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Bop Ig Report on Pharmaceutical Costs, 2005

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AUDIT OF THE FEDERAL BUREAU OF
PRISONS PHARMACY SERVICES
U.S. Department of Justice
Office of the Inspector General
Audit Division
Audit Report 06-03
November 2005

AUDIT OF THE FEDERAL BUREAU OF PRISONS
PHARMACY SERVICES
EXECUTIVE SUMMARY
The Federal Bureau of Prisons (BOP) is faced with a significant
challenge in providing adequate and cost-effective medical care to inmates
because of the rising federal inmate population and the increasing cost of
prescription medications. The BOP’s total health care costs for treating
inmates increased from $412.65 million in FY 2000 to $623.52 million in
FY 2004, an average annual increase of about 11 percent. During that same
period, the BOP’s costs for prescription medications and related supplies
increased an average of 23 percent annually, from $22.51 million in FY 2000
to $50.73 million in FY 2004. Additionally, the cost of prescription
medications and related supplies has continued to account for a growing
share of the BOP’s total health care costs, rising from 5.5 percent in FY 2000
to 8.1 percent in FY 2004.
The Department of Justice (DOJ) Office of the Inspector General (OIG)
conducted this audit to:
•

evaluate the BOP’s efforts to reduce increasing costs of its prescription
medications;

•

assess whether the BOP ensures adequate controls and safeguards
over prescription medications; and

•

assess whether the BOP pharmacies are in compliance with applicable
laws, regulations, policies, and procedures.

During the audit, we conducted work at the BOP headquarters and
12 BOP institutions, consisting of 4 Federal Correctional Institutions (FCI),
3 United State Penitentiaries (USP), 1 Federal Prison Camp (FPC),
1 Administrative Maximum Security (ADX), 1 Federal Transfer Center (FTC),
and 1 medical center as shown in Figure 1.

FIGURE 1.

BOP INSTITUTIONS AUDITED

Institution
Alderson FPC
Atlanta USP
Atwater USP
Danbury FCI
Florence ADX
Florence FCI
Florence USP
Forrest City FCI (Low)
La Tuna FCI
Oklahoma City FTC
Oxford FCI
Springfield Medical Center

Location
West Virginia
Georgia
California
Connecticut
Colorado
Colorado
Colorado
Arkansas
New Mexico
Oklahoma
Wisconsin
Missouri

Background
Health care costs consist of many different components. In 2002 the
three largest components were hospital care (31 percent), physician and
clinical services (22 percent), and prescription medications (11 percent). Of
these components, prescription medication costs have grown at the fastest
rate, increasing by 167 percent from 1995 to 2002. Two significant factors
related to the rise in prescription medication costs are increased price and
increased usage. From 1995 to 2002, the Consumer Price Index for
prescription medications and medical supplies increased by 35 percent, while
the Consumer Price Index for the United States, on average, increased by
only 18 percent. Additionally, the number of individuals reporting that they
had taken at least one prescription medication in the month prior to the
survey increased from 39 percent in 1988 through 1994, to 44 percent in
1999 through 2000.1
As of July 2005, the BOP was responsible for the custody and care of
approximately 182,000 federal offenders. The BOP consisted of
106 institutions, 6 regional offices, a central office, 2 staff training centers,
and 28 community corrections management offices.

1

Department of Heath and Human Services, National Center for Health Statistics,
Health, United States, 2004.

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The BOP’s daily prescription medication cost was $0.92 per inmate in
FY 2004, an increase of 5 percent from FY 2003, and 79 percent from FY
2000. The BOP attributes the increase in its prescription medication costs to
various reasons, including the: (1) increase in inmate population, and
(2) increasing prices of prescription medications as shown in Figure 2.
CHANGES IN PRESCRIPTION MEDICATION COSTS
AND INMATE POPULATION2

35

%

40%

%

35%

%

27

%

%
11
7%

/A
N

5%
0%

10

%

%
6%

10%

11

15%

7%

20%

20

25%

13

P e rce n t

30%

2000-2001

2001-2002

2002-2003

2%

FIGURE 2.

2003-2004

Years
Change in Consumer Prescription Drug Costs
Change in the BOP Prescription Drug Costs

Change in the BOP Inmate Population

Source: Inmate population and prescription medication costs provided by the BOP;
consumer costs obtained from the U.S. Statistical Abstract 2004-2005.

In an effort to reduce prescription medication costs, the BOP is
planning to or has implemented the following proposals:
•

Levels of Care – through Levels of Care, BOP institutions will be
classified based on the level of medical care required by the inmates.
The classification will include four levels based on the severity of
inmates’ medical needs, with Level 1 consisting of healthy inmates and
Level 4 consisting of inmates at one of the BOP’s six medical centers.
In turn, the BOP plans to reorganize the staffing of its pharmacies to
reflect the medical classification of its institutions.

•

Central Fill – through Central Fill, pharmacists at BOP institutions will
review prescriptions to ensure an inmate is not allergic to a
medication, and that a medication does not negatively interact with an
2

Due to the availability of data, the data for the Change in Consumer Prescription
Drug Costs is based on the calendar year, while the Change in the BOP Inmate Population
and the Change in the BOP Prescription Drug Costs are based on fiscal year.

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inmate’s current prescriptions or medical condition. The pharmacist
will then transmit the prescriptions electronically to the Department of
Veterans Affairs (VA) Centralized Mail Outpatient Pharmacy Center in
Dallas, Texas. The VA will fill the prescriptions and mail them
overnight to the institution.
•

Central Processing – through Central Processing, institutions that do
not have a pharmacist on site will be able to electronically transmit the
inmate’s prescriptions to a central location, where BOP pharmacists
will review them for contraindications and then transmit them
electronically to Central Fill.3

•

Electronic Medical Records System – through an electronic medical
records system, BOP pharmacists will be able to access the inmate’s
medical information from any location, thus allowing them to conduct
a complete review of inmate prescriptions to check for any
contraindications. In addition, the system will allow for prescriber
order entry, so that physicians can electronically enter prescriptions
into the system.

•

Over-the-Counter (OTC) Policy – the OTC policy outlines the
requirements that each BOP institution, except medical centers, must
follow when using OTC medications for the treatment of inmates. The
BOP’s OTC policy requires that inmates who complain about cosmetic,
general hygiene issues, or symptoms of minor ailments should be
referred to the commissary where they can purchase OTC medications
with their own funds.

Summary of OIG Findings
Our audit concluded that, the BOP has not adequately assessed the
budgetary impact of its initiatives to reduce increasing costs for prescription
medications. As a result, future initiatives may result in increased, rather
than decreased costs. We also found that the BOP’s cost-benefit analysis for
its Central Fill proposal contained errors and incorrect assumptions that may
result in increased prescription medication costs rather than savings. We
also found that the BOP needs to improve efforts to reduce prescription
medication costs associated with waste and ensure that cost savings
initiatives such as the OTC policy are fully implemented.
3

Contraindications include drug to drug, drug to disease, and drug to food
interactions; therapeutic duplications; allergies; therapeutic inappropriateness;
inappropriate doses; incorrect duration of therapy; and adverse drug reactions.

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Cost Savings Initiatives
The BOP completed a cost-benefit analysis of its Central Fill proposal in
March 2004, to estimate the impact on the BOP’s prescription medication
costs. Based on its cost-benefit analysis, the BOP estimated that Central Fill
will result in a savings of $1.14 million per year. However, based on our
analysis, we concluded Central Fill may cost the BOP as much as
$895,016 more per year, as shown in Figure 3.
FIGURE 3. SUMMARY BOP AND OIG COST-BENEFIT ANALYSIS
BOP Original

OIG Analysis

Difference

$4,943,349
2,385,786
173,250
239,250
$7,741,635

$1,969,371
577,360
96,277
132,954
$2,775,962

($2,973,978)
(1,808,426)
(76,973)
(106,296)
($4,965,673)

Annual Costs:
Rx Fee
Shipping
Information Technology
Total, Annual Gross Costs

$5,600,000
1,000,000
4,000
$6,604,000

$3,111,978
555,000
4,000
$3,670,978

($2,488,022)
(445,000)
--($2,933,022)

NET IMPACT (Savings - Costs)

$1,137,635

($ 895,016)

($2,032,651)

Annual Savings:
Gross Purchase Savings
Waste
Vials
Labels
Total, Annual Gross Savings

Source: BOP and OIG survey and analysis

As shown in Figure 3, the BOP estimated that Central Fill would result
in gross annual savings of $7.74 million, annual costs of $6.6 million, and
annual net savings of $1.14 million. Based on our analysis, the BOP may
have overstated annual gross savings by $4.97 million and annual gross
costs by $2.93 million, resulting in overstated annual net savings of
$2.03 million. Specifically, we found that:
•

The data used by the BOP to calculate the gross purchase savings of
$4.94 million included two errors that resulted in overstated savings
of $2.3 million.

•

The BOP’s analysis used to calculate gross purchase savings also
incorrectly assumed that all institutions will use Central Fill for
100 percent of prescription medications, resulting in additional
overstated savings of $0.67 million.

•

The BOP estimated savings of $2.39 million from the reduction of
waste of prescription medications. However, based on our survey of
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BOP pharmacists, we estimated savings related to waste of only
$0.58 million, resulting in overstated savings of $1.81 million.
•

The BOP estimated that Central Fill will reduce the costs related to
vials and labels by $0.41 million per year. However, this figure was
based on the incorrect assumption that all institutions will use Central
Fill for 100 percent of prescription medications, resulting in overstated
savings of $0.18 million.

•

The BOP estimated that VA fees for filling prescriptions would cost
$5.6 million annually. However, this estimate was also based on
100 percent usage of Central Fill for prescription medications,
resulting in overstated costs of $2.49 million.

•

The BOP estimated costs of $1 million annually for shipping.
However, this estimate was based on 100 percent usage of Central Fill
for prescription medications, resulting in overstated costs of
$0.45 million.

In summary, the BOP’s cost-benefit analysis for its Central Fill proposal
includes several errors and incorrect assumptions. As a result, the BOP’s
estimate that Central Fill will result in net annual savings of $1.14 million is
incorrect. Based on our analysis, we found that Central Fill may actually
increase prescription medication costs by approximately $900,000 per year.
Therefore, it is essential that the BOP has an accurate understanding of the
budgetary impacts of the Central Fill proposal before proceeding with
implementation.
We also concluded that the BOP needs to improve efforts to reduce
prescription medication costs associated with waste. Based on the
responses to our survey of BOP pharmacists, we found that prescription
medication costs associated with waste were estimated at $2.81 million in
FY 2004, or 5.54 percent of the BOP’s total prescription medication costs.
Based on the results of our pharmacist survey, the transfer of inmates
is the largest reason for prescription medication waste, accounting for an
estimated $1.05 million in FY 2004. Waste from inmate transfers results
from the fact that all inmates who are transferred receive a 7-day supply of
their prescription medications regardless of whether or not the inmate
already has a sufficient supply. In addition, there is currently no BOP
requirement that prescription medications already in the inmate’s possession
are transferred with the inmate. As a result, when inmates are transferred
their prescription medications are often left in the inmate’s cell or locker and

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must be disposed of because the pharmacy cannot reuse medication once it
has been in an inmate’s possession.
Confiscations during searches of inmates’ cells were the second largest
reason for prescription medication waste based on our pharmacist survey,
accounting for an estimated $1.02 million in FY 2004. Waste from
confiscations was generally related to the BOP’s policy prior to
January 15, 2005, that prescriptions could only be valid for a total of
90 days (30 days with 2 refills). Therefore, expiration dates on prescription
labels indicated 90 days or less, even though the medication may still be
valid according to the manufacturer’s expiration date. During searches of
inmates’ cells, if correctional officers find a prescription medication that is
past the expiration date on the label, the medication is confiscated and
frequently thrown away. In our survey, BOP pharmacists noted that if
correctional officers were instructed to return confiscated prescription
medications to the pharmacy, some of the medications could be reissued to
the same inmates. In addition, this would assist the pharmacists in tracking
inmate prescription medication usage.
In an effort to reduce prescription medication waste and save
pharmacist time, the BOP issued the OTC Medication Program Statement on
November 17, 2004. The BOP’s OTC policy requires that inmates who
complain about cosmetic, general hygiene issues, or symptoms of minor
ailments should be referred to the commissary where they can purchase
OTC medications with their own funds. However, based on our review of
12 BOP institutions and our pharmacist survey, we found that the OTC policy
has not been fully implemented or consistently applied throughout the BOP
institutions. Specifically, our survey found that, as of April 2005, 35 percent
of the respondents stated that the OTC policy had not been implemented at
their institution. Additionally, 43 percent of the survey respondents stated
that they had been told by medical staff to provide OTC medication to an
inmate even though it was either not medically necessary or could be
obtained from the commissary by the inmate.

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Controls and Safeguard over Prescription Medications
Our audit found that, the BOP is not adequately accounting for and
safeguarding prescription medications. As a result, the BOP could not
account for 1 percent of the controlled substances that should have been on
hand at the time of our inventory at the institutions included in our audit.
However, unaccounted for controlled substances within institutions identify
issues related to internal controls that undermine the accounting and
safeguarding of prescription medications. In addition, we noted numerous
errors related to controlled substances inventory and administration records.
For instance, quarterly inventories submitted to BOP headquarters did not
always include all controlled substances. We also found the BOP has not
implemented adequate internal controls related to the purchasing, ordering,
receiving, payment, and dispensing of prescription medications.
At each of the institutions included in our review, we conducted an
accountability audit of controlled substances. The accountability audit
consisted of a physical count of controlled substances at the time of our visit
and a review of all mainstock and substock records4 for the 1-year period
prior to our audit, including an analysis of documentation related to
purchases, disposals, administrations, and transfers.5 As a result of our
audit, we identified 402 unaccounted for doses of controlled substances out
of a total of 42,125 that should have been on hand at the time of our
inventory at the 12 institutions audited.
Additionally, we found numerous errors in the controlled substances
inventory records, which based on the inventory records alone appeared to
result in unaccounted-for controlled substances. However, we were able to
resolve these discrepancies by reviewing additional documentation.
Specifically, we identified approximately 400 inventory recordkeeping errors
related to: (1) transfer location was not identified in the mainstock or
substock inventory; (2) no amount administered or an incorrect amount
administered was entered into the usage column; and (3) the administration
was entered as a “floor charge” rather than to a specific inmate, identified by
inmate name and number. We also identified approximately
4

Mainstock consist of the bulk inventory of controlled substances. The mainstock
inventory is used to account for all purchases, disposals, and transfer to substocks. The
substock consists of a smaller number of controlled substances dispensed from the
mainstock and is used to administer medications to inmates on a daily basis.
5

At the Springfield Medical Center, we judgmentally selected a sample of
nine controlled substances, and only reviewed a 7-month period because of the large
volume of use at the institution.

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800 recordkeeping errors related to missing information, including inmate
names, inmate numbers, prescription numbers, dates, and times that
medications were administered.
In addition to conducting an accountability audit of controlled
substances, we selected a total of 245 controlled substances administered to
inmates from the Proof of Use sheets and compared the information to the
inmate’s Medication Administration Record (MAR) to verify that the inmate
received the medication.6 Based on our review, we found that 25 percent of
the controlled substance administrations selected: (1) were not available for
review due to missing MARs, (2) were not signed off by the person who
administered the medication, (3) included the wrong dosage, or (4) did not
include a prescription for the medication administered.
We also found that quarterly inventories submitted by BOP
pharmacists to BOP headquarters did not always include all controlled
substances. Specifically, we identified controlled substances at three of the
institutions that should have been included with the mainstock in the
quarterly inventory. We also found that 10 out of 12 institutions audited did
not include controlled substances substock in their quarterly inventories.
Pursuant to BOP policy, the institutions are only required to include
mainstock in the quarterly controlled substances inventories; however,
federal regulations require all controlled substances be included in the
inventories required by the Drug Enforcement Administration (DEA).
Further, given the numerous recordkeeping errors related to controlled
substances noted in this report, in our judgment it is important that a
complete accounting of all controlled substances is conducted on a quarterly
basis.
We identified inadequate internal controls related to purchasing of
prescription medications, including ordering, receiving, and payment. At
each institution audited, we did not find any evidence of segregation of
duties related to purchasing of prescription medications. At most institutions
the person who ordered the prescription medications was the same person
who received and inventoried the shipment, and signed off on the invoice
before it was submitted to the business office for payment. The BOP
currently does not have a national policy related to internal controls over the
purchasing of prescription medications, and relies on each institution to
6

Proof of Use sheets are logs that track substock inventory and include an inmate’s
name and number, quantity issued, date and time, and person administering the
medication. MARs are individual inmate records used to track the receipt of medication and
include an inmate’s name and number, prescription medication name, strength, quantity,
date, time, and person who administered the prescription medication.

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develop and implement its own policies and procedures. The lack of internal
controls resulted in a Chief Pharmacist being able to fraudulently purchase
30,600 doses of prescription medications between July 2002 and February
2004 for his personal consumption.7 This cost the BOP approximately
$1,567, with a retail value of approximately $28,700.
Pharmacy Compliance
We found that the BOP pharmacies were not always in compliance with
applicable BOP policies and procedures regarding the dispensing and
administering of prescription medications. At the 12 BOP institutions
included in our audit, we reviewed 1,107 prescriptions, including 488
prescriptions for controlled substances, and found that 384 (35 percent) of
the prescriptions reviewed were not in compliance with BOP policy.
Specifically, we found:
•

206 prescriptions for which the pharmacist’s review for
contraindications was not documented,

•

54 controlled substance prescriptions for which the prescription
forms were missing a DEA registration number or required
signature,

•

31 prescriptions for non-formulary medications for which the
required waiver was not obtained,8

•

24 controlled substances prescriptions for which the required
separate written prescription forms were not maintained by the
institution,

•

20 controlled substances prescriptions that were written for longer
than the allowable time period,

7

In lieu of prosecution, the Western District of Oklahoma offered the pharmacist a
1-year Pretrial Diversion Program and if all conditions are met, the pharmacist will not be
prosecuted.
8

The BOP National Formulary is a list of all prescription medications recommended
as essential for inmate care and is used to help provide clinically appropriate, safe, and
cost-effective prescription medications. If a non-formulary drug is deemed necessary, the
prescriber is required to obtain a Non-Formulary Drug Authorization requesting approval for
the use of non-formulary medication to treat a specific inmate need.

