oversight

Audit of the American Postal Workers Union Health Plan's Pharmacy Operations as Administered by Express Scripts Holding Company for Contract Years 2012 through 2014

Published by the Office of Personnel Management, Office of Inspector General on 2016-09-28.

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




              Final Audit Report
               Audit of the American Postal Workers Union
                   Health Plan’s Pharmacy Operations
           as Administered by Express Scripts Holding Company
                 For Contract Years 2012 through 2014
                                           Report Number 1H-04-00-15-053
                                                 September 28, 2016




                                                              -- 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 American Postal Workers Union Health Plan’s Pharmacy Operations
                      as Administered by Express Scripts Holding Company
Report No. 1H-04-00-15-053                                                                    September 28, 2016


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

The main objective of the audit was to    We determined that the Plan and/or the PBM needs to strengthen
determine whether costs charged to the    its procedures and controls related to the billing of administrative
Federal Employees Health Benefits
                                          fees, pharmacy claim payments, and performance guarantee
Program (FEHBP) and services provided
                                          reporting and payment of penalties.
to its members were in accordance with
the terms of the contracts between the
                                          Our audit identified the following areas requiring improvement:
U.S. Office of Personnel Management
(OPM) and the American Postal Workers
Union Health Plan (Plan), the Plan’s      1.	 The PBM was unable to accurately support all of the line

agreement with Express Scripts Holding        items it charged for administrative products and services.

Company (PBM), and Federal
regulations.                              2.	 The PBM failed to properly update pharmacy contract
                                              pricing information into its claims system, causing $9,954 in
What Did We Audit?                            erroneous claim payments.

The Office of the Inspector General has   3.	 The Plan paid $16,847 in pharmacy claims on ineligible

completed a performance audit of the          overage dependent children.

Plan’s pharmacy benefits operations as
administered by the PBM. Our audit        4.	 The Plan did not require the PBM to use OPM's debarred

consisted of a review of administrative       providers list, which resulted in claims paid to debarred

fees, claim payments, fraud and abuse,        providers.

Health Insurance Portability and
Accountability Act compliance,            5.	 The Plan paid 96 pharmacy claims incorrectly because
performance guarantees, and rebates           override codes were not properly applied by either it or the
related to the FEHBP for contract years       PBM.
2012 through 2014. Our audit was
conducted from September 8                6.	 The Plan did not report all of the suspected pharmacy fraud
through 29, 2015, at our office in            and abuse cases to OPM.
Washington, D.C. Additional audit work
was completed at our offices in           7.	 The PBM failed to submit its 2014 performance report and a
Washington, D.C. and Cranberry                $120,000 penalty to the Plan in a timely manner.
Township, Pennsylvania.


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

5 CFR 890 	   Title 5, United States Code, Chapter 89; and Title 5, Code of
              Federal Regulations, Chapter 1, Part 890
Agreement 	   The Integrated Prescription Drug Program Master Agreement
              between the American Postal Workers Union Health Plan and
              Express Scripts Holding Company
Contract      OPM Contract CS 1370
CY            Contract Year
FEHB          Federal Employees Health Benefits
FEHBP         Federal Employees Health Benefits Program
FOIA          Freedom of Information Act
HIO           Healthcare and Insurance Office
HIPAA         Health Insurance Portability and Accountability Act
NPI           National Provider Identifier
OIG           Office of the Inspector General
OPM           U.S. Office of Personnel Management
PBM           Express Scripts Holding Company
Plan          American Postal Workers Union Health Plan
PMPM          Per Member Per Month
RRA           Retail Refill Allowance




                                 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.................................................8


         A. ADMINISTRATIVE FEES REVIEW ....................................................................8 

            1. Unsupported Administrative Fees......................................................................8 


         B. PHARMACY CLAIM PAYMENTS REVIEW ......................................................9 

            1. Pharmacy Pricing Errors ....................................................................................9 

            2. Claims Paid for Overage Dependents ..............................................................12 

            3. Claims Paid to Debarred Pharmacies ...............................................................15 

            4. Override Codes Applied Incorrectly ................................................................16 


         C. FRAUD AND ABUSE REVIEW..........................................................................18 

            1. Fraud and Abuse Cases Not Reported by the Plan ..........................................18 


         D. HIPAA REVIEW...................................................................................................19 


         E. PERFORMANCE GUARANTEE REVIEW ........................................................19 

            1. Performance Guarantee Reporting and Penalty Payment................................19 


         F. PHARMACY REBATES REVIEW......................................................................21 


  IV.	   MAJOR CONTRIBUTORS TO THIS REPORT ..................................................22 


         APPENDIX A (Plan’s response to the Draft Report, dated April 14, 2016) 


         APPENDIX B (Plan’s response to the Draft Report Addendum, dated June 24, 2016) 


         APPENDIX C (PBM’s response to the Draft Report Addendum, dated 

                    June 24, 2016) 


         REPORT FRAUD, WASTE, AND MISMANAGEMENT
IV. MAJOR CONTRIBUTORS
            I. BACKGROUND
                       TO THIS REPORT
This report details the results of our audit of the American Postal Workers Union Health Plan’s
(Plan) pharmacy operations as administered by Express Scripts Holding Company (PBM) for
contract years (CY) 2012 through 2014. The audit was conducted pursuant to the provisions of
Contract CS 1370 (Contract) between the U.S. Office of Personnel Management (OPM) and the
Plan; the pharmacy contract between the Plan and the PBM (Agreement); 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 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.

Pharmacy Benefit Managers are primarily responsible for processing and paying prescription
drug claims. The services provided typically include retail pharmacy, mail order, and specialty
drug benefits. For drugs acquired through retail, the PBM contracts 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, the PBM offers the option of
mail order pharmacies. The PBM also provides specialty pharmacy services for members with
rare and/or chronic medical conditions. Pharmacy Benefit Managers are used to develop,
allocate, and control costs related to the pharmacy claims program.

The Plan contracted originally with Medco Health Solutions to provide pharmacy benefits and
services to its members for CYs 2012 through 2014. On April 2, 2012, Medco Health Solutions
and Express Scripts, Inc. merged and became wholly owned subsidiaries of the PBM. On the
date of the merger, the PBM, located in St. Louis, Missouri, assumed the pharmacy operations
and responsibilities under the Agreement and the Contract. Section 1.11 of the Contract includes
a provision which allows for audits of the program’s operations. Additionally, section 1.26(a) of
the Contract outlines transparency standards that require the PBM to provide pass-through
pricing based on its cost. Our responsibility is to review the performance of the PBM to
determine if the Plan charged costs to the FEHBP and provided services to its members in
accordance with the Contract, the Agreement, and the Federal regulations.



                                                1                          Report No. 1H-04-00-15-053
Compliance with the laws and regulations applicable to the FEHBP is the responsibility of the
Plan’s management. Also, management of the Plan is responsible for establishing and
maintaining a system of internal controls.

