oversight

Audit of the BlueCross BlueShield Association's Pharmacy Operations as Administered by Caremark PCS Health LLC for Contract Years 2012 and 2013

Published by the Office of Personnel Management, Office of Inspector General on 2015-08-12.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

        U.S. OFFICE OF PERSONNEL MANAGEMENT
           OFFICE OF THE INSPECTOR GENERAL
                    OFFICE OF AUDITS




  Audit of the BlueCross BlueShield Association’s Pharmacy
  Operations as Administered by Caremark PCS Health LLC
               for Contract Years 2012 and 2013

                                          Report Number 1H-01-00-14-067
                                                  August 12, 2015




                                                              -- CAUTION --
This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit report may
contain proprietary data which is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available under the Freedom of
Information Act and made available to the public on the OIG webpage (http://www.opm.gov/our-inspector-general), caution needs to be exercised
before releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
            EXECUTIVE SUMMARY
             Audit of the BlueCross BlueShield Association’s Pharmacy Operations as 

          Administered by Caremark PCS Health LLC for Contract Years 2012 and 2013
Report No.1H-01-00-14-067         Combined Federal Campaigns                      August 12, 2015




Why Did We Conduct the Audit?            What Did We Find?

The main objective of the audit was to   With the exception of the following items, we found Caremark’s
determine whether costs charged to the   administration of BCBSA’s FEHBP pharmacy operations to be in
Federal Employees Health Benefits        compliance with the contracts and Federal regulations.
Program (FEHBP) and services
provided to FEHBP members were in        1. Duplicate Claim Payments Identified – Caremark did not
accordance with the terms of the            identify and reverse 49 duplicate claim payments, resulting in a
contracts between the U.S. Office of        $5,915 overcharge to the FEHBP.
Personnel Management (OPM) and the
BlueCross and BlueShield Association     2. Fraud and Abuse Cases Not Reported by BCBSA – The
(BCBSA), the BCBSA and Caremark             BCBSA did not report all of the suspected fraud and abuse
PCS Health LLC (Caremark), and the          cases that were reported to it by Caremark to the OPM’s OIG
Federal regulations.                        for CY 2013. Additionally, of those cases reported to the OIG,
                                            approximately 54 percent were not reported within the 30
What Did We Audit?                          working day requirement.

The Office of the Inspector General
(OIG) has completed a performance
audit of the responsibilities of
Caremark in regards to administrative
fees, pharmacy claims pricing,
eligibility, contract performance
standards, and rebates for contract
years (CY) 2012 and 2013, along with
fraud and abuse reporting for CY
2013. Our audit was conducted from
September 15 through 26, 2014, at
Caremark’s offices in Scottsdale,
Arizona.




 _______________________
 Michael R. Esser
 Assistant Inspector General
 for Audits
                                                      i
                   ABBREVIATIONS

5 CFR 890   Title 5, Code of Federal Regulations, Chapter 1, Part 890
BCBS        Blue Cross and Blue Shield
BCBSA       BlueCross BlueShield Association
CAREMARK    Caremark PCS Health LLC
CS 1039     Contract between the Office of Personnel Management and BCBSA
CY          Contract Year
FEHB        Federal Employees Health Benefits
FEHBP       Federal Employees Health Benefits Program
FEP         Federal Employee Program
FIMS        Fraud Information Management System
HIO         Healthcare and Insurance Office
OI          Office of Investigations
OIG         Office of the Inspector General
OPM         U.S. Office of Personnel Management
PBM         Pharmacy Benefit Manager




                                 ii
IV. MAJOR CONTRIBUTORS  TO THIS REPORT
          TABLE OF CONTENTS

                                                                                                                      Page 

       EXECUTIVE SUMMARY ......................................................................................... i 


       ABBREVIATIONS ..................................................................................................... ii 


I.     BACKGROUND ..........................................................................................................1 


II.    OBJECTIVES, SCOPE, AND METHODOLOGY ..................................................3 


III.   AUDIT FINDINGS AND RECOMMENDATIONS.................................................9


       A. ADMINISTRATIVE FEES REVIEW ....................................................................9 


       B. CLAIM PAYMENT REVIEWS..............................................................................9 

          1. Duplicate Claim Payments Identified ................................................................9 


       C. FRAUD AND ABUSE REVIEW..........................................................................11 

          1. Fraud and Abuse Cases Not Reported by BCBSA ..........................................11 


       D. MEMBER ELIGIBILITY REVIEWS...................................................................12 


       E. PERFORMANCE STANDARDS REVIEW ........................................................13 


       F. REBATE REVIEW ...............................................................................................13 


IV.    MAJOR CONTRIBUTORS TO THIS REPORT ..................................................14 


       APPENDIX (BlueCross BlueShield Association’s Draft Report Response, dated
       February 9, 2015.)

