US Pharm. 2012;37(6):68-70.
Government investigations and prosecutions, as well as
penalties assessed against pharmacies, the pharmacy industry, and other
health care providers, are on the rise. On May 10, 2012, the Department
of Health and Human Services’ Office of Inspector General (HHS-OIG)
released a report analyzing community pharmacy claims for Medicare
services from 2009 to 2011.1 The report estimated that
approximately 2,600 retail drugstores, or 4% of all U.S. pharmacies
participating in Medicare, submitted suspicious or excessive billings to
the federal government. The report also stated that 2,637
pharmacies submitted suspect billings for about $5.6 billion in 2009. In
the context of all pharmacies operating in the country, chain stores
were involved in 1% of the alleged fraudulent practices, and 11% of all
independents submitted false or inflated claims for payment (FIGURE 1). The report did not identify any pharmacies by name.1,2
Allegations of Fraud
Some pharmacies dispensed unusually high percentages of
painkillers and other controlled substances or expensive brand-name
drugs in place of less expensive generics that were available and should
have been dispensed according to Medicare plan guidelines.3
Other stores billed Medicare a per patient rate of more than 2.5 times
the national average. In total, Medicare paid about $57 billion in 2009
for prescriptions dispensed by about 59,000 drugstores.
Acknowledging that some of the claims might be legitimate,
investigators stated that “all pharmacies that bill for such extremely
high amounts warrant further scrutiny.”3 Inspector General
Daniel R. Levinson recommended that Medicare seek a legislative change
mandating that insurers administering Medicare plans be required to
report potential fraud to the government. That reporting duty does not
exist at the present time, and it is only when the administrators
voluntarily report suspicious billing claims that Medicare becomes
Kevin Schweers of the National Community Pharmacists
Association (NCPA), the trade-group representing independent pharmacies,
noted that some of the “excessive” billings originating from
independent pharmacies could occur because they service a higher
percentage of aging, nursing home, hospice, and other severely ill
patients on Medicare who tend to use larger quantities of more expensive
drugs than do the chain pharmacies.3
One of the key factors in identifying and targeting
suspicious billing activities has resulted from an increased use of
multiple cooperating federal agencies. Ongoing interagency collaboration
between the Medicare Fraud Strike Force and Health Care Fraud
Prevention and Enforcement Action Team (HEAT) has been effective. Ties
between the Department of Justice (DOJ), the Federal Bureau of
Investigation (FBI), the HHS-OIG, and local U.S. Attorneys’ Offices
(USAOs), as well as Medicaid Fraud Control Units (MFCUs), also assist in
health care fraud investigations.4 Shared intelligence makes
it easier for these agencies to detect, investigate, and prosecute
large-scale fraud schemes. Advanced data-mining techniques will
strengthen the links between investigatory and enforcement agencies,
making large-scale investigations and prosecutions even easier for the
government to pursue in the coming years.
The Health Care Fraud and Abuse Control Program (HCFAC)
report, released in February 2012, states that “convictions increased by
over 27% (from 583 to 743) between 2009 and 2011, and the number of
defendants facing criminal charges filed by federal prosecutors in 2011
increased by 74% (from 821 to 1,430) compared with 2008.”5
During 2011, the DOJ opened 1,110 criminal health care fraud
investigations involving 2,561 potential defendants. Federal prosecutors
investigated 1,873 pending health care fraud criminal cases involving
3,118 potential defendants and filed 489 criminal cases against 1,430
defendants while obtaining 743 convictions against defendants charged
with health care fraud-related crimes. In addition, HHS-OIG excluded
2,662 individuals and health care entities from participating in federal
reimbursement programs for Medicare, Medicaid, and related health care
Not all of these prosecutions involved pharmacies. Many
involved durable medical equipment providers as well as Medicare
insurance administrators and long-term-care nursing facilities. Still, a
substantial number of pharmacists, pharmacies, and programs operating
for the benefit of pharmacy providers were identified in these cases.
In an older case from 2008, CVS Caremark agreed to pay
$38.5 million to settle charges that its Caremark division was illegally
switching prescribed drugs to more expensive medications, thereby
increasing Caremark’s profit margins.6 More recently, on
October 14, 2010, CVS was ordered to pay $77.6 million in fines and
returned profits stemming from a lawsuit alleging improper control in
the sale of pseudoephedrine, used to make methamphetamine.7
CVS had to forfeit $2.6 million in profits from the illegal sale and pay
a fine of $75 million, which at the time was the largest civil penalty
ever paid under the Controlled Substances Act (CSA).
While not yet adjudicated, in 2011 the DOJ charged that
CVS pharmacies in Sanford, Florida, ordered enough oxycodone to supply a
population eight times its size.8 According to the Drug
Enforcement Administration (DEA), in 2010 a single CVS pharmacy in
Sanford ordered 1.8 million oxycodone pills, an average of 137,994 pills
a month. Other pharmacies in Florida averaged 5,364 oxycodone pills a
month. DEA investigators serving a warrant to the Sanford pharmacy on
October 18, 2011, noted that “approximately every third car that came
through the drive-thru lane had prescriptions for oxycodone or
hydrocodone.” A pharmacist at that location stated to investigators that
“customers often requested certain brands of oxycodone using street
slang,” an indicator that the drugs were being diverted and not used for
legitimate pain management.9
On April 29, 2011, CVS agreed to pay $17.5 million to
settle Medicaid fraud allegations in a case initiated by a
whistle-blower pharmacist in Minnesota based on a design flaw inserted
into the company’s software billing system that automatically increased
claims made on Medicare prescriptions.10 Take note that approximately $2.6 million was awarded to the pharmacist informant.
