Prescription Fraud, Diversion Will Keep Spotlight In 2014February 10, 2014

Law360, New York (February 10, 2014, 12:19 PM ET) -- Prescription drug fraud and diversion will likely remain a top priority for law enforcement in 2014. In fact, based on the frenzy of criminal charges last year, efforts to expand data mining and the implementation of the Affordable Care Act, 2014 may exceed 2013 in the volume of investigations, particularly relating to narcotic pain medication. Health care providers, especially, physicians, pharmacists, physician assistants and nurse practitioners, should be prepared for additional scrutiny of their prescribing and dispensing patterns by investigators and auditors. Here are some reasons why:

Fraud and Drug Diversion Continue to Pose a Health Risk

Illegal activities relating to prescription drugs generally fall within two categories: (1) prescription fraud, where reimbursement is sought from governmental or private insurers for medication that is not actually dispensed, and (2) drug diversion, where medication is illegally distributed or abused. Both of these schemes pose significant public health risks.

Prescription fraud usually involves a patient presenting a valid prescription to a pharmacist, but seeks cash from the pharmacist in lieu of the medication. The pharmacist pays the patient, but only a fraction of the amount the pharmacist gets from insurance when he submits a claim, alleging he dispensed the medication. Unfortunately. the drugs most susceptible to this type of fraud are the ones used to treat life-threatening diseases, such as HIV and cancer, because of the high reimbursement rates. Selling the medication or prescription, rather than taking the medication as prescribed, can have devastating consequences.

Drug diversion, on the other hand, poses dangers due to its susceptibility for abuse. According to the Centers for Disease Control, prescription drug abuse has reached epidemic proportions. Opioid pain relievers are responsible for nearly three out of four prescription drug overdoses, and were involved in 14,800 overdose deaths in 2008, more than cocaine and heroin combined. Consequently, the government is seeking to dismantle criminal networks that obtain and distribute the narcotics.

The Cost of Prescription Medication and Potential for Fraud Continue to Climb

According to the American Chemical Society ACS Chemical Neuroscience, the number of prescriptions written every year has reached a record high of 4 billion. The Centers for Medicare and Medicaid Services forecasts that in 2014, the national expenditure for prescription medication will be $268 billion, due to a sharp increase of prescription drug use by the newly insured under the Affordable Care Act.

The increases in pain medication use is more dramatic. According to the Obama administration, during 1997 to 2007, the milligram per person use of prescription opioids in the U.S. increased from 74 milligrams to 369 milligrams, an increase of 402 percent. In addition, in 2000, retail pharmacies dispensed 174 million prescriptions for opioids; by 2009, 257 million prescriptions were dispensed, an increase of 48 percent.

Large-Scale Government Takedowns Are Increasingly More Common

In 2013, law enforcement agencies at the federal, state and local level worked collaboratively to dismantle large prescription fraud and diversion networks throughout the United States.

For example, in the Detroit area, 44 defendants were charged as part of a prescription painkiller distribution ring. In the New York City area, 48 defendants were charged in a massive drug diversion conspiracy that cost Medicaid $500 million. In eastern Pennsylvania, 51 people were arrested in the largest prescription drug bust in the state’s history, and, later in the year, another 27 people were arrested for their involvement in another prescription drug conspiracy. In Staten Island, N.Y., eight people were charged in as part of a painkiller distribution investigation dubbed Operation Shore Thing.

These are only a sample of arrests and indictments across the country, with an increase in the latter part of 2013, which suggests 2014 may be a busy year for these investigations.

Data Mining Makes Prescription Fraud and Drug Diversion Easier to Investigate

Reviewing billing and drug dispensing data has been found to be a cost-effective method of detecting potential fraud. Due to the electronic storage and transmission of health information, government and private investigators routinely analyze billions of bits of claims data with sophisticated algorithms to find “outliers,” i.e, claims that are unusually frequent compared to peers or unusually expensive. For example, the New Jersey Office of the Comptroller’s Medicaid Fraud Division established a Data Mining Unit, which, last year, used data mining to identify physicians that may have inappropriately or fraudulently prescribed Subaxone.

With a simple comparison of databases, they found that the top 20 Medicaid billing providers for Suboxone were not on the Substance Abuse and Mental Health Services Administration list of certified providers. In total, they found 635 such physicians, and potential targets of investigation. The federal government is so keen on data mining that it adopted rules in 2013 to encourage state Medicaid Fraud Control Units to data mine by reimbursing those efforts as part of the states’ federal grant. Additionally, 37 states have implemented a Prescription Drug Monitoring Programs (PDMPs) to coordinate and centralize information relating to the utilization of controlled substance prescription data. All this access to information allows law enforcement to identify potential fraud and diversion from the office.

