Oversight absent for double-billing on multi-use drug vials

By squirreling away a few milligrams of expensive prescription drugs here and there, hospitals and doctors' offices can treat two patients with the same prescription vial yet collect payments from each patient for a full vial.

An intensive two-year investigation by HHS' Office of the Inspector General concluded in November that 77% of the time when a hospital billed Medicare for full 440 mg or 880 mg vials of Herceptin between 2008 to 2010, the patient record showed that a smaller quantity of the drug was actually prescribed. All told, those 20,000 bills accounted for $24 million in improper spending. Medicare has recovered a total of about $18 million in Herceptin overpayments since the two-year probe began.

Critics say liquid drugs such as Herceptin that are stored in vials present many billing challenges. But the CMS is resisting the call for closer scrutiny, despite indications of wider problems.

Watchdogs say expensive injectable drugs are particularly vulnerable to inaccurate billing, including cancer drugs such as Avastin, blood components such as Factor VIII and orphan drugs for rare conditions such as Cerezyme. Many can be safely preserved and used on another patient who will be charged the cost of a full vial.

There are no estimates of the total cost of improper billing for injectable drugs, but the sums can add up quickly. One provider highlighted in the OIG report received $218,486 in Medicare payments for administering 98 doses of Herceptin to a single patient, even though the patient's charts showed those payments should have been $64,552.

Private insurers and government investigators are wise to the techniques, raising the prospects of not just future government auditing but potential liability from whistle-blower lawsuits. Suzanne Durrell, a whistle-blower attorney in Boston with experience in pharmaceutical billing cases, said providers could be violating the False Claims Act if they're double billing for drug vials. “There are many temptations to maximize revenue that comes from drugs,” she said.

According to the OIG's report, hospitals involved in the incorrect Herceptin billings blamed clerical errors and inadequate billing systems. Those hospitals were not identified in the report.

Medicare has complex rules on billing for unused drugs. In 2010, the agency amended its policy so that unused quantities in single-use vials in an outpatient setting can be billed under a special code when it's documented that the remainder was discarded. That policy does not apply to leftovers from multi-use vials like Herceptin because those vials are intended to be used for multiple patients or repackaged in single-use vials inside the hospital.

Last year, drugmaker Amgen paid $762 million to resolve allegations that, among other things, it paid “liquid kickbacks” to doctors by overfilling vials of the anemia drug Aranesp with the intention that the leftovers could be used for other patients and the doctors could double bill for a vial. Amgen pleaded guilty to criminal drug misbranding but settled the remaining civil allegations without admitting wrongdoing.

The OIG has long focused scrutiny on injectable medications in Medicare's outpatient Part B program. Those drugs include anemia drug Epogen, ovarian cancer drug Doxil, and other “J-code” prescriptions, which typically are not self-administered by patients.

But CMS officials are resisting calls for a wider probe into possible overbilling for other drugs that come in vials intended for multiple uses. CMS Administrator Marilyn Tavenner said in a written response to the OIG report that Herceptin represented an “unusual situation” because of quirks in Medicare's Part B drug payment system that don't allow hospitals to bill for discarded amounts of that particular drug.

Unlike Herceptin, most injectable drugs that are reconstituted using a diluting agent end up being repackaged in single-use vials where double-billing isn't an issue. Herceptin is unusual, the CMS said, because it reconstitutes into a multi-use vial that can be preserved for 28 days. “If OIG believes there are other multi-dose vials that are subject to incorrect billing as single dose vials, CMS encourages OIG to bring them to our attention,” Tavenner wrote in response to the OIG's recommendations for greater oversight.

But some experts say a closer review of billing for high-cost J-code drugs is needed. “I would say if it is happening with Herceptin, it is happening with all chemotherapy drugs and other disease-modifying medications,” said Dr. Joel Shalowitz, a professor of medicine and health industry management at Northwestern University.

Alanna Lavelle, director of enterprise investigations at the insurer WellPoint, said one class of J-code drugs that see a lot of billing abuse are blood-clotting agents for hemophiliacs, such as Factor VIII and Factor IX, which are sold under many brand names. WellPoint sees the same type of exploitive billing practices for multi-use vials that the OIG documented, though the activity takes other forms as well.

WellPoint uses predictive analytics to analyze claims and focus investigators' attention on the most likely fraud cases. “Every night, we score 2 million claims,” LaVelle said. “That tells us who our outliers are. That doesn't mean it's fraud, but it means it's worth a closer look.”

Another phenomenon documented by private insurers is “churning,” in which patients receive diluted forms of the drug so they have to return to the clinic several times to get the full dosage. That generates additional facility payments for the provider while putting more burden on the sick patient, Lavelle said.

But finding irregularities in drug doses or clinic visits is a labor-intensive job because it requires analyzing individual patient records for dosing factors such as body mass, said Jim Sheehan, an executive deputy commissioner at the Human Resources Administration in New York City and former federal prosecutor who specialized in healthcare fraud cases.

The CMS told the OIG that “resource constraints” prevent the agency from doing such intensive case-by-case work. Follow Joe Carlson on Twitter: @MHJCarlson