-x-

•

19 prescriptions for which required information was missing in the
inmate’s medical file, and

•

30 prescriptions with other miscellaneous errors.

Recommendations
Our report contains 13 recommendations for the BOP to improve the
administration of its Pharmacy Services. Specifically, our recommendations
seek to ensure that:
•

an adequate cost-benefit analysis is conducted for all cost savings
initiatives prior to implementation and that the initiatives are
implemented consistently throughout all institutions;

•

institutions accurately account for and safeguard their prescription
medications, especially controlled substances;

•

institutions implement controls over ordering and receiving
prescription medications that provide for adequate separation of
duties; and

•

institutions comply with applicable laws and BOP policies.

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AUDIT OF THE FEDERAL BUREAU OF PRISONS
PHARMACY SERVICES
TABLE OF CONTENTS
INTRODUCTION ............................................................................... 1
Background ....................................................................................... 2
The BOP Health Services Division ......................................................... 3
Current BOP Proposals to Reduce Prescription Medication Costs ............... 8
Medical Level of Care Classifications .......................................... 9
Central Fill and Central Processing........................................... 10
Electronic Medical Records System .......................................... 14
Over-the-Counter (OTC) Medications ....................................... 15
Prior Reviews ....................................................................................15
Audit Objectives ................................................................................16
FINDINGS AND RECOMMENDATIONS.............................................. 18
I.

BOP EFFORTS TO REDUCE PRESCRIPTION MEDICATION COSTS .....18
Central Fill Cost-Benefit Analysis ............................................. 18
Analysis of Gross Purchase Savings ......................................... 22
Analysis of Waste Savings...................................................... 26
Analysis of Vials and Labels .................................................... 27
Analysis of Annual Costs ........................................................ 28
Summary of BOP and OIG Central Fill Cost-Benefit Analysis ........ 30
Additional Concerns about the Central Fill Cost-Benefit
Analysis .......................................................................... 30
Prescription Medication Waste ................................................ 32

Over-the-Counter Medication Program Statement...................... 34
Recommendations ................................................................ 35
II.

CONTROLS AND SAFEGUARDS OVER PRESCRIPTION
MEDICATIONS......................................................................37
Controlled Substances ........................................................... 37
Controlled Substance Recordkeeping Errors .............................. 42
Controlled Substance Inventory .............................................. 44
Administration of Controlled Substances .................................. 45
Prescription Medications Purchasing......................................... 48
Recommendations ................................................................ 48
III.

PHARMACY COMPLIANCE ...........................................................50
Prescription Review ............................................................... 50
Non-Formulary Waivers ......................................................... 53
Recommendations ................................................................ 54

OBJECTIVES, SCOPE, AND METHODOLOGY ..................................... 55
STATEMENT ON COMPLIANCE WITH LAWS AND REGULATIONS ...... 59
STATEMENT ON INTERNAL CONTROLS............................................ 60
APPENDIX I - DETAILS OF UNACCOUNTED FOR CONTROLLED
SUBSTANCES.............................................................................. 62
APPENDIX II - CONTROLLED AND NONCONTROLLED
SUBSTANCES.............................................................................. 67
APPENDIX III - BOP RESPONSE TO THE DRAFT REPORT ................ 69
APPENDIX IV – THE OFFICE OF THE INSPECTOR GENERAL
COMMENTS ON THE BOP RESPONSE TO THE DRAFT REPORT ...... 78
APPENDIX V – ANALYSIS AND SUMMARY OF ACTIONS
NECESSARY TO CLOSE THE REPORT. .......................................... 83

INTRODUCTION
The Federal Bureau of Prisons’ (BOP) stated mission is to protect
society by confining offenders in the controlled environments of institutions
and community-based facilities that are safe, humane, cost efficient,
appropriately secure, and that provide work and other self-improvement
opportunities to assist offenders in becoming law-abiding citizens. The
mission of the BOP Pharmacy Services is to “provide access for inmates to
quality, necessary, and cost–effective drug care consistent with community
standards.”
As of July 2005, the BOP consisted of 106 institutions, 6 regional
offices, a central office, 2 staff training centers, and 28 community
corrections management offices. The BOP is currently responsible for the
custody and care of approximately 182,000 federal offenders.
The BOP is faced with a significant challenge in providing adequate and
cost effective medical care to inmates because of the rising federal inmate
population the increasing cost of health care, as shown in Figure 1.
THE BOP ANNUAL PERCENT INCREASE IN
HEALTH CARE COSTS AND POPULATION
14

%

FIGURE 1.

11

%

14%

9%

10

%

12%

7%

6%

8%

7%

6%

2%

Percent

10%

4%
2%
0%
2000-2001

2001-2002

2002-2003

2003-2004

Fiscal Years
The BOP Inmate Population

The BOP Health Care Costs

Source: Data provided by the BOP

Over the past 5 years, the BOP’s inmate population has increased by
23 percent, from 123,141 in FY 2000 to 152,023 in FY 2004. The BOP’s
total health care costs for treating inmates increased from $412.65 million in

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FY 2000 to $623.52 million in FY 2004, an average annual increase of about
11 percent. During that same period, the BOP’s costs for prescription
medications and related supplies increased an average of 23 percent
annually from $22.51 million in FY 2000 to $50.73 million in FY 2004.
Additionally, the cost of prescription medications and related supplies has
continued to account for a growing share of the BOP’s total health care
costs, rising from 5.5 percent in FY 2000 to 8.1 percent in FY 2004.
Background
According to a Department of Health and Human Services report, the
United States spends more on health care than any other industrialized
nation.1 Health care costs account for a significant and increasing portion of
the United States economy. In 1980, health care costs comprised only
9 percent of the Gross Domestic Product; however, by 2002 health care
costs had increased to 15 percent. Additionally, from 1999 to 2002, health
care costs increased an average of 8 percent annually, while the Gross
Domestic Product only increased an average of 4 percent.
Health care costs consist of many different components. In 2002 the
three largest components were hospital care (31 percent), physician and
clinical services (22 percent), and prescription medications (11 percent). Of
all these components, prescription medication costs have grown at the
fastest rate, increasing by 167 percent from 1995 to 2002, as illustrated in
Figure 2.

1

Department of Health and Human Services, Center for Disease Control and
Prevention, National Center for Health Statistics, Health, United States, 2004.

-2-

ANNUAL PERCENT INCREASE IN HEALTH CARE
COSTS

16%

15
%

16
%

15
%

18%

16
%

FIGURE 2.

8%

9%

7%

10%
5%

Percent

12%

9%

14%

6%
4%
2%
0%

1995-1999

1999-2000

2000-2001

2001-2002

Calendar Years
All Health Care

Prescription Medication

Source: Department of Health and Human Services, Center for Disease Control and
Prevention, National Center for Health Statistics, Health, United States, 2004

Two significant factors related to the rise in prescription medication
costs are increased prices and increased usage. From 1995 to 2002 the
Consumer Price Index for prescription medications and medical supplies
increased by 35 percent, while the Consumer Price Index for the United
States as a whole increased by only 18 percent. Additionally, the number of
individuals reporting that they took at least one prescription medication in
the month prior to the survey increased from 39 percent during the period
from 1988 to 1994, to 44 percent during the period from 1999 to 2000. The
survey also found that during the same periods, the number of individuals
reporting that they took 3 or more prescription medications in the month
prior to the survey increased from 12 percent to 17 percent.2
The BOP Health Services Division
The BOP Health Services Division consists of over 3,000 health care
professionals including physicians, nurses, dentists, pharmacists, and
mid-level practitioners, of which 750 are United States Public Health Services
Commissioned Officers.3 The Health Services Division provides a broad
2

Department of Heath and Human Services, National Center for Health Statistics,
Health, United States, 2004.
3

The BOP defines Mid-Level Practitioners as Physician Assistant Certified, Physician
Assistant Non-Certified, and Nurse Practitioner.

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range of services to inmates, from routine patient care to surgery. These
include dental, pharmacy, laboratory, radiological, and psychiatric services.
The BOP Pharmacy Services Division is administered under the Health
Services Division, whose mission is to “provide necessary medical, dental,
and mental health services to inmates by a professional staff, consistent
with acceptable community standards.”4
As of February 2005, the BOP Pharmacy Services Division consisted of
over 160 pharmacist positions, of which 133 are currently filled. About
120 BOP pharmacists are Public Health Services Commissioned Officers.
The responsibilities of the BOP pharmacists include:
•

tracking the controlled substances inventory;

•

safeguarding controlled substances;

•

ordering and receiving prescription medications;

•

reviewing prescriptions for contraindications (e.g., potential negative
interactions with other prescriptions and an inmate’s medical
condition);

•

providing fellow practitioners with drug information, such as drug
recalls, and drug interactions;

•

filling prescriptions;

•

monitoring an inmate’s prescription medication usage to minimize
waste and providing practitioners with information that helps treat
inmates effectively, thereby ensuring that an inmate is taking the
medication as prescribed;

•

counseling patients;

•

conducting clinics on diabetes, hypertension, mental health, and
monitoring the treatment of infectious diseases;

4

BOP Program Statement No. 6000.05, Health Services Manual, updated
February 11, 2000.

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•

attending rounds with physicians; and

•

providing discharge counseling.

The BOP is comprised of six major types of institutions, each of which
generally have pharmacies: (1) Medical Referral Centers (medical centers),
(2) Federal Correctional Institutions (FCIs), (3) United States Penitentiaries
(USPs), (4) Metropolitan Correctional Centers (MCCs), (5) Federal Detention
Centers (FDCs), and (6) Federal Prison Camps (FPCs). The BOP medical
centers provide acute medical services, including surgery, cancer treatment,
and long-term care. Although there are only seven BOP medical centers,
they account for the largest amount (37 percent) of the BOP’s total
prescription medication costs, as shown in Figure 3.5
FIGURE 3.

FCI LOW
15%

THE BOP PRESCRIPTION MEDICATION COSTS
BY INSTITUTION TYPE FOR FY 2004
USP
12%

MCC/FDC
8%
FPC
3%

MRC
37%

FCI MED
25%

Source: The BOP Prescription Medication Cost Report

In FY 2004, the BOP spent $50.73 million on prescription medications
and related supplies, representing an increase of 10 percent over the prior
fiscal year. On average, there has been a 23-percent annual increase in the
BOP’s prescription medication costs since FY 2000. Furthermore, in FY 2004
the BOP spent a daily average of $0.92 per inmate on prescription
medications. On average, the daily prescription cost per inmate has
increased annually by 16 percent since FY 2000, as shown in Figure 4.

5

As of September 2005, the BOP was in process of reclassifying the medical center
in Fort Worth, TX, to an FCI. As a result, when discussing the BOP’s future actions we refer
to six, rather then seven, medical centers.

-5-

FIGURE 4.

BOP DAILY PRESCRIPTION MEDICATION
COSTS PER INMATE

$1.00
$0.90
$0.80
$0.70
$0.60
$0.50
$0.40
$0.30
$0.20
$0.10
$0.00
2000

2001

2002

2003

2004

Fiscal Years
Source: Data provided by the BOP

The BOP attributes the increase in its prescription medication costs to
the: (1) aging of inmates serving longer mandatory sentences, (2) increase
in inmate population, and (3) increasing prices of prescription medications.
However, we found that the average inmate age increased by 0.4 years from
FY 2001 to FY 2004, which does not appear to support the BOP’s assertion
that the increase in prescription medication costs is caused, in part, by an
aging inmate population. On the other hand, from FY 2000 to FY 2003 the
increase in inmate population and consumer drug prices accounted for about
70 percent of the total increase in the BOP’s prescription medication costs.
From FY 2000 to FY 2003 the inmate population increased on average by
6 percent annually, while consumer prescription medication costs increased
on average by 12 percent annually, as shown in Figure 5.

-6-

CHANGES IN PRESCRIPTION MEDICATION COSTS
AND INMATE POPULATION6

35

%

40%
%

35%

%

27

%

%
11
7%

A
N/

5%
0%

10

%

%
6%

10%

11

15%

7%

20%

20

25%
13

P e rc e n t

30%

2000-2001

2001-2002

2002-2003

2%

FIGURE 5.

2003-2004

Years
Change in Consumer Prescription Drug Costs
Change in the BOP Prescription Drug Costs

Change in the BOP Inmate Population

Source: Inmate population and prescription medication costs provided by the BOP;
consumer costs obtained from the U.S. Statistical Abstract 2004-2005.

Treating inmates who test positive for Human Immunodeficiency Virus
(HIV) and inmates requiring psychiatric care account for a significant portion
of the BOP’s total prescription medication costs. While the BOP reported
that 1,677 inmates (or 1 percent) are HIV-positive, including 639 inmates
with Acquired Immunodeficiency Syndrome (AIDS), the cost of prescription
medications to treat HIV-positive inmates comprised 23 percent of the BOP’s
prescription medication costs in FY 2004. Additionally, the cost of HIV
prescription medications increased by 14 percent from FY 2003 to FY 2004,
while the HIV positive inmate population increased by only 5 percent.
Prescription medication costs for treating inmates for psychological
conditions also comprised 23 percent of the BOP’s total prescription
medication costs in FY 2004. As of March 2005, there were a total of
6,910 inmates who were being treated with one or more psychiatric
medications within the BOP.7 In FY 2004, $23.49 million of the
$50.73 million in total BOP prescription medication costs were related to HIV
and psychiatric medications, as shown in Figure 6.

6

Due to the availability of data, the data for the Change in Consumer Prescription
Drug Costs is based on the calendar year, while the Change in the BOP Inmate Population,
and the Change in the BOP Prescription Drug Costs is based on fiscal year.
7

This number does not include data from the Oklahoma FTC, the Rochester Medical
Center, and the Beaumont Federal Correctional Complex because they do not use the same
tracking program as the other BOP institutions.

-7-

FIGURE 6.

THE BOP PRESCRIPTION MEDICATION
COSTS BY TYPE FOR FY 2004 (in millions)
HIV $12

All Other
$24

Hepatitis C
and OTC $3

Psychiatric
$12

Source: Prescription medication costs provided by the BOP

The BOP utilizes the Federal Supply Schedule (FSS) for the majority of
its prescription medication purchases. The FSS is a price catalog of over
23,000 prescription medications that are available for purchase by federal
agencies. In addition to the FSS, the BOP utilizes specific contracts with
prescription medication companies administered by the Veterans
Administration (VA). The BOP purchases over 40 prescription medications
through “Mandatory National Contracts” administered by the VA, which
require that each institution buy specific prescription medication brands.
These contracts provide the BOP with prices lower than the FSS, and include
some frequently used medications, such as Tylenol®, Advil®, Aleve®, and
Zocor®.
Current BOP Proposals to Reduce Prescription Medication Costs
According to the BOP, in an effort to reduce prescription medication
costs, the BOP has implemented or plans to implement several changes to
its health care and pharmacy programs including: (1) classifying institutions
by the level of medical care required by inmates, (2) Central Fill and Central
Processing of prescription medications, (3) use of an electronic medical
records system, and (4) requiring inmates to pay for nonprescription
medications.

-8-

Medical Level of Care Classifications
The BOP is reclassifying its institutions based on a four-level tier of
medical care required by inmates. The BOP also plans to reorganize the
staffing of its pharmacists to reflect the medical classification of its
institutions.
•

Level of Care 1 – Includes inmates who are generally healthy but
may have limited medical or mental health conditions that can be
easily managed by semi-annual clinical evaluations. This level consists
of 10 institutions, of which 9 will not have an on site pharmacist. The
BOP plans to restructure staffing for this level between January 2008
and December 2008.

•

Level of Care 2 – Includes inmates who are stable but have chronic
medical conditions requiring at least quarterly clinical evaluations but
can still perform activities of daily living. This level consists of at least
60 institutions that will have 1 pharmacist on site, except for the
Oklahoma Federal Transfer Center (FTC) which will continue to
maintain 3 pharmacists.8 The BOP plans to restructure staff for this
level between January 2009 and December 2011.

•

Level of Care 3 – Includes inmates who are fragile outpatients
requiring at least monthly clinical evaluations and who may have
limitations in their ability to perform activities of daily living but do not
require daily nursing care. The BOP has not decided the number of
institutions or pharmacist staffing allocation for this level of care. The
BOP plans to restructure staff for this level between January 2009 and
December 2010.

•

Level of Care 4 – Include inmates who require the services available
at the six medical centers and who may require daily nursing care.
The BOP has not decided the pharmacist staffing allocation for this
level. The BOP plans to restructure staff for this level between
January 2009 and December 2010.

8

The Oklahoma FTC will not use Central Fill for its prescription medications because
of the constant turnover of inmates at the facility. Consequently, there will be no change in
its pharmacist staffing levels.

