James G. SheehanAssociate United States Attorney615 Chestnut Street, Suite 1250 Philadelphia, PA 19106Phone: (215) 861-8301E-mail: [email protected]
FRAUD CONTROL ISSUES AFTER THE START OF MEDICARE PART D
PRESCRIPTION DRUG PROGRAMSHCCA
JANUARY 23, 2006
USUAL DISCLAIMERS
HUMBLE ASSISTANT- NOT DOJ POLICYNEW PROGRAM - DETAILS STILL BEING WORKED OUTPRESUMPTION OF INNOCENCECANNOT ADDRESS PROBLEMS SINCE 1/1/06 – NOT ENOUGH INFORMATION
WHAT WE ARE ABOUT
PROTECT PROGRAM AND BENEFICIARIES:DETER FRAUD BY INDIVIDUALS AND
ORGANIZATIONSDETECT FRAUD PREVENT FRAUDULENT PAYMENT,
RECOVER MONEY PAIDOBTAIN PROOF OF INTENTPUNISH, 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 DMEDICARE INTEGRITY CONTRACTORS (MEDICS)LAW ENFORCEMENT COMMITMENTHOT 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 drugs-indictment 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 drugsPharmacy - largest number of claims in health system - exceeds physicians and hospitals combined - $5000 per claimWhistleblowers will bring cases to DOJ - for 15-25% of recovery
WHAT MAY BE A FALSE CLAIM UNDER PART D?
Prescription claims to PDPsPrescription 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 TPAKickbacks, sample sales, research or marketing frauds on any of these drugs sold to any Medicare beneficiary on Part DIdentity 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 PLANSCERTIFICATIONS 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 analysisTechnique for capturing, recording complaintsInternal (or contract) investigative capabilityRecord of investigations and actionsWatch 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
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 itOwners will face being put out of businessManagers of chain pharmacies will face increasing corporate pressure to maintain profit margins, outdo colleaguesChain executives (of chains without their own PBMs) will have difficulty meeting Wall Street profit expectations
PHARMACY FRAUDS-GRAY MARKET DRUGS,COUNTERFEIT
DRUGSWhere 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 threeBUT – 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 WHOLESALERSThrowaway,expired, over-ordered drugsSamples (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? Prescription Drug Marketing Act - requiring
pedigree from manufacturer to ultimate purchaser-FDA 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 ReportDoubling of referrals - proactive investigationsNABP TASK FORCE - susceptible list of 32 drugs(see attached list, Exhibit 1)BUT 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 allegationsFilled partial prescriptions(allegedly due to insufficient stock)billed program for full amountWalgreen’s settlement-$7.6 million in 1999Eckerd 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 = $2Average additional profit per switched prescription = $30 Business Model - Make money by getting large number of beneficiaries using chronic disease drugs, earn spread on genericsCosts-labor from interacting with patients, performing professional prescription servicesPharmacy Model: Volume, refilled prescriptions, minimum patient interaction
HOW TO STEAL IN MAIL ORDER PHARMACY
SHORT PRESCRIPTIONSBILL/NO CREDIT FOR RETURNED PRESCRIPTIONSSWITCH PRESCRIPTIONS TO PREFERRED MEDS WITHOUT AUTHORIZATION FROM DOCTORFAIL TO PERFORM REQUIRED PROFESSIONAL SERVICESTHROW 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 SOURCESSECRET PAYMENTS FROM MANUFACTURERS MISLEADING PRICING (e.g., AAWP, big bottles/little bottles, sales tax)PATIENTS AT RISK FROM SWITCHES SHUT-OFF OF DIFFICULT PATIENTSDOUBLE 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 PROGRAMDOZENS OF PDPs and Medicare
Advantage PlansVariations in covered drugs, per cent co-
pay Regional variations in programsPhysicians, 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, PBMRedundant data - same information available from multiple sourcesExcellent 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 patientsRisk of harm to patients - both from bad drugs and from denial of needed drugsCompelling jury story - most trusted profession, interaction familiar to most jurors
WE CAN MAKE THIS PROGRAM WORK
Identify fraud earlyWork closely with physicians, pharmaceutical manufacturers to identify third-party fraudsBring cases early and quicklyBring cases that matter to citizens and beneficiariesEncourage effective compliance programs and reportingFocus efforts on risk areas
WE NEED YOUR HELP TO MAKE THIS PROGRAM
WORK
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