Medco: Short Fills, Cancellations and Contracted Review

In the Medco mail-order settlement case, Medco agreed to pay $137.5 million under a consolidated agreement covering allegations of short fills, canceled prescriptions and false claims for contracted services. The government alleged that the pharmacy business could bill for more pills than it supplied, make late prescriptions disappear through cancellation and record physician contacts that never happened. For an insider, the telling detail may be the quantity, receipt date or review entry that someone changed.

The Department of Justice announced the broader $155 million federal settlement package on October 23, 2006. The consolidated mail-order agreement was one component, alongside a separate manufacturer-kickback case and a Medicare investigation.

The Contracts Behind the Mail-Order Settlement

Medco Health Solutions was a pharmacy benefit manager that operated mail-order pharmacies and call centers and employed pharmacists. It administered prescription benefits for health plans and employers, including government employers. The company sat on both sides of the service record: it managed benefits and operated the pharmacies carrying out the work.

The mail-order agreement addressed alleged conduct from 1995 through 2004 under contracts involving the Federal Employee Health Benefits Program and TRICARE. The Department of Justice’s announcement described promised prescription services for federal employees, retirees and their families. The agreement reached the quantity dispensed, the timing of the work and the review performed along the way.

A benefit manager’s customer buys services as well as access to medicine. Timing commitments and penalties give an operational record a financial consequence: the date attached to an order can affect what the company owes for failing to perform. Here, the government alleged that Medco canceled valid prescriptions it could not fill on time to avoid contractual penalties.

Short Fills and the Quantity Billed

The short-fill allegation was that Medco dispensed less medicine than the prescription ordered and the company billed. A package could leave the pharmacy while the quantity inside fell short of the quantity represented to the payer. The government also alleged that Medco shipped medicines patients had not ordered.

The useful comparison follows the same prescription through the order, the fill, the shipment and the bill. The prescribed quantity states what was ordered. Dispensing and shipment records concern what the pharmacy supplied. The submitted claim and final remittance concern what it sought and received in payment.

We see the unfairness in paying for a full prescription while allegedly supplying fewer pills. The patient depends on the medicine, and the government health care program pays for the promised quantity.

This is a different quantity problem from insulin days-of-supply billing, where the actual supply and the next refill date have to be compared. Medco’s alleged short fills put the amount supplied against the amount prescribed and billed. We help a pharmacy employee show exactly what the system or instruction changed.

Cancellations That Changed the Receipt Date

The government’s receipt-date allegations concerned cancellations, destruction or reentry that manipulated when a prescription appeared to have arrived. The business could then report turnaround performance using a record that no longer reflected the original receipt date.

That is the point of the date change. Reentering an order with a later receipt date can make the recorded processing interval look shorter while doing nothing to shorten the patient’s wait. The clock on the report changes. The wait does not.

The alleged financial effect ran through daily waterfall reports, monthly invoices and penalties, and annual statements. These were ways the company represented its contract performance. A changed receipt date could therefore reach beyond the pharmacy’s work queue into what a customer was told about service and what penalties were due.

The Department of Justice also described a management allegation. A former Medco vice president who managed the Tampa mail-order pharmacy allegedly canceled valid prescriptions and instructed others to cancel them to conceal failures to fill within the contract’s required time. The settlement resolved the government’s claims against that former executive as well as its claims against the company.

For someone who worked with those orders, the connection is between the original receipt, what happened to the order and the performance report that used the replacement date. An employee handling cancellations may know why an order disappeared. A contract-performance employee may know how its date affected the report or invoice. We connect those accounts to the same prescription and the same promise to the customer.

Physician Contacts and Contracted Review

The government alleged that Medco fabricated physician-contact records and failed to perform concurrent drug utilization review for all prescriptions. The Department of Justice described that review’s purpose as identifying potential adverse drug interactions. These allegations concerned professional work the pharmacy was supposed to do, alongside filling and shipping the prescription.

A physician-contact entry represents a communication. A review entry represents work performed on the prescription. In examining this kind of healthcare claim, we compare what the record says occurred with the actual contact or professional work behind it. A pharmacist or call-center employee may understand the difference immediately because they know how that work is done.

The allegation reaches further than a missing entry. A fabricated contact gives a later reader an affirmative account of an event that allegedly never occurred. That makes the person who knows how the entry was created especially useful. We want to understand the instruction, the entry and the service the contract required.

The broader consolidated case also included allegations that Medco substituted drugs to earn undisclosed manufacturer rebates, accepted payments to favor products on its drug list and paid kickbacks to health plans to obtain mail-order business. Those allegations explain why this resolution reached beyond the number of pills in a package. The dispensing decision, the promised review and the financial incentive each had a place in the government’s account.

The Separate Medicare Part B Agreement

Medco’s Medicare Part B agreement required a separate $8 million payment to the United States. It addressed the company’s coordination-of-benefits recovery program, which allowed claims for services provided to certain commercial clients’ beneficiaries to be submitted to Medicare retroactively.

The government’s allegations in that agreement included failures to credit Medicare for returned products, to assure that products were ordered and received, and to assure that signed patient authorizations existed when a claim represented that one was on file.

What a Mail-Order Insider Can Connect

The strongest account connects the pharmacy’s work to the bill or performance statement that described it. In Medco’s case, that means quantity, receipt dates, physician contacts and contracted review. We work with the person who understands the discrepancy and connect it to the financial consequence.

The record of an uncollected prescription and an unreversed paid claim raises a neighboring question: whether payment remained after medicine was never supplied. Medco’s short-fill allegations show why an inquiry can continue even when something shipped. The question becomes how much arrived and which promised services accompanied it.

Likewise, product-code changes and rebilling concern the identity of the medicine represented to the payer. Product identity, quantity and service performance each need their own comparison. We keep the original claim, subsequent changes and payment history connected to the actual dispensing work.

An insider does not have to occupy every role in that chain. A pharmacist may know which review occurred. A call-center employee may know whether a physician was contacted. A billing or contract employee may know which version of the order reached an invoice or performance statement. Your knowledge of the work gives meaning to the business record.

What Did the Medco Whistleblowers Receive?

In the Medco resolution, the Department of Justice announced $23 million for the whistleblowers in the consolidated case as their combined share of the government’s recovery.

Pharmacists were among the people who brought the mail-order qui tam cases under the False Claims Act. The United States joined the cases, which were later consolidated.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know Why the Record Changed

If you know why a receipt date moved, a fill came up short or a physician-contact entry appeared, talk with our whistleblower experts about the mail-order practice you saw. We build the case with you around the pharmacy’s work and the government’s payment, bringing in pharmacy fraud whistleblower lawyers who understand dispensing and benefit contracts. We stay with you as that inside knowledge becomes a case the government can pursue.