Rx for Fraud

Treating fraud in independent pharmacies

Fraud in independent pharmacies has proliferated in recent years, especially during the pandemic. Here we discuss the different types of pharmacy schemes and what to do about them.

In 2020, the U.S. Department of Justice (DOJ), in its largest health care fraud enforcement action to date, indicted 345 various health care professionals for submitting $6 billion worth of fraudulent claims to federal programs and private insurers. Among those ensnared in the takedown were pharmacies, which were accused of scheming with telemedicine entities and other licensed health care providers to purchase unnecessary medical equipment and prescription pain medications in exchange for illegal kickbacks and bribes, as well as the illegal distribution of opioid drugs. (See “National Health Care Fraud and Opioid Takedown Results in Charges Against 345 Defendants Responsible for More than $6 Billion in Alleged Fraud Losses,” U.S. Department of Justice, press release, Sept. 30, 2020.)

The schemes targeted by the DOJ’s massive enforcement action illustrate the types of frauds that often occur in pharmacies, especially independent ones (retail stores not affiliated with large corporate chain stores). Pharmacy schemes often involve attempts to maximize reimbursements from insurance companies by ordering expensive or unnecessary medications and medical equipment such as foot soaks, nasal rinses, diabetic supplies and topical pain medications. And independent pharmacies don’t always act alone to carry out their schemes. As the DOJ takedown demonstrated, pharmacy employees might collude with prescribers and other medical professionals, telemedicine entities and telemarketers.

Yet despite law enforcement agencies’ success in busting scammers, as soon as law enforcement crushes one scam, fraudsters move on to the next one. Indeed, there’s plenty of opportunity for fraudsters to take advantage of the lucrative prescription drug industry, which generated $1.14 trillion worldwide in 2021. And those opportunities for fraud grew exponentially during the COVID-19 pandemic as governments around the globe injected billions of dollars into their health care systems to fight the pandemic. (See “Global pharmaceutical industry – statistics & facts,” by Matej Mikulic, statista, Oct. 12, 2022, and “Fraud, Waste, and Abuse in the Context of COVID-19,” Healthcare Fraud Prevention Partnership, January 2022.)

According to the National Health Care Anti-Fraud Association, billions of dollars are lost to health care fraud every year, accounting for anywhere between 3-10% of total health care expenditures. These losses often translate into higher government and commercial health insurance premiums. (See “The Challenge of Health Care Fraud,” NHCAA.) But pharmacy fraud causes more than just financial pain; it can put lives at risk. For example, fraudsters might bill for a medication never sent or intentionally send a drug that was not prescribed. A person receiving a medication not prescribed to them could suffer bodily harm if they ingest a drug they’re not supposed to take. [See “Pharmacy and Prescription Drug Fraud,” Senior Medicare Control (SMP).]

The case of the now-defunct New England Compounding Center (NECC) is another example of how pharmacy fraud can endanger lives. In 2012, after 753 people in 20 U.S. states were diagnosed with fungal infections from contaminated injections made by NECC and 100 people died, an investigation revealed the pharmacy had been making and selling numerous drugs in unsanitary conditions, and its owners and operators had been evading regulators and misrepresenting its operations through a variety of fraud schemes. (See “Former Director of Operations for New England Compounding Center Sentenced,” United States Attorney’s Office, District of Massachusetts, press release, Dec. 14, 2022.)

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