Many major insurance companies, including those offering Medicare Part D Prescription Drug Plans, use pharmacy benefit managers (PBMs) to process their prescriptions. The advantage is that PBMs can use their size to negotiate better prices on prescription drugs. PBMs make much of their profits by operating mail order pharmacies which are owned by the PBMs themselves and are in direct competition with other “in network” pharmacies.
Types of PBM fraud can include:
- Shorting medications
- Switching drugs
- Failing to offer negotiated prices
- Paying kickbacks or offering inducements to providers and manufacturers
- Making inappropriate formulary decisions
- Dispensing expired or adulterated drugs
- Reshipping/recycling drugs which had been returned by mail order customers
- Retaining manufacturers rebates instead of passing the savings on to the patient
- Using undisclosed “Locked-in” pricing
These fraudulent practices, and others, may constitute the basis for a whistleblower lawsuit under the Federal False Claims Act (FCA).
Real World Examples of Recent Pharmacy Benefit Manager Fraud False Claims Act Cases:
- 2006: Medco Health Solutions paid $155 million to resolve several whistleblower actions which alleged the company solicited and received kickbacks to promote certain drugs as preferred in their formulary and paid kickbacks to obtain contracts with insurers and HMOs. Two relators received $10 million each, a third received $3 million, and the last received $860,000 for their pursuit of this fraud.
- 2005: Caremark Rx, Inc. paid $137.5 million to settle several whistleblower cases which alleged the company solicited and received kickbacks to provide certain drug manufacturers with favorable treatment of their product through government contracts. Allegations of retaining drug rebates were also resolved in this settlement.