       REPORT FRAUD, WASTE, AND MISMANAGEMENT
 IV. MAJOR CONTRIBUTORS
            I. BACKGROUND
                        TO THIS REPORT

This report details the results of our audit of the BlueCross BlueShield Association’s (BCBSA)
pharmacy operations as administered by Caremark PCS Health LLC (Caremark) for contract
years (CY) 2012 and 2013. The audit was conducted pursuant to the provisions of Contract CS
1039 (between the U.S. Office of Personnel Management [OPM] and BCBSA); the pharmacy
contracts between BCBSA and Caremark; Title 5, United States Code, Chapter 89; and Title 5,
Code of Federal Regulations, Chapter 1, Part 890 (5 CFR 890). The audit was performed by
OPM’s Office of the Inspector General (OIG), as established by the Inspector General Act of
1978, as amended. The audit was performed at Caremark’s office from September 15
through 26, 2014.

The Federal Employees Health Benefits Program (FEHBP) was established by the Federal
Employees Health Benefits (FEHB) Act, Public Law 86-382, enacted on September 28, 1959.
The FEHBP was created to provide health insurance benefits for Federal employees, annuitants,
and dependents. OPM’s Healthcare and Insurance Office (HIO) has overall responsibility for
administration of the FEHBP, including the publication of program regulations and agency
guidance. As part of its administrative responsibilities, the HIO contracts with various health
insurance carriers that provide service benefits, indemnity benefits, and/or comprehensive
medical services. The provisions of the FEHB Act are implemented by OPM through
regulations codified in 5 CFR 890.

The BCBSA, on behalf of participating Blue Cross and Blue Shield (BCBS) plans, entered into a
Government-wide Service Benefit Plan contract (CS 1039) with OPM to provide a health benefit
plan authorized by the FEHB Act. The BCBSA delegates authority to participating local BCBS
plans throughout the United States to process the health benefit claims of its Federal subscribers.

The BCBSA established a Federal Employee Program (FEP) Director’s Office in Washington,
D.C. to provide centralized management for the Service Benefit Plan. The FEP Director’s Office
coordinates the administration of contract CS 1039 with the BCBSA, BCBS plans, and OPM.
Compliance with the laws and regulations applicable to the FEHBP is the responsibility of
BCBSA’s management, which includes establishing and maintaining a system of internal
controls.

The BCBSA also established an FEP Operations Center. The activities of the FEP Operations
Center are performed by CareFirst BCBS, located in Washington, D.C. These activities include
acting as fiscal intermediary between BCBSA and it’s member plans, verifying subscriber
eligibility, approving or disapproving the reimbursement of local plan payments of FEHBP




                                                 1                           Report No. 1H-01-00-14-067
claims (using computerized system edits), maintaining a history file of all FEHBP claims, and
maintaining an accounting of all program funds.

Pharmacy Benefit Managers (PBMs) are primarily responsible for processing and paying
prescription drug claims. The services typically include both retail and mail order drug benefits.
For drugs acquired through the “local” drugstore, PBMs contract directly with the approximately
50,000 retail pharmacies located throughout the United States. For maintenance prescriptions
that typically do not need to be filled immediately, PBMs offer the option of mail order
pharmacies. PBMs are used by BCBSA to develop, allocate, and control costs related to the
pharmacy claims program.

Pharmacy operations and responsibilities under contract CS 1039 are carried out by Caremark,
which is located in Scottsdale, Arizona. Contract CS 1039 section 1.11 includes a provision
which allows for audits of the program’s operations. Additionally, section 1.26(a) of contract
CS 1039 outlines transparency standards related to PBM arrangements (effective January 2011)
that require PBMs to provide pass-through pricing based on the PBM’s cost. Our responsibility
is to review the performance of Caremark to determine if BCBSA charged costs to the FEHBP
and provided services to its members in accordance with this contract.

Our previous audit of Caremark’s administration of BCBSA’s pharmacy operations (Report
Number 1H-01-00-14-008, dated October 6, 2014) covered pharmacy claim pricing (on a limited
basis), compliance with the Health Insurance Portability and Accountability Act, and program
requirements for fraud and abuse for CY 2012. All recommendations from the prior audit have
been satisfactorily resolved.