This was our first audit of the Plan’s pharmacy operations as administered by the PBM.

The results of our audit were discussed with officials of the Plan and the PBM at an exit
conference on October 15, 2015. In addition, a draft report, dated February 19, 2016, and a draft
report addendum, dated June 10, 2016, were provided to the Plan and PBM for review and
comment. The responses of the Plan and PBM to the draft report and addendum were considered
in preparing the final report and are included as appendices in this report.




                                               2                           Report No. 1H-04-00-15-053
IV. OBJECTIVES,
II.  MAJOR CONTRIBUTORS
                SCOPE, ANDTO THIS REPORT
                          METHODOLOGY
 Objective
 The main objective of the audit was to determine whether the costs charged to the FEHBP and
 services provided to FEHBP subscribers were in accordance with the terms of the Contract, the
 Agreement, and applicable Federal regulations.

 Specifically, our audit objectives were to determine if:

    Administrative Fee Review
    	 The administrative fees incurred were compliant with the terms of the Agreement and
       supported by verifiable documentation.

    Claims Payment Review
     Any claims were paid to debarred pharmacy providers; 

     Any claims were paid with dispensing fees outside the contracted rates for mail order and 

       specialty pharmacy;
     Any duplicate claim payments were made by the PBM;
     Any pharmacy claims were paid for deceased members;
     Any claims were paid for non-FEHBP members or members enrolled in an alternate plan
       code under the Plan;
     Any claims were paid with a days supplied exceeding the limits stated in the benefit
       brochures;
     Any claims were paid for non-disabled dependents over the age of 26;
     Claims coded as having a pre-authorization requirement were necessary for the drug and
       that the claim processed correctly; and
     The pricing elements for the retail, mail order, and specialty drug claims were transparent
       and if the claims were paid correctly.

    Fraud and Abuse Review
    	 The Plan’s fraud and abuse program was sufficient and if potential fraud cases were
       being reported to OPM.

    Health Insurance Portability and Accountability Act (HIPAA) Review
    	 The Plan and PBM had policies and procedures in place to address HIPAA’s Standards
       for Privacy, Security, and Electronic Transactions.

    Performance Guarantee Review
    	 The PBM’s performance reports, and any penalties, were properly calculated and 

       submitted timely. 



                                                  3	                      Report No. 1H-04-00-15-053
   Rebates Review
   	 The pharmacy rebates were properly supported, accurately calculated, and remitted to the
      Plan.

Scope and Methodology
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 included reviews of administrative fees, claim payments, the fraud and
abuse program, HIPAA compliance, performance guarantees, and rebates related to the FEHBP
for CYs 2012 through 2014. The audit fieldwork was conducted at our offices from September 8
through 29, 2015. Additional audit work was completed at our Cranberry Township,
Pennsylvania and Washington, D.C. offices.

The Plan is responsible for providing FEHBP members with medical and prescription drug
benefits. To meet this responsibility, the Plan collected premium payments of approximately $3
billion in CYs 2012 through 2014, of which approximately two-thirds was paid by the
government on behalf of Federal employees. Total pharmacy claims paid were approximately
$     million in CYs 2012 through 2014 (See below).

                                    Earned
             Contract Year                            Total Claims      Claims Paid
                                   Premiums
                  2012           $936,333,550                           $
                  2013           $994,780,915                           $
                  2014          $1,075,996,204                          $
                  Total         $3,007,110,669                          $

In planning and conducting the audit, we obtained an understanding of the PBM’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, 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 the Plan’s system of internal controls taken as
a whole.

We also conducted tests of accounting records and other auditing procedures as we considered
necessary to determine compliance with the Contract, the Agreement, and the applicable Federal


                                                 4	                           Report No. 1H-04-00-15-053
regulations. 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 the Plan had not complied, in all material respects,
with those provisions.

In conducting the audit, we relied to varying degrees on computer-generated data provided by
the Plan. 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 our audit, nothing came to our attention to cause us to doubt its reliability. We believe
that the data was sufficient to achieve our audit objectives.

To determine whether the costs charged to the FEHBP and services provided to FEHBP
subscribers were in accordance with the terms of the Contract, the Agreement, and applicable
Federal regulations, we performed the following audit steps:

   Administrative Fee Review
   	 For each CY, we selected the administrative fee invoices with the largest amounts due
      from the Plan. Specifically, we selected 3 invoices, totaling $2,145,989, from a universe
      of invoices, totaling $             . From the invoices selected, we judgmentally
      selected 69 line items (from a universe of     line items), totaling $        , to
      determine if the fees were properly calculated and supported in accordance with the terms
      of the Agreement.

   Claims Payment Reviews
   Unless stated otherwise, the claim samples below were selected from the complete claims
   universe of            claims, totaling $            , for CYs 2012 through 2014.
   	 Using the pharmacies’ National Provider Identifier (NPI), we reviewed all claims to
      determine if any payments were made to a pharmacy debarred by the OIG’s
      Administrative Sanctions Office.
   	 From CY 2014, we identified a universe of           claims, totaling $         , where the
      dispensing fee was between $11 and $300 (which varied from the contractual dispensing
      fees for mail order or specialty drugs). From that universe, we selected a random sample
      of 15 claims, totaling $27,619, to determine if claims were paid with the correct
      dispensing fee.
   	 We identified a universe of potential duplicate claim payments of        claims, totaling
      $            . From each CY, we judgmentally selected the top 10 members by total
      amount paid while ensuring that at least 5 samples included non-compounded drugs. If 5
      members were not found in the top 10, we judgmentally selected the next members with
      non-compounded drugs so our sample totaled 5 in each CY. In total, we selected 32




                                                 5	                           Report No. 1H-04-00-15-053
     members, with claims totaling $3,405,820, for review to determine if duplicate claim
     payments were made by the PBM.
	   We selected the 51 oldest members with paid claims from CY 2014 to determine if any of
     those members were deceased and if they had a claim paid after their date of death.
	   We reviewed all claims to determine if any claims were paid for non-FEHBP members or
     members enrolled in an alternate plan code.
	   From CY 2014, we identified a universe of        mail order claims, totaling $        , where
     the days supplied was greater than 90 days. From that universe, we randomly selected 15
     claims, totaling $9,853, to determine if any were paid with a days supplied outside of the
     limits stated in the benefit brochure.
	   We identified and reviewed all ( dependents, with claims totaling $             ) non-
     disabled dependents 26 years of age or older to determine if the claims were paid
     correctly.
	   We identified a universe of          claims, totaling $             , which were identified
     as pre-authorization claims by the PBM. From that universe, we randomly selected 5
     claims from each CY for a total of 15 claims, totaling $29,086, to determine if the claims
     actually required a pre-authorization and that the claim was processed correctly.
	   We separately identified the universe of brand and generic claims paid to the top 25 retail
     pharmacy chains (as identified by the PBM). Specifically, we identified               brand
     claims, totaling $             , and           generic claims, totaling $            . From
     those universes, we randomly selected 20 brand and 20 generic claims from each CY (60
     brand claims, totaling $11,304, and 60 generic claims, totaling $2,319) to determine if the
     pricing elements were transparent and that the claims were paid correctly.
	   We identified a universe of          specialty pharmacy claims, totaling $              .
     From that universe, we randomly selected 20 claims from each CY (60 claims, totaling
     $347,734) to determine if the pricing elements were transparent and that the claims were
     paid correctly.
	   We separately identified the universe of mail order brand and generic claims paid.
     Specifically, we identified          brand claims, totaling $              , and
     generic claims, totaling $             . From those universes, we randomly selected 20
     brand and 20 generic claims from each CY (60 brand claims, totaling $19,374, and 60
     generic claims, totaling $1,466) to determine if the pricing elements were transparent and
     that the claims were paid correctly.

