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Fighting fraud in Medicare drug program won't be easy, experts say

WASHINGTON—Medicare's plan to fight fraud in its new prescription drug benefit is drawing skepticism from experts who say the benefit is too complex to monitor properly and leaves too much discretion to the industries that have fleeced government health programs in the past.

With taxpayers and Congress still fuming about the drug benefit's 10-year, $720 billion price tag, Medicare officials can ill-afford to let the program cost spiral due to fraud by doctors, pharmacies, drug companies, drug plans and the firms that administer them.

Medicare has identified 33 types of financial fraud that are possible in the program.

Some are as simple as over-reporting the number of prescriptions filled or billing for brand-name drugs when generics are dispensed.

Others are harder to detect, such as fraudulently inflating drug prices and soliciting or receiving a kickback, bribe or rebate in exchange for prescribing certain drugs or including them for coverage by drug plans.

In the past, these kinds of schemes have bilked billions of dollars from such federal health programs as Medicaid and Medicare, forcing cuts in services and increasing costs for patients.

On Friday, Medicare announced that eight private companies will have the primary task of policing the drug program.

The companies will review claims, analyze data and conduct other evaluations to spot unusual billing patterns that might indicate fraud. They'll work with Medicare officials and the Department of Health and Human Services' Office of Inspector General, which also will monitor the program.

But hiring contractors to fight fraud can lessen interest in enforcement within the agency, said Barbara Rowland, assistant U.S. attorney for the Eastern District of Pennsylvania.

Rowland, who has investigated numerous fraud cases against government health plans, said private companies are less likely to view violations as criminal matters.

"While we might look at something from a fraud perspective, when you've got an intermediary, they may be looking at it from a `let's recover the money' perspective. Or `let's get these people back on the road (in) that they're providing the right documentation and putting the right numbers in the right forms,'" Rowland said. "And we're talking about taking away people's ability to do business with the government and referring (violations) to the criminal division."

But Medicare Administrator Mark McClellan remains confident.

"I do not expect fraud to be at all common in the Medicare drug benefit," McClellan said. "One reason I'm confident about that is because of the strong and collaborative programs that we have in place to prevent it and take action quickly if it occurs."

But others say rampant abuses are inevitable, in part because of the benefit's complexity, but also because Congress allowed dozens of private-sector companies to provide the coverage and manage and negotiate most of the program's financial terms.

"Because the program has so many different plans, there's going to be millions of transactions and they're not going to be centralized in any meaningful or auditable way. That means some of these abuses may be hard to detect at least until they've been going on for several years," said Alex Sugerman-Brozan, director of the Prescription Access Litigation Project, a Boston-based group fighting illegal prescription price inflation.

Medicare's inexperience in the prescription drug market doesn't help either.

Nor is there a good track record among drug companies and pharmacy benefit managers, which administer drug plans. Both industries are facing dozens of state and federal lawsuits for allegedly defrauding government health programs in the purchase of prescription drugs.

For those reasons, many fear more of the same with the Medicare benefit.

"I think the problem is akin trying to keep water from seeking its own level," said John Clark, a San Antonio lawyer who represents whistleblowers who expose government fraud at drug companies. "Every time there's a large government program, whether it's pharmaceuticals or anything else, there will be interests who try to game the system and obtain more money out of it than they should."

In fact, 150 investigations involving some of the nation's leading drug companies are attempting to fix blame for illegal drug pricing for 500 different drugs, according to the Department of Justice.

Since 1998, the federal government has received more than $3.8 billion in fines and civil recoveries from drug companies for fraudulent practices.

Last month, drug maker GlaxoSmithKline, paid $150.8 million to settle Justice Department allegations that the company illicitly inflated the prices for two injectable anti-nausea drugs covered by Medicare and Medicaid. The government also claimed Glaxo had engaged in a "double-dipping" scheme that encouraged doctors to pool leftover vials of the drugs to create an extra dose, which was then re-billed to Medicare. Glaxo admitted no wrongdoing in the settlement.

Also last month, pharmacy benefit manager Caremark RX, of Knoxville, Tenn., paid $137.5 million to settle Justice Department allegations that a firm it recently acquired had sought and received kickbacks from drug companies. The kickbacks were to encourage the company, Advance PCS, to add certain medications to the list of drugs approved by several federal health plans. Neither Caremark nor Advance PCS, which Caremark bought in 2004, admitted wrongdoing.

Last year, Medco Health Solutions Inc. of Franklin Lakes, N.J., another major pharmacy benefit manager, agreed to pay $29.3 million to 20 states to settle complaints that it improperly inserted Merck medications into patients' mail-order prescriptions in order to increase profits. Medco didn't admit any wrongdoing.

Both Medco and Caremark agreed to make their business activities more transparent and open to regular federal monitoring. Each company now offers a national drug plan under the Medicare prescription drug benefit.

Phil Blando, a spokesman for the Pharmaceutical Care Management Association, which represents the pharmacy benefit manager industry, said the level of oversight is unprecedented and that the industry will help keep drug prices down.

"Their track record in the private sector makes them a natural to administer this drug benefit," Blando said.

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(c) 2005, Knight Ridder/Tribune Information Services.

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