Pharmacy Fraud and Crime: Challenges to Insurers, PBMs

St. Louis—Health insurers, pharmacy benefit managers (PBMs), and other healthcare and pharmacy-related businesses must take seriously the impact and high costs associated with pharmacy fraud and crime, according to information presented during a Contemporary Issues session at the AMCP meeting titled Pharmacy Fraud and Crime—Impact on Managed Care. Marv Shepherd, PhD, director of the Center for Pharmacoeconomic Studies at the University of Texas, used research from contemporary journals, newspapers, and crime reports as well as information from 2 major sources to detail the fraud. The main publications were “Prescription for Peril” from the Coalition Against Insurance Fraud and “Prescription Fraud” from the US Department of Justice. He said prescription drug fraud is one of the fastest growing segments of crime in the United States. Fraud and drug diversion cost health insurers $72.5 billion in 2007, including $24.9 billion for private insurers. In addition, a New York Times article from July 2010 estimated Medicare fraud at $60 billion to $90 billion per year. The figures do not include hidden costs to treat patients as a result of harm or mistreatment due to fraud. Prescription drug fraud not only involves abusive drugs or controlled substances but also other high-cost pharmaceuticals such as oncology, HIV, and AIDS therapies. Dr. Shepherd defined prescription drug fraud as acquiring or obtaining a controlled substance or other prescription drug by illegal methods as well as wrongfully gaining prescription drugs for profit or personal use without a valid prescription. The most common type of prescription drug fraud involves people stealing a blank prescriber’s prescription pad and then writing prescriptions for themselves or fake patients, friends, and family members. Other typical methods include changing the quantity, strength, or number of refills on a prescription after it has been written, using a computer to create fake prescriptions, photocopying and then altering a prescription, and impersonating a medical staff member to call in a prescription. Doctor shopping is also prevalent, according to Dr. Shepherd. He cited a study indicating that law enforcement groups focusing on drug diversion say 40% of their time is spent on doctor-shopping cases. The crime involves shopping at doctor offices, emergency departments, pharmacies, and dentist offices and feigning symptoms such as migraines, toothaches, psychiatric disorders, and cancer. A WellPoint analysis of 100 doctor shoppers showed that they contacted ≥5 prescribers and had prescriptions filled at ≥5 pharmacies in a 90-day period. In all, they had 1217 prescriptions filled at a cost of $20,233. They visited 689 prescribers for a total of 5089 visits (4131 office visits and 958 outpatient visits). The total medical claims cost was $832,172, and there was a $41 medical claim cost for each $1 prescription cost. Although many health insurers and PBMs have not taken fraud seriously, Dr. Shepherd warned that they might be vulnerable to liability. For instance, firms could be liable if they do not reasonably prevent drug schemes that ultimately injure a patient. Drug diversion, also known as the gray market, occurs when authentic or legitimate drugs leave the legal drug distribution system and are sold illegally. The drugs are diverted to other legal distributors or illegal diverters and then sold to consumers. Dr. Shepherd provided several examples of drug diversion: pharmaceutical products donated to a country for free government clinics are diverted into the retail or commercial market; products intended for use in hospitals are diverted to retail pharmacies; stolen drugs are sold to pharmacies, wholesalers, physicians, hospitals, clinics, or other diverters; teenagers steal prescription drugs and sell them in school; pharmaceuticals are stolen from trucks, tractor trailers, and warehouses; and criminal enterprises involving licensed prescribers act in collusion with patients and other healthcare practitioners who fraudulently provide drugs to drug dealers who bill the PBM or insurance company for medical and drug claims. Prescription drug fraud offenders are found in all segments of society, according to Dr. Shepherd. He said trends show that the following groups are increasingly being cited for pharmacy fraud: people ≤30 years of age, including teenagers; women, particularly middle-aged women; older adults; healthcare workers who steal drugs or prescription pads; and drug addicts. Dr. Shepherd suggested several ways that health insurers and PBMs could become more aware of fraud. They should better understand the impact fraud has on revenues and profits, hire more investigators and data miners to gain access to medical claims data and prescription claims, provide more training through the National Association of Drug Diversion Investigators or National Health Care Anti-Fraud Association, ask for controls such as photo identification at the point of sale in the pharmacy, establish guidelines/criteria for obtaining narcotics, define doctor shopping and track suspects, link medical prescription and dental data sets together, access state prescription monitoring programs, and develop relationships with law enforcement groups and become involved in the National Association of Drug Investigations. “[Pharmacy fraud] is a real threat,” Dr. Shepherd said. “We’ve got to work together to stop it.… It’s a good healthcare decision for patients and a good business decision, too.”—Tim Casey