Decrease Medicaid Drug Diversion in Texas

The Legislature should take steps to decrease Medicaid drug diversion in Texas as a method of reducing program costs.

The illegal diversion of prescription drugs such as morphine, cod eine and benzodiazepines (marketed under such brand names as Valium), continues to be a major challenge to federal and state efforts to combat drug abuse. The U.S. Drug Enforcement Administration (DEA) estimates that several hundred million doses of these prescription drugs are diverted to illicit use from more than 1.5 billion prescriptions dispensed annually.

One major source of this diversion is Medicaid prescriptions available through the Vendor Drug Program option in the State Medicaid Plan. This opti on permits Medicaid recipients up to three prescriptions per month and allows them a 180-day supply of each prescription unless limited by the drug manufacturers recommended dosage. Recipients in nursing homes and in the Early Periodic Screening, Diagnosi s and Treatment (EPSDT) program for minors can receive unlimited prescriptions. No identification other than a Medicaid card is required to receive these prescriptions, and people may obtain prescriptions at pharmacies for multiple parties using Medicaid c ards that do not belong to them.

DEA has documented pervasive diversion of controlled substances with a high potential for abuse or profit in illicit markets. Illicit use of Medicaid prescriptions can include personal drug abuse, purchases for friends or relatives, illegal sales to others and use of the drug to ameliorate the after-effects of illegal drugs such as cocaine. Other illicit activities related to Medicaid prescriptions may include theft of Medicaid cards, prescription of drugs by physicians or pharmacists for illegal use, prescriptions received from multiple physicians under the pretense of legitimate medical needs, prescription forgery and the theft of drugs from physicians and pharmacies.

Texas has two levels of control over Medicaid prescription drugs. One applies only to a group of drugs designated by the federal government as schedule II controlled substances, and the other covers all drugs dispensed under Medicaid.

The federal Controlled Substance Act of 1970 categorized a group of drugs as controlled substances. The drugs are divided into five schedules based on their potential for abuse, addiction and medical use. Controlled substances on schedule I, such as heroin, are considered to have no medical value and are not available for prescr iption. Those on schedule II, such as morphine and pure codeine, have a high potential for abuse but have legitimate medical uses and are legally available for prescription.

The federal government monitors the sale of controlled substances at the wholesal e and manufacturing levels. Texas is one of 11 states which has a prescription drug monitoring program that tracks the prescription, dispensing and purchase of controlled substances at the retail level.

Medicaid prescriptions are included under the monitoring programs but are not separately identified. In Texas, physicians are required to use state issued triple copy prescription forms for all schedule II controlled substances. The physician keeps one cop y, the pharmacist keeps another and a third is sent to the Texas Department of Public Safety (DPS).

DPS uses this information to monitor physicians prescription practices, pharmacies dispensing activities and individuals purchasing patterns. DPS reports evidence of illegal use to the appropriate law enforcement office and to the Attorney General s Medicaid Fraud Control Unit. While Medicaid prescriptions are not separately tracked, the program has led to a decrease both in the amounts of schedule II drugs prescribed under Medicaid and in the incidence of fraud.

Some states, such as New York, have expanded their programs to cover certain schedules III and IV prescription drugs such as benzodiazepine, which includes brand names such as Serax, Centrax, Valium, Xanax and Halcion. New York realized an estimated $27 mi llion in savings from January 1989 to December 1990 due to an approximate 55 percent decrease in benzodiazepine prescriptions after they were added to the drug monitoring program. This savings includes a 20 percent increase in the cost for non-cov ered substances that physicians may have prescribed as substitutes. 1

A number of prescription drugs commonly diverted into illegal sales are not covered under Texas schedule II monitoring system. These include Soma, a muscle relaxant; Tylenol 4, a pain reliever; Darvon, an analgesic; and the various benzodiazepines. Some o f these drugs are often used to counteract the after-effects of cocaine and crack use, while others, such as Darvon and codeine-based drugs, are frequently abused by teens.

The Texas Co ntrolled Substance Act permits agencies to petition the Commissioner of Health to add drugs to schedule II. However, this approach has proven unsuccessful in the past. The act also allows the Legislature to add drugs to the list or to include other schedul e drugs, such as schedule IV benzodiazepines, under the prescription drug monitoring program.

