Manufacturer-Run Prior Authorization Fraud: Scripts That Misstate the Patient’s Diagnosis

Pharmaceutical prior authorization fraud occurs when a manufacturer uses false clinical information or a false prescriber identity to get a drug approved for payment. The cases below describe different ways of getting there: reimbursement staff misleading insurers about a diagnosis, a case manager directing an office to change a code, and a manufacturer sending prescriptions to pharmacies that submit false authorizations. For someone inside the operation, the important difference is between the patient’s diagnosis and the diagnosis that gets the prescription through.

Prior Authorization Is the Payment Gate

Prior authorization puts an insurer or pharmacy benefit manager between a prescription and payment for the drug. The payer asks for information about the patient before approving coverage. That makes the clinical explanation on the request commercially important to the manufacturer as well as medically important to the patient.

The approval can turn on whether the patient meets clinical criteria or has considered less costly treatments. In Medicare Part D, the plan’s pharmacy and therapeutics committee reviews and approves clinical prior authorization criteria, step therapy protocols and quantity limits. A reimbursement center trying to get a prescription covered has to deal with the questions they produce.

The Kaléo case shows the incentive clearly. Its overdose-reversal drug Evzio was the highest-priced naloxone product on the market, according to the Justice Department’s settlement announcement. Insurers frequently required prior authorization before approving coverage. Getting a doctor to prescribe the product left another commercial task unfinished: getting the insurer to pay for it.

Who Supplied the Clinical Information?

The person filling in the form may not have the doctor’s clinical information. That gap matters when the payer is relying on the form to approve treatment.

A University of Portsmouth doctoral thesis from 2020 put a prior-authorization scenario to working U.S. pharmacists. A patient needed a prescription filled, the physician could not be reached, and the hypothetical pharmacist completed and signed the authorization for the physician. Respondents exposed a practical problem behind the form: some said they lacked the patient’s chart, diagnosis codes or laboratory values.

Another respondent described initiating authorizations while leaving completion to the physician. For a manufacturer-run operation, we ask who supplied the clinical answer, who approved it and whose identity accompanied it to the insurer.

When Pharma Prior Authorization Staff Pose as Doctors’ Office Staff

The criminal indictment of Insys’s former executives charged that the company moved the payer-facing work into its own Insys Reimbursement Center, where employees posed as employees of the practitioner. The center sought prior authorization directly from insurers and pharmacy benefit managers for Subsys. In that account, the manufacturer stood behind the call while the caller presented the identity of the treating practice.

That identity mattered alongside the words spoken. A payer asking a practitioner’s office about a diagnosis expects an answer tied to that patient’s treatment. According to the indictment, the manufacturer controlled the reimbursement operation and supplied the script. On that account, the apparent source of the clinical information concealed the commercial source of the answer.

The Justice Department’s June 2019 resolution announcement included a $195 million civil False Claims Act settlement. The civil allegations concerned speaker kickbacks, medically unnecessary Subsys prescriptions and false reimbursement submissions. They connected the effort to generate prescriptions with the effort to get those prescriptions paid.

A Manufacturer Prior Authorization Script With the Wrong Diagnosis

The Insys diagnosis script described in the indictment exploited the fact that insurers were more likely to authorize Subsys payment for cancer-related pain. According to the indictment, employees were instructed to mislead insurers about the patient’s true diagnosis. The script became known inside the reimbursement center as the spiel.

Under its deferred prosecution agreement, Insys admitted that the company’s founder demanded a 100% success rate. That demand gives the script a different meaning from an isolated false answer. Insys also admitted that management approved tactics that misrepresented the patient to the payer to secure that result.

On the criminal record, the insurer’s clinical question became a sales obstacle with a rehearsed answer. A patient’s condition was supposed to determine whether the prescription met the coverage criteria. The reimbursement operation the criminal case describes worked backward from the approval it wanted.

