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Coverage Gap Discount Program Software

Prepared by Dr. Alexander Werner. KB# CGDP.

1. Introduction

Coverage provided by the Medicare Part D program is based on the amount spent by a beneficiary on prescription medications. The program operates with four tiers of the amount spent, and the percentage of reimbursement for the expenses within the tier varies from 0% to 95%.

For the first tier, when the amount spent in below deductible (currently $295), and for the third tier (currently $2,700 – $6,154) all expenses are out-of-pocket for the beneficiary, with 0% reimbursed. Because of that, the third tier is often referred to as a “donut hole”. Many patients, whose expenses reached that third tier opted to either change the medications, or to stop the treatment altogether. Individual health plans offer some assistance for those struggling with the “donut hole” but they charge much higher premiums.

Medicaid Part D Coverage Gap Discount Program (CGDP) uses public and private money to offer discounts to those who happen to hit the third tier, in order to make the drugs more affordable for more Americans, especially ones with chronic illnesses. Many pharmaceutical manufacturers decided to participate in this program and signed agreements with Medicare to offer significant discounts (50%) on qualified purchases of their products to address this problem.

Going forward, pharmaceutical manufacturers need to make sure that they are invoiced for the accurate amount due. Let us review which types of disputes CMS recognizes and see which aspects of validation can or cannot be implemented by the Coverage Gap Discount Program software.

2. Operating Procedure

At the end of each quarter, the Third Party Administrator, Palmetto GBA LLC, sends to each program participant several files, containing: 1) total amount invoiced for the quarter; 2) the detailed records, proving that amount; 3) Part D sponsors banking information.

Received files have to be imported into CGDP software and reconciled. If the amounts match, the payment should be made and payment confirmation file submitted to TPA.
While importing the files, a special care should be taken to convert numbers from EBCDIC format into a regular one. This conversion requires replacing non-numeric characters in numeric fields with properly signed digits according to the Signed Overpunch rule, see Overpunch Rule.

After the files are imported, the lines of the Manufacturer Detailed Report need to be investigated for errors and discrepancies. The list of currently available dispute code reasons is shown below. For each disputed line, manufacturer may bring several supporting fields, like references, dates or additional info. Each detailed line can be disputed with several reason codes, where appropriate.

Dispute Code List

Dispute Code Description Automated Generation
D01 Duplicate Invoice Item Yes – within the same qualifier
D02 Closed Pharmacy Yes – provided the list of closed pharmacies is supplied
D03 Not PART D Covered Drug Explanations for CMS for the products with changed classification will be unique for each NDC
D04 Excessive Quantity Business rules defining the volume when the quantity dispensed is recognized as Excessive have to be developed
D05 Invalid Days Supply Business rules defining the maximum allowed days supply have to be developed for each NDC
D06 High Price of the Drug Yes
D07 Last Lot Expiration Date Yes
D08 Early Fill Yes
D09 Marketing category is not NDA or BLA Explanations for CMS may be unique for each NDC
D10 Invalid Date of Service (prior to 01/01/2011) Yes
D11 Invalid Date of Service (invoiced after 17th quarter for the benefit year) Yes
D12 Invalid Prescription Service Reference Number Yes
D99 Other No
When validation is complete, all records with errors are marked with one of more reason codes and the supporting fields are filled in, manufacturers need to create a dispute file with all the errors and to submit it to TPA for re-valuation.

Limited information passed to the manufacturers does not allow reviewing all aspects of the product usage and the pricing. The following potential issues cannot be validated by the Coverage Gap Discount Program Software based on the information provided by CMS:

Service providers can use up to five qualifiers of their ID: National Provider Identifier, UPIN, NCPDP Provider ID, State License and Federal Tax Number. Technically, the same prescription can be submitted up to five times under different qualifiers without being detected as duplicates by the manufacturers;

The Coverage Gap Discount Program provides discounts to those, whose expenses on prescriptions reached the third tier, “the donut hole”. The report R*.RPT.MANUF_DETAIL given to manufacturers does not show the amount spent by the beneficiary on the plan, and, generally speaking, manufacturers may end up paying for those outside of the required tier;

Pricing utilized by CMS on NDC level on a number of occasions happened to be much higher, than the reported average price of that product sold either directly, or indirectly, or AMP reported for the invoiced period. The program expects manufacturers to pay for 50% of the price negotiated between a Part D sponsor and a pharmacy. Manufacturers do not have access to that price.
These issues were listed separately, because their detection requires either reliance on data available to CMS only, and yet they are not included explicitly into the list of offenses watched by CMS, see CMS manual, though addressed later in the Appeals Guidance.

Manufacturer has sixty day to process invoice and to make a payment to the program sponsors. Payment confirmation file, outlining payments made for each contract and each labeler, has to be created and passed to TPA.

Relasoft developed a Coverage Discount Gap Program Software taking care of all the tasks listed above and deployed it for some manufacturers, including major ones. The program is kept up-to-date with the latest changes in specifications for the CGDP files and interfaces, and does everything currently outlined. The program is easy to setup and to use, processing invoices takes minutes and disputes discovery is automated where possible.

3. Conclusion

Considering the significant percentage of discount – 50% – contributed by the pharmaceutical manufacturers to the Coverage Gap Discount Program, the adequate importance has to be given to careful validating invoices coming from CMS to prevent overpayment. CMS provides dispute codes to correct billing errors. Some errors can be detected based on the information, provided by CMS, and some can not. CGDP software by Relasoft automates all possible steps to ensure that correct amount due becomes known in a timely manner.

Alexander Werner, Ph.D, is a founding partner and the chief software architect for Relasoft Solutions Inc, the company specializing in software for Healthcare Management industry. Relasoft main product Pharma Suite includes modules to process several typical tasks in the pharmaceutical environment: Chargebacks, Rebates, MDRI and Coverage Gap Discount program for Medicaid, Sales Commission, Business Intelligence and reporting systems.

Here are the links for more info on Pharma Suite and to contact Alexander.

Relasoft Solutions Inc is a software boutique.
Ready to work with us? Contact us for more information today!

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