Fraud and Abuse Review
	 We reviewed all (47) potential fraud and abuse cases reported by the PBM to the Plan to
   determine if those cases were reported to OPM.




                                              6	                           Report No. 1H-04-00-15-053
   HIPAA Review
   	 We reviewed the Plan’s and the PBM’s responses to our HIPAA questionnaires to
      determine if they had policies and procedures in place to ensure compliance with
      HIPAA’s Standards for Privacy, Security and Electronic Transaction requirements.

   Performance Guarantees Review
   	 From CY 2014, we judgmentally selected the top 4 performance guarantees (out of a
      universe of 20) with the most dollars at risk to determine if the guarantees were met,
      reported accurately, and that any associated penalties were reported accurately and paid
      to the Plan.

   Rebates Review
   	 We judgmentally selected the pharmacy rebate report related to the first quarter of CY
      2012, from a universe of 12 quarters, for review. From that report, we then judgmentally
      selected the top 5 therapeutic groups, with rebates due totaling $3,200,791, from a
      universe of groups, totaling $             . As each therapeutic group contained many
      drugs, we then judgmentally selected all drugs where the total net rebate due was
      $100,000 or more (five drugs with total rebates of $1,529,807) to determine if the rebates
      were properly supported, accurately calculated, and remitted to the Plan.

The samples mentioned above, that were selected and reviewed in performing the audit, 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.




                                                7	                         Report No. 1H-04-00-15-053
  IV. AUDIT
III.   MAJORFINDINGS
             CONTRIBUTORS  TO THIS REPORT
                     AND RECOMMENDATIONS
 A. ADMINISTRATIVE FEES REVIEW

     1.	 Unsupported Administrative Fees                                                   Procedural

         The PBM was unable to accurately support all of the line items it charged to the Plan for
         administration of the pharmacy benefits.

        According to Section 9 of the Agreement, the Plan agreed to pay the PBM for administrative
        products and services provided by the PBM in accordance with the provisions in Schedule B
   The supporting         of the Agreement. It is the responsibility of the PBM to accurately charge
   documentation          the Plan for products and services actually provided.
provided by the PBM
  did not match the      We reviewed 69 administrative fee line items from three invoices to
quantities billed to the determine if the base fee amount matched the Agreement and if the
         Plan.           quantities billed were supported by accurate documentation. Of the
                         invoices reviewed, we found 13 line items that were not supported with
         accurate documentation. Specifically, we identified the following:

         	 10 line items related to products or services offered by the PBM (Rationalized Med,
            Fraud Waste and Abuse, and Utilization Management) were charged to the Plan on a per
            member per month (PMPM) basis. For each line item questioned, the member counts for
            the services provided (as identified by the PBM) did not match the quantity charged on
            the invoice.
         	 Three line items related to a member program (Personalized Med) charged based on
            member participation. In all cases the list of members participating did not match the
            member counts listed on the administrative fee invoice.

         For items charged on a PMPM basis, the PBM stated that the Plan provides routine eligibility
         files, often on a daily basis. Due to a merger, the PBM was having difficulty identifying the
         exact eligibility file that would accurately tie to the administrative fee invoice. For those
         items charged based on member participation, the PBM only provided spreadsheets listing
         more members than were charged on the invoices without an explanation of the differences.

         Because the supporting documentation provided by the PBM did not accurately reflect the
         quantities charged to the Plan in its administrative fee invoices, we were unable to determine
         if the PBM administrative fee invoices were an accurate representation of the products and
         services provided to the Plan.




                                                     8	                          Report No. 1H-04-00-15-053
     Recommendation 1

     We recommend that the contracting officer and the Plan require the PBM to maintain
     complete and accurate documentation to support administrative fees and invoices billed (both
     the fees charged and quantities).

     Plan Response: 


     The Plan agrees with this recommendation. 


     Recommendation 2

     We recommend that the contracting officer require the Plan to implement policies and
     procedures for reviewing the administrative fees, including the verification of invoices to
     supporting documentation to ensure that invoices related to the FEHBP are paid accurately
     and in accordance with the Agreement.

     Plan Response:

     The Plan agrees with this recommendation and states that it will review the administrative
     fee invoices to verify them to supporting documentation.

B. PHARMACY CLAIM PAYMENTS REVIEW

  1. Pharmacy Pricing Errors                                                                $9,954

     The PBM incorrectly paid 4,162 claims as a result of not properly updating pharmacy
     contract information in its claim system. This error resulted in overpayments of $9,954.

   The PBM paid claims        Section 1.26(a)(2) of the Contract states that the “PBM agrees to
       dispensed to a         provide pass-through transparent pricing based on the PBM’s cost
    particular pharmacy       for drugs … in which the [Plan] receives the value of the PBM’s
    chain incorrectly for     negotiated discounts, rebates, credits or other financial benefits.”
   over six months due to     Similarly, the Agreement states that the Plan will pay the contracted
  an incorrect discount in    rate with the pharmacy less the discount plus the dispensing fee and
     its claims system.       any applicable taxes.

     During our review of retail pharmacy claim payments, we identified one claim where the
     Plan indicated that the claim was priced incorrectly because it did not properly update a
     change to the pharmacy discount and dispensing fee in its claims system between



                                                 9                           Report No. 1H-04-00-15-053
April 1, 2013 and November 15, 2013. The PBM stated that the pharmacy contact
information was updated in its system on November 15, 2013.

From this, we identified all claims paid to the pharmacy (located in Burlington,
Massachusetts) related to the one erroneous claim and found that all 18 claims dispensed
between April 1, 2013 and November 15, 2013 were paid incorrectly. Additionally, we
reviewed five claims dispensed after November 15, 2013, and determined that all were paid
correctly by the PBM, supporting its statement that its system was updated with the correct
discount on that date. The common factor that we identified between the claims (both
generic and brand name drugs) was that most were overpaid by a $1.42 difference in the
dispensing fee ($2.50 – $1.08). We noted that between April 1, 2013 and November 15,
2013, the dispensing fee was $2.50 and after November 15 it changed to $1.08 (as stated in
the pharmacy contract). Claims for brand name drugs were also paid incorrectly because the
pharmacy’s discount rate was not updated as well.

