OIG suggests independent pharmacies more prone to fraud, abuse

August 10, 2012

A recent report indicates that independent pharmacies are more prone to fraud and abuse than are chain stores.

Independent pharmacies are more likely to engage in fraud and abuse than chain pharmacies. That's the easy conclusion from the Office of the Inspector General of the Department of Health and Human Services. A report published in May 2012 found that 10.7% of independent pharmacies submitted questionable claims for Medicare Part D prescriptions in 2009. Among chain pharmacies, 1.3% submitted questionable claims.

"In total, 2,637 retail pharmacies had questionable Part D billing" in 2009, the OIG wrote. "While some of this billing may be legitimate, all pharmacies that bill for such extremely high amounts warrant further scrutiny."

The good news in the report is that OIG concluded that just 4% of the 59,307 retail pharmacies that billed Medicare Part D in 2009 submitted questionable claims.

"In any sector of healthcare, you will find fraudsters," said John Coster, PhD, RPh, senior vice president for Government Affairs for the National Community Pharmacists Association. "We would support digging deeper into the data to see if these pharmacies are providing appropriate patient care or if they are scamming the system."

Eight measures

The report does not directly charge pharmacies, independent or otherwise, with fraudulent or abusive practices. OIG noted that pharmacies serving pain clinic or hospital patients as well as those with older patients could have very legitimate reasons for billing outside national norms.

It simply says that 4% of pharmacies submitted claims that are questionable based on eight measures: the average amount billed per beneficiary, average number of prescriptions per beneficiary, average amount billed per prescriber, average number of prescriptions per prescriber, percent of prescriptions for Schedule II drugs, percent of prescriptions for Schedule III drugs, percent of prescriptions for brand name drugs, and percent of prescriptions for refills.

And of the pharmacies that submitted questionable billings, independents were eight times more likely than chain stores to show questionable charges.

Local singularities

Pharmacies in metro Miami were four times more likely to have dubious billings than in other parts of the country. The biggest problem: extremely high amounts per beneficiary. Ten Miami pharmacies billed an average of $8,000 or more per beneficiary, five times the national average. Miami pharmacies also billed for unusually high amounts of brand name drugs.

Pharmacies in Los Angeles and Detroit were about 2.5 times more likely to submit questionable billings. The major problem in Los Angeles was excessive brand-name billing. Detroit pharmacies overbilled for Schedule III products, most often hydrocodone-acetaminophen combinations.

Pharmacies in New York, Baltimore, and Tampa were twice as likely to submit questionable billings as the national average. New York saw major problems with excessive billings per beneficiary and a high percentage of brand-name drugs. In Baltimore and Tampa, the problem was with excessive Schedule II billings, primarily oxycodone (OxyContin, Purdue).

The report created a few immediate headlines linking independent pharmacy with fraud. Both the National Association of Chain Drug Stores and the Academy of Managed Care Pharmacy declined to comment on the findings.

While OIG said it would refer the questionable pharmacies to CMS for further investigation, the report said CMS' own lack of oversight was the major culprit.

"Our findings indicate vulnerabilities in the oversight of the Part D program," OIG wrote. "Prior reports have also found evidence of these vulnerabilities...Together, these findings call for a strong response to improve Part D oversight."

CMS agreed that it needed to strengthen pharmacy oversight and review, provide additional guidance to Part D plan sponsors on monitoring pharmacy billing, further strengthen compliance plan audits, and follow up on questionable billings identified by the report.

The agency agreed in part with recommendations to require plan sponsors to refer potential fraud and abuse incidents for further investigation and to develop fraud and abuse risk scores for individual pharmacies.