Fraud, pharmacy, and the law

Fraud, pharmacy, and the law - regulations, cases, and recognizing health-care fraud in the practice setting


Continuing Education

Published through an educational grant from WYETH-AYERST LABORATORIES

An ongoing CE program of The University of Mississippi School of Pharmacy and DRUG TOPICS

The University of Mississippi School of Pharmacy is approved by the American Council on Pharmaceutical Education as a provider of continuing pharmaceutical education. Accredited in every state requiring CE. ® ACPE # 032-999-01-001-H03

This lesson is no longer valid for CE credit after 12/31/03.


This lesson provides two hours of CE credit and requires a passing grade of 70%.


Upon completion of this article, the pharmacist should be able to:

  • Describe the government's current fight in combating health-care fraud

  • Understand the Anti-kickback Statute as it relates to pharmacy practice

  • Explain what is meant by safe harbor and qui tam

  • Determine whether a pharmacy's "usual and customary" prescription charge violates the False Claims Act

  • Identify and utilize prevention techniques when dealing with fraudulent prescriptions


  • To highlight current regulations and cases while providing examples to aid the pharmacist in recognizing health-care fraud in pharmacy practice

Fraud, pharmacy, and the law

Jump to:Choose article section... Government's actions to combat fraud The Anti-kickback Statute The False Claims Act Qui Tam actions Fraudulent prescriptions and the pharmacist Conclusion

By Alan R. Spies, R.Ph., J.D., M.B.A.

Department of Pharmacy Administration, University of Mississippi

The subject of fraud is a very broad area of the law, encompassing a variety of crimes. One might wonder why this vague topic is the subject of a continuing education article for pharmacists. With so much attention focused on prescription errors and pharmacist liability, is there a need to devote an entire article to fraud? Obviously the answer is Yes, as seen from the title of this piece.

Fraud is an area of law having the potential to affect every pharmacist, regardless of practice setting. This article will focus primarily on the pharmacist's action or inaction as it applies to committing health-care fraud. Excerpts from several statutes aid in this discussion, and the article will conclude with a section devoted to the subject of fraudulent prescriptions and the corresponding R.Ph.s' role. After each major topic, a chart of application principles (see Figs. 1-3) will present some guidelines to take into practice. These guidelines are merely suggestions, however, and should not be interpreted as law.

Fraud is defined by Black's Law Dictionary as "a knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her injury." Throughout the article, this definition will provide a solid framework in identifying health-care fraud.

First, we will examine the government's ongoing effort to combat this type of fraud, highlighting current statutes, such as the Anti-kickback Statute and the False Claims Act, as they apply to pharmacy practice. An Alabama case will help illustrate what is meant by a "usual and customary" charge in the context of Medicaid fraud. Lastly, two recent cases involving fraudulent prescriptions will be discussed to determine the pharmacist's responsibility when confronted with this problem.

Government's actions to combat fraud

The Department of Justice (DOJ), prompted by the recent increase of abuse and waste in health care, has identified the eradication of health-care fraud as its No. 2 priority, immediately behind violent crime. As James Sheehan, assistant U.S. attorney in the Eastern District of Pennsylvania and a leader in health-care fraud prosecution, recently told the American Society of Consultant Pharmacists, "Since the [recent] creation of dedicated health-care fraud units in every U.S. Attorney's office, every Inspector General's office, and most FBI offices, there are now people whose full-time job is to focus on health-care fraud cases and to bring them to proper resolution." For example, a 1998 General Accounting Office (GAO) report announced that DOJ had more than 4,000 health-care fraud cases under review in 1997, up from the 270 cases it reviewed just five years earlier. To aid DOJ in identifying and prosecuting health-care fraud, Congress allocated $158 million for fiscal year 2000 and $240 million for fiscal year 2001. In 1999, DOJ collected $524 million in criminal fines, civil settlements, and administrative penalties. While the monetary penalties may be severe, individuals or organizations found in violation are also subject to exclusion from participating in Medicare, Medicaid, and other federally funded health-care programs. This penalty can be financially devastating to a pharmacy whose business relies heavily on its Medicare and Medicaid patients.