We performed a search of claims dispensed by that pharmacy chain and found a similar
change in dispensing fees in all claims dispensed in the state of Massachusetts, but not
elsewhere. Our review of the claims dispensed by this pharmacy chain in Massachusetts
determined that all claims dispensed between April 1, 2013 and November 15, 2013, were
paid incorrectly. Our pharmacy-specific review found most claims (632 of 640) dispensed
after November 15, 2013, were paid correctly. Specifically, we identified 4,162 claims paid
in error with overpayments totaling $9,954 ($5,064 in overpayments by the FEHBP, and
$4,890 in overpayments by members).

A question to the PBM regarding why this error occurred and what steps were being taken to
correct the error was not answered by the PBM during our audit.

As a result of not timely updating pharmacy discount information in its claims system, the
PBM made claim overpayments of $9,954 (overcharging the FEHBP by $5,064 and Plan
members by $4,890) to the FEHBP.

Recommendation 3

We recommend that the contracting officer direct the Plan to reimburse $5,064 to the FEHBP
and $4,890 to the affected Plan members.

Plan Response:

The Plan agrees with the recommendation and requests that the PBM reimburse the Plan
and the affected members.



                                           10                          Report No. 1H-04-00-15-053
PBM Response:

The PBM will work with the Plan to reach resolution on this recommendation.

Recommendation 4

We recommend that the contracting officer and the Plan direct the PBM to institute and/or
update its procedures to ensure that pharmacy contract changes are entered into its claims
system so that those changes are effective on the date in the contracts with the pharmacies.

Plan Response:

The Plan agrees with this recommendation and states that it will direct the PBM to
implement procedures to ensure that pharmacy contract changes are entered into its
claims system timely.

PBM Response:

The PBM stated that implementation of a new pharmacy contract takes time and that the
process is not exclusive to the Plan, but to its entire commercial book of business and that
a number of factors impact the timing of contract implementation. However, the PBM
agrees to explore areas for improvement as it moves to a new contracting system and
provided a corrective action plan.

OIG Comments:

We understand that the implementation of new pharmacy contracts, or simple pharmacy
contract modifications for that matter, require extensive work on the PBM’s part. However,
that does not excuse the PBM from not having its systems prepared to accurately price claims
on the date when the discount and dispensing fee changes were effective.

The PBM’s response does not explain why these claims were paid incorrectly for seven-and-
a-half months, which seems more than the result of simple implementation. Nor does it
explain why, once the pharmacy discount and dispensing fee were updated, it did not
research and correct all claims paid between that date and the date when those changes
should have been implemented.




                                            11                          Report No. 1H-04-00-15-053
   Recommendation 5

   We recommend that the contracting officer and the Plan direct the PBM to provide an
   explanation as to how this error occurred, and then take the necessary steps to ensure it does
   not happen again.

   PBM Response:

   The PBM states that an incorrect rate for the pharmacy contract in question was not set-
   up with this pharmacy. It states that the pharmacy rates for the Plan are guaranteed
   through an annual average rate and that the time period of the error in implementation
   did not impact the guarantee under the Plan’s contract with it.

   OIG Comments:

   Based on the PBM’s response to the previous recommendation we can ascertain that the error
   related to these claims was the result of delays in its implementing the contract changes in a
   timely manner. This again is inexcusable in the PBM’s business practice and as it stated the
   contract was not exclusive to the Plan, but to its entire book of business. Therefore this error
   not only affected the Plan and its members, but all claims processed for the pharmacies in the
   state of Massachusetts over that period.

   What we find alarming in its response is that the PBM states that the error was of no impact
   due to the pharmacy guarantee in its contract with the Plan. This is alarming because it
   showcases the PBM’s lack of understanding of its agreement to comply with pharmacy
   standards in the Plan’s contract with OPM (Section 18 of the Agreement). Those standards
   require the PBM to provide pass-through or transparent pricing based on the PBM’s
   contracted rate. This is not an overall guarantee, but a contract by contract, claim by claim
   price, meaning that the PBM is required to pay all claims accurately and at the contracted
   rate established at the date the prescription is filled. So, although the claims identified in
   error did not cause the PBM to miss its pricing guarantee in the Agreement, those claims are
   of importance and do, in fact, impact the FEHBP and its members because they were not
   accurate and transparently priced by the PBM.

2. Claims Paid for Overage Dependents                                                     $16,847

   The Plan paid 124 pharmacy claims, for 16 dependent children, that were ineligible for
   coverage due to being age 26 (or older) on the dates of service. As a result, the FEHBP was
   overcharged $16,847.




                                               12                           Report No. 1H-04-00-15-053
The Plan paid      Public Law 111-148, Section 2714 extends health insurance coverage for
 claims on 16      unmarried dependent children until age 26.
   ineligible
 dependents.         Additionally, section 2.3(g) of the Contract states that “It is the Carrier’s
                     responsibility to proactively identify overpayments through comprehensive,
 statistically valid reviews and a robust internal control program.”

 Finally, section 2.3(g)(12) of the Contract states, “In compliance with the provisions of the
 Contracts Dispute Act, the Carrier shall return to the Program an amount equal to the
 uncollected erroneous payment where the Contracting Officer determines that (a) the
 Carrier’s failure to appropriately apply its operating procedure caused the erroneous
 payment ….”

 To determine if claims were paid for dependent children age 26 and older, we searched the
 claims database and identified claims paid for 41 dependent children over the age of 25. We
 asked the Plan to review and determine the eligibility status of those dependents and it
 confirmed that 16 dependents had not been properly terminated upon turning age 26 in its
 eligibility database.

 As a result of our review, the Plan stated that it identified a gap in its procedures for
 dependents added to coverage who exceeded the allowable age limits. The Plan indicated
 that it had implemented a new manual process to identify dependent children age 26 and
 older who are shown as eligible for benefits. It also states that it changed the criteria for
 reporting these overpaid claims to ensure that all claims paid after termination are captured.
 While we acknowledge the Plan’s efforts to identify these errors, a manual process is
 inadequate because it permits the payment of unallowable claims and would only identify
 those claims after payment was made.

 By not having system edits in place to automatically terminate dependents at age 26, the
 FEHBP has been overcharged $16,847.

 Recommendation 6

 We recommend that the contracting officer direct the Plan to return $16,847 to the FEHBP
 for erroneous claim payments on ineligible overage dependents.

 Plan Response:

 The Plan disagrees with this recommendation. It stated that it has made efforts to recover
 the funds through a third party recovery group and to date $57 has been recovered. Three


                                              13                           Report No. 1H-04-00-15-053
recovery letters have been sent to the members and the Plan believes that it has performed
its required due diligence in trying to recover the funds.