-9-

Central Fill and Central Processing
To address concerns related to the rising cost of prescription
medications, the BOP created the Pharmacy Workgroup (Workgroup). The
Workgroup is comprised of 11 members representing many departments
within the BOP, headed by the BOP Chief Pharmacist. Pursuant to an
Executive Staff Paper dated April 30, 2004, the objectives of the Workgroup
are to:
•

control costs by consolidating prescription medications into a main
inventory and buying the least expensive brand of generic
medications; and

•

establish an automated prescription medication fulfillment system that
provides medications in a timely manner for all BOP institutions.

The Workgroup recommended that the BOP establish an Interagency
Agreement with the Department of Veterans Affairs Centralized Mail
Outpatient Pharmacy Center in Dallas, Texas, to fill prescription medications
for BOP institutions. Through Central Fill, the onsite pharmacists at BOP
institutions would review prescriptions for the following contraindications, as
required by BOP policy:9
•

drug to drug interactions,

•

drug to disease interactions,

•

drug to food interactions,

•

therapeutic duplications,

•

allergies,

•

therapeutic appropriateness,

•

appropriate dose,

•

duration of therapy,

•

adverse drug reactions, and
9

BOP Program Statement No. P6360.01, Pharmacy Services, dated
January 15, 2005.

- 10 -

•

final check of the prescription to ensure it contains the correct
medication.

The pharmacists would then electronically transmit prescriptions to the
VA. Once the order is received, the VA would fill the prescription via its
automated system and mail it overnight to the BOP institutions. The
institutions would receive the prescription medication the following morning
and administer or dispense it to inmates.
The October 25, 2004, draft Interagency Agreement between the BOP
and the VA states that Central Fill will “improve the cost efficiencies through
economies of scale and clinical effectiveness of BOP Pharmacists.” The BOP
expects the Level of Care 1, 2, and 3 institutions to use Central Fill for
95 percent of their prescriptions. Conversely, the BOP expects the
Level 4 institutions and FDCs to use Central Fill for 50 percent of their
prescriptions because of the unique missions of these institutions.
The Workgroup cited several benefits related to its Central Fill
proposal, including improving drug inventory management, reducing
redundancies, eliminating the majority of bulk stock from institutions,
reducing errors through the use of barcode labels on prescriptions, and
increasing the use of pharmacists in a clinical capacity. According to the
BOP, increasing the use of its pharmacists in a clinical capacity would
improve inmate medical care, reducing overall health care costs. Clinical
pharmacy would require BOP pharmacists to:
•

assist doctors with continuity of care to improve medication
management;

•

monitor, modify, and discontinue prescription medication therapy, as
needed;

•

order, perform, and evaluate laboratory tests; and

•

conduct clinics to help inmates manage diseases, including diabetes,
HIV, Hepatitis C, asthma, and others.

The BOP provided several reports illustrating the benefits of clinical
pharmacy. According to a 2002 report in the American Journal of Health
System Pharmacy, HIV clinics conducted by pharmacists improved patient
compliance and care.10 The report also stated that the vast majority of
pharmacists working in the clinics improved treatment effectiveness by
10

American Journal of Health-System Pharmacy, Issue 59(8) (2002).

- 11 -

62 percent. Furthermore, according to a 2003 report in the Journal of
American Pharmacists Association, a diabetes clinic run by pharmacists
reduced the average direct medical cost per patient from $1,872 to
$1,200 per year.11
The Workgroup also proposed the development of Central Processing,
whereby institutions lacking an on site pharmacist could electronically
transmit inmates’ prescriptions to a central location where the BOP’s
pharmacists would review prescriptions for contraindications, and in turn,
transmit them electronically to Central Fill. All BOP institutions would use
Central Processing as a backup or during periods when an on site pharmacist
was not available. BOP officials noted that one benefit from this proposal
would be to reduce the need to hire contract pharmacists to assist when
staff is on leave. The BOP estimates that Central Processing would save
about $2 million a year, assuming that an average of 65 institutions use a
contract pharmacist for 50 days a year at a rate of $80 per hour. However,
the BOP has not conducted a formal cost-benefit analysis of the Central
Processing proposal.
Figure 7 illustrates the relationships between the BOP’s Levels of Care,
Central Fill, and Central Processing proposals.

11

Journal of American Pharmacists Association, Issue 43(2) (2003).

- 12 -

FIGURE 7.

THE CENTRAL FILL AND CENTRAL PROCESSING

Level 4
Institution
with POE

Level 3
Institution
with POE

Level 2
Institution
with POE

Central
Processing
Routine

Institution
Pharmacist
Processing

Level 1
Institution
with POE

Central
Processing
After Hours

After hours
administration
of emergency
meds (Pyxis)

When indicated
Central fill
(VA CMOP)

Local Fill
Acute Meds

Mailed overnight
to Institution

Local
Distribution

Level 1 Institution
Oversight

= Back up only
POE = Prescriber Order Entry
CMOP = Centralized Mail Outpatient
Pharmacy

Source: BOP Pharmacy Staff

•

Level of Care 1 Institutions – The institution would transmit
prescriptions to the Central Processing center using prescriber order
entry. This is an electronic method by which prescriptions are entered
into a computer system by the prescriber and sent to a central location
for processing. A pharmacist at the Central Processing center would
review the prescription for contraindications and then transmit the
prescription electronically to Central Fill.

•

Level of Care 2, 3, and 4 Institutions – The on site pharmacist at
the institution would review prescriptions for contraindications during
normal business hours and then transmit the prescriptions
electronically to Central Fill. If the prescription is for an acute
medication, the institution’s pharmacist would order it directly from
the prime vendor. During periods when the onsite pharmacist is not
available, the institution would transmit prescriptions via prescriber
order entry to Central Processing, which would then transmit the
prescription electronically to Central Fill.

- 13 -

The BOP plans to implement Central Fill and Central Processing over
the next 6 years. The BOP estimates that it will sign the Interagency
Agreement for Central Fill with the VA by June 2006. Once the agreement is
signed, the BOP estimates that it will take more than 3 years to fully
implement the changeover to Central Fill. The BOP plans to implement
Central Fill for the Level 1 institutions by December 2007, with all other
institutions being implemented by December 2009.
Electronic Medical Records System
The development of an electronic medical records system is included
as an objective in the BOP’s 2005 Strategic Plan, which states, “Implement
an electronic medical records system which incorporates all medical,
psychiatric, psychological, and disability information about individual
inmates. The electronic medical records system will incorporate information
currently maintained separately in paper medical records, the Psychology
Data System, the Correctional Institution Pharmacy System, and the
SENTRY data base."12 In conjunction with the Central Fill and Central
Processing proposals, the BOP is in the planning and development stages of
implementing an electronic medical records system.
The electronic medical records system would provide pharmacists with
the ability to access an inmate’s medical information from any location, thus
providing them with the ability to conduct a complete review of inmate
prescriptions to check for any contraindications. In addition, the system
would provide the capability for prescriber order entry, allowing other
physicians to enter prescriptions into the system electronically. A recent
study published by the Journal of the American Medical Association showed
that computerized physician prescribing reduced errors by 80 percent.13
If the proposed electronic medical records system is not implemented,
we would be concerned with the feasibility of implementing Central
Processing, because it is unclear which level of information would be
provided to pharmacists to conduct their review of the prescriptions for
contraindications.

12

SENTRY is the BOP’s primary on-line information system.

13

Journal of the American Medical Association, “Leading Patient Safety Advocates
Assess Progress in Reducing Medical Error Five Years After Landmark IOM Report,”
(May 18, 2005).

- 14 -

Over-the-Counter (OTC) Medications
In an effort to reduce the costs of prescription medications, the BOP
issued the OTC Medication Program Statement on November 17, 2004.14
This statement outlines the requirements that each institution – other than
medical centers – must follow when using OTC medications for the
treatment of inmates. The BOP’s OTC policy requires that inmates who
complain about cosmetic, general hygiene issues, or symptoms of minor
ailments should be referred to the commissary where they can purchase
OTC medications with their own funds. If an inmate is considered indigent,
that is, having less than a $6 average balance in their account for the last
30 days, then the institution can provide two OTC medications per week to
the inmate.
Prior Reviews
In 2000, the Government Accountability Office (GAO) conducted a
review of the health care costs at the BOP.15 It found that from FY 1990 to
FY 1999 the average annual increase in BOP health care costs was about
8.6 percent. The GAO noted several BOP initiatives to help reduce health
care costs, including cooperative agreements using VA contracts to purchase
prescription medications. In the report, the BOP stated that this resulted in
a $0.76 million annual savings for health care costs. The GAO report also
stated that the BOP made progress in containing health care costs, but
additional proposals would help to contain increasing costs. These proposals
included the BOP implementing a co-payment for inmates and negotiating
more cost-effective contracts with community hospitals.

14

BOP Program Statement No. 6541.01, Over-the-Counter Medications, issued
November 17, 2004.
15

Government Accountability Office, Federal Prisons: Containing Health Care Costs
for an Increasing Inmate Population (2000).

- 15 -

Audit Objectives
The Department of Justice (DOJ) Office of the Inspector General (OIG)
conducted this audit to evaluate the BOP Pharmacy Services. Our objectives
were to:
•

evaluate the BOP’s efforts to reduce its increasing costs of prescription
medications;

•

assess whether the BOP ensures adequate controls and safeguards
over prescription medications; and

•

assess whether the BOP pharmacies are in compliance with applicable
laws, regulations, policies, and procedures.

During the audit we conducted work at BOP headquarters and the
12 institutions shown in Figure 8.16
FIGURE 8.

BOP INSTITUTIONS AUDITED

Institution
Alderson FPC
Atlanta USP
Atwater USP
Danbury FCI
Florence Administrative Maximum Security (ADX)
Florence FCI
Florence USP
Forrest City FCI (Low)
La Tuna FCI
Oklahoma City Federal Transfer Center
Oxford FCI
Springfield Medical Center

Location
West Virginia
Georgia
California
Connecticut
Colorado
Colorado
Colorado
Arkansas
New Mexico
Oklahoma
Wisconsin
Missouri

At each of the above institutions, we:
•

reviewed documentation from FY 2002 to FY 2005 related to costs of
prescription medications, lost or stolen controlled substances,
investigations pertaining to the pharmacy and its staff, program and
operational reviews, and access to the pharmacy;
16

We also visited the Englewood FCI, Colorado, to obtain background information;
however, the Englewood FCI is not included in our audit results.

- 16 -

•

analyzed selected samples related to purchases, prescriptions,
inventory, and disposal of controlled and noncontrolled substances
from FY 2004 and FY 2005; and

•

interviewed BOP officials, analyzed the use of OTC medications, and
obtained information impacting the BOP’s proposals to reduce the cost
of prescription medications.

In addition, we analyzed the BOP’s Central Fill and Central Processing
proposals and conducted a survey of all BOP Pharmacists.
The details of the results of our audit are contained in the Findings and
Recommendations section of this report. Additional information related to
our audit appears in the Objectives, Scope, and Methodology section.

- 17 -

FINDINGS AND RECOMMENDATIONS
I.

BOP EFFORTS TO REDUCE PRESCRIPTION MEDICATION COSTS
The BOP has not correctly assessed the budgetary impact of its
planned initiatives to reduce increasing costs for prescription
medications. As a result, future initiatives may result in
increased rather than decreased costs. In our judgment, the
estimated costs and savings of the BOP’s proposal to move to a
Central Fill pharmacy are inaccurate. The BOP estimated that
when Central Fill is fully implemented it will save $1.14 million
annually; however, we found that Central Fill may actually
increase costs by approximately $900,000 annually. We also
found that the BOP wastes over 5 percent of its prescription
medication costs due to inmate transfers, confiscations,
expiration of medication, and other reasons. We estimated the
waste to be approximately $2.81 million in FY 2004. Finally, we
found that the BOP’s OTC policy has not been consistently
applied and implemented across all BOP institutions.

As noted in the Background section of this report, the BOP is
concerned about the increasing cost of prescription medications, the
difficulty in recruiting trained professionals, and the safety of administering
increasingly complex medication regiments. To reduce costs and address
other concerns, the BOP has proposed several changes to its pharmacy
services. These include the planned realignment of institutions based on
levels of care, Central Fill, Central Processing, electronic medical records
system, and an OTC policy.
Central Fill Cost-Benefit Analysis
Through the BOP's Central Fill proposal, pharmacists at BOP
institutions would review prescriptions for contraindications and then
transmit the prescriptions electronically to the VA Centralized Mail Outpatient
Pharmacy Center in Dallas, Texas. The VA would fill the prescriptions and
mail them overnight to the institution.
In March 2004, the BOP completed a cost-benefit analysis of its
Central Fill proposal to estimate the impact on the BOP’s prescription
medication costs. Initially, the BOP developed three different estimates of
savings, ranging from $1.14 to $6.42 million annually, as shown in Figure 9.

- 18 -

FIGURE 9.

BOP’s CENTRAL FILL COST SAVINGS ESTIMATES
Gross
Purchasing
Savings

Gross
Savings

Gross Cost

Net Savings

Estimate 1 - VA only

$10,230,250

$13,028,536

($6,604,000)

$ 6,424,536

Estimate 2 - VA/Perry Point/FSS

$ 7,925,581

$10,723,867

($6,604,000)

$ 4,119,867

Estimate 3 - VA/FSS

$ 4,943,349

$ 7,741,635

($6,604,000)

$ 1,137,635

Source: BOP analysis

The difference in savings for each estimate is based on whether the
BOP can access pricing related to Pub. L. No. 102-585 (1993), which
provides a discount known as the Federal Price Ceiling (FPC) on brand name
prescription medications for which there are no generic equivalents. This
discount was granted to the four federal agencies that are the largest
purchasers of prescription medications: the VA, the Department of Defense,
the Department of Health and Human Services, and the Coast Guard. As a
result, the FPC discount is commonly known as “Big 4” pricing. Based on a
legal opinion provided by the VA, it is a violation of Pub. L. No. 102-585
(1993) for an agency to pass on its Big 4 pricing to any other entity;
therefore, Big 4 pricing is not available to the BOP.
As shown in Figure 9, the BOP Workgroup calculated the three
estimates based on different assumptions of prescription medication prices
charged by the VA.
•

Estimate 1 – The net projected savings of $6.42 million is based on
the BOP’s ability to buy all prescription medications from the VA using
Big 4 pricing. However, the estimated savings of $6.42 million is not
attainable since Big 4 pricing is not available to the BOP.

•

Estimate 2 – The net projected savings of $4.12 million is based on
restocking the VA facility for Big 4 prescription medications purchased
through the Department of Health and Human Services Supply
Services Center, located in Perry Point, Maryland. During the audit,
we determined that the Supply Services Center was passing on its
Big 4 savings to the BOP, in violation of Pub. L. No. 102-585 (1993).
As a result, the Supply Services Center has discontinued this practice.
Therefore, the estimated savings of $4.12 million also is not
attainable.

- 19 -

•

Estimate 3 – The net projected savings of $1.14 million is based on
the BOP purchasing prescription medications through the FSS at
non-Big 4 prices to restock the VA facility for Big 4 prescription
medications. This process could avoid any legal issues related to the
BOP receiving Big 4 pricing on prescription medications, and results in
the only feasible estimate. However, as described below, we believe
that this estimate is also not accurate.

According to BOP officials, they are planning to request that Congress
amend Pub. L. No. 102-585 (1993) to make the BOP eligible for
Big 4 pricing. Given the potential for savings by the BOP in its prescription
medication costs, we believe this is an important strategy, and we
recommend that the BOP aggressively pursue this effort. However, at the
time of our audit, Estimate 3 appeared to be the only feasible estimate.
Consequently, we based our analysis on it.
The BOP based its net savings of $1.14 million for Estimate 3 on
estimated gross savings of $7.74 million, minus estimated costs of
$6.6 million. The $7.74 million estimated gross savings consists of
$4.94 million from gross purchase savings, $2.39 million from the reduction
of waste, and $0.41 million from labels and vials that will no longer be used.
The estimated $6.6 million cost consists of $5.6 million in VA fees, $1 million
in shipping fees, and $4,000 in information technology. A detailed
breakdown of how the BOP reached Estimate 3 is shown in Figure 10.

- 20 -

FIGURE 10.

BOP COST-BENEFIT ANALYSIS

Annual Savings:
Gross Purchase Savings:
Total Prescription Medication Costs
Percent Savings
Total, Gross Purchase Savings
Waste:
Total Rx Costs
Recent Waste
Total, Waste
Vials:
Number of Vials per year
Price per Vial
Total, Vials
Labels:
Number of Labels per year
Price per Label
Total, Labels
Total, Annual Savings

$47,715,720
10.36%
$4,943,349
$47,715,720
5.00%
$2,385,786
$
$

2,750,000
0.063
173,250

$
$

5,500,000
0.0435
239,250

$7,741,635

Annual Costs:
Prescription Medication fees:
Number of Prescriptions per year
VA Fee Per Prescription
Total, Prescription Medication Fees
Shipping:
Cost per Institution per year
Number of Institutions
Total, Shipping
Information Technology:
Scanners and Barcodes
Number of Institutions (new per year)
Total, Information Technology

5,000,000
$
1.12
$5,600,000
$

10,000
100
$1,000,000
$
$

2,000
2
4,000

Total, Annual Costs

$6,604,000

NET TOTAL

$1,137,635

Source: BOP analysis

We reviewed the BOP’s cost-benefit analysis for Estimate 3 and
determined that the savings related to the Central Fill proposal are
overstated. As shown in Figure 10, the BOP estimated that a fully
implemented Central Fill would save $1.14 million per year. However, our
analysis shows that Central Fill could actually cost the BOP as much as
approximately $900,000 per year.