The results of our audit were discussed with Caremark and BCBSA officials throughout the
audit. In addition, a draft report, dated December 9, 2014, was provided to BCBSA for review
and comment. The BCBSA’s reponse to the draft report, dated February 11, 2015, was
considered in preparing the final report and is included as an Appendix in this report.




                                                2                           Report No. 1H-01-00-14-067
 IV. MAJOR CONTRIBUTORS
 II. OBJECTIVES, SCOPE, AND TO THIS REPORT
                            METHODOLOGY

Objectives
The objectives of the audit were to determine whether costs charged to the FEHBP and services
provided to FEHBP subscribers were in accordance with the terms of the contract and Federal
regulations. We also verified that the contract between BCBSA and Caremark complies with the
requirements of the transparency standards included in contract CS 1039, and the retail, mail
order, and specialty drug pharmacy contracts between BCBSA and Caremark.

Our specific audit objectives by area were as follows:

   1.	 Administrative Fees Review – To determine if administrative fees paid by BCBSA to
       Caremark were accurate.

   2.	 Claim Payment Reviews
          a.	 Debarment – To determine if any claims were paid to a debarred pharmacy.
          b.	 Duplicate Claims – To determine if any duplicate claims were paid.
          c.	 Non-Covered Drugs – To determine if claims were paid for any drugs excluded
              from coverage.
          d.	 Mail Order Day Supply – To ensure that mail order prescriptions were filled
              within the allowable day supply as stated in the benefit brochure.
          e.	 Transparency Pricing Review – To determine if the pricing elements were
              transparent and if the retail, mail order, and specialty claims were properly paid.
          f.	 Zero Quantity Review – To determine if any claims were paid which had a zero
              quantity.

   3.	 Fraud and Abuse Review – To determine if Caremark and BCBSA followed OPM
       guidance in reporting fraud and abuse cases for 2013.

   4.	 Member Eligibility Reviews
         a) Dependent Eligibility – To determine if any claims were paid for dependents over
            age 26.
         b) Eldest Members – To determine if any claims were paid for members after the
            date of death.
         c) Ineligible Group Number – To determine if any claims were paid for non-FEHBP
            members or members enrolled in alternate plan codes under BCBSA.

   5.	 Performance Standards Review
          a)	 Contract Performance Review – To determine if Caremark met the performance
              standards required by BCBSA and OPM.


                                                3	                          Report No. 1H-01-00-14-067
           b)	 Policies and Procedures Review – To obtain an understanding of the policies and
               procedures that relate to the segregation of duties, claims processing and
               payments, claim system edits, etc., and to determine if those policies and
               procedures appear to be adequate.
           c)	 Procurement Review – To review the process used by BCBSA to select Caremark
               as its current PBM and to determine if this selection was the most cost effective
               for the FEHBP and its members.

   6.	 Rebate Review – To determine if rebates billed to manufacturers were accurate and if the
       rebates were returned to BCBSA.

Scope and Methedology
We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient and appropriate evidence to provide a reasonable basis for our findings and
conclusions based on the audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on the audit objectives.

This performance audit covered administrative fees, pharmacy claims pricing, eligibility,
contract performance standards and rebates for CYs 2012 and 2013, along with fraud and abuse
reporting for CY 2013.

The BCBSA is responsible for providing
FEHBP members with medical and prescription                       Pharmacy Claims Paid
drug benefits. To meet this responsibility,            $4,500,000,000
                                                       $4,000,000,000
BCBSA collected premium payments of
                                                       $3,500,000,000
approximately $27.5 billion in CY 2012 and             $3,000,000,000
$28.4 billion in CY 2013, of which two thirds          $2,500,000,000
                                                       $2,000,000,000
was paid by the government on behalf of the
                                                       $1,500,000,000
Federal employees. In addition to the premium          $1,000,000,000
payments, program income was also generated             $500,000,000
                                                                   $-
from the investment of program funds. Total                               Retail    Mail Order   Specialty
pharmacy claims paid were approximately $6.1                            Pharmacy    Pharmacy     Pharmacy
billion in CY 2012 and $6.7 billion in CY 2013.                              2012   2013
A breakdown by pharmacy type can be seen in
the chart to the right.

In planning and conducting the audit, we obtained an understanding of BCBSA’s internal control
structure to help determine the nature, timing, and extent of our auditing procedures. This was
determined to be the most effective approach to select areas of audit. For those areas selected,



                                                  4	                          Report No. 1H-01-00-14-067
we primarily relied on substantive tests of transactions and not tests of controls. Additionally,
since our audit would not necessarily disclose all significant matters in the internal control
structure, we do not express an opinion on BCBSA’s system of internal controls taken as a
whole.