OIG Comments:

Although the Plan has started the recovery efforts related to the claims paid in error, it has yet
to exhaust the efforts it must undertake according to section 2.3(g) of the Contract. Section
2.3(g)(3) states that the Plan may off-set future benefit payments to the member or to a
provider on behalf of the member to satisfy the debt if it remains unpaid and undisputed after
120 days. For the members still enrolled in the Plan, this course of action should be
undertaken before any overpayments are allowed.

Additionally, the Plan is financially responsible for all claims incurred prior to
January 1, 2013 that were paid as a result of its failure to apply its operating procedures and
controls appropriately (28 claim lines, totaling $8,568). Effective January 1, 2013, the
Contract allows such overpayments after the Plan has made its due diligent effort to recover
them (Contract Section 2.3(g)(12)). It is our opinion that each of these claim errors identified
were the result of the “inconsistencies” in the Plan’s eligibility system that it stated have
since been identified and fixed.

Lastly, in should be noted that the amount originally questioned in the draft audit report
($16,845) was adjusted due to rounding problems identified in preparing this report.

Recommendation 7

We recommend that the contracting officer direct the Plan to implement system edits that
automatically identify and notify eligible dependents approaching their 26th birthday of their
pending ineligibility. Additionally, the system edits should also terminate dependents upon
reaching age 26.

Plan Response:

The Plan disagrees with this recommendation and states that prior to the OIG audit it had
identified inconsistencies in its eligibility programs related to dependents reaching 26 years
of age. As a result, it already has placed additional edits to identify all dependents over age
26 that could have questionable eligibility.

OIG Comments:

We were not provided the edits and therefore cannot make any comment regarding them.



                                             14                            Report No. 1H-04-00-15-053
3. Claims Paid to Debarred Pharmacies                                                  Procedural

   The Plan did not require the PBM to use the OPM OIG debarment/suspension list to ensure
   that payments are not made for FEHBP claims submitted by debarred providers.
   Consequently, two debarred pharmacies inappropriately received claim payments.

   5 CFR 890.1043(a) states that “A debarred provider is not eligible to          The Plan did not
   receive payment, directly or indirectly, from FEHBP funds for items or         require the PBM
   services furnished to a covered individual on or after the effective date       to utilize OPM
   of the debarment.”                                                             OIG’s debarred
                                                                                  provider listing.
   Additionally, the OPM OIG’s Guidelines for Implementation of
   FEHBP Debarment and Suspension Orders instructs FEHBP carriers to only use OPM OIG’s
   data for debarments when dealing with FEHBP members and enrollees.

   During our review of the PBM’s debarment verification process, the PBM stated that it uses
   the Department of Health and Human Services OIG’s List of Excluded Individuals and
   Entities in its system edits to ensure that payments are not made for claims submitted by
   debarred providers.

   The Plan stated that it was not aware that the PBM was not using the OPM OIG list and
   indicated that it will work with the PBM to incorporate the OPM OIG’s list into the PBM’s
   editing system.

   As a result of the Plan not requiring the PBM to utilize the correct debarment/suspension list,
   payments were inappropriately made to two debarred pharmacies.

   Recommendation 8

   We recommend that the contracting officer direct the Plan to ensure that the PBM uses the
   required OPM OIG debarment/suspension list for excluding FEHBP claim payments to
   debarred providers.

   Plan Response:

   The Plan agrees with the recommendation and states that the OIG debarred provider file
   was installed on the PBMs claims system on July 15, 2015, and that updated files are
   provided to the PBM by the Plan as they become available.




                                               15                              Report No. 1H-04-00-15-053
4.	 Override Codes Applied Incorrectly                                                Procedural

   Override codes were incorrectly applied by either the PBM or the Plan, resulting in 96 claim
   payment errors for contract years 2012 through 2014. Although the overpayments identified
   were immaterial, if the underlying cause is not corrected, significant overpayments may
   occur in the future.

   Section 2.2(a) of the Contract states that the Plan will provide benefits to its members that are
   in accordance with the benefit brochure.                                          Override codes
                                                                           incorrectly allowed
   According to the 2014 Plan benefit brochure, coinsurance on              claims to be paid
   prescriptions purchased at network pharmacies was $8 for covered       without coinsurance.
   generic drugs and 25 percent of cost for brand name drugs. 

   Coinsurance on prescriptions purchased at non-network pharmacies was 50 percent of cost. 


   During our review of retail pharmacy claim payments, we identified one claim where the 

   Plan indicated that a claim overpayment was made due to the incorrect application of a 

   coinsurance override. As a result, we selected a targeted sample to identify claims similar to 

   the one identified in error. Specifically, we selected a sample that included all claim lines 

   where a coinsurance override was present and the coinsurance amount paid was zero dollars. 

   We then reviewed the first claim line for all patients whose out of pocket expense for the 

   claim was zero dollars and who had a coinsurance override present to determine if the claims

   were paid correctly. 


   Our review determined that no coinsurance was paid by the member on 96 claim lines for 19 

   patients due to overrides being applied incorrectly, causing the amount paid by the FEHBP to 

   be overstated. Specifically, we found: 


      	 Seven patients (15 claim lines) were unable to purchase their prescriptions through
         mail order due to residing in either a skilled nursing or assisted living facility.
         Members of the Plan are subject to a retail refill allowance (RRA) penalty if they
         receive more than one refill of a maintenance medication at retail rather than mail
         order. The Plan granted an override to permit these patients to obtain medications
         from retail locations without being charged an RRA penalty.
      	 Five patients (six claim lines) were unable to purchase their prescriptions through
         mail order due to delays or the drug being out of stock. The Plan granted overrides so
         that these patients could have their prescriptions filled at a retail pharmacy and not be
         charged an RRA penalty.
      	 Three patients (63 claim lines) where neither the Plan nor the PBM have any
         information why a coinsurance override was present.



                                               16 	                         Report No. 1H-04-00-15-053
    	 Three patients (11 claim lines) requiring medications to be refilled early were granted
       these overrides due to their need (two were traveling extensively overseas).
    	 One patient (one claim line) required a one-time RRA penalty override. The Plan
       granted a courtesy override to the patient due to confusion related to a pharmacy lock.
       (Patient could only receive certain drugs from one specific pharmacy. However, the
       patient thought the lock applied to all prescription medications and could not use mail
       order.)

The PBM stated that based on the information maintained in its systems, the overrides were
applied correctly for all of the claims questioned. It did state that for most of the claim lines
(14) associated with those residing in skilled nursing or assisted living facilities, that the Plan
entered those overrides directly and not the PBM. Additionally, the PBM stated that it does
not review overrides unless directed by the Plan. The Plan stated that it does not normally
review short term or one-time overrides. However, for longer term overrides (where a
patient is in a skilled nursing or assisted living facility) the facility normally sends a letter to
advise the Plan if the patient is still in the facility and requires an override.