- 21 -

Analysis of Gross Purchase Savings
As previously stated, the BOP estimated a savings of $4.94 million on
prescription medications purchased through the VA by using Central Fill.
The estimated-gross-purchase savings were based on a BOP survey of six
institutions over a 1-year period.17 The BOP compared the costs of
prescription medications purchased by the six institutions to prices paid by
the VA for the same medication. Based on this analysis, the BOP calculated
that Central Fill would save the six institutions $0.33 million, or
10.36 percent of their total prescription medication costs per year. The BOP
then projected the 10.36 percent savings to the total BOP prescription
medication costs for the same time period. Accordingly, the BOP calculated
savings for all institutions at an estimated $4.94 million (10.36 percent of
$47.71 million).
However, based on our analysis of the BOP’s estimate, we found
several errors and incorrect assumptions that resulted in gross purchase
savings being overstated by $2.97 million. Specifically, we found that the:
(1) data used to calculate the 10.36 percent savings, from the analysis of
the six institutions, included two errors resulting in an overstatement of
savings; (2) the savings estimate incorrectly assumed 100-percent usage of
Central Fill by all BOP institutions; (3) analysis of the six institutions did not
include all prescription medications purchased during the 1-year period; and
(4) analysis compared the BOP and VA prices for different time periods.
Specifically, we found that the data used by the BOP to calculate the
10.36 percent estimated gross purchase savings included an error related to
Ribavirin, a Hepatitis C medication, which resulted in an 1,803-percent
difference. The BOP calculated savings for Ribavirin by using costs of
$0.22 million for the six institutions divided by an estimated 17,486 pills
purchased. This resulted in an estimated average price per pill for Ribavirin
of $12.45. However, based on our analysis the number of pills purchased
was actually 51,086, a difference of 33,600 pills. Using the adjusted number
of pills, we estimated the average price of Ribavirin to be $4.26 per pill, a
difference of $8.19, as shown in Figure 11.

17

The six institutions were Forrest City FCI, Arkansas; Atlanta USP, Georgia;
Petersburg FCI (Medium), Virginia; Oxford FCI, Wisconsin; Lompoc USP, California; and Fort
Dix West FCI, New Jersey, from March 1, 2003, to February 28, 2004.

- 22 -

FIGURE 11.

DETAIL ON IMPACT OF RIBAVIRIN ERROR
Original
BOP

Calculation of BOP Price Per Pill
Total BOP Ribavirin Costs
Number of Pills
BOP Price Per Pill

Savings From Using Central Fill for the
Six Institutions
BOP Price Per Pill
VA Price Per Pill
Difference
Number of Pills
Total Ribavirin Savings

Total Savings Excluding Ribavirin
Total Ribavirin Savings
Total Savings
Total Rx Costs
Savings as Percent of Total Rx
Costs

Impact on Gross Purchase Savings on
All BOP Institutions
Total Rx Costs
Percentage Savings
Total Gross Purchase Savings

OIG First
Adjustment

$

217,713

$

217,713

÷
$

17,486
12.45

÷
$

51,086
4.26

$

12.45
(4.11)
8.34
17,486
145,833

$

4.26
(4.11)
0.15
51,086
7,663

$
×
$

$

182,495
145,833
$ 328,328
÷ 3,170,327

$
×
$

$

Difference
---

($

33,600
8.19)

($

8.19)
---

($ 138,170)

182,495
7,663
$ 190,158
÷ 3,170,327

--(138,170)
($ 138,170)
---

10.36 %

6.00 %

(4.36 %)

$47,715,720
× 10.36 %
$ 4,943,349

$47,715,720
×
6.00 %
$ 2,862,943

--(4.36 %)
($2,080,406)

Source: BOP and OIG analysis of data provided by the BOP and the VA

Based on our estimate, the percentage gross purchase savings for the
six institutions is reduced from 10.36 percent to 6 percent. When we project
the new percentage savings to all BOP institutions, we estimate gross
purchase savings to be $2.86 million, compared to the original BOP
calculation of $4.94 million. We brought this error to the attention of BOP
management, who concurred with the OIG calculation and the recommended
adjustment.
We also found that the BOP gross purchase savings estimate included
two prescription medications, Videx® 200 milligrams (mg) chewable and
Sular® 20 mg tablets, for which a VA price was not available for comparison.
Instead of excluding these prescription medications from the gross purchase
savings analysis, the BOP included $14,558 as a cost savings for the six
- 23 -

institutions. Based on our analysis, the savings of the six institutions should
be reduced by 0.46 percent, resulting in a 5.54 total estimated percent
savings instead of 6 percent.
FIGURE 12.

DETAIL ON IMPACT OF VIDEX® AND SULAR®
ERROR
First
Adjustment

Savings from Using Central Fill for the Six
Institutions
$ 190,158
Total Rx Savings
--Removal of Videx®
®
--Removal of Sular
$ 190,158
Adjusted Total Rx Savings
Total Rx Costs
÷ 3,170,327
Savings as Percent of Total Rx
Costs
6.00 %

Impact on Gross Purchase Savings on
All BOP Institutions
Total Rx Costs
Percentage Savings (Adjusted)
Total Gross Purchase Savings

$47,715,720
×
6.00 %
$ 2,862,943

OIG Second
Adjustment

$

Difference

190,158
(6,278)
(8,280)
$ 175,600
÷ 3,170,327

--6,278)
(8,280)
($ 14,558)
---

5.54 %

(0.46 %)

$47,715,720
×
5.54 %
$ 2,643,451

--(0.46 %)
($219,492)

($

Source: OIG analysis of data provided by the BOP and the VA

As shown in Figure 12, we used the adjusted percent to project gross
purchased savings to all institutions, and calculated the savings to be
$2.64 million (5.54 percent x $47.72 million), rather than the BOP’s
estimate of $4.94 million, a difference of $2.3 million.
We also found that the BOP based its estimate of gross purchase
savings on the assumption that all prescription purchases would occur
through Central Fill. The BOP used the total prescription costs for all
institutions of approximately $47.72 million during the 1-year period of its
analysis to calculate estimated savings. However, the BOP expects that
medical centers and FDCs will only purchase 50 percent of their prescription
medications through Central Fill. We also noted that the Oklahoma FTC will
not use Central Fill, and all other institutions will use Central Fill for
95 percent of their prescription medications. As a result, the BOP will use
Central Fill to purchase only 74.5 percent of its total prescription

- 24 -

medications.18 We applied the adjusted usage of 74.5 percent to the
prescription medication costs used in the BOP’s analysis, and found the total
cost affected by Central Fill is reduced to $35.55 million, a difference of
$12.17 million, as shown in Figure 13.
FIGURE 13.

ADJUSTMENT TO TOTAL COST ESTIMATE

Impact on Gross Purchase Savings on All
BOP Institutions
Total Rx Costs
Percentage Savings (Adjusted)
Adjusted Total Gross Purchase Savings

Second
Adjustment

OIG Third
Adjustment

Difference

$47,715,720
×
5.54 %
$ 2,643,451

$35,548,211
×
5.54 %
$ 1,969,371

($12,167,509)
--($ 674,080)

Source: OIG analysis of data provided by the BOP and the VA

This adjustment further reduces the BOP’s estimated gross purchase
savings to $1.97 million, a difference of $2.97 million from the BOP’s original
estimate of $4.94 million.
Finally, we found that the BOP did not include all prescription
medications in its analysis of gross purchase savings for the six institutions.
Instead, the BOP estimated the savings on just tablets and capsules, and
excluded any other types of prescription medications. According to BOP
officials, liquids and ointments were excluded to simplify the calculation.
However, without estimating the costs or savings for all medications, the
BOP could be overstating or understating the estimated total gross purchase
savings. In addition, the time periods used for BOP and VA prices are not
consistent. BOP prices were derived using the average price paid by the
six institutions over a 1-year period from March 2003 through February
2004. The VA prices were based on a specific date during the time of the
analysis. As a result, some BOP estimated gross purchase savings may be
the result of timing differences in prescription prices.

18

To arrive at the 74.5 percent calculation we used the BOP’s FY 2004 expenditures
of $50.73 million and reduced this amount by: (1) 50 percent of the medical centers’ and
FDCs’ costs ($11.00 million); (2) the entire FTC’s costs ($0.51 million); and (3) 5 percent of
the remaining BOP’s costs ($1.41 million), which equal $37.81 million, or 74.5 percent
($37.81 million/ $50.73 million) of the total FY 2004 BOP prescription medication costs.

- 25 -

Analysis of Waste Savings
The BOP’s Central Fill proposal estimated savings of $2.39 million from
the reduction of waste of prescription medications. The BOP based this
savings on informal discussions with several BOP pharmacists, who indicated
that the BOP could save about 5 percent of its total prescription medication
costs through reduced waste. The 5 percent savings relies on the
assumption that Central Fill will provide better inventory management, by
preventing expiration of prescription medications and improving the ordering
of crash cart medications.19
During our audit, we found many different causes of prescription
medication waste, such as expired medicines, transfers of inmates, and
confiscations. For example, the BOP does not ensure that prescription
medications are transferred with inmates when they are moved to new
facilities. Waste from confiscations is also caused by correctional officers
seizing prescription medications during searches of inmates’ cells. Central
Fill would only reduce waste associated with expired prescription
medications. With Central Fill, most institutions only maintain an inventory
of emergency prescription medications, such as antibiotics and pain
relievers, which, in theory, reduce waste caused by medications that expire
before they are used.
Based on our analysis, the BOP overstated the estimated savings of
$2.39 million due to the reduction of waste. We conducted a survey of all
BOP pharmacists and had a response rate of 84 percent (106 responses out
of 126 questionnaires sent). The results of our survey found that BOP
pharmacists estimated that only 1.21 percent of waste is associated with
expired medications rather than the 5 percent figure used by the BOP in its
calculation.
FIGURE 14.

ADJUSTMENT TO WASTE ESTIMATE

Impact on Gross Purchase Savings on All
BOP Institutions
Total Rx Costs
Percent Reduction in Expired Waste
Adjusted Total Rx Savings

BOP
Original

OIG
Adjustment

Difference

$47,715,720
× 5.00 %
$ 2,385,786

$47,715,720
×
1.21 %
$ 577,360

--(3.79 %)
($1,808,426)

Source: BOP and OIG analysis of costs and percentage of estimated waste

19

Crash carts contain urgent care prescription medications, including controlled
substances that are used for emergency purposes only.

- 26 -

As shown in Figure 14, we estimate savings from Central Fill related to
a reduction in waste of $0.58 million (1.21 percent x $47.72 million), a
difference of $1.81 million from the BOP’s estimate.20 In addition, the BOP’s
analysis does not include the partial refunds that many BOP institutions
receive when they return expired prescription medications, which would
further reduce the estimate savings.
Analysis of Vials and Labels
The BOP estimated that by switching to Central Fill it would reduce vial
and label purchases and save an estimated $0.41 million per year. The BOP
based this estimate on the assumption that 5 million prescriptions were filled
during a 1-year period, requiring 2.75 million vials for 55 percent of
prescriptions, and 5.5 million labels for 110 percent of prescriptions.21
However, from data we gathered for FY 2003 and FY 2004, the BOP only
dispensed an average of 3.33 million prescriptions per year during the
period. Therefore, based on our analysis, we estimated that the BOP will
only use Central Fill for 83.4 percent or 2.78 million prescriptions.22 Using
the same percentages for vials and labels estimated by the BOP, the number
of vials used is reduced to 1.53 million and the number of labels used is
reduced to 3.06 million, as shown in Figure 15.

20

The calculation uses $47.72 million in cost because the Central Fill proposal
affects all inventories of prescription medications within the BOP, not only the portion of
prescription medication costs that will use the Central Fill ($35.55 million).
21

The BOP assumes that institutions will use more labels than the actual number of
prescriptions due to mistakes and various other reasons.
22

To arrive at the 83.4 percent calculation we used the BOP’s FY 2004 and FY 2003
average prescription of 3.33 million and reduced this amount by: (1) 50 percent of the
medical centers’ and FDCs’ average prescriptions (0.43 million); and (2) 5 percent of the
remaining BOP’s prescriptions (0.12 million), which equal 2.78 million, or 83.4 percent (2.78
million/3.33 million). Note that the total BOP prescription numbers provided by the BOP did
not include the prescriptions issued at the Oklahoma FTC.

- 27 -

FIGURE 15.

ADJUSTMENT TO VIALS AND LABELS SAVINGS
ESTIMATE
BOP Original

Number of Prescriptions sent to Central Fill
Total Number of Prescriptions
Percent of Prescriptions being sent to Central
Fill
Total Number of Prescriptions sent to
Central Fill

Adjustment

Difference

3,331,597

(1,668,403)

83.4 %

(16.6 %)

2,778,552

(2,221,448)

5,000,000
×

100 %

×

5,000,000

Vials
Number of Vials sent to Central Fill
Price Per Vial
Total Savings from Vials

2,750,000
× $ 0.063
$173,250

×

1,528,204
$ 0.063
$ 96,277

(1,221,796)
--($ 76,973)

Labels
Number of Labels sent to Central Fill
Price Per Labels
Total Savings from Labels

5,500,000
× $ 0.0435
$239,250

3,056,407
× $ 0.0435
$132,954

(2,443,593)
--($106,296)

$412,500

$229,231

($183,269)

Total, Vials and Labels Savings

Source: BOP and OIG analysis of number of prescriptions, vials, and labels

As shown in Figure 15, we estimate that the BOP would save $229,231
in vials and labels by using Central Fill rather than its estimate of $412,500.
Analysis of Annual Costs
The BOP estimated that it will spend $6.6 million annually related to
Central Fill. Of this total amount, $5.6 million would come from VA fees, $1
million from shipping, and $4,000 from information technology. Our analysis
revealed that the BOP overstated prescription fees and shipping costs.
The BOP estimated that the fees paid to the VA for filling prescriptions
would average $5.6 million annually. We found that this estimate is based
on an assumed fee of $1.12 per prescription that the VA will charge to fill an
estimated 5 million prescriptions per year. Because we determined that the
BOP will more likely use the Central Fill for about 2.78 million prescriptions
per year, the cost associated with VA fees would be $3.11 million as opposed
to $5.6 million, shown in Figure 16.

- 28 -

FIGURE 16.

ADJUSTMENT TO PRESCRIPTION FEE COST

Impact on Prescription fee Cost for
All Institutions
Number of Prescriptions sent to Central Fill
VA Prescription fee
Total Prescription fee Paid by the BOP

BOP Original

Adjustment

Difference

5,000,000
x$
1.12
$5,600,000

2,778,552
x $
1.12
$3,111,978

(2,221,448)
--($2,488,022)

Source: BOP and OIG analysis of the number of prescriptions using Central Fill

The BOP’s estimated cost also included a $1 million charge for annual
prescription shipping costs from the VA facility in Dallas, Texas, to
100 BOP institutions. The BOP estimated shipping cost is based on an
assumption of 200 prescriptions per day, per institution, for 250 shipping
days per year. This results in a total of 5 million prescriptions shipped per
year. However, as stated previously, we estimated that the BOP will only
use the Central Fill for about 3 million prescriptions per year. As a result,
the number of prescriptions shipped per day, per institution, is reduced from
200 to 111, resulting in a $0.45 million reduction in the total shipping cost,
as shown in Figure 17.
FIGURE 17.

ADJUSTMENT TO SHIPPING COST
BOP
Original

Adjustment

Difference

5,000,000
÷
250
20,000
÷
100

2,778,552
÷ 250
11,114
÷ 100

(2,221,448)
--(8,886)
---

200

111

(89)

5,000 lbs
$
0.80
$
4,000
×
250
$1,000,000

2,775 lbs
$ 0.80
$ 2,220
×
250
$555,000

(2,225) lbs
--($ 1,780)
--($445,000)

Prescriptions Per Day Per Institution
Number of Prescriptions sent to Central Fill
Number of Shipping Days in a Year
Number of Prescriptions Per Day
Number of Institutions
Number of Prescriptions Per Day Per
Institution

Impact on Shipping Cost for All Institutions
Weight Per Day (4 ounces per prescription)
Price Per Pound
Total Shipping Cost Per Day
Number of Shipping Days in a Year
Total Shipping Cost

Source: BOP and OIG analysis of costs related to shipping

- 29 -

Summary of BOP and OIG Central Fill Cost-Benefit Analysis
During our review of the BOP’s cost-benefit analysis for its Central Fill
proposal, we found several errors and incorrect assumptions concerning the
accuracy of the BOP’s estimated savings. The BOP estimated savings of
$1.14 million annually, which based on our analysis, is overstated by as
much as $2.03 million. As a result, Central Fill may cost the BOP as much
as $895,016 per year, as shown in Figure 18.
FIGURE 18.