In this climate of heightened scrutiny, even well-intentioned pharmacists, physicians, physician assistants and nurse practitioners need to understand the importance of recordkeeping, documentation, proper examinations and patient interactions. Accordingly, they should review their internal controls and office protocols to avoid any improper prescriptions or dispensing. For example:

  1. Patient files should be complete and document the patient-physician interaction, and include a full evaluation and assessment to verify the need for opioid medication for pain. Where appropriate, the provider can request a report of a patient’s medication history from the state PDMP prior to the prescribing of narcotics. The provider should also screen for substance abuse and determine the efficacy and amount of opioids the patient is already taking.
  2. Prescription pads must be secured to prevent unauthorized access. It is not uncommon for office staff or patients to unlawfully obtain prescription pads and write their own prescriptions before anyone is aware the prescriptions are fraudulent or missing. From the perspective of law enforcement, a review of billing records will show only that the named provider wrote the prescriptions and it may be difficult to prove the pads were stolen.
  3. Be alert for the possibility that staff members may be improperly “phoning in” prescriptions or refills of medication. Develop office procedures and documentation whenever a prescription is phoned in to a pharmacy.
  4. Pharmacists and pharmacy techs should only dispense to the patient or authorized family members. Individuals claiming to be picking up medication for multiple patients should raise red flags and trigger additional scrutiny. Similarly, pharmacists should review prescriptions that seem unusually frequent or contain spelling errors. The pharmacy should have a procedure to verify the legitimacy of phoned-in prescriptions.
  5. All health care providers should use common sense and look for unusual behavior both in and immediately outside their office. It is not uncommon for individuals to work together to illegally obtain prescription medication. Often, “runners” will bring multiple patients to a physician or pharmacy and instruct them on what to say and what to do, and will often wait outside to obtain the prescriptions or medication.

As the public demands accountability for the rising cost of health care, state and federal agencies are responding by casting a wider net for fraud. In an electronic age, it only takes a few keystrokes to learn the who, what, where and how much of your practice. By being alert and diligent, health can providers can protect both their patients and themselves.

—By Riza Dagli, Brach Eichler LLC

Riza Dagli is a member and chairman of Brach Eichler's criminal defense and government investigations practice in the firm's Roseland, N.J., office. He has served as director of New Jersey’s Medicaid Fraud Control Unit, deputy director of the New Jersey Division of Criminal Justice, and supervised the NJ Office of the Insurance Fraud Prosecutor.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

All Content © 2003-2014, Portfolio Media, Inc.

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Brach Eichler Welcomes New Partner and Announces Launch of Practice AreaOctober 1, 2013

Riza Dagli Joins Brach Eichler as Chair of Criminal Defense and Government Investigations

October 1, 2013 (Roseland, NJ) – Brach Eichler has announced the launch of its Criminal Defense and Government Investigations practice area which will be chaired by Former Assistant Attorney General, Riza Dagli.

Brach Eichler’s Criminal Defense and Government Investigations Practice will be devoted to aggressive advocacy and counsel in all stages of state and federal investigations and prosecutions from initial inquiries and grand jury subpoenas to trials and appeals, and will cover a broad array of matters including health care and insurance fraud, labor and unemployment fraud, racketeering and money-laundering, and environmental crimes. Brach Eichler recognizes that the states of New Jersey and New York are served by multiple county, state and federal agencies whose goal is to investigate and prosecute fraud committed by health care professionals. As the cost of health care increases, the efforts of these agencies also increases resulting in more scrutiny, investigation, and prosecution of providers. To effectively defend the rights of health care professionals, Brach Eichler brings not only a thorough understanding of the underlying administrative and statutory law, but an understanding of the evolution and development of the law, the agencies that enforce them, and the courts that litigate them.

Riza Dagli has held several key posts within the Office of the Attorney General during his 13 years there, including Director of the Medicaid Fraud Control Unit where he supervised investigations and prosecutions of Medicaid and Medicare fraud, kickback, and off-label marketing litigation. In addition, as Deputy Director of the Division of Criminal Justice, he supervised organized crime prosecutions, as well as labor and environmental crime prosecutions. He also ran the Office of the Insurance Fraud Prosecutor where he supervised criminal and civil investigation and prosecutions of health care and insurance fraud.

John D. Fanburg, managing member of Brach Eichler, said, “This new practice group will enable us to offer vital services to our health law clients and their highly regulated businesses while presenting a dynamic opportunity for Brach Eichler to grow our client base.”

For more information about Brach Eichler’s Criminal Defense and Government Investigations Group, please visit

About Brach Eichler LLC

Brach Eichler LLC is a full-service law firm based in Roseland, N.J. With 60 attorneys, the firm is focused in the following practice areas: healthcare; real estate; litigation; tax, trusts & estates; and business & finance. Brach Eichler attorneys have been recognized by clients and peers alike in Best Lawyers in America, Chambers USA, and New Jersey Super Lawyers.

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