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Validating Coverage Gap Invoices

Validating Coverage Gap Invoices


Every quarter, pharmaceutical manufacturers participating in Medicare Part D Coverage Gap Discount Program receive Coverage Gap invoices and supporting data. The invoices contain billing errors.

Manufacturers can validate invoices and dispute the errors, but this validation requires specialized software.

Coverage Gap Program

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.

Many pharmaceutical manufacturers decided to participate in this program and signed agreements with Medicare to offer significant discounts (50%, or more) on qualified purchases of their products to address this problem.

Coverage Gap – Quarterly Processing

Each quarter, TPA provides a participating manufacturer with invoice and detail files.

The manufacturer has to pay the invoice amount in full.

The detail file, called the Manufacturer Detailed Report, contains Prescription Detail Event (PDE) records. Manufacturer can check PDE records for errors and discrepancies and submit a list of disputed PDE to the program administrator.

PDA data also help manufacturers to see a clear picture of their product utilization by states and providers.

Dispute Codes

The following codes can be currently used to validate provided PDE records:

D01 Duplicate Invoice Item
D02 Closed Pharmacy
D03 Not PART D Covered Drug
D04 Excessive Quantity
D05 Invalid Days Supply
D06 High Price of the Drug
D07 Last Lot Expiration Date
D08 Early Fill
D09 Marketing category is not NDA or BLA
D10 Invalid Date of Service (prior to 01/01/2011)
D11 Invalid Date of Service (invoiced after 17th quarter for the benefit year)
D12 Invalid Prescription Service Reference Number
D13 Gap discount for disputed PDE exceeds maximum discount amount for a single PDE
D14 Total accumulated gap discounts reported across multiple PDEs for a single beneficiary exceed cumulative maximum discount amount
D99 Other

One PDE record can have several dispute codes.

Manufacturer then submits a consolidated Dispute File to TPA.

Validation Limits and Benefits

Insufficient PDE information cannot be used to validate the following issues:

1) 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;

2) The Coverage Gap Discount Program provides discounts to those, whose expenses on prescriptions reached the third tier, “the donut hole”. The report 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;

3) 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.

However, the following codes often result in significant credits issued back to manufacturers: D02, D03, D09, D13 and D14. Out of these D13 and D14 are important, especially for expensive drugs, prescribed to chronic patients.



Manufacturer’s contribution to the Coverage Gap is 50% and growing, and so will be the amounts invoiced.

Handling of large Coverage Gap invoices require specialized software to provide validation and analytics.

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