As mentioned earlier, several statutes will be examined to show their relevance in dealing with health-care fraud. Though each of these laws affects the various health professions, this article will focus solely on the practice of pharmacy. The first law to be discussed is the federal Anti-kickback Statute.

The Anti-kickback Statute

In subsection (b)(2)(B) of Title 42, Section 1320a-7b of the U.S. Code, the federal Anti-kickback Statute provides, in part, that:

Whoever knowingly and willfully offers or pays any any person to induce such person to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made...under a Federal health-care program shall be guilty of a felony.

Admittedly, this statute is quite a lot to digest at one time. Therefore, each part of the law will be separated and examined. After interpreting the act's phrases, we will provide some practical meaning to the law.

The phrase knowingly and willfully is a very important part of the act because it focuses on the individual's mens rea, or criminal intent. The government bears the heavy burden of proving the defendant's mens rea. This standard applies to both parties involved in a prohibited transaction, placing each at an equal risk. In defining knowingly and willfully, courts have applied the "should know" standard. Briefly, such a standard may be breached by reckless disregard for the consequences of one's actions as well as negligence in the preparing and submitting of claims, or in supervising the preparing and submitting of claims. This means a pharmacist must have known he/she was performing the fraudulent act or was instructing another to do the same. With respect to negligently submitting a claim, the courts look at what a similar person of reasonable prudence and intelligence would ascertain. As a result, the statute serves to protect the pharmacist who makes a legitimate mistake in submitting a claim.

Remuneration simply means payment or compensation. The federal anti-kickback law refers to offering or paying something of value with the intention of causing the recipient to make referrals over his/her reason or judgment due to the remuneration. What do referrals have to do with pharmacy? Well, they have the potential to come into play every day. One such example would be payments from the manufacturer to pharmacists for providing patients with instructions on the use of the manufacturer's drug. This would likely be seen as unlawful because patient counseling is a duty pharmacists already are obligated legally and ethically to provide.

An example identified by the Office of Inspector General (OIG) involved drug company A offering a cash award or "switch fee" to pharmacies each time a drug prescription was changed from drug company B's product to drug company A's product. Here, the pharmacies were induced to help persuade physicians, who were unaware of the pharmacies' financial interest, to change prescriptions. The OIG's example is different from the situation in which a pharmacist is required to switch a patient's prescribed medication to a formulary drug in order to be covered by the patient's insurance company. In the formulary illustration, the pharmacist is receiving a nominal dispensing fee plus a market value less than or equal to fair market value for services rendered. For example, a pharmacist receiving the average wholesale price (AWP) minus 10% plus a $2.50 dispensing fee for a prescription does not fit the definition of remuneration.

Two recent cases involving drug manufacturers further illustrate violations of the anti-kickback law with respect to remuneration. They also show how states are becoming more active in enforcing these regulations.

In both cases, Upjohn and Miles Laboratories instituted "cognitive services programs" under which they offered to compensate pharmacists for educating patients who switched to the new drugs covered under the program. The state attorneys general alleged these payments were made without the patients' knowledge, therefore depriving them of their rights under state unfair trade and consumer protection laws. Miles paid $605,000, in addition to paying $200,000 to the Massachusetts Medicaid Fraud Unit, while Upjohn paid $675,000.

There are, however, exceptions to liability under the federal Anti-kickback Statute. Otherwise known as safe harbors, these business relationships prevent the participants from being subject to criminal or civil prosecution. Though a description of all these exemptions is beyond the scope of this article, two safe harbors will be mentioned. The first one, relating to discounts, excludes from the definition of remuneration "a discount or other reduction in price obtained by a provider of services or other entity ... if the reduction in price is properly disclosed and properly reflected in the costs claimed or charges made by the provider or entity."

