Prescription drug fraud can be a costly problem for health plans. The author describes common abuses and recommends steps plan sponsors can take to identify fraud and stop it from happening. Finding and Preventing Prescription Drug Fraud 18 benefits magazine june 2017 by | Susan Hayes MAGAZINE pdf/517 june 2017 benefits magazine 19 prescription drug fraud t seems that a day does not go by cal personnel (physicians, pharmacists, Why Prescription Drug without prescription drug fraud nurses or other medical personnel) Fraud Happens making the headlines. Consider steal drugs for their own use or to sell The regulation or lack of regulation Ithese stories: illegally, is on the rise. The Internation- of pharmacy technicians can be a factor • The city of Kermit, West Virginia al Health Facility Diversion Associa- in prescription drug fraud. For example, is seeking to recoup the costs of tion estimates that 37,000 health care most states require a pharmacy to be dealing with opioid abuse and is professionals are impaired in the Unit- owned and operated by a pharmacist, suing out-of-state drug distribu- ed States on a daily basis from drugs but Florida (one of the most notorious tors.1 stolen from their place of employment.4 states for prescription drug fraud) al- • A former university trustee pleads Prescription drug fraud comes under lows pharmacy technicians to own a guilty to tax evasion charges for the purview of state and federal laws, as pharmacy if they pay $105 and complete prescribing painkillers without a well as Employee Retirement Income a two-week course. Adding to the ripe legitimate medical purpose.2 Security Act (ERISA) regulations. Phar- conditions for fraud is that south Florida • An Amherst, New York doctor is macies and PBMs also are contractually has the highest density of Medicare and sentenced for fraud for writing obligated to not commit fraud. Violators Medicaid recipients in the U.S. more than 200 illegal painkiller of these laws face potential significant Several states, including New York, prescriptions and will spend two jail time (e.g., up to 20 years for medi- Pennsylvania, Wisconsin, Delaware, years in prison.3 cal identity fraud) and may be required Colorado and Hawaii, do not regulate As these examples illustrate, fraud is to make restitution. Perpetrators who pharmacy technicians. In these states, committed at many levels and often by work in the health care industry, such a convicted felon (with a conviction of those we expect to be ethical, making as pharmacists and physicians, also may possession or distribution of controlled it all the more difficult to detect. While temporarily or permanently lose their substances, for example) can work be- many plan sponsors rely on pharmacy license to practice. hind the counter with unfettered access benefit managers (PBMs) to help them Federal laws that encompass pre- to medications. These vital assistants prevent prescription drug fraud, there scription drug fraud include the False perform many routine functions within are actions that plan sponsors, as fidu- Claims Act, wire and mail fraud stat- the pharmacy but also are given a wide ciaries, should take to ensure that their utes, the Health Care Fraud Statute range of discretion. They have the poten- plans and participants don’t fall victim. and theft or embezzlement of health tial to greatly harm patients, since tech- care statutes. The False Claims Act, nicians mix compounds and place the Defining Prescription for example, provides a civil penalty of appropriate drugs in the vial for patients. Drug Fraud between $5,000 and $10,000 for each Many prescription drug fraud The National Health Care Anti- count (i.e., each claim processed) plus schemes involve medical identity theft, Fraud Association in 2009 estimated three times the amount of damages to which can be costly. According to think that annual health care fraud costs as government programs because of the tank Ponemon Institute, a medical much as $234 billion. Prescription drug action. The Civil Monetary Penalties identity theft incident costs patients an fraud can be defined as any unlawful Law provides penalties of $10,000 per average of $22,000 and affects 1.85 mil- act that involves a prescription drug item or service—so for every fraudu- lion Americans.5 and is performed for financial gain. A lent claim processed, the perpetrator wide range of activities qualify under could receive a penalty far in excess of How Fraud Happens this broad definition: drug diversion the actual claim amount or a simple Phantom Prescriptions within a hospital, pharmacists submit- one-for-one damage restitution order. ting fake prescriptions or physicians In addition to laws, each state has In a 2014 case, a California medical writing prescriptions for patients not licensing regulations governing health clinic wrote thousands of fraudulent under their care. care professionals that include provi- prescriptions for antipsychotic medica- Drug diversion, which is when medi- sions against fraud. tions for fictional patients, according 20 benefits magazine june 2017 