Also of interest, in 2008 the Walgreen Co. was sued for
using a system that fraudulently inflated Medicaid billings in
Minnesota.11 Walgreens settled the case for $9.9 million. The
two pharmacist whistle--blowers in this case shared a $1.44 million
reward for bringing the illegal billing scheme to the attention of
government investigators. Perhaps not learning its lesson in that case,
Walgreens settled another lawsuit alleging false claims for $7.9 million
on April 20, 2012.11
One of the odder cases involved alleged Canadian
pharmacies doing business with patients residing in the United States.
On August 24, 2011, Google (the Internet search engine company) agreed
to pay the federal government $500 million to settle charges that it
knowingly accepted illegal advertisements from fraudulent Canadian
pharmacies.12 The investigation found that Google was aware
that some Canadian pharmacies that advertised on its site did not
require a prescription for medications such as Ritalin and OxyContin.
Google continued to accept their money and even assisted the pharmacies
in placing ads and improving their Web sites. Under federal law, Web
site operators are liable for advertising that violates U.S. laws.
In a more typical case, on February 7, 2012, Lam’s
Pharmacy in Las Vegas, Nevada, agreed to pay $1 million to settle civil
charges that it violated the federal CSA in exchange for dismissal of
criminal charges it could have faced for drug trafficking.13
This is the largest civil fine ever levied against an independent
pharmacy under the CSA. That, however, is not the end of this story.
Lam’s Pharmacy will also surrender its DEA registration, meaning it no
longer will be able to order, dispense, or even handle any controlled
substances, and ownership of its assets will be sold. The business will
be allowed to operate in Las Vegas under new ownership and a different
The cases discussed here are only a small tip of the very
large iceberg of fraud, waste, and abuse lawsuits and claims settled and
pending over the past few years. One recurring theme seems to keep
popping up. The cost of the fines, settlements, attorney fees, and
overhead associated with these lawsuits hardly ever seems to stop the
very large operators from making the same “mistakes” over and over
again. Using the notion that the punishment should fit the crime, it
seems at least reasonable that these companies should incur larger, more
punitive penalties that would deter such behavior. Otherwise, business
as usual will come to mean that the crime really does pay, even if they
have to give a little bit back.
1. Department of Health and Human Services, Office of
Inspector General. Retail pharmacies with questionable Part D billing
(OEI-02-09-00600). May 2012.
http://oig.hhs.gov/oei/reports/oei-02-09-00600.pdf. Accessed May 11,
2. Medicare overbilling. Detroit Free Press. May 11, 2012. www.freep.com/article/20120511/NEWS07/205110359/4-of-all-drugstores-suspected. Accessed May 11, 2012.
3. Wayne A. Suspicious Medicare bills found at 2,600 U.S. pharmacies. Bloomberg News.
May 11, 2012.
Accessed May 11, 2012.
4. Miner TA, Dunphy DP, Willis SD, et al. United States:
industry trends in criminal health care fraud enforcement—part III in a
continuing series on health care enforcement. Mintz Levin News. May 4, 2012. www.mondaq.com/unitedstates/x/175740/. Accessed May 11, 2012.
5. New tools to fight fraud, strengthen federal health
programs, and protect taxpayer dollars. Department of Health and Human
Services. February 14, 2012.
Accessed May 11, 2012.
6. CVS Caremark agrees to pay $38.5M to settle allegations that it did not pass on rebates, discounts to patients, employers. Kaiser Health News. February 15, 2008. http://www.kaiserhealthnews.org/Daily-Reports/2008/February/15/dr00050454.aspx?p=1. Accessed May 11, 2012.
7. Ellis B. CVS to pay $77.6 million in meth case. CNN Money. October 14, 2010. http://money.cnn.com/2010/10/14/news/companies/cvs_meth/index.htm?hpt=T1. Accessed May 11, 2012.
8. Schoenberg T. Cardinal Health blocked from shipping painkiller in Florida. Bloomberg News.
February 29, 2012.
Accessed May 11, 2012.
9. Leinwand Leger DL. DEA aims big in Cardinal Health painkiller case. USA Today. February 28, 2012. www.usatoday.com/news/nation/story/2012-02-27/painkiller-abuse-DEA/53275844/1. Accessed May 11, 2012.
10. Jones BL. CVS settlement featured in Minnesota Lawyer. Pharmacy Fraud Whistleblowers. April 29, 2011. www.pharmacyfraudwhistleblowers.com. Accessed May 11, 2012.
11. Walgreens pharmacy chain pays $7.9 million to resolve false prescription billing case. Justice News. April 20, 2012. www.justice.gov/opa/pr/2012/April/12-civ-505.html. Accessed May 11, 2012.
12. Miller CC. Google reaches $500 million settlement with government. NY Times.
August 24, 2011.
Accessed May 11, 2012.
13. Van Wey K. DEA fines Las Vegas pharmacy in violation of federal drug laws. Pill Mill Monitor.
February 8, 2012.
Accessed May 11, 2012.
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