Apparent errors in either entering or applying overrides resulted in FEHBP claim payment
errors for contract years 2012 through 2014.

Recommendation 9

We recommend that the contracting officer direct the Plan to ensure that all overrides,
especially effecting coinsurance, are entered and applied correctly so that claims are paid
correctly. Additionally, the Plan should institute procedures to review the initial paid claims
with overrides to ensure that the coinsurance is paid correctly.

Plan Response:

The Plan agrees with this recommendation and states that it will develop procedures to
define how and why overrides may be entered and will identify a process to validate that
they are correctly applied.

PBM Response:

The PBM states that it did not receive a report to identify the overrides found in error. It
was provided a list of 81 claim examples and it identified 9 overrides that did not contain
enough detail to justify the override approval. It stated that currently all overrides are
submitted through a dedicated team to ensure consistent documentation is maintained.




                                              17 	                           Report No. 1H-04-00-15-053
     OIG Comments:

     We disagree with the PBM’s statement that it only received a list of 81 claim examples in
     relation to this finding. We sent a list of all 96 claim lines questioned in this finding on
     June 13, 2016 via email to the PBM.

     Recommendation 10

     We recommend that the contracting officer direct the Plan to obtain from the PBM a list of
     all claim overrides in place and to review those overrides to ensure that they are still
     necessary. This should be done on an annual basis.

     Plan Response:

     The Plan agrees with the recommendation and states that it will review all overrides
     currently in place and perform an annual review going forward.

C. FRAUD AND ABUSE REVIEW

  1. Fraud and Abuse Cases Not Reported by the Plan                                     Procedural

     For CYs 2012 through 2014, the Plan did not report to the OPM OIG all of the suspected
     fraud and abuse cases that were received from the PBM.

     According to Carrier Letter 2011-13, the “FEHBP Carrier Special Investigative Units
     (Carrier) are required to submit a written notification to the OPM OIG … within 30 working
     days of becoming aware of a fraud, waste or abuse issue where there is a         All suspected
     reasonable suspicion that a fraud has occurred or is occurring against the fraud and abuse
     [FEHBP]. Reportable fraud, waste or abuse issues include the                    cases were not
     identification of emerging fraud schemes; suspected internal fraud or           reported to the
     abuse by Carrier employees, contractors, or subcontractors; suspected             OPM OIG.
     fraud by providers who supply goods or services to FEHBP members; 

     suspected fraud by individual FEHBP members; issues of patient harm, and Carrier 

     participation in class action lawsuits. There is no financial threshold for these initial case 

     notifications.”


     To determine if the Plan had reported to OPM OIG all cases of suspected fraud and abuse it 

     received from the PBM, we requested that the PBM provide a listing of all FEHBP fraud and 

     abuse cases reported to the Plan during CYs 2012 through 2014. We also requested from the 

     OIG’s Office of Investigations a list of all fraud and abuses cases reported by the Plan. Our 

     review determined that the Plan did not report all potential fraud and abuse issues submitted 



                                                 18                           Report No. 1H-04-00-15-053
      by the PBM during CYs 2012 through 2014. We determined that out of 47 cases reported by
      the PBM to the Plan, only 3 were reported to OPM OIG during this time period.

      The Plan stated that beginning in February 2014, patients who were restricted to using one
      pharmacy due to drug-seeking or doctor shopping behaviors were reported to OPM. Prior to
      this time, the Plan did not identify these cases as fraud and abuse and therefore they were not
      reported to OPM OIG.

      By not reporting all potential fraud and abuse cases to the OPM OIG, the Plan adversely
      affected OPM OIG’s ability to investigate these cases and increased the risks of possible
      overcharges to the FEHBP.

      Recommendation 11

      We recommend that the contracting office ensure that the Plan has updated its policies and
      procedures so that all potential cases of fraud, waste, and abuse reported to the Plan by the
      PBM are referred to the OPM’s OIG, in compliance with the most recent FEHBP Carrier
      Letter (CL 2014-29).

      Plan Response:

      The Plan agrees with this recommendation and states that it has implemented procedures
      so that it is in compliance with the Carrier Letter.

      OIG Comments:

      We were not provided with the new procedures and therefore cannot make any comment
      regarding them.

D. HIPAA REVIEW

   The results of our review showed that the Plan and the PBM had policies and procedures in place
   to address the HIPAA Standards for Electronic Transactions, Privacy Rules and Security Rules.

E. PERFORMANCE GUARANTEE REVIEW

   1. Performance Guarantee Reporting and Penalty Payment                                   $120,000

      The PBM did not submit the required 2014 annual performance report to the Plan by the due
      date in the Agreement. Furthermore, the PBM did not timely credit the Plan $120,000
      related to a performance standard that it failed to meet in CY 2014. Additionally, the Plan


                                                  19                           Report No. 1H-04-00-15-053
  was not aware that the report was not submitted and a penalty was due until after we 

  identified the oversight in our audit. 


  Section 6.4 of the Agreement states that annual performance standards will be reported to the
  Plan within 75 business days from the close of the CY. Additionally, Section 6.6 states that
  any penalties will be credited to the Plan against the next billing following receipt of the
  annual performance report.

                    We reviewed the PBM’s performance standard reports for CYs 2012
The PBM did not     through 2014 to determine if they were calculated correctly, if the
 timely credit a    performance standards were attained, and whether any applicable penalties
  performance       were paid by the PBM. Our review found that the Claims Adjudication
 penalty to the     Accuracy Rate was not attained by the PBM in CY 2014. According to
      Plan.         Schedule F of the Agreement, the PBM is assessed a $120,000 penalty
  when this standard is not achieved.

  We requested that the PBM provide supporting documentation to demonstrate the penalty
  was credited to the Plan. We found that the $120,000 credit was not made until after we
  identified the error. According to the PBM, staffing changes in CY 2014 caused the report
  deadline of April 15, 2015, to be missed. The PBM sent the report to the Plan on
  August 15, 2015, and credited the Plan $120,000 on October 13, 2015.

  According to the Plan, it was unaware that the performance report was not submitted by the
  PBM because the manager responsible for oversight of the Agreement terminated
  employment in June 2015, and no follow-up request was made to obtain the missing report.

  As a result of staffing changes at both the PBM and the Plan, the 2014 performance standard
  report and related penalty were not conveyed to the Plan in a timely manner.

  Recommendation 12

  We recommend that the contracting officer confirm that the PBM credited the Plan $120,000
  related to performance penalties in 2014.

  Plan Response:

  The Plan agrees with the recommendation and states that a credit for the amount in

  question was applied to its October 13, 2015 invoice by the PBM. 





                                             20                           Report No. 1H-04-00-15-053
        Recommendation 13

        We recommend that the contracting officer require the Plan and the PBM to develop policies
        and procedures to ensure that the annual performance report and any associated penalties are
        submitted to the Plan within the required deadlines.