SUMMARY BOP AND OIG COST-BENEFIT ANALYSIS
BOP Original

OIG Analysis

Difference

$4,943,349
2,385,786
173,250
239,250
$7,741,635

$1,969,371
577,360
96,277
132,954
$2,775,962

($2,973,978)
(1,808,426)
(76,973)
(106,296)
($4,965,673)

Annual Costs:
Rx Fee
Shipping
Information Technology
Total, Annual Gross Costs

$5,600,000
1,000,000
4,000
$6,604,000

$3,111,978
555,000
4,000
$3,670,978

($2,488,022)
(445,000)
--($2,933,022)

NET IMPACT (Savings - Costs)

$1,137,635

($ 895,016)

($2,032,651)

Annual Savings:
Gross Purchase Savings
Waste
Vials
Labels
Total, Annual Gross Savings

Source: BOP and OIG survey and analysis

In our judgment, it is important that the BOP has an accurate
understanding of the budgetary impacts of its Central Fill proposal before
proceeding. Therefore, we recommend that it conduct a complete and
accurate cost-benefit analysis considering the monetary and non-monetary
impacts of the proposal before deciding if it should proceed with the
implementation of this proposal.
Additional Concerns about the Central Fill Cost-Benefit Analysis
In addition to the concerns related to the specific dollar estimates, we
identified several other concerns related to the BOP’s Central Fill cost-benefit
analysis. These include: (1) the representation of the six institutions used
to estimate savings, as compared to the BOP as a whole; (2) whether
pharmacists ensure that the lowest-cost prescription medications are
purchased; (3) the static nature of the analysis which does not include any
assumptions of growth in inmate population or changes in prescription

- 30 -

medication costs; and (4) the increase in clinical work conducted by
pharmacists.
In our judgment, the six institutions used by the BOP to estimate
prescription medication costs may not represent the average institution.
The BOP stated that it picked six institutions at random; however, no
sampling methodology was used to ensure that the sample was
representative of all institutions. Although we could not verify the validity of
the sample, we found several factors that cause concern. The average
amount spent on prescription medications by the six institutions was
23 percent higher than the average for all other BOP institutions. Further,
47 percent of the FY 2004 prescription medication costs for one of the
six institutions were for Hepatitis C medications, compared to an average of
3 percent for all BOP institutions. These issues raise concerns about the
BOP’s ability to project analyses of these six institutions to all BOP
institutions.
According to the Workgroup, Central Fill would allow the BOP to utilize
VA staff to research manufacturer prices and purchase prescription
medications at the lowest cost. The BOP asserts that using the Central Fill
would result in cost savings because BOP pharmacists currently do not have
the time to conduct price research. However, we found that it is possible for
BOP pharmacists to research the lowest prescription medications prices. We
reviewed prescription medication purchases at several BOP institutions and
found significant price differences for identical medication during the same
time period. For example, one institution purchased Nasalide® 25 mcg nasal
spray on October 14, 2003, for $0.98 each, while another institution
purchased the same item on October 21, 2003, for $0.21 each, for a
difference of $0.77 per item. This demonstrates that BOP pharmacists can
research the lowest prescription medication prices. Thus, in our judgment
the BOP should implement a policy that would require staff to search for the
lowest possible price within the FSS.
We also found that the BOP’s cost-benefit analysis was based on the
number of BOP institutions, number of prescriptions, inmate population, and
prescription medication costs in FY 2004, without taking into account future
changes. Based on the current implementation plan for Central Fill, the BOP
does not anticipate full implementation until December 2009. As a result,
many of the factors used to compile the analysis may change and should be
incorporated to develop a complete and accurate cost estimate. For
example, cost estimates do not include information regarding inmate
population growth, changing demographics of the inmate population,
increasing prescription medication costs, and BOP staffing levels, since each
of these factors impact the estimated savings. We recommend that they
- 31 -

should be included in the cost analysis if the BOP is to accurately project the
proposal’s future impact on the prescription medication costs.
In addition, as stated in the Introduction section of this report, the
BOP Workgroup asserts the Central Fill proposal will increase pharmacists’
ability to conduct clinical work. The BOP asserts that the proposal frees
time, allowing pharmacists to hold clinics to better manage disease and
medication through education and examinations. The free time occurs
because pharmacists will no longer have to fill prescription bottles manually.
We believe that the BOP may be overestimating the amount of time Central
Fill will actually save pharmacists. Out of the 12 institutions visited,
10 would use the Central Fill for the majority of their prescriptions. Of these
10, 8 had at least 1 pharmacy technician, who usually filled prescription
bottles manually. By eliminating the need to fill the prescriptions at the
institution, the BOP is reducing the workload of the pharmacy technicians
rather than the pharmacists. The pharmacists currently spend much of their
time reviewing prescriptions for contraindications and effectiveness, which
will still be completed by the BOP pharmacists under Central Fill, resulting in
little reduction of their workload.
In sum, the BOP’s cost-benefit analysis overstates the savings related
to the Central Fill proposal and fails to consider other important issues. The
BOP estimated that a fully implemented Central Fill would save $1.14 million
per year, while our analysis shows that Central Fill could actually cost
approximately $900,000 per year. It is important that the BOP fully
consider the monetary and non-monetary impacts of the proposal before
deciding if it should proceed with the implementation of this proposal.
Prescription Medication Waste
We found that the BOP needs to improve efforts to reduce prescription
medication costs associated with waste. Based on the responses to our
pharmacist’s survey, we found that the BOP pharmacist estimated
prescription medication costs associated with waste at $2.81 million in
FY 2004, or 5.54 percent of the BOP’s total prescription medication costs.
Most often, the survey found that prescription medication waste is the result
of inmate transfers and confiscations. As shown in Figure 19, waste from
transfers and confiscations during searches of inmates’ cells comprise
approximately 74 percent of total waste, an estimated $2.07 million per
year.

- 32 -

FIGURE 19.

DISTRIBUTION OF PRESCRIPTION
MEDICATION WASTE BY TYPE

Other
5%
Cell Search
36%

Expired
22%

Transfer
37%
Source: OIG Survey of BOP Pharmacists

The results of our pharmacist survey showed that the transfer of
inmates is the largest cause of prescription medication waste, accounting for
an estimated $1.05 million annually. Waste from inmate transfers results
from the BOP’s policy requiring that all transferred inmates receive a 7-day
supply of prescription medications, regardless of whether or not the inmate
already has a sufficient supply. This policy was established to ensure
enough prescription medication is available to the inmate during the transfer
and to give the new institution time to purchase the medication if it is not
currently in the institution’s inventory. There is currently no BOP
requirement that prescription medications already in the inmate’s possession
be transferred with the inmate. As a result, when inmates are transferred,
their prescription medications are often left in their cell or locker. In turn,
these medications must be disposed of since the pharmacy cannot reuse
them for another inmate once it has been in an inmate’s possession.
In response to our survey, pharmacists offered several suggestions to
reduce waste from transfers. Out of 81 pharmacists who responded to this
question, 37 (46 percent) suggested that the BOP require medications to be
transferred with the inmates. Other suggestions include: (1) limiting the
amount of medication dispensed to inmates; (2) requiring correctional
officers to return medication to the pharmacy prior to transfer; and
(3) shortening the number of days of medication required for intra-system
transfers from 7 to 3 days.

- 33 -

Our pharmacist survey responses indicated that confiscations during
searches of inmates’ cells were the second largest reason for prescription
medication waste. Confiscations from waste totaled an estimated
$1.02 million in FY 2004. Waste from confiscations was generally related to
the BOP’s policy prior to January 15, 2005, that prescriptions could only be
valid for a total of 90 days (30 days with 2 refills). Therefore, the expiration
date on the prescription label was for no more than 90 days, even though
the medication may still be valid per the manufacturers’ expiration date and
still valid for use by the inmate. During searches of inmates’ cells, if
correctional officers found prescription medications that were past the
expiration date per the label, the medications were confiscated and
frequently thrown away.
Based on our survey, BOP pharmacists noted that if correctional
officers were required to return confiscated prescription medications to the
pharmacy, there was a possibility that the medication could be reissued to
the same inmate. In addition, this would assist the pharmacists in tracking
inmate prescription medication usage. The BOP revised its policy on
January 15, 2005, and extended the length of time for a valid prescription
from 90 to 180 days (a 30-day prescription with 5 refills), which may reduce
waste resulting from confiscations.
In conclusion, prescription medication waste represents a significant
cost to the BOP, representing about 5 percent of total prescription
medication expenditures. The BOP has made some progress addressing
these issues by extending the expiration date, which may help to reduce the
waste associated with confiscations. However, we recommend the BOP
implement policies and procedures ensuring the transfer of prescription
medications with inmates, and that confiscated prescription medications are
returned to the pharmacy for reissuance or disposal.
Over-the-Counter Medication Program Statement
In an effort to reduce the cost of prescription medications, the BOP
issued the OTC Medication Program Statement, on November 17, 2004 .
This statement outlines the requirements that each institution – other than
the medical centers’ inmates who are classified as in-patient status – must
follow when using OTC medications for the treatment of inmates. The BOP
requires that inmates who complain about cosmetic, general hygiene, or
symptoms of minor ailments should be referred to the commissary, where
they can purchase OTC medications with their own funds. If an inmate is
considered indigent, that is, having less than a $6.00 average balance in
their account for the last 30 days, then the institution must provide two OTC
- 34 -

medications per week to the inmate, as needed. The following OTC
medications are available to BOP inmates, as shown in Figure 20.
FIGURE 20.
•
•
•
•
•

THE BOP OTC MEDICATIONS

Tylenol® 5 grain Tablets
Bayer® 5 grain Tablets
Aller-Chor® 4 mg Tablets
Cortaid® 0.5%
Mylanta® II or Maalox® Plus Liquid

•
•
•
•
•

Ex-Lax® Milk of Magnesia Liquid
Fiberall® Muciloid Powder SF
Selsun Blue® 1% Shampoo
Mylanta® 40 mg Tablets
Tinactin® 1% Cream

Source: BOP Program Statement No. 6541.02, Over-the-Counter Medications, issued
November 17, 2004

However, based on our review of 12 BOP institutions and our
pharmacist survey, we found that the BOP has not fully implemented OTC
policy throughout BOP institutions. Specifically, 35 percent of the
respondents stated on our survey that the OTC policy had not been followed
at their institution. Additionally, 43 percent of respondents stated that
medical staff directed them to provide OTC medication to an inmate even
though it was either not medically necessary or could be obtained from the
commissary.
The savings generated from implementing the OTC policy relates to
time, instead of dollar savings. OTC medication comprises only 2.7 percent,
or $1.36 million, of the BOP FY 2004 medication costs. As a result, lowering
the amount of OTC medication issued has a small impact on the total costs.
However, the larger savings from this policy relates to pharmacists’ time.
We found pharmacists and their staff spend much of their day reviewing and
filling prescriptions for all medications. By shifting the OTC medication from
the pharmacy to the commissary, the BOP will reduce the number of
prescriptions the pharmacy staff has to review and fill on a daily basis. This
will allow pharmacists more time to complete other required tasks.
Recommendations
We recommend that the BOP:
1.

Conduct a complete and accurate cost-benefit analysis of the Central
Fill proposal before deciding whether to proceed with implementation.

2.

Pursue efforts to request that Congress amend Pub. L. No. 102-585
(1993) to provide the BOP with eligibility for Big 4 pricing.

- 35 -

3.

Ensure BOP pharmacy staff search for the lowest possible prescription
medication prices within the FSS.

4.

Implement a system that would ensure that prescription medications
are transferred with the inmates, by taking into account security
issues.

5.

Ensure that prescription medication confiscated from an inmate is
returned to the pharmacy for reissuance to the same inmate or is
disposed of properly.

6.

Ensure that all BOP institutions comply with the OTC policy.

- 36 -

II.

CONTROLS AND SAFEGUARDS OVER PRESCRIPTION
MEDICATIONS
The BOP is not adequately accounting for and safeguarding
prescription medications. As a result, the BOP could not account
for 402 controlled substances at the institutions included in our
audit. In addition, we noted numerous errors related to
controlled substances inventory and administration records.
Furthermore, quarterly inventories submitted to BOP
headquarters did not always include all controlled substances.
We also found the BOP has not implemented adequate internal
controls related to the purchasing, ordering, receiving, payment,
and dispensing of prescription medications.

BOP policy requires that necessary medical, dental, and mental health
services be provided to inmates by professional staff.23 Sick or injured
inmates may be seen during routine appointments or through sick calls at
the institution. If an inmate needs a prescription medication, the health
service practitioner prepares a written order, which can sometimes include
controlled substances.
Controlled Substances
Controlled substances are prescription medications that fall under the
jurisdiction of federal and state laws regulating their manufacture, sale,
distribution, use, and disposal. The federal government separates controlled
substances into five schedules as defined by the Controlled Substances
Act § 202 (21-USC-812), as follows:
•

Schedule I – controlled substances that have no accepted medical use
in the United States.

•

Schedule II – controlled substances that have accepted medical uses
but a high potential for abuse, with severe psychological or physical
dependency.

23

BOP Program Statement No. 6000.05, Health Service Manual, updated
February 11, 2000.

- 37 -

•

Schedule III through V – controlled substances that have accepted
medical uses for which the potential for abuse is in decreasing levels of
dependency.

The Drug Enforcement Agency (DEA) is the primary agency
responsible for enforcing the Controlled Substances Act. In order to
prescribe and administer controlled substances, institutions and physicians
must register and obtain a DEA Controlled Substance Registration
Certificate. The DEA requires registrants to comply with regulatory
requirements related to security, records accountability, and other specific
standards for controlled substances. Specifically, the DEA requires that
registrants conduct biennial inventories of all controlled substances and
maintain records of all purchases, disposals, and administration of controlled
substances for at least 2 years. Registrants must also have a written
prescription for controlled substances that include the physician’s signature
and applicable DEA registration number. Each BOP institution is registered
with the DEA to prescribe, dispense, and administer controlled substances.24
The BOP places further requirements on the use and accounting for
controlled substances.25 BOP policy requires that the mainstock of controlled
substances be stored in a safe or vault and that only the Chief Pharmacist or
designee should have access.26 Each institution is required to maintain a
perpetual inventory for all controlled substances stored in the mainstock.
The inventory for controlled substances is used to record all purchases,
transfers, and disposals of controlled substances in and out of the
mainstock.
BOP policy also requires that any substocks of controlled substances
be stored in a stationary, approved steel cabinet with overlapping steel
doors that are separately locked or in a safe with a key padlock. Several
institutions use an automated system, such as a Pyxis or OmniCell system,
to store controlled substances substock. These systems allow for improved
electronic tracking and recordkeeping through inventory records. The only
staff members who generally have access to the substock are pharmacists,
24

“Prescribing” is defined as writing or giving medical directions, or indicating
remedies. “Dispensing” is defined as providing multiple doses in a properly labeled
container for use over a period of time. “Administration” is defined as providing one dose of
medication to be applied or consumed immediately.
25

The Chief Pharmacist is responsible for procurement, storage, distribution,
product selection, and security of all controlled substances.
26

BOP Program Statement No. 6000.05, Health Service Manual, updated
February 11, 2000.

- 38 -

pharmacy technicians, and mid-level practitioners. According to BOP policy,
institutions should maintain a perpetual inventory of controlled substances in
any substock. In addition, institutions are required to count controlled
substances at each shift change.
Each time a controlled substance is administered to an inmate from
the substock, the BOP requires it to be recorded on the Proof of Use sheet as
well as the inmates’ Medication Administration Record (MAR). The Proof of
Use sheet is the substock inventory record and includes the inmate’s name
and number, date issued, strength, quantity, signature of the person
administering the medication, and balance on hand. The MAR should include
the prescription medication name, strength, quantity, date, time, and person
who administered the prescription medication. The information on the Proof
of Use sheet and the MAR should agree.
At the 12 institutions included in our audit, we identified 22 different
types of controlled substances that were being used to treat inmates. (See
Appendix I for the medical uses of each type of controlled substance.)
Tylenol® with Codeine and Phenobarbital were the most commonly used
controlled substances throughout the institutions. The types of controlled
substances identified in our audit, the number of institutions using each
type, and the DEA Schedule classification, are shown in Figure 21.

- 39 -

FIGURE 21.

CONTROLLED SUBSTANCES IDENTIFIED AT
THE 12 BOP INSTITUTIONS AUDITED

Controlled Substance
Tylenol® with Codeine
Phenobarbital
Ativan®
Klonopin®
Valium®
Morphine
Andro®
Demerol®
Percocet®
Xanax®
Dolophine®
Roxicodone®
Codeine
Lomotil®
Duragesic®
Ritalin®
Android-10®
Stadol®
Lorcet®
Darvon®
Provigil®
Versed®

Number of
Institutions

DEA
Schedule

12
12
11
9
9
9
7
6
6
3
3
3
2
2
2
2
2
1
1
1
1
1

III
IV
IV
IV
IV
II
III
II
II
IV
II
II
II
V
II
II
III
IV
III
IV
IV
IV

Source: OIG analysis of BOP institutions’ inventory records

At each institution audited, we reviewed all relevant documents for
controlled substances to account for every dose. We conducted an
accountability audit consisting of a physical count of controlled substances
during our review, and a review of all mainstock and substock records for a
1-year period. This included a review of documents related to purchases,
disposals, administrations, and transfers. At the Springfield Medical Center
we judgmentally selected a sample of nine controlled substances, and
reviewed at least a 7-month period because of the large volume of use at
the institution.27
Based on the results of our accountability audit, we found that BOP
institutions did not always adequately account for and safeguard controlled
substances. Specifically, we identified 402 unaccounted for doses of
controlled substances out of a total of 42,125 that should have been on hand
at the time of our inventory as shown in Figure 22.
27

The Springfield Medical Center had 12 types of controlled substances consisting of
36 different strengths and forms (liquid vs. tablet).

- 40 -

FIGURE 22.