The key message here is that the pharmacist should properly disclose the discounts given. As seen earlier in the Miles and Upjohn cases, failure to disclose the remuneration resulted in violations of the act by both manufacturers. A second safe harbor relates to "personal service agreements" such as consulting arrangements. While possibly not as relevant to pharmacy practice as the first safe harbor, this second example illustrates an important point. Any pharmacist receiving payment for providing this type of service must make sure the arrangement is made pursuant to a written agreement that specifically details the services to be provided while not exceeding the fair market value of the services provided. Failure to take these steps will cause the agreement to lose its safe-harbor status and will result in a violation of the statute. Application principles for the federal anti-kickback law are presented in Fig. 1.


Figure 1
Application principles from the federal anti-kickback law

• A pharmacist who receives a financial inducement for switching medications violates the act.

• Adherence to the APhA code of ethics presents a less appealing target for enforcement of the act.

• Choose incentives that benefit patient care when pursuing economic value.


The False Claims Act

By its terms, the False Claims Act, in 31 U.S.C.A. § 3729(a), provides, among other things:

Any person who ...

(1) knowingly presents, or causes to be presented, to [the Government] ... a false or fraudulent claim for payment or approval;

(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; [or]

(3) conspires to defraud the Government by getting a false or fraudulent claim allowed or paid;

... is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person....

Here, as with the Anti-kickback Statute, a mental state is required to find liability. There is a difference, however, between the two laws. While the Anti-kickback Statute applies a "knowing and willful" mens rea, the False Claims Act employs a somewhat less stringent standard. The mental state required for finding liability under the False Claims Act is also defined by statute, 31 U.S.C.A. § 3729(b), which states:

For purposes of this section, the terms "knowing" and "knowingly" mean that a person, with respect to information ...

(1) has actual knowledge of the information;

(2) acts in deliberate ignorance of the truth or falsity of the information; or

(3) acts in reckless disregard of the truth or falsity of the information,


This statute uses knowledge to determine the mens rea. In False Claims Act cases, the government must prove that the defendant "knew" it was submitting claims that were false. While still a challenge for prosecutors, not requiring proof of specific intent makes the government's case easier to litigate. One last comment about the "knowing" standard that is worth making deals with the 1986 amendments to the False Claims Act. As explained by one of the 1986 act's sponsors:

While the Act was not intended to apply to mere negligence, it is intended to apply in situations that could be considered gross negligence where the submitted claims to the Government are prepared in such a sloppy or unsupervised fashion that [it] resulted in overcharges to the Government.

The Anti-kickback Statute and the False Claims Act may appear at first glance to be essentially the same law. While there are some definite similarities between the two, a major difference exists, namely the "qui tam" action provision of the False Claims Act. This action is the subject of the next section's discussion.

Qui Tam actions

Black's Law Dictionary defines a qui tam action as "an action brought under a statute that allows a private person to sue for a penalty, part of which the government or some specified public institution will receive." Simply put, qui tam is synonymous with whistle-blowing. The False Claims Act contains a provision allowing such a suit by a private party. Because there are many provisions describing the requirements of a qui tam action, a brief overview will be presented.

The language providing for qui tam actions under the False Claims Act is found in 31 U.S.C.A. § 3730(b)(1). To paraphrase, the subsection states that a person may bring a civil action for a violation of the act with the resulting action actually brought in the name of the government. Subsection (d) of Section 3730 is also worthy of mention because it defines the possible award to a qui tam plaintiff. The pertinent language states:

If the Government proceeds with an action brought by a person under subsection (b), such person [shall receive between 15 and 25 percent of the proceeds of the action or settlement of the claim, depending on the extent to which the person contributed to the prosecution, plus attorneys' fees and costs. If the Government does not proceed, the person may receive between 25 and 30 percent plus attorneys' fees and costs.

Therefore, it is easy to see the incentive an individual might have in initiating a suit. However, this action does have limitations.

