 
maybe another question? But before I ask this, I am going to 
telegraph a pitch, if I could here. One of the things sometimes 
I will do with a hearing of this nature is ask not only the 
witnesses to give an opening statement, but ask you to give a 
brief closing statement, not a 5-minute statement but just a 
brief closing statement. If there are some points you want to 
reiterate, that would be fine. If some of the other witnesses 
have said something that you think needs to be seconded or re-
emphasized, or if there are some things, you have some advice 
for us on this side of the dais, again, we would welcome that, 
but just some closing thoughts that you think ought to be 
mentioned, either for the first time or re-emphasized, that 
would be helpful.
    But, Mr. Rannazzisi, I am interested in learning a little 
bit more about the steps that DEA takes to ensure that its 
registry of practitioners authorized to prescribe controlled 
substances is accurate and up to date. A key preventive step 
for curbing fraudulent diversion of controlled substances such 
as OxyContin is, I am told, to maintain an accurate list of 
those physicians that are authorized to prescribe in the first 
place. But, obviously, there are some challenges.
    For example, I understand that the DEA only has access to a 
less than complete list of people who have died. There is 
something called the Death Master File (DMF), and you have 
access to the public file but not the more complete file that 
is maintained by the Social Security Administration (SSA). And 
I would just ask what steps does the DEA take to ensure that 
the registry of controlled substance providers is accurate and 
up to date? And are there some additional steps that are under 
consideration, perhaps some that might need congressional 
support?
    Mr. Rannazzisi. I believe that we are bouncing our system 
off the Social Security death registry. I have to go back and 
look now because I thought we were looking at the complete 
system. But if we are looking at a partial system and not 
getting the information, I would like to get back to the 
Committee.
    Chairman Carper. If you would. I am told you have access to 
the public file, but not to the more complete file that is 
maintained by the Social Security Administration. So if you 
could followup on that, and we will ask you to respond in 
writing, if you would, please.
    Mr. Rannazzisi. Yes, sir.
    Chairman Carper. OK.
    I have a short closing statement of my own, but before I 
offer that, I am just going to go back to our witnesses. And 
thank you for being here. Thank you for your work in these 
vineyards. This is not an easy one, is it? It is not an easy 
one. And none of us has the solution or the ability to--there 
are no silver bullets here. A lot of silver BB's. And we have 
to make sure that we identify them and that we are putting them 
to good use.
    Ms. Lavelle, do you want to give just a brief closing 
statement, just a minute or two?
    Ms. Lavelle. Sure. I appreciate Mr. Blum's words, and they 
give us great hope that we are going to have some changes in 
the future. I also appreciate the work that HHS and the Fraud 
Prevention Partnership has been doing. We have people in the 
room here that have been instrumental in bringing the privates 
and the publics and the agencies together, and I have great 
hope that we will have a very successful partnership going 
forward. There is a great deal of promise there, but we have 
work to do.
    And, second, I wanted to reiterate and point out that the 
paradigm is changing for WellPoint. We no longer want to pay 
and chase. In doing so we get 20 to 30 cents back on the 
dollar. The paradigm for us is prevention and to stop the 
dollars from ever going out the door.
    So, with that, I want to point out that with the medical 
loss ratio we are only allowed credit for collections, which is 
counterintuitive to our new paradigm of savings. So it actually 
encourages recoveries because that is the only credit we get. 
So with our new paradigm, we hope that there may be some 
changing activities in the MLR that will give us credit for 
some of the work we do and the tools that we use. Thank you.
    Chairman Carper. Thank you for that point. Thank you. Mr. 
Wright.
    Mr. Wright. In closing, I think I would like to make three 
points.
    One, it is extremely important to follow through and 
implement the recommendations that have been made by our 
office. I would specifically mention recommendations aimed at 
the sponsors. For example, we have recommended that the 
sponsors be required to refer fraud and abuse cases to the 
MEDIC. Currently that reporting is only voluntary.
