Purpose

To determine whether the Department of Health paid pharmacy providers for controlled substances in compliance with the New York State Controlled Substances Act, which limits the quantities of controlled substances that pharmacies can dispense under certain circumstances. The audit covered the period January 1, 2009 through December 31, 2013.

Background

The Department of Health (Department) administers the State’s Medicaid program, which provides a wide range of health care services, including prescription drugs, to individuals who are economically disadvantaged and/or have special health care needs. The New York State Controlled Substances Act (Act), which was enacted to combat illegal use of controlled substances, limits the quantities of controlled substances that pharmacies can dispense when prescriptions are ordered via telephone or fax, due to the inherent risk of drugs ordered in this manner being diverted for inappropriate or unauthorized use. The supply limits that the Act imposes vary depending on the classification of the controlled substance. Generally, drugs that are highly prone to abuse are limited to a five-day supply, and others that carry less risk are limited to a 30-day supply.

During the audit period, the Medicaid program paid pharmacy providers through the fee-for-service method and the managed care method. Under fee-for-service, Medicaid pays pharmacy providers directly for drugs dispensed to Medicaid recipients. Under managed care, Medicaid pays managed care organizations (MCOs) a monthly premium for each recipient enrolled in the MCO. The MCO then arranges for the provision of services its members require and reimburses providers directly for services provided to enrollees. Effective October 1, 2011, most pharmacy benefits were covered by managed care.

Key Findings

• Medicaid overpaid pharmacies $1,183,601 for 13,705 fee-for-service claims, in which quantities of controlled substances exceeded supply limits allowed by the Act. In one instance, a pharmacy filled two telephone orders for alprazolam (a drug used to treat anxiety) on the same day for one recipient. Each order was filled for a 30-day supply even though telephone orders for this drug are limited to a five-day supply that can only be dispensed in emergency situations. We further determined the supporting documentation for the prescriptions did not indicate the orders were authorized for emergency purposes.
• We determined the Department’s eMedNY claims processing system does not contain edits to deny claims from pharmacies for controlled substances that exceed supply limits allowed by the Act and thus prevent improper payment.
• We also identified 3,323 managed care claims for controlled substances in which the quantities dispensed exceeded the limits set by the Act. We further identified two MCOs that, similar to the Department, do not have system edits to prevent the payment of pharmacy claims for controlled substances that exceed supply limits allowed by the Act. There is considerable risk that other participating Medicaid MCOs also do not have such controls.

Key Recommendations

• Review the improper pharmacy claims and make recoveries, as appropriate.
• Implement eMedNY edits to prevent the payment of pharmacy claims for quantities of controlled substances that exceed supply limits allowed by the Act.
• Instruct MCOs to implement controls to prevent the payment of pharmacy claims for quantities of controlled substances that exceed supply limits allowed by the Act.
• Formally remind pharmacy providers of the supply limits on controlled substances.

Other Related Audits/Reports of Interest

Department of Health: Selected Operating and Administrative Practices of the Bureau of Narcotic Enforcement (2011-S-19)
Department of Health: Controls Over eMedNY Edit Changes (2007-S-139)