We also conducted tests to determine whether BCBSA complied with contract CS 1039, service
agreements, applicable procurement regulations (i.e., Federal Acquisition Regulations and FEHB
Acquisition Regulations, as appropriate), and the laws and regulations governing the FEHBP.
Exceptions noted in the areas reviewed are set forth in the “Audit Findings and
Recommendations” section of this report. With respect to the items not tested, nothing came to
our attention that caused us to believe that BCBSA and Caremark had not complied, in all
material respects, with those provisions.

In conducting our audit, we relied to varying degrees on computer-generated data provided by
Caremark. Due to time constraints, we did not verify the reliability of the data generated by the
various information systems involved. However, while utilizing the computer-generated data
during audit testing, nothing came to our attention to cause us to doubt its reliability. We believe
that the data was sufficient to achieve the audit objectives.

To determine whether costs charged to the FEHBP and services provided to FEHBP members
were in accordance with the terms of the contract and Federal regulations, we performed the
following steps:

1.	 Administrative Fees Review
      a.	 From a universe of 24 retail pharmacy administrative fee invoices, totaling
          $127,815,047 for CYs 2012 and 2013, we selected the highest dollar invoice from
          each CY (2), totaling $12,492,304, to determine if the fees charged were accurate.

       b.	 From a universe of 24 mail order pharmacy administrative fee invoices, totaling
           $7,965,138 for CYs 2012 and 2013, we selected the highest dollar invoice from each
           CY (2), totaling $728,693, to determine if the fees charged were accurate.

       c.	 From a universe of 24 specialty pharmacy administrative fee invoices, totaling
           $188,740 for CYs 2012 and 2013, we selected the highest dollar invoice from each
           CY (2) , totaling $18,423, to determine if the fees charged were accurate.

2.	 Claim Payment Reviews
       a.	 We obtained a list of debarred pharmacies from our Sanctions and Debarrment Group
           and ran a match to the pharmacies on our                       (       ) claims
           database to determine if any claim payments were made to debarred pharmacies.



                                                 5	                          Report No. 1H-01-00-14-067
b.	 From a universe of 2,958 members, with potential duplicate claims totaling
    $1,564,511, we used a random number generator in          to select 50 members, with
    claims totaling $8,244 for CY 2012, to determine if any duplicate claims were paid.

c.	 From a universe of 9,799 members, with potential duplicate claims totaling
    $5,238,923, we used a random number generator in          to select 50 members, with
    claims totaling $24,612 for CY 2013, to determine if any duplicate claims were paid.

d.	 From a universe of 1,212 non-covered drugs, we performed a search to identify all
    those where claims were paid. Our review identified 47 non-covered drugs that had
    paid claims. Of the 47 non-covered drugs identified, we selected 45 non-covered
    drugs to review (2 drugs were inadvertenly excluded from our sample). Rather than
    expand our sample to include the remaining 2 non-covered drugs, we relied upon the
    results of our review of the 45 drugs selected (96 percent). All claims for the 45 non-
    covered drugs were determined to be allowable because either the member had a prior
    authorization, the drug was allowable at the time of fill and became unallowable at a
    later date, or the drug was part of a discount program for which the drug was paid for
    entirely by the member. As no errors were identified in our review of the 45 non-
    covered drugs, we did not expand our sample.

   From the 45 non-covered drugs, we selected the first claim from the first two
   members listed (by subscriber number) for each non-covered drug for a total of 73
   claims, totaling $22,728, selected out of a universe of 1,570 claims totaling $359,645,
   to determine allowability. (Of the 45 drugs, 17 had only one member with paid
   claims. The remaining 28 drugs had two members with paid claims.)

e.	 We performed a search to identify all mail order pharmacy claims with a days supply
    under 21 and identified a universe of 1,619 claims totaling $165,330. Using the
            random number generator, we selected 25 claims, totaling $2,083, to determine
    if the claims were paid correctly.

f.	 We performed a search to identify all mail order pharmacy claims with a days supply
    over 90 and identified a universe of 2,865 claims totaling $1,011,496. Using the
          random number generator, we selected 25 claims, totaling $11,310, to
    determine if the claims were paid correctly.

g.	 From a retail pharmacy universe of approximately 153 million claims, totaling
    approximately $7.5 billion, we used the            random sample generator to select a
    random sample of 75 claims from each CY from the top 25 pharmicies (as provided
    by Caremark), for a total of 150 retail claims, totaling $17,579, to determine if the
    claims were paid correctly.


