Drug Diversions Sting Insurers, Says Report

Its findings are based on a comprehensive review of data and dozens of interviews with law enforcement, regulators, insurers, policymakers and others involved with drug diversion, the Coalition said.

A portion of diversion-related insurance schemes cost private insurers up to nearly $25 billion annually in bogus claims and hidden costs of treating abusers who obtain their drugs through insurance fraud, according to the report. It estimates the largest health plans may lose up to $857 million apiece annually.

Doctor shopping by addicts and abusers is the most common of many diversion schemes. Crooked doctors and pharmacies also make bogus prescription claims to obtain drugs for resale on the black market, the study found.

The report warned that insurers "cannot afford to treat drug diversion in a 'low-dollar' vacuum at the case level. The overall dollar costs are unacceptably high, and the potential for legal liability could magnify those costs. Payers must better research–and measure–the large costs that doctor shopping and other diversion schemes add to total medical expenses."

Workers' compensation insurers are major victims. Narcotic painkillers form a major portion of the workers' comp industry's $3 billion annual prescription tab, the report noted.

Aetna Inc., which aggressively combats diversion, said in 2006 nearly half of suspected frauds by its plan members involved prescription-benefit scams such as prescription forgeries. The company said that one member obtained insurer-paid prescriptions from 72 doctors over 22 months, according to the report.

Prescriptions for suspected doctor shoppers cost nearly seven times more than for normal users, Medco Health Solutions found in its own member study.

According to the Coalition, the largest fraud-related losses, surprisingly, may not involve prescriptions themselves. Suspected prescription abusers incurred $41 in claims for office visits and outpatient treatment for every $1 in suspicious narcotic prescription claims, WellPoint, an aggressive diversion fighter, found in a study of suspected doctor-shopping plan members.

Some health insurers respond effectively, but most respond inconsistently and with little impact, the report said. "Most insurers focus almost entirely on traditional frauds by health care providers. They generally ignore scams by their plan members, who account for the bulk of drug-diversion losses," the study related.

Beyond direct fraud-related losses, insurers could face costly lawsuits for failing to prevent a plan member's prescription abuse. One pharmacy already is being sued, so the legal climate may be ripening for more suits, the coalition's report warns.

The Coalition's report called on insurers to support better point-of-sale controls at pharmacies; improve data mining to identify doctor shoppers earlier; tighten reimbursement requirements; and push for strong state prescription monitoring programs.

Making a dollars and cents argument, the report said that "combating fraud and drug diversion is a sound business decision. But it's also a corporate responsibility to the public."

The Coalition Against Insurance Fraud is a national alliance of insurers, consumer advocates and government agencies combating all forms of insurance fraud.