    There are a series of recommendations aimed specifically at 
the MEDIC in terms of their ability to get information from 
sponsors, pharmacies, and prescribers that they do not 
currently have. There are recommendations pertaining to the 
MEDIC in terms of doing more proactive data analytics. And, 
last, I think just in general, revamping and strengthening the 
MEDIC function is really crucial to what we have been talking 
about today.
    The second point that I would reiterate is the resource 
issues that Gary raised. Fully funding the office in terms of 
the President's budget request is crucial for our oversight 
activities. As Gary mentioned, we are slated to be down 200 
staff by the end of the year and are on track to attrit 400 
staff by the end of 2015. The office likes to point out that we 
return $8 for every dollar invested in us. To the extent staff 
leave, they will no longer be contributing to that return on 
investment.
    And the third and final----
    Chairman Carper. Stop right there if you would. So the 
President's budget, you are urging us at least in this respect 
to support the President's budget?
    Mr. Wright. To fully fund the President's budget, correct.
    Chairman Carper. OK. Thank you. All right.
    Mr. Wright. And, last, conducting oversight hearings, as 
you have done today, is really crucial to shedding light on 
these problems and getting all the players aligned to actually 
do something about them.
    Chairman Carper. All right. Thank you. Mr. Cantrell.
    Mr. Cantrell. First, I want to thank you, Chairman Carper, 
for holding this hearing. I think it is a great opportunity for 
us all to talk and identify potential solutions. And Mr. Wright 
has already mentioned the resource issue, so----
    Chairman Carper. You can mention it again. Seriously. 
Repetition is good.
    Mr. Cantrell. Well, I will say real quick, you may have 
heard of the Health Enforcement Action Team (HEAT) and our 
strike force teams that have tackled Medicare fraud in nine 
cities across the country. It has been a very successful model 
in tackling all types of Medicare fraud. We would like to be 
able to expand that kind of focus in other areas of the country 
and other areas of the program. And I think with additional 
resources that are included in the President's budget, we would 
be able to do that sort of thing. And while prescription drug 
fraud and abuse is a top priority for OIG now, I know that 
there is more that we can do with more boots on the ground.
    Chairman Carper. OK. Thank you. Mr. Blum.
    Mr. Blum. I want to thank the Committee for holding this 
hearing. CMS welcomes the oversight. Oversight helps us build 
programs that better serve beneficiaries. And I think it is 
true that when the program was established back in 2006, the 
focus was on making sure beneficiaries got every drug they 
needed. And a lot of the oversight work that CMS has done was 
to make sure that beneficiaries get what they need at the point 
of sale, and that was appropriate at the time.
    But now we are in a different time, and I think now the 
focus should be making sure beneficiaries get what they need, 
but stopping those payments for the prescribing that is 
inappropriate. And that will take some further steps--will 
build on current actions but take some further steps. It will 
create more friction that you will hear about from the 
physician community, from pharmacies, and from beneficiary 
themselves. I think that is something that, in addition to 
changes in law, I think the programs will need your support 
once that friction starts. To enroll all prescribers to the 
Medicare program will take a huge lift, and you will hear about 
it.
    And I think one request that we do have is that Congress 
continue to support these changes, but we are going to have to 
create more friction in the system to kind of shift the 
paradigm from not just providing all drugs at the point of 
sale, but to hold everyone accountable, CMS too, to stopping 
those drugs that are not appropriate.
    Chairman Carper. All right. Thank you. Mr. Rannazzisi.
    Mr. Rannazzisi. Finally, Mr. Chairman, I want to thank you 
and Senator Coburn for your leadership in this area and to get 
the word out about the use of these drugs.
    I also want to thank you for identifying education of 
parents and family members as being an important part of our 
overall strategy because, quite frankly, there are not too many 
people that understand that because it does not really affect 
them until it actually affects them, and then it is too late.