                                         6	                          Report No. 1H-01-00-14-067
       h.	 From a mail order pharmacy universe of approximately 15 million claims, totaling
           approximately $2.9 billion, we used the           random sample generator to select a
           random sample of 75 claims from each CY for a total of 150 mail order claims,
           totaling $58,800, for review to determine if the claims were paid correctly.

       i.	 From a specialty pharmacy universe of 383,328 claims totaling approximately $2.3
           billion, we used the         random sample generator to select a random sample of
           75 specialty pharmacy claims from each CY, for a total of 150 specialty claims
           totaling $945,783, for review to determine if the claims were paid correctly.

       j.	 From a universe of 538,854 claims with zero quantities dispensed in CY 2012,
           totaling $39,068,952, we used the          random sample generator to select 50
           claims totaling $2,532, to review for allowability. No sample was selected from CY
           2013 as the universe identified was determined to be immaterial.

3.	 Fraud and Abuse Review
       a.	 We coordinated with our Office of Investigations (OI) to review the information
           provided by Caremark on 2013 cases entered into BCBSA’s Fraud Information
           Management System (FIMS) to determine if BCBSA reported all cases entered into
           FIMS to the OIG and if the cases were reported timely in accordance with contract
           CS 1039 Section 1.9(a) and FEHBP Carrier Letter 2011-13.

4.	 Member Eligibility Review
      a.	 Using the          random sample generator, we selected a sample of 25 dependents
          over the age of 26 from each CY, with claims totaling $3,920, to determine whether
          they were eligible over-age dependents.

       b.	 We selected the 50 oldest members, out of a total universe of 1,268 members over the
           age of 100 for CY 2012, to determine if any claims were paid after the date of death.

       c.	 We compared the list of Group ID numbers generated from the pharmacy claims in
           the        database to a list of eligible BCBSA Group ID numbers provided by
           Caremark to determine if claims for any non-BCBSA groups were included in the
                  database.

5.	 Performance Standards Review
       a.	 We reviewed the performance standards reported in the Retail Pharmacy, Mail Order
           Pharmacy and Specialty Pharmacy’s annual statements for CYs 2012 and 2013 to
           determine whether the PBM reported the performance standards required by BCBSA




                                               7	                          Report No. 1H-01-00-14-067
           and OPM and reconciled the penalty amounts reported to each Annual Statement’s
           “Statement of Charges.”

       b.	 We reviewed all of Caremark’s policies and procedures that relate to claims
           processing, billing and payments, pre-payment reviews, and quality assurance to
           determine adequacy.

       c.	 We reviewed information from BCBSA on the process used to select a PBM for CYs
           2012 through 2014.

6.	 Rebate Review
       a.	 From a universe of $762,504,017 in drug manufacturer rebates from retail pharmacy
           sales, we judgementally selected the highest guaranteed and non-guaranteed rebate
           from the 1st quarter rebate summary report of each CY, for a total of four retail
           pharmacy rebates totaling $20,020,299, to determine if the rebates were calculated
           properly and returned to the FEHBP.

       b.	 From a universe of $427,677,105 in drug manufacturer rebates from mail order
           pharmacy sales, we judgementally selected the highest guaranteed and non-
           guaranteed rebate from the 1st quarter rebate summary report of each CY, for a total
           of four mail order pharmacy rebates totaling $19,993,726, to determine if the rebates
           were calculated properly and returned to the FEHBP.

       c.	 From a universe of $80,855,579 in drug manufacturer rebates from specialty
           pharmacy sales, we judgementally selected the highest guaranteed and non-
           guaranteed rebate from the 1st quarter rebate summary report of each CY, for a total
           of four specialty pharmacy rebates totaling $3,696,825, to determine if the rebates
           were calculated properly and returned to the FEHBP.

The samples selected during our review were not statistically based. Consequently, the results
could not be projected to the universe since it is unlikely that the results are representative of the
universe taken as a whole. We used contract CS 1039 to determine if claims charged to the
FEHBP were in compliance with the terms of the Contract.




                                                  8	                           Report No. 1H-01-00-14-067
    IV. AUDIT
  III.   MAJOR  CONTRIBUTORS
              FINDINGS       TO THIS REPORT
                       AND RECOMMENDATIONS

A. ADMINISTRATIVE FEES REVIEW

  The results of our review showed that the administrative fees charged by Caremark complied
  with the terms of the contract between it and BCBSA.