One such restriction requires an individual to be an "original source," meaning that he/she must have direct and independent knowledge of the information on which the allegations are based. Another limitation prevents an individual from commencing a suit based on allegations or transactions already subject to a proceeding in which the government is currently a party. This measure keeps an individual from riding the government's coattails by rewarding only those individuals taking the initiative to identify fraud. While a qui tam action may seem important, is there any possible relevance to a practicing pharmacist? This question will be addressed by the following Alabama case.

United States ex. rel. Gathings v. Bruno's, Inc.54 F.Supp.2d 1252, 1999 U.S. Dist. LEXIS 10409, 63
Soc.Sec.Rep.Service 314 (M.D.Ala.1999)

This is a qui tam action under the False Claims Act. In this case, the plaintiff asserted that the defendants, who operate pharmacies in the state of Alabama, defrauded the federal government by charging the Alabama Medicaid Agency a higher prescription "dispensing fee" than allowed by the Alabama Medicaid provider contract. The plaintiff, a sole proprietorship, asserted he met the statutory definition of "original source" under the False Claims Act. The dispensing fee paid by Medicaid is $5.40 per prescription, while the dispensing fee paid by Blue Cross-Blue Shield of Alabama is $2.30 per prescription. The plaintiff contended that the $5.40 dispensing fee charged for Medicaid prescriptions was in clear violation of the contracts between Medicaid and defendants, and that the defendants knowingly and willingly perpetrated a fraud on the United States by charging higher rates to Medicaid participants.

The central issue in this case is the definition of general public in the provider contract, which states in part, "In no event shall the Medicaid payment exceed the amount charged to the general public for the same service." The plaintiff argued the term general public referred to any person who did not receive assistance for payment of prescriptions through Medicaid. The defendants, on the other hand, asserted that general public unambiguously meant a cash customer (i.e, someone who pays the retail price for his/her prescription without financial assistance from any other source) and did not include a third-party payer like Blue Cross-Blue Shield. The district court agreed with the defendants by noting that customers for whom Blue Cross-Blue Shield pays the cost of prescription drugs were not members of the "general public."

The court then addressed the issue of what constitutes a pharmacy's "usual and customary" charge to the general public. The plaintiff claimed Blue Cross-Blue Shield's lower dispensing fee caused the state's payment to exceed the cost to the general public. In refuting this argument, the court held the "usual and customary charge to the general public" referred to the retail price or billed charges and did not refer to dispensing fees charged to other third-party providers. Furthermore, the court ruled that there is no requirement in the federal and state regulations, or in the provider contract, that reimbursement from Medicaid not exceed reimbursement amounts provided by other third-party providers, such as Blue Cross-Blue Shield.

In rendering its decision for the defendants, the district court applied the Pennsylvania Department of Public Welfare's regulation governing reimbursement for prescription drugs provided to Medicaid recipients. Though "usual and customary charges" may vary according to each state's statute, the following Pennsylvania example provides a good illustration:


To be able to determine more easily the pharmacy's "usual and customary charge" when billing the Department, the pharmacist must only take into consideration the type of Medicaid patient being served. If a Medicaid patient meets the qualifications of a pharmacy's special group or inclusive category of customers, and it is the policy of that pharmacy to extend that specific group a special rate that includes certain discounts, special promotions or other programs initiated to reduce prescription prices, the pharmacy must also extend the same rate to the Department for that Medicaid recipient.25 Pa.Bull.3978,3980.

One point regarding prescription pricing should be made at this juncture. Federal regulations set upper limits for Medicaid reimbursement of prescription drugs. The current version of the federal regulations differentiates between multiple-source drugs (i.e., generic drugs) and other drugs. The Health Care Financing Administration (HCFA) sets specific upper limits for reimbursement of certain multiple source drugs. Reimbursement of other drugs (i.e., brand-name drugs) continues to be based on the requirement that payment be determined by applying the lower of the (1) estimated acquisition costs (EAC) plus reasonable dispensing fees, or (2) providers' usual and customary charges to the general public, as discussed earlier. EAC is defined as the agency's "best estimate of the price generally and currently paid by providers." Though the states are somewhat restricted by federal reimbursement rates, they are given some leeway in setting their acquisition costs.