UNACCOUNTED FOR CONTROLLED
SUBSTANCES BY BOP INSTITUTION

Institution
Springfield Medical Center
Percocet®
Tylenol® with Codeine
Ativan®
Codeine
Phenobarbital
Duragesic®
La Tuna FCI
Tylenol® with Codeine
Klonopin®
Valium®
®
Andro
Atwater USP
Lomotil®
®
Liquid Tylenol with Codeine
Elixir
Danbury FCI
Phenobarbital
Tylenol® with Codeine
Stadol®
Forrest City FCI (Low)
Tylenol® with Codeine
Phenobarbital
Oklahoma FTC
Percocet®
Phenobarbital
Atlanta USP
Percocet®
Klonopin®
Florence USP
Phenobarbital
Lomotil®
Florence FCI
Percocet®
Morphine
Valium®
Alderson FPC
Tylenol® with Codeine
Klonopin®
Florence ADX
Oxford FCI
Total

Tablets
159.00
69.00
43.00
43.00
2.00
2.00
98.00
60.00
35.00

46.00
46.00

Others28
4.00

4.00
1.50
3.00
1.50
39.00
39.00

23.00
19.00
4.00
11.00
10.00
1.00
5.00
4.00
1.00
4.00
2.00
2.00
4.00
3.00
1.00
3.00
2.00
1.00
2.25
2.00
0.25
0
0
352.25

1.00
1.00

1.00
1.00

0
0
49.50

Total
163.00
69.00
43.00
43.00
2.00
2.00
4.00
99.50
60.00
35.00
3.00
1.50
85.00
46.00
39.00
24.00
19.00
4.00
1.00
11.00
10.00
1.00
5.00
4.00
1.00
4.00
2.00
2.00
4.00
3.00
1.00
4.00
2.00
1.00
1.00
2.25
2.00
0.25
0
0
401.75

Source: OIG analysis of BOP Institutions

28

“Others” category includes, liquid doses in milliliters, injectables, and patches.

- 41 -

A summary of our findings related to the missing controlled substances
by institution is included in Appendix I.
Controlled Substance Recordkeeping Errors
Additionally, we found numerous errors in the controlled substances
inventory records, which based on the inventory records alone, appeared to
result in unaccounted controlled substances. We were able to resolve all of
these discrepancies by reviewing additional documents. Although, these
errors did not result in missing controlled substances, errors in the inventory
records for controlled substances weaken the ability of the BOP to accurately
account for and safeguard the controlled substances.
At the 12 institutions included in our audit, we reviewed the controlled
substances records for the mainstock perpetual inventory and substock Proof
of Use sheets to determine if the required information was complete and
accurate.29 As a result of our review, we identified two different types of
errors relating to the records used to account for controlled substances:
(1) errors that resulted in discrepancies in the controlled substances balance
that could be resolved using inmates’ MARs, and (2) missing or incomplete
information in the mainstock and substock records, such as date, time,
inmate number or name, and signature of person administering the
medication. These errors were generally related to substock Proof of Use
sheets, which are maintained by health services staff administering the
controlled substances, and not the pharmacist. We noted many errors had
been identified previously as deficiencies during the institutions’ Operation
and Program Reviews.
Specifically, we identified approximately 400 recordkeeping errors on
the controlled substances inventories that appeared to result in
unaccounted-for controlled substances. However, we were able to account
for the controlled substances using additional documentation. The following
types of errors comprise the majority of these issues.
•

Transfer location not identified – we noted 133 instances where the
transfer location was not identified in the mainstock or substock
inventory;

•

Incorrect number in the usage column – we noted 52 instances where
the incorrect amount was entered into the usage column on the Proof
of Use sheet;
29

We sampled 9 of the 36 controlled substances at the Springfield Medical Center.

- 42 -

•

“Floor charge” entries – we noted 46 instances where a prescription
medication was removed from the OmniCell and shown as a “floor
charge” rather than as an administration to a specific inmate, which
would include the inmate’s name and number; and

•

Missing entry or amount in the usage column – we noted 77 instances
where the amount administered was not entered in the usage column
on the Proof of Use sheet.

We also noted the following errors on the inventory records for
controlled substances:
•

incorrect beginning inventory balance,

•

incorrect dose subtracted from the balance column,

•

doses administered that were not recorded,

•

duplicate entries,

•

incorrect strength shown for medication,

•

inventory overstated,

•

purchase not recorded in mainstock,

•

disposal not recorded in mainstock,

•

transfer not recorded in mainstock,

•

incorrect transfer amount recorded in mainstock, and

•

substock records show administered to pill line rather than to inmate.

In addition to these recordkeeping errors, we noted our physical count
of controlled substances sometimes exceeded the balance on the inventory
records. For example, at one institution we identified 32 extra Phenobarbital
tablets from mainstock records that may have been caused by an
unrecorded transfer of controlled substances with an inmate who transferred
into the institution. There were also instances where the Proof of Use sheet
had incorrect information, resulting in a physical count that exceeded the
balance per the inventory record.

- 43 -

We also identified approximately 800 instances for which required
information was not entered in the mainstock and substock inventory
records, including the following:
•

missing inmate name and, or number;

•

missing inmate prescription medication number;

•

missing date and time the prescription medication was administered;
and

•

missing signature of the person administering the prescription
medication.

As stated previously, these errors weaken the ability of the BOP to
adequately account for and safeguard controlled substances, which can
result in missing or stolen medication. For example, as a result of
inadequate recordkeeping, there was a theft of controlled substances from
the Springfield Medical Center. According to an OIG Investigation, between
June and December 2003, a Licensed Practical Nurse stole approximately
1,300 Percocet®, which the DEA labels a Schedule II controlled substance.
The nurse was convicted in the United States District Court, Springfield,
Missouri, for violation of Title 21, USC 844(a), Possession of Controlled
Substances and sentenced to 3-years probation.
The investigation found that the nurse concealed the theft by altering
and destroying various records for the controlled substances, because of
poor recordkeeping at the facility. In fact, she concealed the theft for
approximately 6 months. The nurse identified several factors that also
contributed to her ability to steal the controlled substances. She noted that
there were no supervisors or other independent persons that verified the
controlled substances log sheets. In addition, the Proof of Use sheets were
not routinely returned to the pharmacy in a timely manner, and when they
were returned, the nurse did not believe that pharmacy staff reviewed the
sheets to check for errors.
Controlled Substance Inventory
The DEA requires that each registrant conduct a biennial inventory of
all controlled substances. In addition, the BOP requires that the mainstock
is inventoried quarterly with results submitted to BOP headquarters, and
that the substock is inventoried at each shift change, unless the institution is
using an automated system.
- 44 -

According to federal regulations, “Each inventory shall contain a
complete and accurate record of all controlled substances on hand on the
date the inventory is taken . . . . Controlled Substances shall be deemed to
be ‘on hand’ if they are in the possession of or under the control of the
registrant, including substances returned by a customer."30 We found
quarterly inventories submitted to BOP headquarters did not always include
all controlled substances. Specifically, we identified controlled substances at
three institutions that should have been listed on the mainstock in the
quarterly inventory:
•

Atwater USP – 70 Lomotil® tablets located within a lock box in the
pharmacy were not included in any inventory;

•

La Tuna FCI – 53 Klonopin® tablets that were transferred in with an
inmate but not included in the institution’s quarterly controlled
substances inventory; and

•

Florence FCI – 7.2 milliliters of Andro® that were transferred in with an
inmate but not included in the institution’s quarterly controlled
substances inventory.

We also found that 10 out of 12 institutions audited did not include
controlled substances in substock quarterly inventories.31 Pursuant to BOP
policy, the institutions are only required to include mainstock in the quarterly
controlled substances inventories. However, federal regulations require all
controlled substances to be included in the inventories required by the DEA.
Given the numerous recordkeeping errors related to controlled substances
noted in this report, in our judgment, we believe it is important for the BOP
to conduct a complete accounting of all controlled substances on a quarterly
basis.
Administration of Controlled Substances
According to BOP policy, health service staff members, including
mid-level practitioners, and medical and pharmacy technicians who have
completed a Pharmacy Services Training Program can administer doses of
controlled substance medications to inmates. The staff member
administering the medication is required to record it on the Proof of Use
30

Code of Federal Regulations, 21 C.F.R. (2004) § 1304.11.

31

These institutions are, Florence FCI, Florence USP, Alderson FPC, Atlanta USP,
Atwater USP, Danbury FCI, Forrest City FCI (Low), Oklahoma FTC, Oxford FCI, and
Springfield Medical Center.

- 45 -

sheet and the MAR, immediately following administration of the controlled
substance. Information recorded on the Proof of Use sheet must include the
inmate’s name, inmate number, date, time, dosage administered, and
signature of the person who administered the controlled substance. The
information recorded on the MAR, which is located in the inmate’s medical
file, should include the name, quantity, and strength of the controlled
substance issued, as well as the date, time, and name of the person who
administered the controlled substance.
At each of the 12 institutions included in our audit, we generally
selected a sample of 20 controlled substances administered to inmates from
the Proof of Use sheets except for Oklahoma FTC during the period
September 2003 through April 2005. Our sample included a total of
245 administrations of controlled substances to inmates based on the
information recorded on the Proof of Use sheets. We then compared the
information recorded on the Proof of Use sheet to the inmate’s MAR to verify
that the inmate received the medication, and we determined if the
institutions were in compliance with the BOP’s requirements.
As shown in Figure 23, we found that the institutions did not always
comply with the BOP’s requirements for administering controlled substances
to inmates.

- 46 -

FIGURE 23.

ADMINISTRATION OF CONTROLLED SUBSTANCES
REVIEW

Institution
Alderson FPC
Atlanta USP
Atwater USP
Danbury FCI
Florence ADX
Florence FCI
Florence USP
Forrest City FCI (Low)
La Tuna FCI
Oklahoma FTC
Oxford FCI
Springfield Medical
Center
Total

Controlled
Substance
Reviewed
30
20
20
20
20
21
20
20
24
10
20
20
245

Missing
MAR
4
3
3
3
0
0
0
0
4
0
2
7
26

MAR Not
Signed
2
5
0
2
0
0
0
0
6
0
2
1
18

Other
Issues
0
0
15
0
0
0
2
0
0
0
0
0
17

Source: OIG analysis of the BOP’s review of the administration of controlled
substances

Specifically, we found:
•

for 26 controlled substance administrations, we were unable to locate
the MAR in the inmate’s medical file that covered the period during
which the controlled substances were recorded as being administered;
as a result, there are no assurances that the inmate received the
medication;

•

for 18 controlled substance administrations, the date of the
administration per the inmate’s MAR did not match the date recorded
on the Proof of Use sheet; and

•

for 17 controlled substance administrations, incorrect information was
recorded on the Proof of Use sheet, including the inmate’s name, or
the information recorded on the MAR including prescription information
and the dose administered did not match the Proof of Use sheet, or the
inmate was given a medication without obtaining the required
non-formulary waiver.

It is important that the required administration information of
controlled substances is complete and accurate on the Proof of Use sheet
and the MAR. Without accurate documentation the institution has no
assurance that the medication was administered to the correct inmate or in
- 47 -

the correct dose. This weakens the institution’s ability to account for or to
detect theft of controlled substances.
Prescription Medications Purchasing
The BOP purchases its prescription medications through a “prime
vendor” contract that is administered by the VA. During our audit, we
identified inadequate internal controls related to purchasing, ordering,
receiving, and paying for prescription medications. At each institution
included in our audit, we found that there was no evidence of any
segregation of duties related to purchasing of prescription medications. At
4 of the 12 institutions, either the Health Services Administrator (HSA) or
the contracting officer signed a blanket purchase agreement for the entire
year and delegated all responsibilities for ordering, receiving, and approving
invoices for payment to the pharmacist. In addition, 5 of the 12 institutions
audited, there was no documentation that the pharmacist verified the
prescription medications received to the invoice. Furthermore, in 5 of the
12 institutions the person who ordered and received prescription medications
was also the individual who signed off on the invoice before it was submitted
to the business office for payment.
The lack of internal controls over the purchasing of prescription
medications at BOP institutions allowed a Chief Pharmacist at the El Reno
FCI to illegally purchase four different brands of non-formulary prescription
medications. An OIG investigation found that he stole a total of
30,600 doses between July 2002 and February 2004, for his personal
consumption. This individual’s purchases included Fioricet®, Soma®,
Ultram®, and Mobic®, and cost the BOP approximately $1,567 with a retail
value of approximately $28,700. In lieu of prosecution, the Western District
of Oklahoma offered the pharmacist a 1-year Pretrial Diversion Program and
if all conditions are met, he will not be prosecuted. Adequate segregation of
duties for purchasing and receiving of controlled substances would likely
have prevented this theft.
Recommendations
We recommend the BOP:
7.

Ensure all documentation related to controlled substances is accurate
and complete.

- 48 -

8.

Require all controlled substances, including those in the substock,
crash cart, and other locations, are included in the quarterly
inventories.

9.

Develop and implement policies and procedures requiring the Health
Service Administrator or an authorized designee to approve each
prescription medication purchase order and verify the items received
to each vendor invoice.

10.

Develop and implement policies and procedures requiring adequate
segregation of duties for ordering and receiving prescription
medications.

- 49 -

III.

PHARMACY COMPLIANCE
We found that the BOP pharmacies were not always in
compliance with applicable BOP policies and procedures. At the
12 BOP institutions included in our audit, we found that
384 (35 percent) of the prescriptions reviewed were not in
compliance with BOP policy. Specifically we found prescriptions
for which: (1) the pharmacist’s or physician’s signature was not
documented; (2) the separate written prescription form for
controlled substances was not maintained; (3) required
information was missing in inmates’ medical files; (4) controlled
substance prescription forms were missing a DEA registration
number or required signature; and (5) the prescription time
period exceeded the BOP policy for controlled substances. We
also found 31 prescriptions (84 percent) for non-formulary
medications and 14 purchases (47 percent) of non-formulary
medications for which the required waivers were not obtained.

Prescription Review
In assessing compliance with BOP policies and procedures, we
judgmentally selected a sample of about 100 prescriptions written from
October 2003 through July 2005 at each institution audited, with the
exception of the Oklahoma FTC.32 Our sample generally consisted of
50 controlled and 50 noncontrolled substances prescriptions. If an
institution did not have 50 prescriptions for controlled substances during the
period, we increased our sample of noncontrolled substances for a total
combined sample of about 100 prescriptions. Additionally, if the prescription
selected from our sample was for an inmate that had been transferred or
released, we verified the inmate’s location by using the BOP’s SENTRY
system and replaced the sample with a new prescription since medical files
are transferred with the inmates.
At the 12 institutions included in our audit, we selected a total of
1,107 prescriptions, including 488 prescriptions for controlled substances.
For each prescription in our sample, we reviewed the inmate’s medical file to
ensure that the appropriate information such as prescription name, dosage,
and instructions were recorded, and that the pharmacist’s review was
32

Over 80,000 inmates transfer through the Oklahoma FTC annually. Generally, the
inmates are at the facility for an average of 14 to 30 days, and some inmates are at the
facility for less than 24 hours. Therefore, we only reviewed a sample of 18 prescriptions at
FTC Oklahoma because the medical files are transferred with inmates.

- 50 -

documented. In addition, we reviewed prescriptions for controlled
substances to determine if separate prescription forms were completed,
including all required information, and that the prescription was written for
the allowable time period. We also reviewed prescriptions for non-formulary
medications to determine if the required waivers had been obtained.
As shown in Figure 24, we found that 384 (35 percent) of the
1,107 prescriptions reviewed were not in compliance with applicable policies
and procedures.
FIGURE 24.

PRESCRIPTION REVIEW

Institutions
Alderson FPC
Atlanta USP
Atwater USP
Danbury FCI
Florence ADX
Florence FCI
Florence USP
Forrest City FCI (Low)
La Tuna FCI
Oklahoma FTC
Oxford FCI
Springfield Medical
Center
Total

Controlled
Substances
Reviewed
50
50
50
39
11
43
50
50
43
2
50

Noncontrolled
Substances
Reviewed
50
50
50
61
79
51
55
50
57
16
50

50
488

50
619

Total
Number of
Findings33
2
101
45
9
3
52
33
24
63
0
4
48
384

Source: OIG analysis of the BOP’s prescription review

We found 206 prescriptions for which the pharmacist’s review for
contraindications or physician’s signature was not documented in the
inmate’s medical file. The majority of these prescriptions (93) were at the
Atlanta USP. Officials there stated that pharmacists review prescriptions for
contraindications but do not annotate their review in the inmate’s medical
chart because of a staffing shortage. At several other institutions, the
pharmacist’s review for contraindication was not documented because the
prescription was faxed to the pharmacy. For example, at the Springfield
Medical Center we found about 40 prescriptions that were faxed to the
pharmacy from a nursing station and the faxed copy with the pharmacist’s
signature could not be retrieved. We also noted that as a result of faxing
the prescriptions for contraindications, the pharmacist does not have the

33

The total number of findings may include multiple errors for the same
prescription.

- 51 -

inmate’s medical chart, as required, to conduct a review of the prescription
for contraindications.
Generally, at each of the 12 institutions, we found that the written
prescriptions were included in the inmate’s medical files and that the
prescriptions contained the required information; however, we noted that
19 prescriptions were not in the inmate’s medical file or lacked required
information such as prescription name, dosage, and instructions.
As stated previously, our sample included 488 prescriptions for
controlled substances. According to federal regulations, all prescriptions for
controlled substances are required to include the physician’s name, address,
signature, and DEA registration number.34 In addition, BOP policy requires
that prescriptions for Schedule II controlled substances should be written for
no more than 72 hours and that prescriptions for Schedule III through
V controlled substances should not be written for more than 30 days, with
up to 2 refills, not to exceed a total of 90 days.35 Based on our review of
488 controlled substance prescriptions, we found:
•

54 controlled substance prescriptions for which the prescription forms
were missing a DEA registration number or required signature;

•

24 controlled substances prescriptions for which the required separate
written prescription forms were not maintained by the institution; and

•

20 prescriptions that were written for periods exceeding 72 hours for
Schedule II controlled substances or 90 days for Schedule III through
V controlled substances.36

On February 10, 2005, the Director of BOP Pharmacy Services
distributed an e-mail to BOP pharmacists stating that separate prescription
forms are no longer required for non-receiving and discharging controlled
substance medication orders. Instead, prescriptions for controlled
substances can be filled directly from the inmate’s medical file since all BOP
pharmacies are licensed with the DEA as a hospital or clinic, which was
34

Code of Federal Regulations, 21 C.F.R. § 1306.05 (2004).

