Transit Authority Uncovers Nationwide Prescription Drug Scam
CLEVELAND, OHIO, March 18, 2018 – The Greater Cleveland Regional Transit Authority (RTA) has filed a claim to recover $2 million lost to fraudulent prescription drug claims – one of the final steps in a years-long internal investigation.
The investigation, conducted by RTA’s Internal Audit team, included the termination of 10 employees found to be participating in the scam.The identified specifics of this scam were provided to the Cleveland office of the Federal Bureau of Investigation and the U.S. Attorney as well as the Cuyahoga County Prosecutor.
“We found it. We investigated. We reported it and we took decisive action,” said RTA CEO and General Manager Joe Calabrese. “Now, we’re in the process of working with an insurance consultant to get our money back through our crime insurance policy.”
RTA launched an investigation into possible healthcare benefits fraud in May 2016, said Anthony Garofoli, executive director of Internal Audit. Garofoli said that the internal audit revealed the scam was conducted from January 2014 to March 2016. “By late-2016, 10 RTA employees were terminated for participating in the fraud,” Garofoli said.
How the scam worked
RTA officials said the scam worked like this: Pharmacies and doctors collaborating on the scheme sent “marketers” to approach employees of various organizations. The employees were promised several hundred dollars monthly if they accepted deliveries of pharmaceuticals by mail. The scam particularly focused on prescriptions for “compound medications” – custom-made preparations. The prescriptions, though, were written without the required medical necessity – and without a doctor ever seeing a patient. While the scam was being conducted, RTA contracted with third-party administrators, CVS Caremark and Express Scripts, who were responsible to manage its prescription benefits. The scammers billed the third-party administrators for far more than the actual cost of the medication. These costs were passed on to RTA, which is self-insured.
“This was a new fraud, in which compounding pharmacies took advantage of loopholes in a complex drug coding system. Since the fraud was exposed, Express Scripts responded with a compound drug management program to catch the fraudulent benefit claims. That program has been in place since 2016 and we continue to monitor. No further fraud has been detected since,” said Garofoli.
Garofoli emphasized that the scam was also taking place across the nation and that many public and private organizations fell victim to it.
Victims hit nationwide
In one of the most publicized examples, commonly known as the TRICARE fraud, a similar scheme defrauded the U.S. military’s health insurance provider TRICARE of more than $2.2 billion. RTA was defrauded by some of the same pharmacies that impacted TRICARE. The FBI investigated and closed some of these pharmacies.
Earlier this month, a bus driver for the Metropolitan Transportation Authority (MTA) in New York, pleaded guilty to conspiracy to commit healthcare fraud in yet another example of the compound drug fraud. Officials estimated the fraud cost the MTA $5 million.
RTA now has filed the claim with its insurance carrier on the health benefits loss. Garofoli said the claim recovery process is expected to take eight to twelve months.
“We certainly aren’t happy that we were victims in part of this nationwide scam,” Calabrese said. “We take our fiduciary responsibility very seriously. But we are pleased that our internal controls worked. We discovered the scam and we stopped it. Now, we want to get our money back and put it to work for the people we serve.”