Given this flexibility in prescription pricing, is a pharmacy required to disclose its pricing information to its uninsured customers?

Langford v. Rite Aid of Alabama, Inc.
2000 U.S. App. LEXIS 27362 (11 Cir. Nov.2, 2000)

The plaintiff in this case argued that Rite Aid had implemented a scheme to defraud its uninsured customers of prescription drugs by charging them higher prices for medication than it charged its insured customers, then failing to disclose this fact. The court of appeals was not convinced by the plaintiff's argument and found for the defendant.

In rendering its opinion, the court stated that retailers are not expected to disclose information about their pricing schemes. Consumers are the individuals best equipped to gather pricing information, putting it to the best use. The court went further by noting that "pharmacists owe duties to their patients ranging from diligence in recommending medication to confidentiality in maintaining patient's records; however, nothing in their professional code of conduct suggests, even obliquely, that pharmacists violate that duty by not disclosing the pricing policies of their pharmacy."

It is important to note that this case involved an uninsured patient. Had this plaintiff been a Medicaid recipient who had been charged a higher price than other patients of similar nature, the court may have ruled against the pharmacy.

Application principles for the False Claims Act are presented in Fig. 2.


Figure 2
Application principles from the False Claims Act

• A pharmacist with direct and independent knowledge of fraud may initiate a qui tam action.

• Usual and customary charges refer to the retail price or billed charges.

• A pharmacist is not required to disclose the pricing policies of his/her pharmacy to its patients.


Fraudulent prescriptions and the pharmacist

The last section of this article will address the pharmacist's role in dealing with the growing prevalence of fraudulent prescriptions. To aid in the discussion, two recent cases will be examined.

The article will conclude with some recommendations from the U.S. Department of Justice as to ways a pharmacist can identify and prevent prescription fraud.  

United States v. Russell1998 U.S. App. LEXIS 5775 (6th Cir. Mar.19,1998)

In this case, defendant James Russell, formerly a licensed pharmacist, appealed his conviction for conspiracy to distribute controlled prescription drugs. The evidence presented at trial revealed the following pattern of events.

Clarence Wilson, D.O., a co-conspirator with Russell, had a clientele consisting of a large number of patients who complained of many of the same bogus symptoms and who appeared to be drug addicts. Wilson would perform perfunctory examinations of these patients and then liberally issue prescriptions. The prescriptions, which were substantially similar, whoever the patient, typically consisted of a dangerous combination of controlled and uncontrolled drugs. Wilson would rewrite the same 30-day prescriptions for the patients when they returned month after month, without further examination or diagnosis. According to expert testimony, Wilson prescribed controlled drugs without apparent medical need and outside the course of usual medical practice. Despite this fact, pharmacist Russell serviced the majority of Wilson's patients, even while other pharmacists refused. Filling prescriptions for Wilson's patients constituted between 80% to 93% of Russell's total business. In fact, Russell told a DEA agent that he depended upon Wilson's patients.

Expert testimony revealed the apparent reasons why many area pharmacists refused to fill these prescriptions: (1) the prescribed drugs were dangerous when taken in combination; (2) it was odd to prescribe this same protocol for the same patients over such a prolonged period of time; (3) Wilson's patients were often troublesome and unruly; and (4) many of Wilson's patients appeared to be under the influence of drugs. Russell apparently devised a system to allow Wilson's patients to receive only the drugs they desired, typically the controlled substances, from the combination prescriptions that included additional medications. This procedure was purportedly instituted to address Wilson's patients' general inability to pay for the prescribed drugs in their entirety. Not persuaded by this sham procedure, the court of appeals affirmed Russell's conviction. In its opinion, the court of appeals relied on the district court's finding that this practice provided circumstantial evidence that Russell knew the prescriptions were not valid but that he cultivated the illicit business by allowing the patients to opt for the controlled substances without having to pay for the unwanted noncontrolled drugs.

