Transcript Fraud Control Issues After The Start of Medicare Part D

FRAUD CONTROL ISSUES AFTER THE
START OF MEDICARE PART D
PRESCRIPTION DRUG PROGRAMS
HCCA
JANUARY 23, 2006
James G. Sheehan
Associate United States Attorney
615 Chestnut Street, Suite 1250
Philadelphia, PA 19106
Phone: (215) 861-8301
E-mail: [email protected]
USUAL DISCLAIMERS
HUMBLE ASSISTANT- NOT DOJ
POLICY
NEW PROGRAM - DETAILS STILL
BEING WORKED OUT
PRESUMPTION OF INNOCENCE
CANNOT ADDRESS PROBLEMS
SINCE 1/1/06 – NOT ENOUGH
INFORMATION
WHAT WE ARE ABOUT
PROTECT PROGRAM AND
BENEFICIARIES:
DETER FRAUD BY INDIVIDUALS AND
ORGANIZATIONS
 DETECT FRAUD
 PREVENT FRAUDULENT PAYMENT,
 RECOVER MONEY PAID
 OBTAIN PROOF OF INTENT
 PUNISH, EXCLUDE FRAUDSTERS

WEBSITES YOU SHOULD
KNOW ABOUT
NABP (National Association of Boards
of Pharmacy) - www.nabp.net
FDA counterfeit drug initiative –
www.fda.gov/oc/initiatives
CMS- www.cms.hhs.gov/pdps
WHERE THERE IS FEDERAL
MONEY, THERE IS RISK OF
FRAUD AND ABUSE
$60 billion plus in new federal money
per year
Businesses new to federal contracting
requirements and controls
New data systems
Questionable existing practices in some
industry segments
WHERE THERE IS FEDERAL
MONEY, THERE IS FEDERAL
OVERSIGHT
MANDATED COMPLIANCE
PROGRAMS UNDER PART D
MEDICARE INTEGRITY
CONTRACTORS (MEDICS)
LAW ENFORCEMENT COMMITMENT
HOT LINES, PUBLIC COMPLAINTS,
MEDIA
OUR TOP TEN LIST-#1
COUNTERFEIT,DILUTED, MISMARKED
DRUGS(SEE NABP DIRTY THIRTY-TWO
HANDOUT )
World Health Organization-10% of global
pharmaceutical sales in 2005 will be
counterfeit
Congressional hearings-Committee on House
Govt Reform, Subcommittee on Criminal
Justice 11/2/05
COUNTERFEIT DRUGS
Pfizer sues Albers Medical and
repackager Med-Pro in 2003-recalls
200,000 bottles of Lipitor
The(alleged) Lipitor Gang of Kansas
City-$42 million in counterfeit drugsindictment of Albers Medical in
August,2005.
FOCUS ON FALSE CLAIMS
VIOLATIONS-WHY
PHARMACEUTICAL FRAUD INVOLVING ANY
MAJOR MANAGED CARE PLAN OR
PDP(Medicare) - NOW A FRAUD/FALSE CLAIM ON
UNITED STATES
Over - 65 population - largest per capita users of
prescription drugs
Pharmacy - largest number of claims in health
system - exceeds physicians and hospitals
combined - $5000 per claim
Whistleblowers will bring cases to DOJ - for 15-25%
of recovery
WHAT MAY BE A FALSE CLAIM
UNDER PART D?
Prescription claims to PDPs
Prescription claims to Medicare Advantage
Plans (managed care)
Prescription claims for over - 65s to employer
prescription plans receiving the 28% subsidy
from CMS(8 million beneficiaries) - even if
managed by insurer, PBM, or TPA
Kickbacks, sample sales, research or
marketing frauds on any of these drugs sold
to any Medicare beneficiary on Part D
Identity theft
WHAT MAY BE A FALSE CLAIM
UNDER MEDICARE PART D
CERTIFICATIONS TO CMS BY PDPs and Medicare
Advantage Plans about their actual costs (for risk
corridor calculations and payment)
CERTIFICATIONS TO CMS ABOUT
CONCESSIONS FROM MANUFACTURERS WHICH
FAIL TO DISCLOSE OTHER PAYMENTS BY
MANUFACTURERS TO PLANS
CERTIFICATIONS BY INSURORS, TPAS, PBMs TO
EMPLOYER PLANS ABOUT COSTS, CLAIMS,Fraud
Controls