35

BOP Program Statement No. 6000.05, Health Services Manual, updated
February 11, 2000.
36

Schedule II controlled substances can be written for 30 days if the medication is
used in cases of chronic or terminal illness resulting in unremitting pain not likely to abate in
the short term, or if it is used to treat narcolepsy.

- 52 -

verified with the DEA. However, the written prescription in the inmate’s
medical file must still contain the information required by federal
regulations. In addition, BOP institutions are required to keep logs for
prescription of controlled substances.
Non-Formulary Waivers
The BOP National Formulary (formulary) is a list of all prescription
medications recommended as essential for inmate care and is used to help
provide clinically appropriate, safe, and cost-effective prescription
medications. The BOP Pharmacy and Therapeutics Committee, comprised of
pharmacists and physicians from the institutions and the Central Office,
develops and maintains the formulary. Physicians and pharmacists are
generally required to limit prescriptions to those medications listed in the
formulary. If a non-formulary prescription medication is deemed necessary
for the treatment of an inmate, the prescriber is required to obtain a
non-formulary Drug Authorization (waiver) requesting approval for the use
of non-formulary medication to treat a specific inmate’s needs.37 The
non-formulary waiver must be approved by the BOP Medical Director.
For each of the 1,107 prescriptions included in our sample, we
determined whether or not the medication was included in the BOP
formulary. For any non-formulary medications, we determined whether the
required non-formulary waiver had been obtained. Our sample of
1,107 prescriptions included 37 prescriptions that were for non-formulary
medications. Of the 37 non-formulary prescriptions identified from our
sample, we found that for 31 prescriptions (84 percent) the required
non-formulary waiver had not been obtained.38
In addition to reviewing the prescription sample to identify any
non-formulary prescription medications for which the required waivers were
not obtained, we also reviewed a sample of medications purchased. At each
institution included in our audit, we obtained invoices for prescription
medications purchased from October 2003 through July 2005 and selected a
sample of at least 100 individual medications. Our total sample consisted of
1,198 prescription medications purchased during the period of October 2003
37

BOP Program Statement No. 6501.06, Pharmacy Technical Reference Manual,
updated February 28, 2001.
38

This analysis includes prescriptions for each separate non-formulary prescription.
For example, we found 23 instances where the same non-formulary medication was
prescribed to the same inmate without the required waiver and this was counted as
23 separate non-formulary prescriptions without the required waiver.

- 53 -

through July 2005. We reviewed each prescription medication in our
purchase sample to identify any non-formulary medications that were
purchased and determined whether the required waiver had been obtained.
Generally, the institutions included in our sample were in compliance with
the BOP’s requirements for non-formulary prescription medications;
however, we found a total of 30 purchases for non-formulary medications, of
which 14 purchases (47 percent) did not obtain the required non-formulary
waiver.
Although we found that the institutions included in our audit were
generally in compliance with the BOP’s non-formulary medication
requirements, we did identify an issue related to the non-formulary waivers
that should be addressed. The BOP’s current requirements allow
non-formulary waivers to be issued for an indefinite period, which does not
take into consideration changes in the inmate’s medical condition or the
availability of newer prescription medications. Therefore, in our judgment,
the BOP should require that non-formulary waivers be renewed annually to
ensure that the inmate’s prescription is still medically necessary. In
addition, since the BOP formulary is updated annually, this practice would
allow the BOP to determine if another medication in the updated formulary
may fulfill the need of the non-formulary prescription.
Recommendations
We recommend that the BOP:
11.

Implement a policy that requires pharmacist reviews for
contraindications are documented in the inmates’ files.

12.

Ensure that written prescriptions include all required information.

13.

Ensure that non-formulary waivers are obtained and required to be
renewed annually.

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OBJECTIVES, SCOPE, AND METHODOLOGY
The DOJ OIG conducted this audit to evaluate the BOP Pharmacy
Services. The objectives of our audit were to:
•

evaluate the BOP’s efforts to reduce its increasing costs of prescription
medications;

•

assess whether the BOP ensures adequate controls and safeguards
over prescription medications; and

•

assess whether the BOP pharmacies are in compliance with applicable
laws, regulations, policies, and procedures.

We conducted our audit in accordance with the Government Auditing
Standards. We included such tests as were considered necessary to
accomplish the audit objectives. The audit generally covered, but was not
limited to, the period of October 2003 through July 2005. We conducted
audit work at the sites shown in Figure 25.39
FIGURE 25.

BOP INSTITUTIONS VISITED

Institution
Alderson FPC
Atlanta USP
Atwater USP
Danbury FCI
Florence ADX
Florence FCI
Florence USP
Forrest City FCI (Low)
La Tuna FCI
Oklahoma City FTC
Oxford FCI
Springfield Medical Center

Location
West Virginia
Georgia
California
Connecticut
Colorado
Colorado
Colorado
Arkansas
New Mexico
Oklahoma
Wisconsin
Missouri

To evaluate the BOP’s efforts to reduce its increasing costs of
prescription medications, we analyzed the BOP’s Central Fill proposal. Our
39

We also visited the Englewood FCI, Colorado, to obtain background information;
however, Englewood FCI is not included in our results.

- 55 -

analysis included a comprehensive review of the cost-benefit analysis
conducted by the BOP in support of the Central Fill proposal. We analyzed
purchasing data for the six institutions included in the BOP’s analysis during
the period of March 2003 to February 2004, and compared it to pricing
information provided by the VA, in order to determine estimated gross
purchase savings. In addition, we analyzed the BOP’s estimate of savings
from the elimination of waste by conducting a survey of all BOP pharmacists
to determine the percentage of waste that would be reduced by Central Fill.
We also analyzed the number of prescriptions and percentage of prescription
medication costs that would use Central Fill and determined their impact on
the cost-benefit analysis.
To determine estimated prescription medication costs related to waste
and other issues, we surveyed all 126 BOP pharmacists. We received
responses to 106 (84 percent) surveys. The survey consisted of
40 questions and covered the following topics: (1) training and assessment;
(2) access and security; (3) purchasing and receiving; (4) OTC medication;
(5) waste and returns; (6) Central Fill; (7) Central Processing; and (8) other
areas.
To determine whether the BOP’s OTC program statement had been
fully implemented, we reviewed OTC medications prescribed at the
institutions to ensure that inmates were being referred to the commissary.
When appropriate, we also conducted interviews of staff and included
questions in our survey to determine the progress towards implementation
of the policy throughout the BOP.
To determine whether the BOP ensures adequate controls and
safeguards over controlled substances, we reviewed all controlled
substances at 11 of the 12 sites included in our audit and identified
deficiencies related to the records used to account for controlled substances.
Specifically, we performed an accountability audit of controlled substances,
which compared the physical inventory that we conducted on site, to an
inventory conducted at least 1-year prior to our audit. At the Springfield
Medical Center, we judgmentally sampled a selection of 9 of the
12 controlled substances maintained, and conducted an accountability audit
that included at least 7 months of data. The accountability audit consisted
of:
•

conducting a physical inventory;

•

adding prescriptions, disposals, and transfers out;

•

subtracting out the beginning inventory balance; and
- 56 -

•

subtracting out purchases and transfers in.

All controlled substances were accounted for if the result of the
calculation was equal to zero. If the total was not equal to zero, we
reviewed additional documentation to attempt to account for all controlled
substances. During the accountability audit we reviewed the following
records:
•

mainstock perpetual inventory, which includes purchases, transfers in
from the substock, transfers out to the substock, and disposal of
controlled substances;

•

substock Proof of Use sheets, also known as certificates of disposition,
which are used to record the transfers in from the mainstock, the
administration of controlled substances to inmates, and transfers back
to the mainstock;

•

inmates’ MARs, which are used to record the administration of a
controlled substance to an inmate;

•

DEA 222 form for the disposal and purchase of controlled substances;

•

controlled substance invoices from the prime vendor; and

•

disposal records provided to the institution by the returns company.

To determine whether the BOP had adequate controls over prescription
medication purchases, we reviewed five purchases from the prime vendor
and ensured that documentation was maintained and signed off by a
supervisor. In addition, we reviewed up to 10 purchases from sources other
than the prime vendor to ensure proper documentation. During interviews
with pharmacists and the HSA, we asked for detailed descriptions of how the
ordering, approving, receiving, and paying processes worked.
To determine whether the BOP pharmacies were in compliance with
applicable laws, regulations, policies, and procedures, we selected a sample
of approximately 100 prescriptions written from October 2003 through July
2005 at each institution we audited, with the exception of the
Oklahoma FTC. Our prescription sample generally consisted of 50 controlled
and 50 noncontrolled substances. If an institution did not have
50 prescriptions for controlled substances during the period, we increased
our sample of noncontrolled substances for a total sample of about
100 prescriptions. Additionally, if the prescription selected from our random
sample was for an inmate that had been transferred or released, we verified
- 57 -

the inmate’s location by using the BOP’s SENTRY system and replaced the
sample with a new prescription, because medical files are transferred with
the inmates.
For each prescription included in our sample, we reviewed the inmate’s
medical file to ensure that the appropriate information, such as prescription
name, dosage, and instructions were recorded, and that the pharmacist’s
review was documented. In addition, we reviewed prescriptions for
controlled substances to determine if separate prescription forms were
completed – including the required information – and to determine if the
prescription was written for the allowable time period. For each of the
prescriptions included in our sample, we determined whether or not the
medication was included in the BOP formulary. For any non-formulary
medications, we determined whether the required non-formulary waiver had
been obtained.
At each institution included in our audit, we also obtained invoices for
prescription medications purchased from October 2003 through July 2005
and selected a sample of at least 100 individual medications. We reviewed
each prescription medication in our purchase sample to identify any
non-formulary medications that were purchased and determined whether the
required waiver had been obtained.
In addition, at each site, except Oklahoma FTC, we judgmentally
selected at least 20 administrations of controlled substances and ensured
that the information on the Proof of Use sheets and MARs agreed. At
Oklahoma FTC we only reviewed 10 administrations due to the constant
transferring of inmates and their records. We selected our sample based on
the Proof of Use sheet and then obtained the inmate’s MAR from their
medical file and ensured that the MAR agreed with all the information,
including drug name, strength, date, time, and quantity.

- 58 -

STATEMENT ON COMPLIANCE WITH LAWS AND
REGULATIONS
As required by the Government Auditing Standards, we tested the
BOP’s records and documents pertaining to Pharmacy Services and
prescription medications to obtain reasonable assurance that the BOP
complied with laws and regulations that, if not complied with, in our
judgment could have a material effect on the BOP’s administration of
Pharmacy Services. Compliance with laws and regulations related to
prescription medications is the responsibility of BOP management. An audit
includes examining, on a test basis, evidence about compliance with laws
and regulations. At the time of our audit, the pertinent legislation and the
applicable regulations were:

•

Code of Federal Regulations, 21 C.F.R. (2004)

•

BOP Program Statement No. 6000.05, Health Services Manual,
updated February 11, 2000

•

BOP Program Statement No. 6501.06, Pharmacy Technical
Reference Manual, updated February 28, 2001

•

BOP Program Statement No. 6541.02, Over-the-Counter
Medications, dated November 17, 2004

•

BOP Program Statement No. 6360.01, Pharmacy Services,
dated January 15, 2005

•

BOP Health Services National Formulary 2003, dated
January 8, 2003

•

BOP Health Services National Formulary 2004, dated
February 17, 2004

Except for the issues discussed in the Findings and Recommendations
section of this report, nothing came to our attention that caused us to
believe that BOP management was not in compliance with the laws listed
above.

- 59 -

STATEMENT ON INTERNAL CONTROLS
In planning and performing our audit of the BOP’s Pharmacy Services,
we considered the BOP’s internal controls for the purpose of determining our
auditing procedures. The evaluation was not made for the purpose of
providing assurance on the internal control structure as a whole; however,
we noted certain matters that we consider reportable conditions under
generally accepted government auditing standards.40
Finding II
•

The BOP did not ensure that records for controlled substances,
including the mainstock and substock inventory, Proof of Use sheets,
and quarterly inventories, were accurate and complete.

•

The BOP did not ensure that the Health Services Administrator or an
authorized designee approved and verified all purchase orders and
verified items received to the vendor invoices for all prescription
medications.

•

The BOP did not ensure that the administration of controlled
substances was properly documented on inmates’ Medication
Administration Records.

•

The BOP did not ensure that there was adequate segregation of duties
for ordering and receiving of prescription medications.

Finding III
•

The BOP did not ensure that its institutions were in compliance with
regulations related to prescriptions for controlled substances.

•

The BOP did not ensure that prescriptions in inmates’ medical files
contained the required information, including documentation of the
pharmacists’ reviews for adverse interactions.

40

Reportable conditions involve matters coming to our attention relating to
significant deficiencies in the design or operation of the internal control structure that, in our
judgment, could adversely affect the ability of the BOP to administer its Pharmacy Services.

- 60 -

Because we are not expressing an opinion on the BOP’s overall internal
control structure, this statement is intended solely for the information and
use of the BOP in managing its Pharmacy Services.

- 61 -

APPENDIX I

DETAILS OF UNACCOUNTED FOR CONTROLLED
SUBSTANCES
Springfield Medical Center
We were unable to account for 69 Percocet® tablets, 43 Tylenol® with
Codeine tablets, 43 Ativan® 1 mg tablets, 2 Codeine 30 mg tablets,
2 Phenobarbital 30 mg tablets, and 4 Duragesic® 75 mg patches. The
69 Percocet tablets were related to 39 errors on the substock Proof of Use
sheets that could not be resolved using the inmates’ MARs. These errors
include:
•

Twenty transactions that showed a decrease in the balance column, for
which a corresponding amount administered was not recorded in the
usage column, for a difference of 38 tablets; and

•

Nineteen transactions recorded in the usage column that did not match
the change in the balance column, for a difference of 31 tablets.

The 43 missing Tylenol® with Codeine tablets were related to 19 errors
on the substock Proof of Use sheets that could not be reconciled with the
inmates’ MARs. These errors include:
•

Eleven transactions that showed a decrease in the balance column, for
which a corresponding amount administered was not recorded in the
usage column, for a difference of 22 tablets;

•

Seven transactions recorded in the usage column that did not match
the change in the balance column, for a difference of 19 tablets; and

•

One transaction of a return to substock that was not added to the
inventory balance, for a difference of 2 tablets.
For the 43 missing Ativan® tablets, we found:

•

The mainstock records showed a transfer out of 140 tablets to the
substock, in January 2005. However, the corresponding substock
records only showed a transfer in of 122 doses, resulting in
18 unaccounted for tablets;

- 62 -

•

Two decreases in the substock inventory that could not be accounted
for with an inmate’s MAR, for a difference of 11 tablets;

•

The mainstock records showed 1 transfer out of 10 tablets to the
substock in December 2004. We were unable to account for the
medication being transferred in on the corresponding substock
records, resulting in 10 unaccounted for tablets; and

•

Three transactions recorded in the usage column did not match the
change in the balance column, for a difference of 4 tablets.

The remaining 8 missing controlled substances (2 Codeine 30 mg
tablets, 2 Phenobarbital 30 mg tablets, and 4 Duragesic® 75 mg patches)
resulted from several transactions errors.
La Tuna FCI
We were unable to account for 60 Tylenol® with Codeine tablets,
35 Klonopin® tablets, 3 Valium® vials, and 1.5 milliliters of liquid Andro®.
•

For the 60 missing Tylenol® with Codeine tablets, the mainstock
records showed transfers out totaling 122 tablets to the camp between
June and August 2004. The corresponding substock records at the
camp, however, only showed total transfers in of 62 tablets, resulting
in 60 unaccounted for tablets.

•

For the 35 missing Klonopin®, we found the institution received a total
of 58 tablets that were transferred to the facility with an inmate.
Using the inmate’s MAR, we were able to determine that 23 of the
58 tablets were administered to the inmate during June and July 2004.
However, we were unable to account for the remaining 35 tablets. In
addition, we noted that the Klonopin® tablets were not recorded as
part of the institution’s quarterly controlled substances inventory.

•

For the three missing Valium® , we found the substock records at the
Federal Satellite Location in El Paso, Texas, showed a transfer out of
three vials to La Tuna FCI in March 2004. However, La Tuna FCI did
not have a record of receiving the medication, resulting in three
unaccounted for vials.

- 63 -

Atwater USP
We were unable to account for 46 Lomotil® tablets and 39 doses of
Liquid Tylenol® with Codeine Elixir.
•

The mainstock records showed 3 transfers of 100 tablets to one
inmate between January and February 2005. We examined the
inmate’s corresponding MAR and were able to verify the administration
of 254 tablets, leaving 46 unaccounted tablets. We noted that the
300 tablets were not recorded in the substock.
For the 39 missing Liquid Tylenol® with Codeine Elixir:

•

The mainstock records showed 3 transfers of 10 doses each to the
OmniCell between September and December 2004. We reviewed the
OmniCell records and were unable to account for the medication being
transferred, resulting in 30 unaccounted-for doses;

•

The mainstock record showed a transfer out of 20 doses to the
OmniCell in February 2005. However, the corresponding OmniCell
records only showed a transfer in of 12 doses, resulting in
8 unaccounted-for doses; and

•

The mainstock records showed a transfer out of 10 doses to the
substock, in August 2004. However, the corresponding substock
records only showed a transfer in of 9 doses, resulting in
1 unaccounted-for dose.

