Medicare is investigating reports that CVS Caremark Corp., the country's second-largest drugstore chain, has refilled prescriptions and submitted insurance claims without patients' approval, according to an official with knowledge of the matter.
The Office of the Inspector General for the U.S. Department of Health and Human Services has launched the investigation into CVS' refill practices, said the official, who was not authorized to discuss the case and therefore requested anonymity.
The inspector general is the starting point for any case involving possible Medicare fraud. Such probes also can include other law-enforcement agencies, including the Federal Bureau of Investigation.
Word of the Medicare investigation follows my columns on CVS' refill practices. One column featured confidential company emails showing that dozens of pharmacists in the New Jersey area were instructed by a supervisor to refill prescriptions and bill insurers without patients' say-so.
Another column included statements from CVS customers and pharmacists in California and elsewhere saying they too had experienced prescriptions being refilled without authorization.
Typically, drugstores submit claims to insurers when a prescription is filled, not when customers pick up their medicine.
CVS said unauthorized refills are not condoned by the company. State officials said such practices could be considered insurance fraud, particularly if insurers weren't refunded for any drugs rejected by patients.
CVS spokesman Mike DeAngelis said the company hasn't been contacted yet by federal investigators about its refill practices.
The Centers for Medicare & Medicaid Services, which oversees the federal programs, declined to comment on whether an investigation was underway.
Medicare, which provides health coverage to about 50 million beneficiaries, said only that it "takes any allegations of fraud very seriously and works in close coordination with our law-enforcement partners when we receive a complaint of possible fraudulent activity."
Investigators are reviewing a random sampling of the millions of claims CVS has submitted on behalf of customers to ensure that refunds were made to Medicare for drugs that patients hadn't requested and didn't pick up, said the official with knowledge of the case.
Last year, CVS agreed to pay $17.5 million to resolve allegations that the company falsified claims for prescription drugs for Medicaid programs in California and nine other states.
In that case, the Justice Department accused CVS of submitting inflated bills to the healthcare program for low-income people who had other insurance as well. As part of the settlement, CVS denied any wrongdoing but agreed to allow federal authorities to monitor its billing procedures.
"This case is an example of the government's strong commitment to pursue companies that overcharge our federal health programs by submitting false claims," Tony West, assistant attorney general for the Justice Department's Civil Division, said about last year's settlement.
Don White, a spokesman for the Inspector General, wouldn't comment on whether refilling prescriptions without patient approval was a violation of last year's settlement agreement.
Meanwhile, federal authorities have been stepping up efforts to crack down on Medicare fraud.
Last week, federal prosecutors filed criminal charges against 91 doctors, nurses and other medical professionals for allegedly submitting nearly $430 million in false bills to the agency.
In May, a similar investigation resulted in criminal fraud charges accusing 107 people of defrauding Medicare of $452 million.
Private insurers, which do extensive business with CVS, are playing down concerns of possible fraud.
Anjie Coplin, a spokeswoman for insurance giant Aetna Inc., said her company works hard to ensure that all claims are legitimate.
"Aetna manages pharmacy utilization closely, and there are audits and double-checks in place to prevent excess billing," Coplin said. "This includes the auditing of individual pharmacies, where claims are compared to prescriptions and to the signatures in the patient log book."
She said Aetna believes most pharmacies routinely refund money for undelivered drugs "to avoid being audited or found out of compliance."
Brad Kieffer, a spokesman for insurer Health Net Inc., also emphasized the diligence of internal claim audits.
"Health Net works closely with our partners to ensure accurate billing and claims payments," he said. "And we have checks and balances in place, including audits of claims submitted by pharmacies, to monitor the accuracy of those payments."
But a system involving millions of insurance claims across a wide spectrum of public and private insurers is vulnerable to abuse. The FBI estimates that healthcare fraud costs the country at least $80 billion annually.
David Balto, a former policy director for the Federal Trade Commission, said federal and state officials have not paid enough attention to CVS since the company purchased Caremark for about $21 billion in 2006.
The deal made CVS not just a leading provider of prescription drugs but also a leading manager of pharmacy benefits for employers and insurers. CVS purchased rival Longs Drugs for almost $3 billion in 2008.
"When you have that much control over the market," Balto said, "there's a tremendous temptation to act in ways that aren't in the best interest of consumers."