Fake Prescriptions Cost Taxpayers Billions

Monday, 20 Jun 2011 11:54 AM

By Caroline Rawls

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Healthcare fraud costs taxpayers and insurers more than $60 billion a year. This number is growing with the latest form of fraud to exploit the healthcare system — the “phantom pharmacy,” according to CNN Money.

Illegal enterprises are posing as legitimate pharmacies and billing Medicare, Medicaid, and private insurers for reimbursements on fake, and costly, prescriptions, CNN Money reports.

Using real business and residential addresses, criminals launch fake pharmaceutical companies. Then they use stolen doctor and patient ID and insurance numbers to write illegal prescriptions for some of the most expensive drugs on the market. After submitting fraudulent reimbursement paperwork to Medicare and Medicaid, these “phantom pharmacies” rob the government of up to $8,000 in taxpayer money per claim, CNN Money reports.

"These scams are exploding,” says Shimon Richmond, a field agent with the Department of Health and Human Services. “They're a huge issue for the department.”

Catching these covert operations has proved difficult. The architects of these scams know better than to use the same address for extended periods of time. “Criminals quickly make large amount of money, then close up and open up a new scam somewhere else,” said Gary Cantrell, assistant inspector general for investigations with the Department of Health and Human Services.

Medicare processing regulations provide a buffer to the criminal activity, requiring that pharmacies be reimbursed in as little as two weeks. The result is that some fake claims will be paid out to criminals before those claims can be validated. The operations are disbanded before any government official can catch the scam.

Experts worry that this form of health care fraud has infiltrated the health care profession itself. Corrupt doctors have been known to operate “phantom pharmacies” on the side, allowing them to simply write the fake prescriptions themselves.

Though scammers typically target Florida and California because of their large Medicare and Medicaid populations, “phantom pharmacies” are beginning to crop up in major cities all across the country, including Dallas, Detroit, and New York City.

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