        Plan Response:

        The Plan agrees with the recommendation and states that it has put procedures in place to
        review the PBM’s performance regularly.

F.   PHARMACY REBATES REVIEW

     The results of our review showed that the PBM properly returned all pharmacy rebates due to the
     Plan in accordance with the Agreement.




                                                   21                          Report No. 1H-04-00-15-053
IV. MAJOR CONTRIBUTORS TO THIS REPORT
Special Audits Group

              , Auditor-In-Charge

             , Auditor

           , Auditor




               , Group Chief,

                  , Group Chief (former)

                 , Senior Team Leader




                                           22   Report No. 1H-04-00-15-053
APPENDICIES
                   APPENDIX A 





              Report No. 1H-04-00-15-053
                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report 


A. ADMINISTRATIVE FEES REVIEW

1. 	Unsupported Administrative Fees                                                    $595,272

                                 Deleted by the OPM-OIG
                              Not Relevant to the Audit Report 


  Recommendation 1 


  We recommend that the contracting officer and the Plan require ESHC to maintain complete
  and accurate documentation to support administrative fees and invoices billed (both the fees
  charged and quantities).

  APWU Health Plan’s Response to Draft Report

  APWU Health Plan agrees with this recommendation.

                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report 


  Recommendation 2

  We recommend that the contracting officer require the Plan to implement policies and
  procedures for reviewing ESHC’s administrative fees, including the verification of invoices to
  supporting documentation to ensuring that invoices related to the FEHBP are paid accurately
  and in accordance with the Agreement.

  APWU Health Plan’s Response to Draft Report

  APWU Health Plan agrees to review the monthly administrative fees to verify the invoices to
  supporting documentation.

B. PHARMACY CLAIM PAYMENTS REVIEW

1. Claims Paid to Debarred Pharmacies             	                                 Procedural

                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report 


                                                                          Report No. 1H-04-00-15-053
   Recommendation 8

   We recommend that the contracting officer direct the Plan to ensure that ESHC uses the
   required OPM OIG debarment/suspension list for excluding FEHBP claim payments to
   debarred providers.

   APWU Health Plan’s Response to Draft Report

   The APWU Health Plan has implemented the recommendation and ensured that ESHC is
   using the OPM OIG debarment/suspension list. As stated in the audit report, the APWU
   Health Plan was not aware that Express Scripts was using the HHS/CMS debarred provider
   file to edit claims instead of the OPM/OIG debarred provider file. Express Scripts installed
   the OPM/OIG debarred provider file for editing on July 15, 2015. Updated files are sent
   from APWU Health Plan to Express Scripts as they become available from OPM.

2. Claims Paid for Overage Dependents                                                    $16,845

                                 Deleted by the OPM-OIG 

                              Not Relevant to the Audit Report 


   Recommendation 6

   We recommend that the contracting officer direct the Plan to return $16,845 to the FEHBP
   for erroneous claim payments on ineligible overage dependents.

   APWU Health Plan’s Response to Draft Report

   The APWU Health Plan disagrees with this recommendation. The Health Plan has taken the
   appropriate due diligent steps to recover these funds as outline in the contract and is not
   required to return the $16,845 if considered unrecoverable. The APWU Health Plan has
   requested overpayment recovery for the individuals in question. The overpayments were sent
   to a third party recovery group for collection. There have been at least 3 overpayment
   recovery letters sent to these individuals since September 2015. To date the APWU Health
   Plan collected $56.65 of the Rx overpayments. The APWU Health Plan has performed due
   diligence in trying to recover these funds.

   Recommendation 7

   We recommend that the contracting officer direct the Plan to implement system edits that
   would automatically identify and notify eligible dependents approaching their 26th birthday


                                                                           Report No. 1H-04-00-15-053
   of their pending ineligibility. Additionally, the system edits should also terminate dependents
   upon reaching age 26.

   APWU Health Plan’s Response to Draft Report

   The APWU Health Plan disagrees that additional system edits are necessary because The
   APWU Health Plan has system edits in place that trigger notification to the dependent 90
   days before their 26th birthday. At that time, the future termination date is placed on the
   dependent. There were some inconsistencies to this program identified by APWU Health
   Plan prior to the OIG audit and additional edits were put in place to identify all dependent
   over 26 that could have questionable eligibility.

                                  Deleted by the OPM-OIG 

                               Not Relevant to the Audit Report 


C. FRAUD AND ABUSE REVIEW

1. Fraud and Abuse Cases Not Reported by the Plan                                      Procedural

                                  Deleted by the OPM-OIG 

                               Not Relevant to the Audit Report 


Recommendation 11

We recommend the contracting officer ensure that the Plan has updated its policies and
procedures so that all potential cases of fraud and abuse reported to it by ESHC are referred to
the OPM OIG in compliance with the most updated FEHBP Carrier Letter 2014-29.

APWU Health Plan’s Response to Draft Report

APWU Health Plan has implemented this recommendation. As stated in the audit report above
beginning in February 2014 the Health Plan starting reporting the patient restrictions to
OPM/OIG and has installed steps to be in compliance with the new CL 2014-29 issued on
December 19, 2014.

                                  Deleted by the OPM-OIG 

                               Not Relevant to the Audit Report 





                                                                             Report No. 1H-04-00-15-053
E. PERFORMANCE GUARANTEES REVIEW

1. Performance Guarantees Reporting and Penalty Payment                                         $120,000

                                    Deleted by the OPM-OIG 

                                 Not Relevant to the Audit Report 


   Recommendation 12

   We recommend that the contracting officer confirm that ESHC credited the FEHBP $120,000 related
   to performance penalties in 2014.

   APWU Health Plan’s Response to Draft Report

   The APWU Health Plan provided proof to OPM/OIG auditor that the $120,000 performance penalty
   was applied as an offset to the Express Scripts invoice on 10/13/2015. The credit reduced the amount
   of the bi-weekly payment for pharmacy claims. A copy of this transaction was provided to the
   OPM/OIG on March 25, 2016.

   Recommendation 13

   We recommend that the contracting officer require the Plan and ESHC to develop policies and
   procedures to ensure that the annual performance report and any associated penalties are submitted to
   the Plan within the required deadlines.

   APWU Health Plan’s Response to Draft Report

   APWU has implemented this recommendation. The APWU Health Plan has put a performance check
   list together for each vendor. This check list will be reviewed quarterly to determine that all vendors
   are reporting their performance timely and that penalties are paid as outline in the contracts.

                                    Deleted by the OPM-OIG 

                                 Not Relevant to the Audit Report 





                                                                                  Report No. 1H-04-00-15-053
     APPENDIX B





Report No. 1H-04-00-15-053
                                    Deleted by the OPM-OIG 

                                 Not Relevant to the Audit Report 


B. PHARMACY CLAIM PAYMENTS REVIEW (AMENDED)

  5. Override Codes Applied Incorrectly                                                  Procedural

      Recommendation 9

      We recommend that the contracting officer direct the Plan to ensure that all overrides,
      especially effecting coinsurance, are entered and applied correctly so that claims are paid
      correctly. Additionally, the Plan should institute procedures to review the initial paid claims
      with overrides to ensure that the coinsurance is paid correctly.