This case was mentioned to compare and contrast pharmacists and their respective standards of practice. The defendant pharmacist, James Russell, filled every prescription that came into the pharmacy. Russell had intimate knowledge of Dr. Wilson's practice and repeatedly witnessed the same prescriptions for the same patients. Although this should have sounded an alarm to Russell, he chose to look at the financial rewards over the needs of his patients. As a result, Russell lost his license to practice. In essence, Russell was not practicing pharmacy but merely filling prescriptions. However, a difference existed in the pharmacists who testified at Russell's trial. They all testified that they refused to honor Wilson's prescriptions because they included excessive and/or contraindicated controlled substances. These pharmacists are excellent representatives of the profession because they truly practice pharmacy. Their actions reflected a pharmacist's responsibility as a health-care professional. For more information on pharmacist responsibility in dealing with prescription fraud, see Fig. 3.


Figure 3
A pharmacist's guide to prescription fraud


• You have a legal responsibility to acquaint yourself with the state and federal requirements for dispensing controlled substances. You also have a legal and ethical responsibility to uphold these laws and to help protect society from drug abuse.

• You have a personal responsibility to protect your practice from becoming an easy target for drug diversion. You must become aware of the potential situations in which drug diversion can occur and the safeguards that can be enacted to prevent this diversion.


Pharmacists should be aware of the various kinds of fraudulent prescriptions that may be presented for dispensing:

• Legitimate prescription pads are stolen from physicians' offices, and prescriptions are written for fictitious patients

• Some patients, in an effort to obtain additional amounts of legitimately prescribed drugs, alter the physician's prescription.

• Some drug abusers will have prescription pads from a legitimate doctor printed with a different callback number that is answered by an accomplice to verify the prescription.

• Some drug abusers will call in their own prescriptions and give their own telephone number as a callback confirmation.

• Computers are often used to create prescriptions for nonexistent doctors or to copy legitimate doctors' prescriptions.

The following criteria MAY indicate that the purported prescription was not issued for a legitimate medical purpose:

• The prescriber writes significantly more prescriptions (or in larger quantities) compared with other practitioners in the area.

• The patient appears to be returning too frequently. A prescription that should have lasted for a month in legitimate use is being refilled on a biweekly, weekly, or even a daily basis.

• The prescriber writes prescriptions for antagonistic drugs, such as depressants and stimulants, at the same time. Drug abusers often request prescriptions for "uppers and downers" at the same time.

• The patient presents prescriptions written in the names of other people.

• A number of people appear simultaneously, or within a short time, all bearing similar prescriptions from the same physician.

• Numerous "strangers," people who are not regular patrons or residents of the community, suddenly show up with prescriptions from the same physician.


• Prescription looks "too good"; the prescriber's handwriting is too legible.

• Quantities, directions, or dosages differ from usual medical usage.

• Prescription does not comply with acceptable standard abbreviations or appear to be textbook presentations.

• Prescription appears to be photocopied.

• Directions are written in full, with no abbreviations.

• Prescription is written in different color inks or written in different handwriting.


• Know the prescriber and his/her signature.

• Know the prescriber's DEA registration number.

• Know the patient, AND check the date on the prescription order. Has it been presented to you in a reasonable length of time since the prescriber wrote it?

• When there is a question concerning any aspect of the prescription order, call the prescriber for verification or clarification.

• Should there be a discrepancy, the patient must have a plausible reason before the medication is dispensed.

• Any time there is doubt, request proper identification. Although this procedure is not foolproof, it does increase the drug abuser's risk.

