:/ ,/ u.s. OFFICE OF PERSONNEL MANAGEMENT OFFICE.OF THE INSPECTOR GENERAL OFFICE OF AUDITS Final Audit Report Subject: AUDIT OF THE AMERICAN FOREIGN SERVICE· . .PROTECTIVE ASSOCIATION'S PHARMACY· OPERATIONS AS .ADMINISTERED. BY MEDCO HEALTH SOLUTIONS; INC. 2003 -'2007 Report No. IH-02-00-08-039· Date: September lQ, 2009 --CAUTION- This audit reporl has beeD distributed to Federal oflici::tls who arerespousible ror the lIdministrafiori ortbe audited program. This::tudi.l reporlmay contain proprielary data whicb is protec"ted .by Federal law (18 U.S.C.1905). TbcTI'Jore, while tbis audil report is available under the Freedom of.]uform::ttion Act.::tDd made anilabk to the public on lhe OIG webpage, caution needs to be exercised before releasing Ibe report to tbe general public ::ts it may contain proprietary information that was redacted from the publicly distributed coPy. UNITED STATES OFFICE OF PERSONNEL MANAGEMENT Washington. DC 20415 Office of the Inspector General AUDIT REPORT Federal Employees Health Benefits Program Pharmacy Operations Contract CS 1062 American Foreign Service Protective Association Plan Code 40 Medco Health Solutions, Inc. Franklin Lakes, New Jersey REPORT NO. IH-02-00-08-039 DATE: September 10, 2009 ~ Michael R. Esser Assistant Inspector General for Audits www.opm.gov www.~saJobs.gov UNITED STATES OFFICE OF PERSONNEL MANAGEMENT Washington, DC 20415 Office of the Inspector General EXECUTIVE SUMMARY Federal Employees Health Benefits Program Pharmacy Operations Contract CS 1062 American Foreign Service Protective Association Plan Code 40 Medco Health Solutions, Inc. Franklin Lakes, New Jersey REPORT NO. IH-02-00-08-039 DATE: September 10, 2009 The Office of the Inspector General has completed a performance audit of the 2003 through 20P? American Foreign Service Protective Association's (AFSPA) phalmacy operations as administered by Medeo Health Solutions, Inc. (Medeo). The primary objective of the audit was to determine if Medeo complied with the regulations and requirements contained within its contract with AFSPA and Contract CS 1062 (between AFSPA and the Office of Personnel Management). The audit was conducted in Franklin Lakes, New Jersey, from December 1 through December 3, 2008. The audit showed that the 2003 through 2007 AFSPA pharmacy operations were in compliance with the contracts. www.opm.goy www.usajobS.goy CONTENTS PAGE EXECUTIVE SUMMARY , ~ i I. INTRODUCTION AND BACKGROUND I II. OBJECTIVES, SCOPE, AND METHODOLOGY 2 III. AUDIT RESULTS 4 IV. MAJOR CONTRIBUTORS TO THIS REPORT 5 SCHEDULE A - CONTRACT CHARGES I. INTRODUCTION AND BACKGROUND INTRODUCTION As authorized by the Inspector General Act of 1978, as amended, we conducted an audit ofthe 2003 through 2007 American Foreign Service Protective Association's (AFSPA) pharmacy operations as administered by Medco Health Solutions, Inc. (Medco). The audit field work was conducted at Medco's offices in Franklin Lakes, New Jersey, from December 1 through December 3,2008. Additional audit work was completed at our Washington, D.C. office. BACKGROUND 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. The Office of Personnel Management's (OPM) Center for Retirement and Insurance Services has overall responsibility for administration ofthe FEl-IBP. The provisions of the FEHB Act are implemented by aPM through regulations, which are codified in Title 5, Chapter 1, Part 890 of the Code of Federal Regulations (CFR). Health insurance coverage is made available through contracts with various health insurance carriers that provide service benefits, indemnity benefits, or comprehensive medical services. AFSPA has entered into a government-wide contract (CS 1062) with aPM to provide a health benefit plan authorized by the FEHB Act. AFSPA has contracted directly with Medco to manage the delivery and financing of prescription drug benefits for AFSPA health benefit purchasers. This is our first audit of the AFSPA pharmacy benefit operations as administered by Medco relating to claim payments. 1 II. OBJECTIVES, SCOPE, AND METHODOLOGY OBJECTIVES The objectives of our audit were to determine whether Medco's charges to the FEHBP and services provided toFEHBP members, relative to benefit payments, Were in accordance with the terms of the contracts. SCOPE 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, 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. We reviewed the AFSPA claim tapes as provided by Medco for contract years 2003 through 2007. During this period, AFSPA paid approximately $104 million in phannacy drug charges (see Schedule A). In planning and conducting our audit, we obtained an understanding ofMedco's internal control structure to help determine the nature, timing, and extent of our auditing procedures. This was deternlined to be the most effective approach to select areas for audit. For those areas selected, we primarily relied on substantive tests of transactions and not tests of controls. Based on our . testing, we did riot identify any significant matters involving Medco's internal control structure and its operation. However, since our audit would not necessarily disclose all significant matters in the internal control structure, we do not express an opinionoD Medco's system ofintemal controls taken as a whole. In c6ilducting the audit we relied to varying degrees on computer-generated data provided by Medco. 