Medco Health Solutions, Inc. - Contract No. 00077345

May 31, 2016

2014-15043

Audit

As part of the OIG's annual audit plan, we audited $172.6 million in costs billed to the Tennessee Valley Authority (TVA) by Medco Health Solutions, Inc. (Medco), for prescription drug benefits services from January 1, 2012, through December 31, 2013, under Contract No. 00077345. The contract required Medco to provide a fully integrated prescription drug program that would include retail pharmacy, mail order pharmacy, and specialty drug pharmacy services. In summary, we determined Medco overbilled TVA $562,498 and overbilled program participants $121,048 because Medco did not use the contractually defined methodology for pricing certain claims. Medco also overbilled TVA $106,788, including (1) $50,000 for performance standard penalties not paid to TVA, (2) $38,815 for ineligible claim dispensing fees, (3) $13,820 in duplicate claim costs, and (4) $4,153 in ineligible utilization management fees. Medco issued a $50,000 credit to TVA for the performance standard penalties on October 19, 2015. In addition, we noted instances of inadequate contract administration. Specifically, we found Medicare eligible individuals were enrolled in the Commercial account, rather than the Medicare Supplement account, which we estimated has cost TVA up to $200,420 in federal subsidies. We also determined TVA did not perform any independent analyses to verify Medco had achieved the contractually defined operational and pricing guarantees.(Summary Only)

Yes

Yes (agency-wide)

$0

$0