[Homestead] Your tax dollars at work, predatory pharmacies

Tvoivozhd tvoivozd at infionline.net
Tue Sep 21 10:30:01 EDT 2004

Loophole Lets Pharmacies Bill Government Twice

*By David B. Caruso* Associated Press Writer
Published: Sep 21, 2004


PHILADELPHIA (AP) - A regulatory loophole is allowing some pharmacy 
companies to bill government health programs twice for the same drugs, 
according to whistleblower lawsuits challenging the payments.

The complaints are about a practice called "restocking," in which 
pharmacies resell drugs returned by hospitals or nursing homes. The 
medications often were for patients who had died.

A majority of states allow the return of medication still sealed in its 
original packaging and stored in a controlled environment to prevent 
millions of dollars worth of expensive drugs from being destroyed 

The savings, however, are not always passed along to buyers.

In a case recently decided by a federal appeals court, a former 
administrator at a subsidiary of the pharmacy company Omnicare alleged 
the firm was cheating the Medicaid program by charging it twice - the 
sale and the resale - for restocked drugs.

Thomas Quinn said he questioned the practice after seeing workers open 
packages of returned drugs, push unused pills from their foil packs and 
place them in fresh cases, then reseal the boxes with irons to make them 
ready for resale.

The Omnicare subsidiary, based in New Jersey, informed Medicaid when a 
drug was returned but offered it a rebate of only 50 percent of the 
original price.

The 3rd U.S. Circuit Court of Appeals this month called such double 
payments "disturbing," but said it could not find anything in New 
Jersey's Medicaid rules requiring the company to give a full refund for 
restocked drugs.

"We are constrained by the lack of a regulation," Judge Jane R. Roth 
wrote in the court's decision. "We believe that Congress and/or the New 
Jersey legislature might serve Medicaid well if this lack of regulation 
were corrected."

A spokeswoman for the U.S. Centers for Medicare and Medicaid Services, 
which oversees the Medicaid program, said each state may set its own 
rules regarding refunds for returned drugs.

Quinn's lawyer is frustrated by the ruling but said it would be hard to 
argue with the court.

"We have a situation where there is no regulation. There is no 
accountability," lawyer Harvey S. Mars said. "A company could deliver 
the medication, take it back the next day and resell it, and would be 
paid twice."

Omnicare officials did not return telephone messages.

In other states with different Medicaid rules, the Covington, Ky.-based 
Omnicare has been less successful in defending itself against 
complaints. In 1998 the company agreed to pay $5.3 million to settle 
allegations that one of its subsidiaries improperly resold drugs in 
Missouri without crediting Medicaid.

Similar charges have been filed against other pharmacy benefit firms.

In a whistleblower lawsuit filed this year, two pharmacists at Caremark 
Rx Inc. alleged that the Nashville, Tenn.-based firm defrauded a Florida 
health plan for retired state workers by failing to give it credit for 
medications that were returned, unopened, by customers. The case is 

Unlike the Omnicare case before the Philadelphia appeals court, which 
involved drugs returned from health care facilities, the Caremark 
lawsuit involved medications that had gone directly to consumers.

Most states, including Florida, ban pharmacies from reselling drugs once 
they are handled by people other than health care professionals. The 
suit alleged Caremark had attempted to get around the ban by shipping 
the returned drugs from Florida to Illinois, where rules about reselling 
medications are looser.

A Caremark spokesman, Gerard Carney, said the company no longer restocks 
any medications but believes its former policies complied with state law.

Taxpayers Against Fraud, a Washington D.C.-based watchdog group, 
advocates a clear federal rule requiring pharmacies to reimburse 
Medicaid for drugs that are returned for resale, said spokesman Patrick 

"Someone needs to close this loophole fast," Burns said. "This is just a 
classic case where the failure of the state to act abets waste.

AP-ES-09-21-04 0328EDT

More information about the Homestead mailing list