OPM investigators zero in on prescription drug fraud

Recent investigations into prescription drug providers for federal employees have uncovered illegal kickbacks, improper rebates and other cases of fraud.

The Office of Personnel Management Inspector General's semiannual report, which was transmitted to Congress in November and released on the agency's Web site Wednesday, focuses on prescription drug abuse in the Federal Employees Health Benefit program.

IG Patrick McFarland said in a letter to lawmakers that his office's investigations confirmed suspicions of "serious issues" within the FEHB pharmacy program.

"We are progressively increasing the level of effort and resources that we devote to pharmaceutical-related issues," McFarland said. "I can assure you that we will meet the challenges posed by illegal or improper practices."

One of the largest FEHB cases resulted in a $54.6 million settlement from AdvancePCS, a pharmacy benefit manager for some of the program's health plans. The settlement revolved around two alleged offenses. The IG claimed that AdvancePCS took money from pharmaceutical manufacturers in return for favorable treatment of its drugs in FEHB contracts. The government also alleged that the company illegally paid health insurance plans to ensure its selection as their pharmacy benefit manager.

Caremark Rx, which acquired AdvancePCS in March 2004, denied any wrongdoing and said it settled the claims to avoid the expense and hassle of litigation. The settlement did not include an admission of guilt.

The IG also uncovered $1.5 million in improper rebates to Group Health Inc., a New York area medical plan. GHI, the inspectors claimed, also was late in repaying another $5 million in rebates. The company did not respond to requests for comment.

The IG report noted that two FEHB physicians were found to have unethically prescribed painkillers. One, a Washington state psychiatrist, over-prescribed oxycodone and hydrocodone to patients so that he could keep some for himself. A Virginia doctor overly prescribed similar, highly addictive painkillers. Several of his patients died of overdoses, although it was not clear that his prescriptions were the source. Both physicians were debarred from practicing under the FEHB.

In an effort to step up its investigations into FEHB drug providers, McFarland said his group is in the process of auditing multiple firms that manage pharmacy benefits. The OPM IG also is investigating some cases involving drugs that are prescribed for uses other than their Food and Drug Administration-approved purpose.