On guard: The auditor cometh

January 8, 2007

State and federal authorities are increasingly cracking down on pharmacies for fraud, waste, and abuse

Stan Smith tried to be a Good Samaritan, and in return, the Georgia Department of Community Health slapped him with a $400,000 fine. His crime, unknowingly employing a pharmacist who was on the Medicaid "exclusion list," only came to light after the Georgia Inspector General uncovered it while auditing the pharmacy's records. And Smith is not alone. By some estimates as many as one pharmacist in three may face a fraud, waste, and abuse audit from either state officials or pharmacy benefit managers.

For many in Georgia, Smith's case is also indicative of the capricious and arbitrary nature of the auditing process, which is more focused on recovering money than stamping out true fraud and waste in the system. "We have some real problems," insisted Buddy Harden, executive VP of the Georgia Pharmacy Association (GPhA). "We don't deny that the regulation is there, but the thing that bothered us is that the Department of Community Health saw an opening to recoup a lot of dollars by enforcing a regulation nobody really knew about."

For the most part, auditors and even law enforcement officials are loathe to precisely define what constitutes fraud, waste, and abuse. Kimberly L. Brandt, director of the Program Integrity Group at the Centers for Medicare & Medicaid Services, told Drug Topics that the agency left the exact definitions of fraud, waste, and abuse purposely vague. She and state officials agreed that fraud involves a willful intention to steal or inflate prices and can be followed up by a criminal investigation. Waste results from inefficiencies in the system itself and is not a common issue in pharmacy audits. Abuse, however, is perhaps the biggest issue for pharmacies and stems from problems of ignorance, misunderstanding, and clerical errors.

"The program, it is tough," Brandt admitted. "Medicare is very complex, and there is a very high threshold for understanding the program. But if you are a partner in it, you need to know the rules."