As of May 2019, the Medicare Fraud Strike Force has recovered $3.48 billion from fraudulent billings and indicted more than 2,800 people.

One of the areas of largest concern, according to the Department of Health and Human Services Office of the Inspector General (HHS OIG), is Medicare Part D fraud. This focused type of pharmaceutical fraud costs Americans millions of dollars each year, in addition to putting Medicare beneficiaries at risk.

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What is Medicare Part D?

Medicare Part D is an optional prescription drug benefit that beneficiaries can add to their Medicare plan. Part D came into effect in January 2006.

Private insurance companies, called plan sponsors, provide prescription drugs either directly or through pharmacy benefit managers (PBMs) or brokers. Plan sponsors then bill the Centers for Medicare & Medicaid Services (CMS) for the drugs they provide to beneficiaries.

What is Medicare Part D Fraud?

According to CMS, Medicare Part D fraud is "intentionally submitting false information to the Government or a Government contractor to get money or a benefit." It covers a wide variety of fraud schemes and related crimes designed to defraud the Medicare program.

Anyone can commit Medicare Part D fraud, waste and abuse. Beneficiaries may use drugs in an unintended way or sell them. Physicians may receive kickbacks or bribes. Pharmaceutical companies and PBMs benefit from billing for more or different prescriptions than they provide. Even unrelated people may commit Medicare Part D fraud through medical identity theft.

RELATED: What is Medicare Part A Fraud?

What's the Difference Between Fraud, Waste and Abuse?

Fraud, waste and abuse (also referred to as FWA) all get lumped together, but they're three distinct actions.

Fraud is when someone knowingly and intentionally commits an act meant to defraud the Medicare program. For example, a doctor could receive a bribe from a pharmaceutical company to prescribe their products to beneficiaries.

Waste refers to a misuse of resources (in this case, government funds) that lead to unnecessary costs. For instance, a plan sponsor or PBM may refill (and submit a claim for) a prescription refill that a patient didn't really need.

Abuse bends the rules of medical best practices, resulting in unnecessary costs to the government. It looks the same as fraud on the outside, but the perpetrator doesn't have the same knowledge or intent that they are doing wrong. For example, a pharmacist might submit a claim to Medicare when that is not the patient's primary insurance provider.

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Medicare Part D Fraud Examples

With varying levels of access to prescription drugs and Medicare claims, beneficiaries, doctors and providers commit Medicare Part D fraud in different ways.

Beneficiaries

• Drug diversion: The beneficiary fills a prescription and sells or gives the drug to others.
• Prescription drug abuse: The beneficiary takes too much of their prescription drug to "get high" or uses it in an off-label capacity.
• Doctor shopping: The beneficiary visits multiple physicians for the same condition in order to obtain multiple prescriptions of the same drug (to either use or sell).

Sometimes a beneficiary doesn't know that their information is being used to commit Medicare Part D fraud. Medical identity theft occurs when someone steals Personally Identifiable Information (PII) such as name and Medicare card number. The thief then uses the PII for either drug diversion or to sell to PBMs so they can commit fraud.

RELATED: Pharmaceutical Fraud: What is Off-Label Marketing?

Medical Practitioners

• Kickbacks and bribes: The provider receives a monetary reward from a pharmaceutical company for prescribing their product to Medicare beneficiaries.
• Unnecessary prescriptions: The provider prescribes a drug that the patient doesn't need. If the beneficiary is in on the scheme, they may sell the drug and pay kickbacks to the doctor. They may also receive kickbacks from the PBM that fills the prescription. This type of fraud is especially dangerous, as taking unnecessary drugs may make the patient sick.
• Conflict of interest: A provider has a financial interest in a facility to which he or she refers patients (a violation of the Stark Law).

RELATED: What is Medicare Part B Fraud?

Part D Sponsors (Insurance Providers) and Pharmacy Benefit Managers (PBMs)

• Billed but not dispensed drugs: The sponsor or PBM bills Medicare for a drug they didn't actually give out. The beneficiary may receive kickbacks from their physician or PBM if they obtain a real prescription from a doctor for a high-cost drug but don't fill it as part of the fraud scheme. This scheme could also include billing for prescriptions that don't exist.
• Inappropriate dispensing practices: The PBM dispenses drugs that are expired, have been tampered with, were returned by another patient or are of inferior quality (such as counterfeit) but bills Medicare for authentic drugs. They may also give or sell drugs to people without a prescription.
• Submitting claims for brand-name prescription drugs but dispensing the generic version: Similarly, the PBM might switch to a more expensive version of a drug than the doctor prescribed, e.g. capsules instead of tablets.
• Overcharging for drugs: This scheme could also include negotiating prices for drugs but charging beneficiaries the original price. In addition, the PBM may receive a manufacturer's rebate for a drug but fail to pass the savings onto beneficiaries.
• Kickbacks: The PBM offers beneficiaries a reward for switching to a drug that is covered by Medicare Part D.
• Auto-refilling fraud: The PBM refills (and bills for) a prescription that the beneficiary neither requested nor collected.

RELATED: Pharmaceutical Fraud: What are Kickback Schemes?

The OIG stresses that "Part D fraud can result in financial losses to the program and patient harm when prescription drugs are not used as intended." When doctors, sponsors, PBMs and beneficiaries commit Medicare Part D fraud, they reduce the quality of care and financially harm every American taxpayer.