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OIG Report Critical of P&T Committee Oversight

By Theresa C. Carnegie and Ellyn L. Sternfield

In a newly issued Report, the OIG has expressed concern regarding CMS’s lack of oversight of P&T Committee conflicts of interest. As the entities responsible for making Medicare Part D formulary decisions, P&T Committees must ensure that their decisions are made based on scientific evidence and not based on the personal financial interests of committee members.

Federal regulations require that Medicare Part D sponsors follow their P&T Committee’s decisions regarding which drugs to place on formulary.  However, sponsors ultimately can determine the tier placement of such drugs based on P&T Committee recommendations. With respect to conflicts of interest, federal laws and regulations stipulate that at least one physician and at least one pharmacist on the P&T Committee must be free of conflict relative to the Part D sponsor, Part D plan, and pharmaceutical manufacturers.

OIG's Findings

The OIG’s Report concludes that CMS has failed to ensure that P&T Committee decisions are free from conflicts of interest.  Specifically, the OIG identified the following:

  • Limited Definitions of Conflict of Interest – In surveying sponsors, the OIG found that more than half of the P&T Committees’ definitions did not address conflicts of interest prohibited by federal regulations.  In addition, P&T Committees’ definitions do not always address relationships with other entities, such as PBMs, that could benefit from formulary decisions.  Finally, more than two-thirds of P&T Committees’ definitions do not view employment by the entity that maintains the committee as a potential conflict.
  • Committee Members Allowed to Determine and Manage Own Conflicts of Interest – The majority of P&T Committees allow members to determine their own conflicts and manage them through recusal.  Many P&T Committees do not even have a process for determining conflicts or for collecting financial interest information from members.
  • Inadequate CMS Oversight of P&T Committee Conflict of Interest Compliance – The OIG determined that CMS does not monitor conflicts of interest on P&T Committees or review P&T Committee conflict of interest information reported by sponsors and PBMs.  Additionally, during 2010 CMS did not have audit protocols to audit P&T Committee member conflicts of interest.  In 2012, CMS added an optional review of P&T Committee documentation to determine compliance with federal conflict of interest requirements, but less than 10 percent of its audits included these elements.

OIG's Recommendations

To minimize the possibility that conflicts of interest may influence formulary decisions, the OIG recommends that CMS improve its oversight of P&T Committee conflicts and set minimum standards for sponsor oversight.  OIG recommends that CMS:

  • Specify that P&T Committee conflict of interest requirements extend to PBMs;
  • Require sponsors to maintain policies and safeguards applicable to P&T Committee members who are employed by the entity that maintains the Committee;
  • Require sponsors to use objective processes to determine if P&T Committee members’ disclosed financial interests do in fact constitute a conflict of interest;
  • Require sponsors to use objective processes to manage disclosed  P&T Committee members’ conflicts of interest, including specifying when the member must be recused from discussion and/or voting; and
  • Oversee compliance with P&T conflict of interest procedures, including auditing both plan sponsor P&T Committee conflict of interest determinations and management policies.   

Part D plan sponsors and their contracted PBMs should review the adequacy of their existing P&T Committee policies and procedures in light of the concerns highlighted in the OIG Report.  Sponsors and PBMs should also be prepared for additional P&T audits and enhanced requirements with respect to the reporting of P&T Committee membership data in the Health Plan Management System.

Click here to hear a podcast of Ann Maxwell, Regional Inspector General in Chicago for the Office of Evaluation and Inspections, discussing the Report’s findings and the OIG’s concerns regarding CMS’s lack of P&T Committee oversight. 


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Theresa advises clients on all aspects of the pharmaceutical supply chain, including counseling industry stakeholders on a range of business, legal, transactional, and compliance matters. She provides clients with strategic counseling and creative business modeling that considers legal restrictions and regulatory risk in light of innovation and business goals.