By Dr. Robert Haskey, M.D., F.A.C.S, Chief Medical Officer

Pharmaceutical reimbursement is a high-stakes process that demands accuracy at every step. However, the intricate web of coverage policies, coding protocols and administrative systems creates opportunities for costly errors and inefficiencies. When mismatches occur, the consequences ripple across the healthcare ecosystem: denied claims, financial burdens on patients and misallocated resources for providers. 

These pressing challenges beg the question: what can be done to ensure reimbursement processes are accurate? Let’s dive into the root causes of reporting mismatches and actionable solutions to address them. 

The Challenges of Pharmaceutical Reimbursement 

Pharmaceutical reimbursement might appear straightforward, governed by defined benefit structures and standardized coding systems. However, factors like coverage definitions, distribution points, coding limitations and patient diagnoses introduce layers of complexities that can complicate the reimbursement process. 

For instance, when a drug is approved by the FDA for one use but widely recognized in scientific literature for another off-label use, determining coverage becomes significantly more complicated. 

To establish whether a pharmaceutical is a covered benefit and if reimbursement is justified, it is essential to connect the dots between member contracts, pharmacy claims and patient diagnoses. This is where reporting errors often emerge—if the intent behind the drug’s use is not accurately captured, health plans face the risk of approving claims that should not be reimbursed, or worse, missing legitimate claims. 

The Fundamentals of Pharmaceutical Reimbursement 

For reimbursement to occur, several conditions must be met: 

1. Prescription Requirement: A licensed healthcare provider must prescribe the medication for a specific medical issue. 
2. FDA Approval: The pharmaceutical must have FDA approval for the condition being treated. In some cases, off-label use supported by scientific literature may be acceptable. 
3. Administration Guidelines: Certain drugs, particularly injectables or infusion medications, require administration by a healthcare professional in a controlled setting, such as a clinic or home infusion service. 
4. Reimbursement: After the medication is provided, the reimbursement process starts. The health plan has contracts defining coverage for members and reimbursement terms with providers. The member contract outlines covered items, while the provider contract specifies reimbursement rates. 

Two primary coding systems, the National Drug Code (NDC) and the Healthcare Common Procedure Coding System (HCPCS), report essential details about the drug, such as its manufacturer and dosage. However, these codes do not indicate the drug’s intended use—a critical factor when a single drug serves multiple purposes. Additionally, coding errors often stem from a mismatch between the FDA-approved use and off-label prescribing, which compounds the challenge. 

The High Stakes of Reporting Errors 

The reporting process varies depending on the administration setting. Injectable medications administered in clinical settings require detailed claims with NDC, HCPCS and ICD-10-CM diagnosis codes. In contrast, retail pharmacy claims typically lack diagnosis codes, creating opportunities for significant reporting mismatches. 

In 2023, total U.S. pharmaceutical spending reached $722.5 billion, with $434.1 billion—over 60%—spent on 4.83 billion retail pharmacy prescriptions. The sheer volume of retail prescriptions, coupled with the lack of diagnosis details in claims, increases the risk of errors and potential misuse. 

GLP-1 Agonists: A Case Study in Complexity 

Pharmaceutical reporting complexities come into sharp focus when examining glucagon-like peptide-1 (GLP-1) receptor agonists. These drugs, such as semaglutide (marketed as Ozempic, Rybelsus and Wegovy) and tirzepatide (Mounjaro), are FDA-approved for both type 2 diabetes management and weight loss— each with unique dosing schedules, application intentions and coding requirements. For instance, Ozempic was initially approved for diabetes management, and its oral form, Rybelsus, followed suit in 2019. Weight loss observed in patients using these drugs led to off-label use, prompting the FDA to approve Wegovy for weight loss in 2021.  

For health plans, distinguishing between these uses is crucial, as diabetes management is often covered, but weight management may not be, or could be subject to specific criteria. This makes accurate coding and reporting essential, as off-label prescriptions for weight loss could lead to inappropriate claims and reimbursement issues. 

Additionally, retail pharmacy claims typically lack diagnosis codes, complicating efforts to verify whether the drug’s use aligns with FDA approval and coverage policies. Accurate reporting requires matching the right ICD-10-CM codes to the condition being treated—whether it’s diabetes (E11.xxx), pre-diabetes (R73.0), or weight management (E66.0-E66.9). Without these details, health plans may struggle to determine whether the reimbursement is valid under the patient’s benefits. 

How to Address and Detect Claim Discrepancies 

Errors and abuse in pharmaceutical claims often stem from mismatches between the intended use of a drug and its coding. These mismatches are particularly problematic when a medication is prescribed for an off-label use that does not align with the approved indications in the member’s contract or the health plan’s coverage policies. 

Retail pharmacy claims, which typically lack diagnosis codes, further complicate this issue because they make it difficult to assess the appropriateness of the drug’s use. Without a corresponding diagnosis, health plans are left without a clear way to verify if the reimbursement aligns with the intended purpose of the drug. 

To effectively identify such mismatches, a multifaceted approach is needed. Here are key strategies for detecting and addressing claim discrepancies: 

• Cross-reference multiple claims: Linking prescription claims with medical claims helps verify if a drug was used according to its approved or authorized off-label use.
• Implement utilization management strategies: Tools like prior authorization and step therapy ensure that medications are prescribed according to health plan guidelines. 
• Analyze population-level data: By examining trends and outliers in claims data, health plans can identify potential misuse or systemic issues. 
• Verify diagnosis codes and drug use: Ensure the correct ICD-10-CM codes are applied to match the drug’s intended use, preventing incorrect reimbursements. 

By combining these strategies, health plans can not only identify discrepancies but also prevent future errors. It’s about creating a robust system that integrates data from multiple touchpoints—prescription records, claims, patient diagnoses—and applies stringent checks to ensure that all claims are legitimate. 

Through diligent oversight and strategic data analysis, health plans can protect themselves from costly errors, optimize their reimbursement processes and ensure that patients receive the appropriate medications and care. 

As healthcare continues to evolve, the focus must remain on building transparent and reliable systems that safeguard all stakeholders—patients, providers and payers alike—ensuring that reimbursement reflects the appropriate and intended use of medications.