If you believe you have a forged, altered, or counterfeited prescription, don't dispense it. Call the local police.

If you believe you have discovered a pattern of prescription abuses, contact your state board of pharmacy or the local DEA office. Both DEA and state authorities consider retail-level diversion a priority issue.


Source: U.S. Department of Justice, Drug Enforcement Administration, Diversion Control Program, "A Pharmacist's Guide to Prescription Fraud," Vol. 1, Issue 1 (February 2000).


Stuart v. Hammond1999 U.S. Dist. LEXIS 14384 (N.D.Tex.Sept.13,1999),
aff'd, 218 F.3d 744 (5th Cir.2000)

Unlike the previous case, in which pharmacist Russell ignored fraudulent prescriptions, the pharmacist in this case acted responsibly. The facts of this case are as follows.

On Oct. 17, 1995, plaintiff Stuart visited Deborah Meadows, DDS, complaining of a toothache. Meadows prescribed penicillin 500 mg and hydrocodone 7.5mg/acetaminophen 750mg. A pharmacy filled the prescriptions the same day in response to a telephone call believed to originate from the dentist's office. Stuart obtained telephoned refill prescriptions for the hydrocodone on Oct. 20, 25, and 27, 1995. The pharmacist, Julie Edwards, became suspicious on receipt of the Oct. 27 refill that the prescription and refills were unauthorized. She contacted Dr. Meadows' office, which denied authorizing the prescription. Pharmacist Edwards immediately contacted the Dallas Police Department, which assigned a detective to investigate. Stuart was later arrested, but the grand jury declined to indict her. Dr. Meadows later testified that she probably authorized the hydrocodone refills and her office likely misinformed the pharmacist that the refills had not been authorized.

Stuart filed a suit against the Dallas Police Department detective who arrested her pursuant to the valid arrest warrant. This action is beyond the focus of the article. However, the conduct of pharmacist Edwards is worth mentioning.

After receiving one prescription and three telephoned authorizations for hydrocodone within a 10-day period, Edwards properly called the doctor's office for authorization. While these refills seem excessive, it is important to note that the facts of this case do not state the quantities or directions for the hydrocodone prescription. However, this example does illustrate an important DOJ prevention technique: When there is a question concerning any aspect of the prescription order, call the prescriber for verification or clarification. Also, after receiving word from Dr. Meadows' office that the refills were unauthorized, pharmacist Edwards called the authorities. This, too, was the right course of action. Instead of dispensing the medication anyway, Edwards properly refused to refill the prescription.

What result would have occurred had the plaintiff brought this suit against the pharmacist? From the facts of the case, it is very unlikely the court would have ruled for the plaintiff. Edwards used professional judgment in assessing the patient's use of the medication, and when verification was denied from the doctor's office, she acted in good faith in promptly reporting the matter to the Dallas Police Department. Additionally, a pharmacy technician who worked with Edwards corroborated her information by identifying the plaintiff as the person who picked up the refills. Therefore, pharmacist Edwards' actions should serve as a guide for other pharmacists to follow. For more information on prevention techniques, types of fraudulent prescriptions, and characteristics of forged prescriptions, please refer to Fig. 3.


In summary, it is essential for pharmacists to take an active role in combating health-care fraud. This may involve anything from refusing to fill a fraudulent prescription to actually reporting a health-care provider for improper billing practices. The key is for each pharmacist in his/her practice setting to actively communicate with other health-care providers.

References are available upon request.


Write your answers on the answer form appearing below (photocopies of the answer form are acceptable) or on a separate sheet of paper. Mark only one correct answer.