    I look forward to working with colleagues at HHS, 
continuing to work in CMS as we move forward against these 
people who are basically gaming the system and doctor shoppers 
and people who are just diverting.
    And, finally, when you talk about sequestration, it is 
problematic for us too. We are losing positions through 
attrition, and we cannot fill those positions right now, 
especially in my scientific staff and my regulatory staff and 
our special agents.
    Thank you very much for this opportunity.
    Chairman Carper. Thank you, each of you, for those closing 
statements. I was not going to mention this, but I am going to. 
Dr. Coburn has put in a lot of time and energy over the last 
several years in helping to develop a comprehensive deficit 
reduction plan which involves roughly $1 of revenue, additional 
revenue for every $3 on the spending side, and it is a balanced 
plan put together under the auspices of Erskine Bowles and 
former Senator Alan Simpson, and it is something that I support 
as well, as do a number of my colleagues. The President's 
latest budget proposal for 2014 actually mirrors and looks a 
whole lot like the efforts of the Simpson-Bowles Deficit 
Commission.
    One of the virtues that it would have if it were adopted, 
if something like that were to be adopted, is we would end 
sequestration. We would also put ourselves on a track to reduce 
the deficit by another roughly $5 trillion over the next 10 
years. It does not balance the budget, but it gets us certainly 
a lot closer to where we need to be.
    In response to your urging for us to be mindful of 
sequestration and what it does in terms of your abilities to do 
your jobs, I just want you to know, there is a pretty good plan 
out there, and the President actually seems to be lined up 
behind it now, and my hope is that we can before the end of 
this fiscal year actually do that or do something very close to 
that.
    That leads me to this statement. I have already said it 
before. We still have huge budget deficits, about over $600 
billion. That is better than $1.4 trillion, but we still have a 
ways to go, and it looks like the deficit might continue to go 
down for a while and then come back up again. The big driver of 
this is my generation, the boomers, and as we move into 
Medicare and other programs, we are needing greater Federal 
assistance.
    As a result, if we are going to be serious on deficit 
reduction, it has to include Medicare, not in a thoughtless 
way, not in a way that savages older people or poor people, but 
in a way that actually saves some money. And it uses a lot of 
common sense, it uses technology, and saves these programs for 
my kids, for your kids, and for our grandchildren as well.
    On the other side of that, Medicare is not running a big 
surplus these days. In fact, Medicare, given the tidal wave of 
boomers that are moving into a time in their lives when they 
are eligible for Medicare and other programs, is looking to 
eventually run out of money in the next decade, and that is not 
good.
    So we attack on this Committee a lot of issues on a fiscal 
basis, and we look at why we are wasting money, it makes the 
deficit worse, it makes it hastens the day when Medicare runs 
out of money. But this issue has another more human side that 
we have heard here today. And when you talked, Ms. Lavelle, 
about your daughter, a lacrosse player, injured, going back to 
school, taking the controlled substance for pain control, and 
having other students in the schools saying they would like to 
buy some of her extra pills, that really brings it home.
    And as good as you and the folks at WellPoint are in the 
work that you do in these vineyards, and our friends from the 
Inspector General's office and Jonathan Blum and the people at 
CMS and folks from DEA and our efforts here, it is not enough. 
Any one of us by ourselves cannot do it. This is, as I like to 
say, an old Navy guy, all hands on deck. It is a shared 
responsibility, and we have to all be part of this team.
    We have the benefit of having some technology today that we 
did not have that many years ago, and I can remember--my mom is 
deceased now, but she passed away about 6 years ago. She lived 
down in Florida for most of the last 30 years of her life. She 
had I think about six different doctors that were prescribing 
15 different medicines. None of them ever talked to each other. 
They did not know that the others were prescribing medicines 
for her. And, unfortunately, she was not unique, and that 
happened a whole lot.
