Presentation at the IIR Pharmaceutical and Healthcare Division\'s 4th Annual Government Programs Summit on the Medicare Coverage Gap Discount Program.

1. Coverage Gap Discount Program
Invoicing and Disputes
Mark Newsom
Director, Division of Payment Reconciliation,
Medicare Plan Payment Group
March 16, 2012

2. Coverage Gap Discount Process

3. Prescription Drug Events (PDEs)
Are submitted by Part D plan sponsors.
On each PDE, the plan reports the
actual amount of gap discount paid for
the dispensing event in the Reported
Gap Discount field.
PDE submissions are subjected to a
rigorous set of over 150 edits.

4. Cumulative Accepted PDE Processing Trends
01/01/12 - 01/21/12
1,600
Millions
1,400
1,200
1,000
800
600
400
200
0

5. More Details on PDE Submission
Available at
www.mcoservice.com

6. Manufacturer Quarterly Invoice Process
CMS aggregates Gap Discount amounts reported on
PDE data and performs a validation analysis.
CMS then sends this information to Palmetto GBA,
the Third Party Administrator (TPA) for the CGDP.
The TPA sends quarterly invoice reports to
manufacturers and Part D sponsors simultaneously.
Manufacturers are required to pay the invoiced
amount in full to the Part D sponsors within 38
days of report distribution.

7. Count of PDEs Invoiced by Quarter, 2011
19,555,000
1,706,000 4,675,000
136,000
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Rounded to the nearest thousand

8. 2011 Invoiced Amounts by Quarter
$1,556,676,000
$394,864,000
$174,106,000
$50,687,000
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Rounded to the nearest thousand

9. Dispute Resolution
Manufacturers have the right to dispute
invoices within 60 days of receipt.
CMS will deny disputes if the discount
payment is accurately calculated based
upon accurate data for dispensing
events that actually occurred.

10. Q1 – Q3 Dispute Volume, 2011
131,731
58,827
2,383
Q1 Q2 Q3

11. Dispute Reasons
DISPUTE REASON CODE DISPUTE REASON DESCRIPTION
D01 Duplicate Invoice Item
D02 Closed Pharmacy
D03 Not PART D Covered Drug
D04 Excessive Quantity
D05 Invalid Days Supply
D06 High Price of the Drug
D07 Last Lot Expiration Date
D08 Early Fill
D09 Marketing Category is not NDA or BLA
D10 Date of Service prior to 01/01/2011
D11 PDE improperly invoiced beyond Manufacturer Agreement Invoice period
D12 Invalid Prescription Service Reference Number
D99 Other

12. Q1 – Q3 Disputes by Reason Code, 2011
100%
80%
60%
40%
20%
0%
Q1 % Q2 % Q3 %
D03 - Not PART D Covered Drug D09 - Marketing Category is not NDA or BLA
D04 - Excessive Quantity All others
D01 - Duplicate Invoice Item

13. Denied and Upheld Disputes
To date, 99% of disputes have been
denied.
Most of the upheld disputes have been
in the “Excessive Quantity” category.

14. Disputes Should Be Based Upon
Part D Policy Only
www.cms.gov/PrescriptionDrugCovContra/12_PartDManuals.asp#TopOfPage

15. Part D Benefit Designs
2012 Defined Standard Benefit for Applicable Drugs

16. Part D Benefit Designs (cont.)
The defined standard (DS) benefits is used my only
around 10% of Prescription Drug Plans.
Other benefit designs may:
Substitute the DS co-insurance, with tiered co-pay structures
tied to plan formularies or preferred pharmacies in a plan’s
network.
May have reduced deductible or a modification to the initial
coverage limit.
May, for an additional premium, have reduce cost sharing
and/or have coverage of non-Part D drugs.

17. Common Reasons CMS Denies Disputes
Duplicate Invoice Item: Most disputes of duplicates
have turned out to be a situation where an adjustment to a
previously invoiced PDE has been submitted. This is not a
true duplicate.
Closed Pharmacy: Edits are performed on PDEs to
confirm that a pharmacy was open on the Date of Service
(DOS) based up0n NCPDP data. We have observed
instability in the data where a pharmacy is reported as
closed then later that information is corrected to show a
continuous open period. Because of this, CMS allows a six
month grace period following the DOS.

18. Reasons CMS Denies Disputes(cont.)
Not Part D Covered Drug: Often incorrectly
disputed as Medicare Part B versus Part D.
Excessive Quantity and Days Supply: These types
of disputes should represent inappropriate amounts
not clinically acceptable variations from the label.
High Price of the Drug: Part D negotiated prices are
not specifically connected to common list prices or
prices from other government programs.
Maximum Gap Discount Disputes: Often
calculated based on a defined standard benefit, but
most Part D plans use other benefit designs.

19. Reasons CMS Denies Disputes(cont.)
340B Pharmacy Disputes: Part D sponsors may
include 340B pharmacies in their networks. The Part
D negotiated price is not necessarily the 340B
pharmacy acquisition cost.
Marketing Category is Not NDA or BLA and Last
Lot Expiration Date: We have found disputes here
that are not tied to the actual FDA e-listing as of the
date of service for the PDE. Retroactive listing
changes will not impact PDEs invoiced before the
changes were made.