B. CLAIM PAYMENT REVIEWS

  1. Duplicate Claim Payments Identified                                                      $5,915

      Caremark did not identify and reverse 49 duplicate claims, resulting in a $5,915 overcharge
      to the FEHBP.

      According to Contract CS 1039, Section 3.2(b), costs charged to the FEHBP must be actual,
      allowable, allocable, and reasonable. Additionally, Section 2.3(g) states when “a Member’s
                          claim has been paid in error … the Carrier shall make a prompt and
    Duplicate claims 
 diligent effort to recover the erroneous payments ….”
   were not identified 

    by Caremark’s 
       We originally reviewed a sample of 100 members with potential
    system of edits.      duplicate claim payments to determine if the claims were properly paid.
                          We identified eight claims, totaling $310, that were duplicate claim
      payments. We then sent Caremark the entire universe of potential duplicate claims over $50,
      which consisted of 2,875 claims, for review of proper payment. Caremark identified an
      additional 41 claims totaling $5,605 that were duplicate claim payments.

      Specifically, the errors identified were the result of




      Upon review, Caremark stated that its system edits did not identify these claims as duplicate
      payments because they had different prescription numbers. Caremark currently runs a report
      of possible duplicate claims that match key items: Member ID, Date of Fill, Generic Code
      Number and Prescription Number. However, our review did identify one duplicate claim
      that had matching prescription numbers that Caremark’s system did not identify. Caremark
      stated that it has begun the process to enhance the system’s edits used to identify these types
      of duplicate payments.



                                                 9                             Report No. 1H-01-00-14-067
As a result of Caremark’s system’s edits not identifying these types of duplicate payments,
the FEHBP was overcharged $5,915.

Recommendation 1

We recommend that the contracting officer direct BCBSA to start the recovery process for
the duplicate claim payments identified and return $5,915 to the FEHBP.

BCBSA’s Response:

The BCBSA did not provide a response to this recommendation in its response to the draft
audit report.

Caremark’s Response:

Caremark concurs with the recommendation and stated that it had adjusted and returned
monies to the FEP program for the 41 claims identified.

OIG’s Response:

In it’s response, Caremark did not address the eight claims identified in the original finding,
nor did it indicate if the monies for those claims had been returned. Additionally, Caremark
did not provide documentation to demonstrate that the monies had been returned to the
FEHBP. Caremark needs to ensure that it also adjusts and returns the monies for those eight
claims, totaling $310, that were initially identified and provide documentation to the
contracting office to show that the entire $5,915 has been returned to the FEHBP.

Recommendation 2

We recommend that the contracting officer and BCBSA ensure that Caremark updates its
claim system edits to better identify           duplicate claims (especially for claims
with different prescription numbers).

Caremark’s Response:

Caremark concurs with the recommendation. Caremark currently runs a report for possible
duplicate claims that is based off matching pharmacy prescription numbers. It was
determined through this audit that the query logic should be updated to include all key fields
(other than pharmacy prescription number). Caremark issued a Business Support Request on
October 24, 2014, to update the query logic for the duplicate claims report to include
                                                                     . This enhancement will


                                            10                           Report No. 1H-01-00-14-067
      identify claims that do not have the same pharmacy prescription number but match on the
      remaining fields. This is scheduled to be implemented by                .

      BCBSA’s Response:

      The BSBSA stated that it will add a summary duplicate claims report to three of its current
      management reports reviewed by it to ensure that Caremark is reviewing the report timely
      and that the enhancements were implemented.

C. FRAUD AND ABUSE REVIEW

   1. Fraud and Abuse Cases Not Reported by BCBSA                                       Procedural

      The BCBSA did not report to the OPM’s OIG all of the suspected fraud and abuse cases that
      were reported to it by Caremark for CY 2013. Additionally, of those cases that were reported
      to the OIG, approximately 54 percent were not reported within the 30 working day
      requirement.

      Contract CS 1039, Section 1.9(a) requires the BCBSA to “operate a system designed to
      detect and eliminate fraud and abuse ... by providers providing goods or services to FEHB
      Members, and by individual FEHB Members.”

