The tragic consequences of the currently raging opioid epidemic are splashed across the headlines and vividly displayed in television documentaries every day and yet, unless they specialize in the healthcare sector, I’ve found that most CFEs and forensic accountants are relatively unfamiliar with the mechanics of prescription drug and pharmacy fraud.
The reality is that, in many communities across America today, obtaining illegal prescriptions and the related controlled drugs of choice can be as easy as ordering a sandwich. Licensed physicians in every part of the country are daily arrested for on-demand prescribing of Oxycontin, Vicodin and Xanax. The resulting grand jury indictments usually feature some version of charges related to ‘prescribing drugs outside the usual course of professional practice and without a legitimate medical purpose’.
According to the Centers for Disease Control and Prevention (CDC), U.S. non-medical use of prescription painkillers results in more than $72.5 billion annually in direct healthcare costs and identifies prescription drugs as the second most-abused category of drugs after marijuana. In addition, the U.S. Department of Justice Office of Inspector General (OIG) has released several reports on prescription drug fraud in the Medicaid and Medicare Part D populations.
This epidemic has not only led to an increase in prescription drug fatalities, it’s also fueled opportunities for a host of ethically challenged individuals. This category of fraudsters has many faces: patients, patients’ family members, prescribers, pharmacy staff, medical employees, service contractors, recruiters and countless others are continuously involved in ever-mutating prescription drug fraud schemes.
Patients who commit prescription fraud often do so to acquire drugs to support their own addictions. But prescription drugs are a commodity with a high resale value, so fraudsters also divert prescription drugs for profit. Fraudsters illegally sell Oxycontin for $1 to $2 per milligram on the street. Some retirees on fixed incomes visit physicians complaining of phantom pain just so they can receive prescriptions for controlled drugs to re-sell for additional income.
Sometimes medical services’ employees, patients, family members, family friends and others fraudulently acquire prescription pads. In a recently reported case, owners of a professional cleaning service stole prescription pads and an ink signature pad from a doctor’s office they were hired to clean.
Some bypass obtaining prescriptions entirely by stealing controlled substances directly from pharmacies. Many pharmacies in hard hit areas no longer carry selected drugs or have increased their security.
Here are other common examples of the various ways individuals have chosen to defraud the system:
• Doctor shopping: visiting multiple doctors in search of prescriptions.
• Pharmacy shopping: filling prescriptions at multiple pharmacies to avoid being denied service.
• Prescription alteration: increasing dosage, quantity or refills on existing prescriptions.
• Washed prescriptions: washing ink off written prescriptions to create blanks and re-writing new fraudulent prescriptions.
• Forged prescriptions: using copy machines or computers to create fake prescriptions.
• Fax and phone prescriptions: faxing fraudulent prescriptions to pharmacies or phoning pharmacies to call in and/or verify prescriptions.
• Illegal market: acquiring drugs from illegal sources.
Regarding providers, some medical providers have turned to selling prescriptions to patients or anyone willing to pay their fees, even when there’s no medical justification for the drug therapies; this activity might or might not take place in the prescribers’ place of business.
As the ACFE indicates, prescribers of large volumes of pain drugs risk being identified as “pill mill” operators. Pain clinics, legitimate and otherwise, often prescribe large volumes of controlled pain drugs. In typically reported cases, patients line up outside the pain clinics prior to their opening because they know they can easily obtain prescriptions for controlled drugs.
Prescribers who knowingly commit prescription fraud have turned to some of the following schemes to defraud the system:
• Medically unnecessary prescribing.
• Internet prescribing.
Like enterprising patients and prescribers, pharmacies that participate in fraud schemes often do so for enhanced profit. In a recent case which received enhanced media coverage, a pharmacist, a doctor and others were among the a number arrested for “prescription harvesting”. The accused fraudsters stole patients’ identities to bill Medicare and Medicaid for $18 million in illegitimate prescriptions. Approximately $7.3 million in taxpayer dollars was lost in this scheme.
Other prosecuted pharmacy schemes have included:
• False claims: submitting claims for payment for which no prescription or authorization exists.
• Buy-backs: buying back prescriptions from patients – often at a discount.
• Kickbacks: receiving or providing monetary incentive for selling certain prescriptions.
• Shell or vanishing pharmacies: operating pharmacies in name only – or operating pharmacies just long enough to submit false claims for profit.
• Shell ownership: masking pharmacies’ ownership to hide identities of the true owners.
• Online pharmacies: selling controlled substances illegally with relative anonymity.
• Counterfeit products: knowingly dispensing counterfeit drugs.
Recruiters are intermediaries who engage partners to carry out fraudulent activity. In most cases, recruiters conspire with prescribers and/or pharmacies to enlist patients to carry out their fraudulent billings and/or diversion schemes. Documented cases show that patients, prescribers, pharmacies and recruiters have conspired to submit false claims, and to support buy-backs, kickbacks and diversions.
More than 80 pharmacists, physicians and others in a large metropolitan area conspired to establish a network of pill mills that issued prescriptions, many for controlled drugs such as hydrocodone and oxycodone, to patients without a legitimate need. The patients used Medicaid, Medicare or private insurance coverage to pay for the drugs. The principal pharmacist owned and operated 26 different pharmacies; following prosecution, he was sentenced to 17 years in prison.
Many U.S. federal, state and private organizations are now vigorously data mining prescription activity to detect fraud at all levels. Federal examples include the Drug Enforcement Agency, the DOJ OIG and routine Federal analysis of vendor contracts. Each U.S. state (except Missouri) now has a Prescription Drug Monitoring Program, which receives all information on prescription drug activity for controlled substances from both cash and insurance provider imbursed prescription transactions. Also, state law enforcement and vendors provide detection activities. Health care entities in the private sector, such as health plans and other payers, sometimes perform the data mining themselves or work with vendors. Private citizens frequently act as whistleblowers to expose fraudsters.
The entities charged with exposing schemers now use numerous methods to detect fraud and are developing new approaches every day just to keep up with all the evolving scenarios. Audits can be an effective detection method when conducted by trained, knowledgeable staff. Those who are called upon to perform desk and onsite audits must be cognizant of current activities and patterns and ensure that involved investigative groups are working together so leads from these audits can be directed to the appropriate law enforcement entities.
To identify aberrant behaviors, investigators utilize a number of different detection processes including:
• Sending confirmation letters to patients or prescribers to validate services received or rendered.
•Analyzing patient, prescriber, pharmacy and drug activities to identify aberrant utilization, prescribing, dispensation and/or processing patterns.
• Analyzing drug utilization by therapy classification and/or risk category.
• Reviewing prescribers by medical specialty to identify individuals prescribing outside the normal scope of their specialties.
• Focusing on geographic areas where fraud is an issue.
• Applying geospatial analyses to determine distances traveled by patients and to identify clusters.
• Searching for historical and current patterns to anticipate future fraudulent behaviors.
• Expert fraud examiners can assist in many ways in the performance of different types of analytics on prescription claim data. They use public and private data sources and sophisticated algorithms for retrospective, predictive and geospatial analyses.
Prescription drug fraud goes far beyond the headlines about controlled drugs. The ACFE reports that fraudsters also target high-dollar retail drugs of all kinds. These medications are used for the treatment of HIV, mental health issues, diabetes and cancer and can all command high fees from desperate patients.
It’s imperative for CFEs, forensic accountants and other assurance professionals to be aware of past and present drug diversion schemes and mindful of the changing health care environment and its associated vulnerabilities no just to keep pace with fraudsters but, more importantly to more effectively support the law enforcement professionals who rely on us for the high quality investigative materials so vital to successful prosecutions.