      APWU Health Plan’s Response to Draft Report

      APWU Health Plan agrees that it should establish procedures to ensure that all overrides
      effecting coinsurance are entered and applied correctly. The APWU Health Plan will
      develop procedures defining how and when overrides may be entered and will identify a
      process to validate correct adjudication.

      Recommendation 10

      We recommend that the contracting officer direct the Plan to obtain from the PBM a list of
      all claim overrides in place and to review those overrides to ensure that they are still
      necessary. This should be done on an annual basis.

      APWU Health Plan’s Response to Draft Report

      APWU Health Plan agrees with this recommendation. The APWU Health Plan will review
      all overrides currently in place and perform this function at least annually going forward.

  6. Pharmacy Pricing Errors                                                                  $9,954

                                    Deleted by the OPM-OIG 

                                 Not Relevant to the Audit Report 





                                                                               Report No. 1H-04-00-15-053
Recommendation 3


We recommend that the contracting officer and the Plan direct the PBM to reimburse $5,064
to the FEHBP and $4,890 to the effected Plan members.


APWU Health Plan’s Response to Draft Report


APWU Health Plan agrees with this recommendation. The Health Plan will request that the
PBM reimburse the Plan and the affected members.


Recommendation 4


We recommend that the contracting officer and the Plan direct the PBM to institute and/or
update procedures to ensure that pharmacy contract changes are entered into its claims
system so that those changes are effective on the date in the contracts with the pharmacies.


APWU Health Plan’s Response to Draft Report


APWU Health Plan agrees with this recommendation. The APWU Health Plan will direct
the PBM to implement or update procedures to ensure that pharmacy contract changes are
entered into its claims system timely.


Recommendation 5


We recommend that the contracting officer and the Plan direct the PBM to provide an
explanation as to how this error occurred.


APWU Health Plan’s Response to Draft Report


APWU Health Plan will direct the PBM to provide an explanation as to how the error
occurred.




                                                                       Report No. 1H-04-00-15-053
                                                                                       APPENCIX C





24 June 2016
1H-04-00-15-053


Group Chief Special Audits
Office of Personnel Management
Office of Inspector General
1900 E Street, NW – Room 6400
Washington, DC 20415

Dear            ,

Express Scripts, Inc. (ESI) has completed its response to the draft audit report, addendum 1H-04-00-
15-053. A response was provided to each of the OIG findings, in addition to the response from the
APWU Health Plan.

Express Scripts is committed to supporting the Prescription Drug Program for the APWU Health
Plan. We will continue to partner with the Health Plan provide resolutions to the recommendations
provided by the OIG.

Questions regarding this matter may be addressed to the undersigned at                 or via email
at          @express-scripts.com

Best regards,


Senior Manager, Government Audit
Express Scripts, Inc.




                                                                              Report No. 1H-04-00-15-053
                                    Deleted by the OPM-OIG 

                                 Not Relevant to the Audit Report 


B. PHARMACY CLAIM PAYMENTS REVIEW (AMENDED)

  5. Override Codes Applied Incorrectly                                                  Procedural

      Recommendation 9

      We recommend that the contracting officer direct the Plan to ensure that all overrides,
      especially effecting coinsurance, are entered and applied correctly so that claims are paid
      correctly. Additionally, the Plan should institute procedures to review the initial paid claims
      with overrides to ensure that the coinsurance is paid correctly.

                                    Deleted by the OPM-OIG 

                                 Not Relevant to the Audit Report 


      Express Scripts’ Response to Draft Report

      Express Scripts has not received a report to identify the overrides found in error. The OIG
      provided Express Scripts with a list of 81 claim examples between Information Requests 65
      and 66. Express Scripts identified 9 overrides that did not contain enough detail to justify
      the override approval. Currently, all client initiated authorizations are being submitted
      through a dedicated team to ensure consistent documentation of the override is retained.

      Recommendation 10

      We recommend that the contracting officer direct the Plan to obtain from the PBM a list of
      all claim overrides in place and to review those overrides to ensure that they are still
      necessary. This should be done on an annual basis.

                                    Deleted by the OPM-OIG 

                                 Not Relevant to the Audit Report 


      Express Scripts’ Response to Draft Report

      Express Scripts agrees with APWU Health Plan’s response.




                                                                              Report No. 1H-04-00-15-053
6. Pharmacy Pricing Errors                                                                $9,954

                                Deleted by the OPM-OIG
                             Not Relevant to the Audit Report


   Recommendation 3


   We recommend that the contracting officer and the Plan direct the PBM to reimburse $5,064
   to the FEHBP and $4,890 to the effected Plan members.

                                Deleted by the OPM-OIG
                             Not Relevant to the Audit Report

   Express Scripts’ Response to Draft Report


   Express Scripts will work with APWU Health Plan to reach a resolution on this
   recommendation.


   Recommendation 4


   We recommend that the contracting officer and the Plan direct the PBM to institute and/or
   update procedures to ensure that pharmacy contract changes are entered into its claims
   system so that those changes are effective on the date in the contracts with the pharmacies.

                                Deleted by the OPM-OIG
                             Not Relevant to the Audit Report

   Express Scripts’ Response to Draft Report


   A signed pharmacy contract requires an implementation period for any changes identified
   within the new contract. The pharmacy contract implementation is a commercially accepted
   process that is not exclusive to APWU Health Plan. There are a number of factors that
   impact the timing of the contract implementation. We seek to operate our business process
   as quickly and efficiently as possible. Express Scripts agrees to explore areas for
   improvement as we move to a new contracting system. As part of the current process; when
   the team receives a new request/contract, a team member will review and provide an
   analysis of the changes. The analysis period is dependent on the complexity of the contract.

                                                                          Report No. 1H-04-00-15-053
The documentation is submitted to a secondary party for Quality Review (QR). The
reviewer validates the analysis with the contract. The QR person then returns the work to
the initial team member and any needed corrections are made. The contract changes are
then submitted for update. Each month the Retail Network Triage team will pull a random
sample for additional review.


Recommendation 5


We recommend that the contracting officer and the Plan direct the PBM to provide an
explanation as to how this error occurred.

                             Deleted by the OPM-OIG 

                          Not Relevant to the Audit Report 


Express Scripts’ Response to Draft Report

Based on the standard contract implementation, an incorrect rate was not set-up for this
pharmacy. Pharmacy rates are guaranteed through an annual average rate. The
implementation period did not impact the performance guarantee for this period.




                                                                       Report No. 1H-04-00-15-053
                                                                                                                         



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                                           Mismanagement 

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                                              and operations. You can report allegations
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                                                             -- 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
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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-04-00-15-053