Prescriptions: Partly Filled, Fully Billed

The feds probe Eckerd for overcharging

It sounds innocent enough. The drugstore doesn't have a sufficient amount of the prescription medicine a customer needs. So the pharmacist fills part of the order, bills a health-care plan for the full amount, and tells the customer to come back for the rest. But what if the customer never returns?

In a civil fraud suit filed on Feb. 4 in federal court in Tampa, the Florida attorney general and Justice Dept. contend that just such a practice enabled Eckerd Corp. to defraud government health-insurance programs, including Medicaid, when it billed them for drugs customers never picked up. The total, more than $11.5 million since 1986, won't make this a big deal in the annals of alleged health-care fraud. But the case, based on a whistle-blower suit brought by an Eckerd employee, could have broad implications.

Pharmacies may wind up under the microscope--alongside laboratories, hospitals, and home health-care agencies in the search for health-care fraud. "This problem is not unique to Eckerd, and state and federal investigations are ongoing," says Mark H. Schlein, assistant attorney general and director of Florida's Medicaid Fraud Control unit. Massachusetts is looking into retail pharmacy practices for possible overbilling charges. And a national association of Medicaid Fraud Control units from 47 state attorneys general offices is working with Justice on the issue, says John A. Guthrie, vice-president of the association.

Eckerd, a subsidiary of J.C. Penney Co. that operates 2,831 drug stores in 24 states, denies the charges. "It's ludicrous," says Chief Executive Francis A. Newman. He says that if true, the government is talking about a minuscule amount of the 960 million prescriptions Eckerd has filled in the past decade, and adds that the company only learned of any problem once authorities brought it to its attention.

ORDERS MAILED. Newman blames computers. "The industry uses a computer billing system that doesn't adequately allow pharmacies to partial-bill, even if prescriptions are only partially filled," he says. Moreover, he says Eckerd now mails remaining orders to customers who don't claim them within 30 days.

Industry groups agree that a widely used billing system makes it hard to enter data on partially filled prescriptions. But the government doesn't buy that. Says Schlein: "There have always been mechanisms to refund money owed to government for products and services not delivered." Furthermore, says Gary J. Takacs, the Tampa attorney representing whistle-blower Louis H. Mueller, Eckerd installed new systems in 1992 and could have set up procedures to reimburse third-party payers. "They elected not to do so," Takacs says. Newman disputes that contention.

Meanwhile, other investigations are proceeding. In Massachusetts, the state attorney general in January notified 1,200 drug stores about possible overbilling. Pharmacists were asked to review records and determine amounts owed. That's a headache that this painfully consolidating business could do without.

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