How to Remedy the Dangers of Prescription Fraud, Waste, and Abuse

Jennifer Warren, CPC, CFE, CPhT
December 12, 2018

Imagine being prescribed a high-cost medication by a doctor you’ve never met and who has never reviewed your medical records. Sounds a bit far-fetched, right? It’s not. In fact, this scenario is the most troubling trend we’re seeing in cases of pharmaceutical fraud, waste, and abuse (FWA).

Here’s a real-life example of this scheme: A marketing company uses cold calls and commercials to gather information—you know the ones about relieving back or knee pain. In addition to sending you a brace to alleviate discomfort, the company also offers pain creams. Your information is sent to a telemedicine company who pays physicians a flat fee for each prescription they issue. These are filled at contract pharmacies.

You never talk to the physician, which in many states invalidates the prescription. And since you have no relationship with the doctor or pharmacist, you may end up taking two forms of the same medication or a dangerous combination of drugs. A legitimate pharmacy would be receiving alerts about potential issues and would warn you about possible problems. Unfortunately, these bad-acting pharmacies are disconnected from the patients’ normal care and are consequently putting the patients at risk.

In the years I’ve spent fighting fraud, waste, and abuse, I’ve seen the devastating effects these types of schemes can have on victims—including death. The NHCAA also points out the danger that healthcare fraud causes to patients who may undergo unnecessary or unsafe procedures or who may fall victim to identity theft. It’s horrifying the harm a few greedy individuals can inflict.

Economically, FWA carries a hefty price tag; estimates range from $80 billion to $225 billion in the United States alone. The National Health Care Anti-Fraud Association (NHCAA) has indicated that losses account for three to 10% of the total annual spending on healthcare.

The variety of fraud, waste, and abuse cases are almost endless. They can be as innocent as honest mistakes that result in erroneous billings or inefficiencies that result in wasteful diagnostic tests, or as malicious as false claims that result in improper payments. Collectively, the adverse impact on the industry has been huge.

Even worse, research suggests that only a paltry 5% (or even less) of these losses are recovered annually. This is a bitter pill to swallow not only for insurers who pay out these claims, but more so for consumers who continue to shoulder the burden of expensive healthcare costs.

Demolishing data silos to combat fraud

Investigators of fraud, waste, and abuse cases have a tough job—schemes evolve quickly, they have to sift through a large number of false-positive leads, and knowing the right time to pursue a case can be tricky. It’s hard to be proactive in such an environment, and priorities are logically based on cases where FWA is taking the biggest financial toll.

One of the largest barriers investigators face is data segregation. Most FWA is addressed in silos, whether it be medical claims versus pharmacy claims, or government versus private insurers.

Since fraud schemes go beyond an individual payor, it takes data from multiple sources to more easily detect the bigger scheme.“When a payer looks at its own data, they would only see a small picture of a provider’s total medical practice,” says Mary Beach of the Healthcare Fraud and Prevention Partnership (HFPP). “By combining the data, we get a much bigger picture.”

The truth of this statement was evident when we conducted our FWA analysis on a client. We identified several pharmacies with the same network of prescribers who were prescribing high-cost drugs without clearly established patient-doctor relationships. We performed the same analysis for a larger health plan and uncovered the identical scheme on a much larger scale. Even after the second client put utilization management around the sub-optimal medications, the bad-acting pharmacies began utilizing other high-cost medications. Our analysis was able to identify and mitigate damages before this new scheme became a costly problem.

Let the numbers tell the story

PSG’s integrated platform tears down data silos of medical and pharmacy data, enabling our clinical experts and analysts to identify big-picture FWA trends across our entire book of business. Analysis from these tens of millions of claims arms investigators and health plans with the insight to effectively address FWA in all its harmful forms.

We help investigators efficiently process cases—including false-positives—so they can proactively focus on bigger-scale schemes. Our clinicians and formulary experts proactively work with clients to take action on these FWA findings. Strategies we’ve implemented include requiring audits and network removal of pharmacies by the PBM as well as developing utilization management protocols and formulary adjustments to restrict access to medications prone to fraudulent prescribing.

My passion for FWA goes beyond managing the cost of medications for plan sponsors. While that is an important component, what really matters is protecting health and wellbeing of patients.  Far too often, bad acting prescribers and pharmacies are putting that at risk. Data coupled with clinical and industry expertise enable me and my PSG colleagues to relentlessly advocate on behalf of our clients and their members every day.

You have the power to protect your members and reduce costs by fighting fraud, waste, and abuse. Contact PSG for an FWA analysis on your claims data today.


Jennifer Warren has 11 years of analytical, investigative, and management experience that encompasses medical and pharmacy benefits. Prior to joining PSG, Jennifer was a Pharmacy Fraud and Analytics Subject Matter Expert at Cigna, where she served as pharmacy subject matter expert, including specialized analytics to support how medical diagnosis related to pharmacy activity.