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 doubt its reliability. We believe that the data was sufficient to achieve the audit objectives. We also conducted tests to determine whether Medco had complied with the contract, the applicable procurement regulations (i.e., Federal Acquisition Regulations and Federal Employees Health Benefits Acquisition Regulations, as appropriate), and the laws and regulations governing .the FEHBP. The results of our tests indicate that, with respect to the items tested, Medco complied with all provisions of the contract and the federal procurement regulations. 2 METHODOLOGY To test Medea's compliance with the contracts regarding claim payments, we reviewed the following samples of pharmacy claims adjudicated by Medco and billed from July 1, 2006 tluough December 31, 2007: • We randomly selected 25 mail order claim lines for review, totaling $12,784, which had indicators showing that either the physician or patient requested the prescription to be dispensed as written (DAW) (i.e., brand name dispensed with no option for generic substitution). This sample was selected from a universe of 546,112 claim lines totaling $47,147,196. Specifically, we reviewed 15 mail order claims with DAW code 1 (DAW requested by physician) and 10 mail order claims with DAW code 2 (DAW requested by . patient). • To determine ifmail order specialty drugs (specialty drugs are prescription medications that require special handling, administration, or monitoring) were properly adjudicated, we judgmentally selected 25 specialty mail order claim lines for review, totaling $100,187 (from a universe of 582 claim lines totaling $2,212,318). These claims were selected from Medco's specialty only Accredo mail order phannacy. • We judgmentally selected 100 mail order claim lines for review, totaling $94,607, to determine if the claims were adjudicated correctly. This sample was selected from a universe of the top 100 mail order drug claims paid from 2003 through 2007, with 183,395 claim lines totaling $45,544,840. Specifically, we judgmentally selected the top 10 mail order drugs (by highest amount paid) in 2003 through 2007 and randomly selected 10 claims from each drug (for a total of 100 claim lines). • To determine if retail drug claims were properly adjudicated, we judgmentally selected 150 retail claim lines for review, totaling $59,658 (from a universe of the top 100 retail pharmacies paid from 2003 through 2007; 250,610 claim lines totaling $10,213,005). Specifically, our sample was made up of the following two selections: o We judgmentally selected the top 5 retail phmmacies (by highest amount paid) and randomly selected 25 claim lines from each pharmacy (for a total of 125 claim lines, totaling $42,314). o We judgmentally selected 8 retail phmmacies which had 1,000 or fewer claim lines and randomly selected 25 claim lines, totaling $17,344, from this UnIverse. The above samples that were selected and reviewed in perfonning the audit were not entirely 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 the Contract CS 1062 and the contract between Medco and AFSPA to determine if the phannacy benefits charged to the FEHBP were in compliance with the tenns of the contracts. 3 III. AUDIT RESULTS Based on our review of claim payments we found that the AFSPA pharmacy operations for 2003 through 2007, as administered by Medco, were administered in accordance with the contracts. 4 IV. MAJOR CONTRIBUTORS TO'THIS REPORT Special Audits Group Auditor Senior Team Leader Group Chief, 5 SCHEDULE A AUDIT OF THE AMERICAN FOREIGN SERVICE PROTECTIVE ASSOCIATION'S PHARMACY OPERAnONS AS ADMINISTERED BY MEDCO HEALTH SOLUTIONS FRANKLIN LAKES, NJ CONTRACT CHARGES REPORT NUMBER: 1H-02-00-08-039 CONTRACT CHARGES 2003 2004 2005 2006 2007 TOTAL A. PHARMACY BENEFIT PAYMENTS $16.405,009 $19,801,896 $21,132.150 $23,178,060 $23,969,137 $104,486,252
Audit of the American Foreign Service Protective Association's Pharmacy Operations As Administered Medco Health Solutions,Inc 2003-2007
Published by the Office of Personnel Management, Office of Inspector General on 2009-09-10.
Below is a raw (and likely hideous) rendition of the original report. (PDF)