Initially, our tests were unable to account for 1,391 controlled
substances. Subsequent to our review, the staff at USP Atwater provided
additional documents showing the existence of a second substock that we
were not aware of during our initial visit. The additional information helped
to account for the majority of missing controlled substances. Nevertheless,
we were still unable to account for the 46 Lomotil® tablets and the 39 doses
of Liquid Tylenol® with Codeine Elixir.
Danbury FCI
We were unable to account for 19 Phenobarbital tablets,
4 Tylenol® with Codeine tablets, and 1 milliliter of liquid Stadol®. These
missing drugs were related to decreases in the balance column on the
substock Proof of Use sheets, for which no amount was recorded in the
corresponding usage column. On each occasion, the substock records
- 64 -

identified the inmate’s name and number; however, we were unable to
verify the administration of the tablets using the inmate’s MAR.
Forrest City FCI (Low)
We were unable to account for 10 Tylenol® with Codeine tablets and
1 Phenobarbital tablet. For the 10 missing Tylenol® with Codeine, the
mainstock records show a transfer out of 10 tablets to the medium security
facility in September 2004. We were unable to account for the medication
as being transferred in, on the corresponding records for the Forrest City FCI
medium security facility. For the missing Phenobarbital tablet, the
mainstock records show a transfer out of 30 tablets to the camp in
October 2004, and a return transfer of 29 tablets from the camp on
December 2004, resulting in 1 unaccounted for tablet. The camp did not
maintain records showing either transfer or that the missing tablet was given
to an inmate.
All Other Institutions
At the remaining seven institutions, controlled substances were
generally accounted for; however, we found some minor issues at the
following five institutions:
•

Oklahoma FTC – We were unable to account for four Percocet®
tablets, and one Phenobarbital tablet because errors in the usage
column of the substock Proof of Use sheet could not be resolved using
the inmates’ MARs.

•

Atlanta USP – We were unable to account for two Percocet® tablets,
and two Klonopin® tablets because errors in the usage column of the
substock Proof of Use sheet could not be resolved using the inmates’
MARs.

•

Florence USP – We were unable to account for three Phenobarbital
tablets and one Lomotil® tablet because errors in the usage column of
the substock Proof of Use sheet could not be resolved using the
inmates’ MARs.

- 65 -

•

Florence FCI – We were unable to account for two Percocet® tablets,
one Morphine tablet, and one Valium® injectable because errors in the
usage column of the substock Proof of Use sheet could not be resolved
using the inmates’ MARs, and discrepancies in the disposals reported
by the institution and the returns company.

•

Alderson FPC – We were unable to account for two Tylenol® with
Codeine tablets and a quarter tablet of Klonopin® 1 mg because errors
in the usage column of the substock Proof of Use sheet could not be
resolved using the inmates’ MARs.

- 66 -

APPENDIX II

CONTROLLED AND NONCONTROLLED SUBSTANCES

Brand Name
Ativan

®

Generic Name for
Controlled Substance
Lorazepam

Usage

Depo-Testosterone

Anxiety
Testosterone
Hormone

Methyltestosterone

Hormone

Propoxyphene
Meperidine

Pain
Moderate to Severe
Pain

Dolophine

Methadone

Narcotic Addiction

Duragesic®

Fentanyl

Pain

Clonazepam
Propoxyphene
with Acetaminophen
Diphenoxylate
and Atropine Sulfate

Seizure

Severe Pain

Percocet®

Morphine
Oxycodone
with Acetaminophen

Provigil®

Modafinil

Ritalin®

Methylphenidate

Roxicodone®
Stadol®

Oxycodone
Butorphanol

Sleep Apnea
Attention Deficit
Hyperactivity Disorder
Moderate to Severe
Pain
Pain

Solofton®
Tylenol® with
Codeine
Tylenol® with
Codeine Elixir
Valium®
Versed®
Xanax®
(None)

Phenobarbital

Seizure

Acetaminophen with Codeine

Moderate Pain

Acetaminophen with Codeine
Diazepam
Midazolam
Alprazolam
Codeine

Moderate Pain
Anxiety
Sedative
Anxiety
Pain

Andro®
®

Android-10
Darvon

®

Demerol®
®

Klonopin

®

Lorcet®
Lomotil®
MSIR®

- 67 -

Mild to Moderate Pain
Anti-Diarrheal

Moderate Pain

Brand Name
Advil®
Aleve®

Generic Noncontrolled
Substance
Ibuprofen
Naproxen Sodium

Aller-Chor®

Chlorpheniramine

Bayer®
Copegus®
Cortaid®
Ex-Lax® Milk of
Magnesia

Aspirin
Ribavirin
Hydrocortisone Cream

Fiberall®

Psyllium

Fioricet®
Maalox®
Mobic®

Butalbital
Simethicone
Meloxicam
Aluminum with
Magnesium Hydroxide
Flunisolide
Selenium
Carisoprodol
Nisoldipine
Tolnaftate
Acetaminophen
Tramadol
Didanosine
Simvastatin

Mylanta®
Nasalide®
Selsun Blue®
Soma®
Sular®
Tinactin®
Tylenol®
Ultram®
Videx®
Zocor®

Magnesium Hydroxide

- 68 -

Usage
Anti-Inflammatory
Anti-Inflammatory
Allergies/Allergic
Reaction
Fever, Pain,
Inflammation
Hepatitis C
Skin Irritations
Constipation
Diarrhea or
Constipation
Mild to Moderate
Pain
Excess Gas
Arthritis
Antacid
Nasal Congestion
Dandruff
Muscle Relaxer
Blood Pressure
Skin Infections
Mild to Moderate Pain
Pain Relief
HIV
Cholesterol

APPENDIX III

- 69 -

- 70 -

- 71 -

- 72 -

- 73 -

- 74 -

- 75 -

- 76 -

- 77 -

APPENDIX IV
OFFICE OF THE INSPECTOR GENERAL
COMMENTS ON THE BOP RESPONSE
TO THE DRAFT REPORT
The OIG has identified several issues in the BOP response to our draft
report (see Appendix III) that we believe should be addressed. Before
addressing each response to the OIG recommendations in turn, we are
providing the following comments on the BOP response to the draft report.
In Appendix III, page 69, the BOP provided the following general
statement in response to the audit:
The 12 selected institutions may not be a true representation of all
BOP institutions in regards to institution type, region, size, Program
Review findings, Joint Commission on Accreditation of Health
Organization (JCHO) review scores, American Correctional Association
(ACA) findings, staffing levels, staffing shortages, etc. As such,
selection bias may have a role in the findings.
The OIG disagrees with the BOP suggestion that selection bias may
have a role in the findings. We solicited the BOP’s input when selecting the
12 BOP institutions for on-site visits. In addition, we provided pharmacists
at all BOP facilities with the opportunity to complete an anonymous
questionnaire that included questions about many of the issues addressed in
the OIG recommendations. We received responses from 84 percent of the
BOP pharmacists (106 responses out of 126 questionnaires sent), which, in
our judgment, is a fair representation of all BOP institutions.
In Appendix III, page 70, the BOP provided the following general
statement in response to the audit:
Other major and more specific contributing factors for increased
medication costs, within and outside the BOP, should be referenced. . .
It should be noted that appropriate medication therapy and
monitoring, while possibly increasing medication expenditures, often
play a role in reducing healthcare expenditures by improving overall
patient outcomes.
OIG assessed the pharmaceutical per capita cost increase from 2000
to 2002 which BOP agrees is the most appropriate means to evaluate
trends related to pharmaceutical expenditures. . . However, we do not
- 78 -

concur with the appropriateness of the comparison between BOP
prescription drug costs and the change in Consumer Prescription Drug
Costs represented in Figure 2, page iii, and Figure 5, page 7. . . As
such, this comparison may graphically inflate any differences between
BOP purchases and Consumer Prescription Drug Costs.
It should be noted that the information referred to by the BOP was
included in the report as background information to help provide context to
understand the report. These facts were not used to develop a finding or
recommendation related to the BOP’s prescription medication costs. Rather,
the information was intended to demonstrate that prescription medication
costs were not only increasing within the BOP, but throughout the entire
United States, and that those increases can be partially explained by some
of the factors we detailed in the background section of the report. We agree
that these are not the only factors found explaining the increases.
In Appendix III, pages 70 and 71, the BOP provided the following
general statement in response to the audit:
We have undertaken several initiatives to reduce overall healthcare
costs, as well as improve patient care, which were not addressed in
the report. One such initiative is the BOP National Formulary which
was cited as a model program on pages 138 and 392 of the June 2002
publication Criminal Justice/Mental Health Consensus Project. Other
initiatives include the BOP Clinical Practice Guidelines and the Inmate
Copayment Program Policy.
Again, the information referred to by the BOP was cited by the OIG for
background purposes to provide basic information regarding some of the
major initiatives that may have a direct impact on BOP pharmacy services.
On page 53 of the report, the OIG refers to the National Formulary and
states that “The BOP National Formulary (formulary) is a list of all
prescription medications recommended as essential for inmate care and is
used to help provide clinically appropriate, safe, and cost-effective
prescription medications.” In regards to the BOP Clinical Practice Guidelines,
the BOP did not provide any documentation to demonstrate how it impacted
the overall health care costs or the BOP pharmacy services. Lastly, the
Inmate Copayment Program Policy was not implemented at the time of our
field work so we were not able to review its impact on BOP pharmacy
services, and thus it was not included in our report.

- 79 -

In Appendix III, page 71, the BOP provided the following statement in
response to recommendation 1:
1.

Conduct a complete and accurate cost-benefit analysis of the
Central Fill proposal before deciding whether to proceed with
implementation.
We agree with your recommendation. As pointed out in your cost
adjustments, many of which were based upon differing assumptions
between BOP and OIG, we realize that there will always be some
variables. Taking into consideration your cost adjustments in relation
to the BOP analysis and how Central Fill is inextricably linked to an
overall pharmacy transformation. . . I have made the decision to
move forward with our plans to implement Central Fill. . .

Although the BOP stated that it agrees with the recommendation, it
nevertheless states that it decided to move ahead with the implementation
of the Central Fill proposal without conducting a complete and accurate costbenefit analysis. The OIG report sites several concerns with the BOP’s
existing cost-benefit analysis that can only be resolved by conducting a new
analysis prior to deciding whether to proceed with the implementation of the
Central Fill proposal. The concerns related to the BOP’s cost-benefit analysis
identified in the report include:
•

Page 30 of the report states that, “The BOP estimated savings of $1.14
million annually, which based on our analysis, is overstated by as
much as $2.03 million. As a result, Central Fill may cost the BOP as
much as $895,016 per year. . .”

•

Page 25 of the report states that, “we found that the BOP did not
include all prescription medications in its analysis of gross purchase
savings for the six institutions. Instead, the BOP estimated the
savings on just tablets and capsules, and excluded any other types of
prescription medications. According to BOP officials, liquids and
ointments were excluded to simplify the calculation. However, without
estimating the costs or savings for all medications, the BOP could be
overstating or understating the estimated total gross purchase
savings.”

•

Page 25 of the report states that, “the time periods used for BOP and
VA prices are not consistent. BOP prices were derived using the
average price paid by the six institutions over a 1-year period from
March 2003 through February 2004. The VA prices were based on a
specific date during the time of the analysis. As a result, some BOP
- 80 -

estimated gross purchase savings may be the result of timing
differences in prescription prices.”
•

Page 31 of the report states that, “In our judgment, the six institutions
used by the BOP to estimate prescription medication costs may not
represent the average institution. The BOP stated that it picked six
institutions at random; however, no sampling methodology was used
to ensure that the sample was representative of all institutions.
Although we could not verify the validity of the sample, we found
several factors that cause concern.”

In Appendix III, page 73, the BOP provided the following statement in
response to recommendation 7:
7.

Ensure all documentation related to controlled substances is
accurate and complete.
We understand OIG is evaluating us based on our own policy;
however, the acceptable compliance rate or threshold of OIG is
unclear. . . Pages iii and 40 of the report refer to 402 unaccounted for
doses, which represents less than a 1 percent error rate.
Documentation and accountability of controlled substances within an
institution are thoroughly reviewed through the BOP Program Review
Process.

The OIG believes that in the secured environment provided by BOP
facilities, that it is important that all controlled substances are properly
accounted for and documented. In addition, the OIG disagrees with the BOP
assertion that documentation of controlled substances is thoroughly
reviewed through the BOP Program Review process to ensure that records
are accurate and complete. The report refers to numerous recordkeeping
errors in addition to the 402 unaccounted for doses that show the need for
the BOP to ensure all documentation related to controlled substances is
accurate and complete. Page 42 of the report states that “Specifically, we
identified approximately 400 recordkeeping errors on the controlled
substances inventories that appeared to result in unaccounted-for controlled
substances.” As stated in the report, the OIG had to use supplemental
documentation to account for these controlled substances that appeared to
be missing. In addition, page 44 of the report states that “We also identified
approximately 800 instances for which required information was not entered
in the mainstock and substock inventory records.” As a result, we found at
least 1,600 doses for which the information on the controlled substances
records was not complete or accurate.
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It should also be noted that the BOP Program Review Process does not
include any steps that require individuals conducting the review to check the
accuracy of the data entered into the controlled substances inventory.
Further, these same review processes were in place during the time of our
audit; however, the Program Reviews at the sites we visited did not find the
errors related to controlled substances documentation we identified during
our audit. Therefore, we believe the BOP needs to develop and implement
additional procedures to ensure the accuracy and completeness of the
controlled substances records.
In Appendix III, page 75, the BOP provided the following statement in
response to recommendation 10:
10.

Develop and implement policies and procedures requiring
adequate segregation of duties for ordering and receiving
prescription medications.
We disagree with this recommendation. This recommendation is in
essence a redundancy of recommendation #9. If a new procedure is
appropriately found and implemented, this recommendation will not be
necessary.

The OIG agrees with the BOP assertion that this recommendation may
be addressed by developing new procedures in response to
recommendation 9. However, we disagree with the BOP conclusion that the
recommendation is not necessary or that it is a redundancy of
recommendation 9. Recommendation 10 addresses the broader issue of
segregation of duties compared to recommendation 9 which looks only at
the approval process for purchasing and receiving. Page 48 of the report
states that “During our audit, we identified inadequate internal controls
related to purchasing, ordering, receiving, and paying for prescription
medications. At each institution included in our audit, we found that there
was no evidence of any segregation of duties related to purchasing of
prescription medications.” In addition, on page 48 the report provides an
example of how inadequate segregation of duties provided a pharmacist with
the opportunity for theft from a BOP pharmacy. Specifically, “The lack of
internal controls over the purchasing of prescription medications at BOP
institutions allowed a Chief Pharmacist at the El Reno FCI to illegally
purchase four different brands of non-formulary prescription medications.
An OIG investigation found that he stole a total of 30,600 doses between
July 2002 and February 2004, for his personal consumption.”

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APPENDIX V
ANALYSIS AND SUMMARY OF ACTIONS
NECESSARY TO CLOSE THE REPORT
1.

Unresolved. This recommendation can be resolved when the BOP
conducts an additional and more accurate cost-benefit analysis of the
Central Fill proposal before deciding whether to proceed with
implementation. The BOP response states that it agrees with the
recommendation; however, it has decided to proceed with the
implementation of the Central Fill proposal without conducting a new
cost-benefit analysis that addresses the concerns identified in the
report.

2.

Resolved. This recommendation can be closed when we receive
documentation supporting that the BOP has pursued efforts to request
Congress amend Pub. L. No. 102-585 (1993).

3.

Resolved. This recommendation can be closed when we receive
documentation supporting that the BOP has revised the Health
Services Program Review Guidelines to incorporate a review step to
assess if pharmacists are in compliance with the new requirements
placed in the 2005 BOP National Formulary.

4.

Resolved. This recommendation can be closed when we receive
documentation supporting that the BOP has implemented a policy that
would ensure that prescription medications are transferred with the
inmates.

5.

Resolved. This recommendation can be closed when we receive
documentation supporting that the BOP has implemented a policy that
would require prescription medication confiscated from inmates to be
returned to the pharmacy for reissuance to the same inmate or for
proper disposal.

6.

Closed.

7.

Resolved. This recommendation can be closed when we receive
documentation supporting that the BOP has implemented a policy to
ensure all controlled substance documentation is accurate and
complete.

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8.

Resolved. This recommendation can be closed when we receive
documentation supporting that the BOP has implemented a policy that
requires all controlled substances to be included in the quarterly
inventories.

9.

Resolved. This recommendation can be closed when we receive
documentation supporting that the BOP has implemented policies and
procedures requiring Health Services Administrators or their
authorized designees to approve prescription medication purchase
orders and verify the items received to vendor invoices.

10.

Unresolved. This recommendation can be resolved when the BOP
provides a plan that addresses the recommendation to develop and
implement policies and procedures requiring adequate segregation of
duties for ordering and receiving prescription medication. The BOP
response disagrees with this recommendation because it asserts it can
be addressed by developing new procedures in response to
recommendation 9. While the OIG agrees that the BOP can
incorporate adequate segregation of duties in its procedures developed
in response to recommendation 9, the OIG disagree with the BOP
conclusion that the recommendation is not necessary.

11.

Resolved. This recommendation can be closed when we receive
documentation supporting that the BOP has implemented a policy
requiring pharmacist reviews for contraindications to be documented in
the inmates’ file.

12.

Resolved. This recommendation can be closed when we receive
documentation supporting that the BOP has updated the Health
Services Program Review Guidelines to ensure that written
prescriptions include all required information.

13.

Resolved. This recommendation can be closed when we receive
documentation supporting that the BOP has implemented a policy to
ensure that non-formulary waivers are obtained and required to be
renewed annually.

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