    But we figured out in that situation that a Medicare 
patient, was receiving medicines that were not compatible with 
one another. And we have just gone way beyond that in terms of 
our technology and our ability to know what is going on in 
those situations.
    In this Committee we spend a fair amount of time on 
homeland security, the other piece of what we do, and there is 
a lot of discussion in the media and across the country about 
what the National Security Agency is doing in terms of 
telephone calls or electronic messages over the Internet, and 
in an effort to try to make sure bad people do not come in and 
do harm to us. And we have folks that are hacking into our 
systems as we gather here today, and there is a real tension 
between how do we protect our privacy, our rights as 
individuals, and how do we protect ourselves and our country 
from attacks, whether they be from terrorists or whether they 
be from cyber terrorists.
    Having said that, the kind of tools that are available to 
protect our personal safety and our national security and 
protect us from cyber attacks, the technology is pretty 
amazing. And I think we are only scratching the surface in 
terms of what we can do in a way that is respectful to privacy 
rights to better harness technology, to identify whether it is 
a doctor, whether it is one of these pill mills, or whether it 
is a massage therapist--nothing against massage therapists--
whether it is a dental hygienist--nothing against dental 
hygienists--but we want to make sure that they are prescribing 
what is appropriate, what is lawful; and when they do not, that 
we have the ability to detect that and do something about it.
    The last thing I want to say is this: Parents have to get 
their heads in the game. Most kids grow up in a home where they 
have at least one, oftentimes two parents that really care 
about them, love them, and want to make sure they are making 
the right decisions and the parents are setting the right kind 
of examples. The government cannot do this by itself. We need 
to be helpful. We need to be supportive. We need to play our 
role, and we have a big role to play. But so do parents and 
family members, and they need to get their heads in the game. 
And my hope is that holding a hearing like this not only helps 
to encourage all of us that have these responsibilities to work 
on these problems; my hope is that the word will get to a lot 
of homes across the country where parents are not as mindful as 
they need to be and remind them that they have a responsibility 
as well. They have a whole lot at stake as well.
    We have a pretty good to-do list here for us on this side 
and for you on the other side of the table. Thank you for 
helping us put that together, for the work that is being done. 
And as I like to say, everything I do I know I can do better. 
And as I learned from my father as a little boy growing up in 
Roanoke, Virginia, I learned that if it is not perfect, make it 
better. That is what I learned: This is not a perfect 
situation. We are doing better in some respects, and we can do 
a whole lot better, and we need to.
    With that, this hearing is almost adjourned, and I am told 
by this young lady over here on the left who is going to be 
retiring--in how many days? Four days. Trina is going to be 
retiring. She has been our chief clerk for a lot longer than 
you would imagine. Looking at her, it is hard to believe she is 
eligible to retire, but she is. And we appreciate very much her 
work. I do not know if we are going to have another hearing 
before you step down. I know we are going to have a business 
meeting here later today and try to put out some of the 
President's nominees. I just want to say in front of you and 
those who have admired your work for many years, Trina, how 
much we admire you and respect you and are grateful for your 
service not just to this Committee, not just to the Senate, but 
really to our country.
    And with that having been said, the hearing record will 
remain open for 15 days--that is until July 9 at 5 p.m.--for 
the submission of statements and questions for the record.
    And I would just say to our guests, three of us were here 
today. A number of staff were here as well. As I said earlier, 
we have a vote that starts at 5:30. Members are flying in from 
all over the country, from their own home States. And the fact 
that there are not more Members here, do not be discouraged by 
that. I am not. You should not be either. Dr. Coburn and I and 
our new Member from New Jersey, he is going to be good. I think 
he is in office until at least October or so. Maybe November. 
But we are going to get a lot of work out of him. He knows this 
stuff, and he is going to be a good addition to the U.S. 
Senate.
    All right. I think that is it. It is a wrap, and with that 
this hearing is adjourned. Thank you.
    [Whereupon, at 4:59 p.m., the Committee was adjourned.]


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