WARNING-MANY PRIVATE PLANS WILL NOW BE THE
BASIS FOR CHARGES OF FALSE CLAIMS AGAINST THE
UNITED STATES
WHAT WILL PLANS
(or PBMs) DO?
Data review and analysis
Technique for capturing, recording
complaints
Internal (or contract) investigative
capability
Record of investigations and actions
Watch list - pharmacies, drugs,
prescribers, patients
UNDERSTANDING INCENTIVES:
BUSINESS MODELS AND FRAUD
RISKS
RETAIL PHARMACIES
MAIL PHARMACIES
NURSING HOME
PHARMACIES/CONSULTANTS
PBMs/PDPs
PROFIT IN PRESCRIPTION
DRUGS-RETAIL
Average profit per third - party prescription =
$.50
Business Model: Make money by drawing
people into store to buy higher-profit items
Costs of drug acquisition, storage, inventory,
spoilage
Pharmacy Model: Repeat customers,
personal interaction, convenience
PROFIT IN PRESCRIPTION
DRUGS-RETAIL
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Pre-Part D - Pharmacy prescription drug dispensing profits
come primarily from over - 65 cash customers
Post-PART D Most prescription drug purchases will be
priced and processed through pharmacy benefit
management (PBM) companies,EVEN WHEN THE
CUSTOMER IS PAYING CASH, because-Beneficiary responsible for 100% of drug costs between
$2500 and $5000, and 5% over $5000 but cannot get credit
for expenditures unless claim is priced and processed
through PBM system
RESULT - retail pharmacy loses its primary profit stream
HOW WILL SOME
PHARMACIES REACT?
“SATISFICING” - people are more likely to
use extreme measures to maintain standard
of living vs. improving it
Owners will face being put out of business
Managers of chain pharmacies will face
increasing corporate pressure to maintain
profit margins, outdo colleagues
Chain executives (of chains without their own
PBMs) will have difficulty meeting Wall Street
profit expectations
PHARMACY FRAUDS-GRAY
MARKET DRUGS,COUNTERFEIT
DRUGS
Where do prescription drugs come from?
Manufacturer, who ships to “big three” or
specialty wholesaler, who ships to purchaser
(retailer, hospital, nursing home)
Secondary wholesaler (usually member of the
Pharmaceutical Distributors Association), who
buys from someone other than manufacturer
or big three
BUT – WHO IS SELLING TO SECONDARY
WHOLESALER?
BUYING FROM SECONDARY
WHOLESALERS
Where are their drugs coming from?
How can they charge prices less than
Big Three?
What assurances does a pharmacy
have that their drugs are properly
labeled and safe?
SECONDARY
WHOLESALERS
POTENTIAL BAD SOURCES OF
PRESCRIPTION DRUGS FOR
SECONDARY WHOLESALERS
Throwaway,expired, over-ordered drugs
 Samples (from reps and physicians)
 “Gold Pill” purchases from Medicaid
/Medicare beneficiaries
 Gray market drugs purchased for hospitals,
nursing homes

WHO REGULATES SECONDARY
WHOLESALERS
What about the FDA?

