Government-funded medications for afflictions like HIV and Hepatitis C that are illegally resold to pharmacies are becoming a significant danger to consumers and a growing cost for taxpayers, according to the Department of Health and Human Services Inspector General.
It’s a complicated process, but essentially what the IG calls “drug diversion” works like this: A recruiter working for a pharmacy finds a Medicare beneficiary who illegally obtains government-paid medication. The recruiter then sells it to a collaborative pharmacy at a below-market price. The pharmacy can then re-sell the drug at full price to legitimate buyers.
“You’re billing Medicare for the full amount,” said Mike Cohen, an operations officer with the Office of Inspector General. “From a financial standpoint, you don’t have to buy any stock.”
The diversion, or “recycling” operation, also involves recruiters, conspiring physicians, secondary drug wholesalers and even organized crime, according to Cohen. The Medicare beneficiaries are the key to the success of the process and are carefully cultivated by recruiters.
“Quite frequently, they’re taken en masse in a van to a pharmacy,” Cohen said.
The problem has become so serious that it now ranks second only to investigating the Obamacare insurance exchanges among the HHS IG’s 2015 priorities. Government funding of prescription drug purchases took on added significance in 2006 under President George W. Bush when his Medicare Part D program became law.
For the most part, the pharmacies aren’t diverting drugs that are often bought and sold illegally on the street, such as Xanex or Oxycontin. Rather, they’re dealing with more expensive medications for afflictions like HIV or Hepatitis C, Cohen said.
Not only is this safer, since illegally selling the commonly abused street drugs carries a minimum sentence of 10 years in most states, it’s also more lucrative, he said.
For example, in 2012, questionable payments for HIV drugs alone totaled $32 million, according to an IG report.
“You can make literally millions of dollars,” Cohen said. Because Medicare pays for the drug, the profit margin on the transactions is tremendous.
In addition to costing taxpayers money, drug diversion is dangerous for consumers.
“Once the drug leaves the pharmacy, they should not go back on the shelf,” said Cohen. “When the pills go out the door, you don’t know what’s happening to them.”
There is no oversight for content, quality or age of the drugs being resold to the pharmacy.
“This presents a real quality-of-care hazard for legitimate patients who need those pills,” Cohen said.
The process enables the pharmacy to restock its shelves for legitimate consumers or resell the medication to wholesalers. Pharmacies sometimes collude with organized crime and ship the drugs overseas, out of the IG’s jurisdiction, according to Cohen.
Because the process is so convoluted, it is difficult to catch or prevent.
“You’re not going to prosecute your way out of this problem,” Cohen said.
In addition to legal action, the IG is taking steps to educate pharmacists and analyze data surrounding prescriptions, Cohen said.