      Additionally, FEHBP Carrier Letter 2011-13 (Carrier Letter) states that all FEHBP Carrier
      Special Investigative Units are required to submit a written               Approximately 39
      notification to the OIG within 30 working days of becoming                percent of suspected
      aware of a fraud, waste, or abuse issue where there is reasonable        fraud and abuse cases
      suspicion that fraud has occurred or is occurring against the           were not reported to the
      FEHBP. It also states that, in order to meet the 30 working day          OIG. Additionally, 54
      requirement, the carriers should provide notification on cases          percent of those reported
      where their investigation is still in the early stages and has not yet  were reported untimely.
      determined if there is sufficient evidence to substantiate the
      allegation. There is no dollar threshold for this Carrier Letter requirement.


      During our audit we requested that Caremark provide a listing of all of its FEHBP fraud
      cases related to BCBSA which were entered into BCBSA’s FIMS for CY 2013. (CY 2012
      was covered by a previous audit.) This information was then provided to the OIG’s OI to
      compare to the pharmacy-related cases reported to it by BCBSA for CY 2013. Our review of
      the subsequent information provided by the OIG’s OI determined that the BCBSA did not
      report all potential fraud, waste, or abuse cases entered into FIMS by Caremark.
      Additionally, of those reported, the OIG was notified untimely on approximately 54 percent
      of the cases.


                                                  11                          Report No. 1H-01-00-14-067
      Specifically, we identified the following:
                                                                                     53
               Cases Entered into FIMS but not Reported to the OIG:                              84
                Of the 137 cases Caremark entered into FIMS, only
                84, or approximately 61 percent, were reported to the
                OIG by BCBSA.                                              Reported to OIG     Not Reported to OIG

               Case Submitted After 30 Working Day Timeliness
                Guideline: Of the 84 cases reported to the OIG, 45
                were reported untimely to OIG by BCBSA. On                                45
                average, these cases were referred 57 working days                                 39
                after the case was entered into FIMS by Caremark (we
                assumed that the “Date Referred” in the 2013 Case
                Referral spreadsheet provided to the OIG is the date
                                                                           Reported Timely      Not Reported On Time
                that the case was entered into FIMS).

      This finding has been identified by the OIG in eight recently issued audit reports (since 2012)
      and has led BCBSA to institute new procedures (effective July 2014) to help alleviate the
      problem. However, these procedures (submitting a monthly report to the OPM Contracting
      Office on cases referred to and not referred to the OIG each month, and meeting with OIG OI
      staff weekly to review and search online FIMS entries at BCBSA) instituted by BCBSA were
      at best ineffective and inefficient. By not reporting all potential fraud and abuse cases to the
      OIG, BCBSA is adversely affecting the OIG’s ability to investigate those potential fraud
      cases and potentially recover FEHBP monies. Additionally, by not reporting all potential
      fraud cases reported to it by Caremark in a timely manner, BCBSA is further limiting the
      OIG’s investigative efforts.

      To address our continuing concerns in this area, the BCBSA provided the OIG with remote
      read-only access to the FIMS on December 7, 2014. Therefore, no recommendation is
      included for this finding.

D. MEMBER ELIGIBILITY REVIEWS

   Our member eligibility reviews of dependents over the age of 26, members aged 100 or greater,
   and non-FEHBP group numbers, determined that Caremark paid all claims in accordance with
   the contract between it and BCBSA.




                                                   12                           Report No. 1H-01-00-14-067
E. PERFORMANCE STANDARDS REVIEW

  The results of our review showed that Caremark properly reported its performance to the
  BCBSA in its 2012 and 2013 Annual Statements (for each pharmacy drug contract) without
  exception.

F. REBATE REVIEW

  The results of our review determined that pharmacy drug rebates were calculated correctly and
  remitted to the BCBSA in accordance with the contract between the BCBSA and Caremark.




                                                13                          Report No. 1H-01-00-14-067
 IV. MAJOR CONTRIBUTORS TO THIS REPORT

Special Audits Group

                   , Auditor-In-Charge

                , Auditor

                    , Auditor




                   , Group Chief, (202) 606-4745

                  , Senior Team Leader

Office of Investigations

              , Special Agent-In-Charge




                                          14       Report No. 1H-01-00-14-067
                                                                              APPENDIX




                                                                        Federal Employee Program
                                                                              1310 G Street, N.W.
                                                                          Washington, D.C. 20005
                                                                                   202.626.4800
                                                                                 www.BCBS.com

February 9, 2015

                         , Group Chief
Special Audits Group
Office of the Inspector General
U.S. Office of Personnel Management
1900 E Street, Room 6400
Washington, D.C. 20415-11000

Reference:	 OPM DRAFT AUDIT REPORT
            BCBS Pharmacy Ops Caremark PCS Health LLC Audit
            Audit Report Number 1H-01-00-14-067
            (Dated December 9, 2014 and Received December 9, 2014)

Dear           :

This is the BCBSA response to the above referenced U.S. Office of Personnel
Management (OPM) Draft Audit Report covering the Federal Employees Health
Benefits.