The second procedure for monitoring Medicaid prescription drugs is primarily based on medical standards. A Medicaid recipient can obtain up to a 180-day supply o f any prescription drug except for certain tranquilizers and H2 antagonists, which are ulcer medications.

H2 antagonists are limited to a 62-day supply because that is the manufacturer s recommended acute dosage period. After 62 days, a maintenance dose is permitted unless the prescribing doctor verifies a continued higher acute dosage rate. These medications are very expensive, so this restriction also acts as a savings mechanism. Certain tranquilizers are also restricted to a 60-day supply based on manufacturers recommended dosages. Texas could use this limitation to further restrict schedule II drugs and other drugs with a high potential for abuse. New York has limited all Medicaid-paid prescriptions for schedule II drugs to 31 days.

Under the 1990 Omnibus Budget Reconciliation Act, states must establish a Medicaid drug utilization review by January 1, 1993. The review requires both a prospective and retrospective review. Texas prospective review occurs electronically at the point of sale. Pharmacists enter the invoice on a computer directly linked to the Texas Department of Human Services (DHS). DHS will respond with verification of Medicaid coverage and information on the recipient s prior prescriptions at any of the 35,000 Medicaid pharmacies in Texas. In addition, the system also will provide medical information about possible interactions between the drug and other prescription medications the recipient takes.

Texas retrospective review, which is scheduled to begin in 1993, will take place after the sale, through a review of past payments to determine whether doctors are prescribing drugs appropriately. This review can also identify evidence of fraud.

While this system will improve monitoring efforts, it will not be sufficient to address many of the concerns surrounding Medicaid drug diversion in Texas.

A. The Legislature should mandate that benzodiazepines be added to the list of schedule II controlled substances and the triple-copy prescription monitoring program.

This recomm endation will ensure closer monitoring and increase the criminal penalty for illegal sales. To achieve the savings from this recommendation, the Legislature must reduce Medicaid appropriations by the savings amount indicated in the fiscal impact section be low.

B. The Legislature should mandate that DHS put all schedule II controlled substances and other drugs subject to illegal sale and abuse, such as benzodiazepines, under a 31-day prescription restriction.

This will provide an additional level of control to reduce chances of abuse and illegal sales of these drugs.

C. The Legislature should consider placing other frequently abused drugs on the schedule II list.

A recent study by New York indicates that prescription drugs are frequently abused by young teens.

D. The Legislature should mandate that a signed picture identification and a Medicaid card be required to receive an adult prescription except in cases in which a person is too ill or otherwise unable to pick up their own prescription. In those cases, the person picking up the prescription for them must present a note along with a signed identification card of the person receiving the prescription and the Medicaid card. The pharmacist should compare the signature on the identification with the ca rd and the note.

This would prevent individuals from using multiple Medicaid cards or cards that do not belong to them to fill prescriptions illicitly.

These recommendations would reduce the diversion of Medicaid prescription drugs into illicit markets, improve identification and deterrence of fraud in the Medicaid Vendor Drug Program and save taxpayer dollars.

Fiscal Impact
The fiscal impact calculated below is for the addition of benzodiazepines to Texas drug monitoring program. The estimates below were based on New York s experience and controlled for differences in program size. The state should experience net savings of about $2.5 million in fiscal 1994 and $12.7 million over the five-year period. The recom-mendation also would save the federal government $5 million in fiscal 1994 and $24.8 million over the five-year period.

Although the other recommendations would generate cost savings, insufficient data exist to determine the amount. To the extent that they save costs, approximately 36 percent would accrue to the state and 64 percent would accrue to the federal government.

Savings to the Net Savings to the
Fiscal General Revenue Administrative General Revenue Reduced Cost to Change in
Year Fund 001 Costs Fund 001 Federal Funds FTEs

1994 $2,822,000 $282,000 $2,540,000 $4,967,000 0
1995 2,822,000 282,000 2,540,000 4,967,000 0
1996 2,822,000 282,000 2,540,000 4,967,000 0
1997 2,822,000 282,000 2,540,000 4,967,000 0
1998 2,822,000 282,000 2,540,000 4,967,000 0

1 U.S. General Accounting Office, Prescription Drug Monitoring: States Can Readily Identify Illegal Sale and Use of Controlled Substances (Washington, D.C.: Superintendent of Documents, July 1992), p. 1.
2 Ibid., p. 3.
3 Ibid., p. 9.