prescription drug fraud to a statement from the U.S. Attorney’s Office (these fake the PBM has for auditing and prosecuting fraud. Most PBMs prescriptions are commonly referred to as phantom prescrip- have some type of fraud program, but they may not be strong tions). The company then bought back the drugs for a nomi- enough or might fail to find the fraud until after the claims nal fee and diverted them to the black market to sell to other have been paid. pharmacies.6 Some PBM fraud programs may send auditors to a small number of pharmacies to determine if the pharmacy has Institutional Fraud the proper paperwork (e.g., prescription order and signa- Another example of prescription drug fraud involves ture log). If the pharmacy does not have the proper records, institutional fraud (fraud perpetrated by the industry itself: even if the prescription was ordered by a prescriber and the drug companies, mail-order facilities, pharmacy chains and patient requested/received the prescription, the claim is re- PBMs). In one recent case, a drug manufacturer was accused versed, and the plan sponsor may or may not be credited for of hiding its relationship with a network of mail-order phar- the claim.11 macies that solicited physicians and overrode plan design. These procedures, however, are recordkeeping investiga- The mail-order chain helped the pharmaceutical company tions rather than true fraud investigations. Many of the audi- artificially increase its revenue by bending account rules in a tors may have little or no law enforcement/private investi- channel stuffing scheme7 and used coupons to increase sales gation experience and may not properly prepare a case for and to forgive copays.8 prosecution. They also may lack the legal authority to inves- A lawsuit against the manufacturer claimed it was: tigate a pharmacy, since many states require any person who • Actively changing codes on prescriptions to ensure investigates claims and who does not work for an insurance that the prescriptions would be filled with its own drug company, or investigates beyond the claim (meaning investi- rather than a generic equivalent gating ownership or finances of a pharmacy), to be a licensed • Using false pharmacy identification information to bill private investigator.12 payers/PBMs for prescriptions in order to fraudulently bypass payers’ denials of claims for reimbursement Obtain and Review Claims Data • Submitting prescription renewals for reimbursement A significant spike in claims—either from a particular and falsely representing to payers/PBMs that patients pharmacy or provider or a specific therapeutic class (such as had requested renewals of their prescriptions when no compound drugs) can be a warning sign for fraudulent claims. such request had been made Compound drugs are medications that are mixed together • Waiving patient copays through manufacturer cou- and that are not commercially available. Compounding a drug pons or otherwise to remove patients’ incentive to seek is perfectly legal (a) if it is medication that is not commer- out cheaper drugs cially available in the formulation needed by the patient and • Using affiliate pharmacies within its “enterprise” to en- able the mail-order pharmacies to indirectly operate in states where it had been denied a license.9 learn more What Plan Sponsors Should Do Education Visit www.ifebp.org/benefitbits to watch a video of Susan There are efforts within the health care industry to combat Hayes discussing pharmacy fraud. fraud. For example, more than 40 health insurance agencies Fraud Prevention Institute for Employee Benefit Plans have formed the Medical Identity Fraud Alliance to fight med- July 17-18, Chicago, Illinois ical identity theft.10 Plan sponsors, however, should undertake Visit www.ifebp.org/fraudprevention for more information. their own efforts to detect and prevent prescription drug fraud. From the Bookstore Pharmacy Benefits: Plan Design and Management Discuss Fraud With the PBM F. Randy Vogenberg. International Foundation. 2011. Plan sponsors should first talk with their PBMs about Visit www.ifebp.org.books.asp?6962 for more information. fraudulent claims and find out what policies and procedures june 2017 benefits magazine 21 prescription drug fraud geographic area. It is rare that a mem- takeaways ber in Illinois, for example, will travel to • Health care fraud, including prescription drug fraud, is estimated to cost as much as New York to simply obtain a prescrip- $234 billion annually in the United States. tion at a New York pharmacy, especially • Phantom prescriptions—prescriptions for fictional patients—are a common prescription if the physician is also in Illinois. drug fraud scheme. Educate Members About Fraud • Plan sponsors should talk with their pharmacy benefit manager (PBM) to find out what policies and procedures the PBM has for auditing and prosecuting fraud. It’s much less likely for a plan to fall • Warning signs for fraud include a significant spike in claims from a particular pharmacy victim to fraud if plan members are or for a specific therapeutic class of drugs.