Our comments concerning the findings in the report are as follows:

C. DUPLICATE CLAIMS REVIEW


1. Duplicate Claims 	                                                                   $310

   Recommendation 1

                                  Deleted by OIG 

                          Not Relevant to the Audit Report 


   Caremark Response

                                  Deleted by OIG 

                          Not Relevant to the Audit Report 


   Based on the results of this review, CVS Caremark agrees that 41claims totaling
   $5,605 were duplicate claim payments that had not been adjusted/voided by the OIG
   Audit Notification receipt date of July 23, 2014. CVS Caremark subsequently


                                                                     Report No. 1H-01-00-14-067
adjusted the 41 identified claims and refunded monies to the FEP Program related to
this error.

                               Deleted by OIG 

                       Not Relevant to the Audit Report 



Recommendation 2

                               Deleted by OIG 

                       Not Relevant to the Audit Report 


CVS Caremark Response

CVS Caremark currently reviews potential duplicate payment claims for accuracy. A
duplicate claim report (CLTM51L103-01) is reviewed for claims with matching
Pharmacy Prescription Numbers.

During the course of the OIG audit, it was determined that claims matching on all
key data fields except Pharmacy Prescription Number should also be included in the
query logic used to generate the CVS Caremark Duplicate Report. A Business
Support Request (BSR) was opened on October 24, 2014 (BSRFE15637) to
enhance the query logic used to identify claims for inclusion in the Caremark
Duplicate report. The enhanced query logic will include claims that do not share a
common Pharmacy Prescription number but otherwise match on the remaining key
terms or fields.

The enhanced query logic will allow CVS Caremark to generate a report of claims
that match on the following key terms other than Pharmacy Prescription Number:

1.
2.
3.

With the implementation of the planned enhancement to the query logic, CVS
Caremark anticipates a further reduction in potential duplicate payment claims. The
enhancement is scheduled to be implemented by                      .

BCBSA Response

Effective for the 2nd Quarter 2015, a summary report of the duplicate claims review
will be added to the existing management reports (RPP, MOP, and SDP) that are
reviewed by FEP Pharmacy Programs to ensure that CVS Caremark reviews
duplicate claims timely and that the enhanced duplicate post payment editing was
completed.



                                                                 Report No. 1H-01-00-14-067
D. FRAUD AND ABUSE 	                                              Procedural


1. Fraud and Abuse cases not Reported by BCBSA

                                  Deleted by OIG
                          Not Relevant to the Audit Report 


    BCBSA Response: 


    BCBSA provided read only access to the OPM-OIG on December 7, 2014.

We appreciate the opportunity to provide our response to this Draft Audit Report and
request that our comments be included in their entirety as an amendment to the Final
Audit Report.

Sincerely,




Attachments

cc: 	               , Contracting Officer, OPM
        Jena L. Estes, V.P. Government Program Integrity
                       , CVS Caremark




                                                                   Report No. 1H-01-00-14-067
                                                                                                                         



                                       Report Fraud, Waste, and 

                                           Mismanagement 

                                                  Fraud, waste, and mismanagement in
                                               Government concerns everyone: Office of
                                                   the Inspector General staff, agency
                                                employees, and the general public. We
                                              actively solicit allegations of any inefficient
                                                    and wasteful practices, fraud, and
                                               mismanagement related to OPM programs
                                              and operations. You can report allegations
                                                          to us in several ways:


                        By Internet:               http://www.opm.gov/our-inspector-general/hotline-to-
                                                   report-fraud-waste-or-abuse


                         By Phone:                 Toll Free Number:                              (877) 499-7295
                                                   Washington Metro Area:                         (202) 606-2423


                           By Mail:                Office of the Inspector General
                                                   U.S. Office of Personnel Management
                                                   1900 E Street, NW
                                                   Room 6400
                                                   Washington, DC 20415-1100
                     
                                                                                                                         
                                                                                                                         




                                                             -- CAUTION --
This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit report may
contain proprietary data which is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available under the Freedom of
Information Act and made available to the public on the OIG webpage (http://www.opm.gov/our-inspector-general), caution needs to be exercised
before releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.

                                                                                                                   Report No. 1H-01-00-14-067