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Prescription Drug Marketing Act - requiring
pedigree from manufacturer to ultimate purchaserFDA has six times extended the pedigree
requirement deadline, most recently to 2007
Terry Vermillion - the pedigree requirements are
so weak “you can satisfy the pedigree requirement
by writing it on a paper napkin” (quoted in
Dangerous Doses by Katherine Eban, 2005)
FDA-MAJOR INCREASE IN GRAY
MARKET ENFORCEMENT ACTIVITY
2004 Report
Doubling of referrals - proactive investigations
NABP TASK FORCE - susceptible list of 32
drugs(see attached list, Exhibit 1)
BUT
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Crooks getting smarter
Better printers, scanners,pill machines
Greater demand
Higher prices for newer drugs
Overseas sources
#2-Short fills
Short fills-Wal-Mart paid $2.8 million in
2004 to settle False Claims allegations
Filled partial prescriptions(allegedly due
to insufficient stock)billed program for
full amount
Walgreen’s settlement-$7.6 million in
1999
Eckerd settlement-$5.8 million in 2002
#3 Return to Stock
Rite-Aid 2004 $7.0 million to USA and
states for false Medicaid billing-products
billed to program, then returned to stock
w/o credit
#4 Recycling of patient
purchases
AIDS Drugs
Other expensive treatments
#5 Kickbacks to Prescribing
Physicians
Astra Zeneca - settlement
TAP – settlement
Qui tams
OTHER WAYS TO STEAL IN
RETAIL PHARMACY
CHARGE BRAND, DELIVER GENERIC
IDENTITY BORROWING/THEFT
BILLING UNINSURED PATIENTS ON
INSURED ACCOUNTS
ELIMINATE THE WHOLESALER - buy direct
from the thieves
FALSE STATEMENTS ABOUT PHYSICIAN
APPROVAL FOR CHANGES
PROFIT IN PRESCRIPTION
DRUGS-MAIL ORDER
Average profit per prescription = $2
Average additional profit per switched
prescription = $30
Business Model - Make money by getting
large number of beneficiaries using chronic
disease drugs, earn spread on generics
Costs-labor from interacting with patients,
performing professional prescription services
Pharmacy Model: Volume, refilled
prescriptions, minimum patient interaction
HOW TO STEAL IN MAIL
ORDER PHARMACY
SHORT PRESCRIPTIONS
BILL/NO CREDIT FOR RETURNED
PRESCRIPTIONS
SWITCH PRESCRIPTIONS TO
PREFERRED MEDS WITHOUT
AUTHORIZATION FROM DOCTOR
FAIL TO PERFORM REQUIRED
PROFESSIONAL SERVICES
THROW AWAY, CANCEL DIFFICULT
PRESCRIPTIONS
PROFIT IN PHARMACY/
CONSULTING – NURSING
HOMES (AND OTHER
FACILITIES)
Largest source of profit in nursing home and
ESRD facilities
Business model: Make money from captive
patient and physician population, volume of
drugs prescribed, payment from
manufacturers
HOW TO STEAL IN
PHARMACY/CONSULTING –
NURSING HOME (AND OTHER
FACILITIES)
Sell gray market/black market drugs
Short prescriptions
Sell the same drugs twice
Charge brand and deliver generic
Identity borrowing/theft
Switch patients at risk
Kickbacks from pharmaceutical manufacturers
HOW TO STEAL IN
PHARMACY/CONSULTING –
NURSING HOME (AND OTHER
FACILITIES) #2
Unnecessary drugs
Unused drugs
Billing family and program, Medicare
and Medicaid, Part B and Part D
PROFIT IN PHARMACY BENEFIT
MANAGEMENT(PDPs)
Average profit per prescription = $2 mail order (captive), $.50
retail (rough estimate)
Business Model: Make money on the spread between what
retail is paid and what payor is charged
.Business Model: Move beneficiaries from retail to mail order,
with greater switch potential
Business Model: Obtain discounts from PHARMA by promising
market share, make PHARMA eat risk
Business Model: Make money by moving patients to generics (if
multisource)
CONCERNS IN PHARMACY
BENEFIT MANAGEMENT
SECRET PAYMENTS TO REFERRAL
SOURCES
SECRET PAYMENTS FROM
MANUFACTURERS
MISLEADING PRICING (e.g., AAWP, big
bottles/little bottles, sales tax)
PATIENTS AT RISK FROM SWITCHES
SHUT-OFF OF DIFFICULT PATIENTS
DOUBLE BILLING
CONCERNS IN PHARMACY
BENEFIT MANAGEMENT
Will they provide the needed drugs if they are
at risk
How will they treat patients with significant
drug management and cost issues?
How will they push costs to other payors (Part
B, DVA, self-pay)
How will they move people past the hole in
the donut?
Data Warehouse/Fraud
Detector
If PBMs want to help, they can make a huge
difference in fraud control-lots of low-hanging fruit
Largest non-governmental computer system
Single biggest point of interaction between health
plans and consumers - more transactions, more
information
connections in most PBM/insuror systems between
med/surgical information and drug information – is
this a treating physician? Is this drug for a diagnosis
for which patient is being treated?
State Enforcement
Issues
1. Unfair Trade Practices
2. Pharmacy Board Regulations
3. Commercial Bribery/Kickback
Statutes
4. State Insurance Regulation
5. False Claims Act (some states)
CONCERNS ABOUT FRAUD
CASES UNDER PART D
COMPLEXITY OF PROGRAM
DOZENS OF PDPs and Medicare
Advantage Plans
 Variations in covered drugs, per cent copay
 Regional variations in programs
 Physicians, Pharmacies dealing with
multiple contractors and data systems

CONCERNS ABOUT FRAUD
CASES UNDER PART D
We want this program to work-avoid unnecessary
burden on participating plans and pharmacies,
especially in first year
Who is the victim? Will they support the case?
(existing contractual relationships)
Is there a loss to the Government (yes, but proving it
will be tough)
What is the False Claim?
OPPORTUNITIES OF FRAUD
INVESTIGATIONS IN Prescription
Drugs
Excellent data - frequent data points for
each patient, physician, retailer, PBM
Redundant data - same information
available from multiple sources
Excellent existing system used by
commercial players - IMS Health, drug
companies for tracking sales, utilization,
rebates
CONSIDERATIONS FOR FRAUD
INVESTIGATION IN Prescription Drugs
Multiple professionals with knowledge,
and some independence and loyalty to
profession, ethic of concern for patients
Risk of harm to patients - both from bad
drugs and from denial of needed drugs
Compelling jury story - most trusted
profession, interaction familiar to most
jurors
WE CAN MAKE THIS
PROGRAM WORK
Identify fraud early
Work closely with physicians, pharmaceutical
manufacturers to identify third-party frauds
Bring cases early and quickly
Bring cases that matter to citizens and
beneficiaries
Encourage effective compliance programs
and reporting
Focus efforts on risk areas
WE NEED YOUR HELP TO
MAKE THIS PROGRAM
WORK