1. The DOJ has identified the eradication of health-care fraud as what number on its priority list?

a. No. 1 priority
b. No. 2 priority
c. No. 3 priority
d. No. 4 priority

2. How many health-care fraud cases were under review by the DOJ in 1997?

a. 270 cases
b. 500 cases
c. More than 2,000 cases
d. More than 4,000 cases

3. How much money has Congress allocated for fiscal year 2000 to aid the DOJ in identifying and prosecuting health-care fraud?

a. $158 million
b. $240 million
c. $524 million
d. $270 million

4. The term mens rea can best be defined as:

a. Criminal acts
b. Criminal intent
c. Knowingly and willfully
d. Reckless disregard standard

5. Which one of the following acts requires a mens rea?

a. The False Claims Act
b. The Federal Anti-Fraud Act
c. The Federal Restoration Act
d. The Federal Anti-Kickback Statute

6. Remuneration is a term meaning:

a. To count
b. To initiate a suit
c. Paying something of value
d. Giving something away

7. What governmental agency does the abbreviation OIG represent?

a. Office of Interior Government
b. Office of Interior General
c. Office of Inspector General
d. Office of Independent General

8. All of the following examples were described in this article as remuneration except:

a. Fee switching
b. Cognitive services program
c. Manufacturer payment for counseling
d. Average Wholesale Price

9. Exceptions to liability under the federal anti-kickback law are known as:

a. Safe exemptions
b. Safe harbors
c. Exempted areas
d. No-kickback zones

10. Which of the following is an example of an exemption from liability under the anti-kickback law?

a. Personal service agreements
b. Receiving football tickets for switching patients' drug regimen
c. Obtaining secret price discounts from a manufacturer
d. Accepting cash payments in exchange for marketing a manufacturer's drug to a local physician

11. An action brought under a statute that allows a private person to sue for a penalty is known as:

a. Quid pro quo
b. Quasi-judicial
c. Qui tam
d. Quantum meruit

12. The court in United States ex. rel. v. Bruno's Inc. held all of the following except:

a. The $5.40 dispensing fee charged for Medicaid prescriptions violated the statute
b. The plaintiff, a sole proprietorship, failed to meet the statutory definition of original source
c. The term general public referred to a cash customer
d. Usual and customary charge did not refer to dispensing fees charged to other third-party providers

13. What is another term for multiple-source drugs as defined in federal regulations?

a. Brand-name drugs
b. Formulary drugs
c. Generic drugs
d. Other drug category

14. Which federal agency is responsible for setting specific upper limits for reimbursement of certain multiple-source drugs?

a. DOJ
b. OIG
c. FDA

15. Medicaid reimbursement of brand-name drugs continues to be based on the requirement that payment may be determined by which one of the following:

a. EAC
b. AWP
c. MAC
d. Other third-party billed charges

16. In United States v. Russell, area pharmacists testified they would not fill Dr. Wilson's prescriptions for all of the following reasons except:

a. Dangerous drug combinations
b. Patients' inability to pay
c. Patients appeared to be under the influence of drugs
d. Patients were often unruly

17. Which of the following choices is not a type of fraudulent prescription?

a. Altering of the amount prescribed
b. Legitimate prescription pads stolen from physicians' offices
c. Refills authorized by a physician's nurse
d. A computer-generated copy of a legitimate doctor's prescription

18. Of the following criteria, which one best indicates a legitimate medical purpose?

a. The prescriptions are written for both depressants and stimulants.
b. The patient presents a prescription written for another individual.
c. A number of patients present the pharmacist with similar prescriptions from the same physician.
d. A patient arrives at the pharmacy a few days early to have his 30-day supply prescription refilled.

19. According to the DOJ's "A Pharmacist Guide to Prescription Fraud," a forged prescription may occur with which one of the following conditions?

a. The prescription is handwritten.
b. The handwriting is illegible.
c. The directions are written with no abbreviations used.
d. The prescription is folded.

20. A pharmacist should perform all the following prevention techniques in his/her practice setting except:

a. Know the prescriber's DEA number
b. Call the prescriber for verification after dispensing the medication
c. Ask for proper identification
d. Call the local police if the pharmacist believes a prescription has been forged



Alan Spies. Fraud, pharmacy, and the law. Drug Topics 2001;2:65.