This is also why the authorization work deserves attention alongside pharmaceutical kickbacks. Paying a prescriber to generate a prescription and misleading an insurer to pay for it address different parts of the same sale. In the Insys civil case, both appeared in the government’s allegations. A reimbursement-center employee may know the payer-facing part even without seeing the speaker payments.

Aegerion and the Diagnosis Changed Without the Doctor

Aegerion allegedly altered or falsified statements of medical necessity and prior authorizations submitted to federal health care programs for Juxtapid. The drug was approved to treat high cholesterol in patients with the rare genetic disease homozygous familial hypercholesterolemia, commonly called HoFH. Whether the patient had that diagnosis mattered to the drug’s approved use and to the company’s representations.

The whistleblowers’ complaint describes a specific change. It alleged that a Compass case manager directed an office employee to change the diagnosis code, allowing the prescription to be processed without the doctor’s knowledge:

In the complaint’s account, the prescription went through before the doctor learned of the change. For someone inside a hub or physician’s office, the comparison is concrete: the diagnosis the practitioner supplied and the diagnosis used to secure payment.

In September 2017, Aegerion agreed to a $28.8 million civil settlement covering authorization falsification and other Juxtapid allegations. The government also alleged that employees misled doctors about using the drug for high cholesterol regardless of a HoFH diagnosis, including where information pointed against that diagnosis.

The patient criteria had a safety purpose as well. As the criminal information against Aegerion describes it, Juxtapid’s FDA risk-management program sought to inform prescribers about the drug’s risks and restrict prescribing to patients with a clinical or laboratory diagnosis consistent with HoFH. The diagnosis on the paperwork sat at the intersection of access, payment and patient safety.

Kaléo and the Preferred Pharmacies That Secured Approval

Kaléo allegedly kept directing business to preferred pharmacies that submitted false and misleading Evzio prior authorizations. The manufacturer’s connection was the flow of prescriptions to those pharmacies and what it knew about their conduct.

The Justice Department alleged that Kaléo directed doctors to send Evzio prescriptions to preferred pharmacies, which submitted false claims to Medicare, TRICARE and the Federal Employees Health Benefits Program. Those pharmacies allegedly submitted misleading authorizations and dispensed the drug without collecting or attempting to collect copays from government beneficiaries. The department said Kaléo knew of, or deliberately ignored, the pharmacy misconduct and continued sending business their way.

The November 2021 settlement required Kaléo to pay $12.7 million. It also resolved allegations that sales representatives induced and rewarded prescribing with frequent food and beverage deliveries to doctors’ offices and occasional holiday gifts, including deliveries unconnected to an educational or other business event.

The alleged scheme put the cost of those sales on taxpayer-funded healthcare programs. For an insider who knows why a particular pharmacy kept getting referrals, the manufacturer-to-pharmacy relationship is as revealing as the authorization form itself.

What Evidence Is Needed to Prove Fraud?

The evidence needs to connect the patient’s clinical information, the statement sent to the payer, the manufacturer’s role and the resulting claim for payment. We work through those connections with the person who knows the operation.

The manufacturer’s responsibility can reach a claim submitted by someone else. The False Claims Act addresses knowingly causing false claims as well as submitting them. Kaléo’s settlement allegations illustrate the point: the pharmacies submitted the claims, while the manufacturer allegedly kept steering prescriptions to them despite its knowledge of the misconduct.

If your concern involves patient information, we address that with you as part of assessing the case. The useful starting point is what you know about the clinical statement, the instructions behind it and the payment it helped obtain.

How Much Money Do Pharmaceutical Whistleblowers Get for Exposing Fraud?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. In Aegerion, former employees brought the qui tam case, and the Justice Department announced that they would receive $4.7 million from the federal civil settlement proceeds. Their case reached the company’s diagnosis, authorization and copay practices.

When You Know Where the Diagnosis Came From

If you worked in a reimbursement center, patient hub or preferred pharmacy and know how the clinical story changed before it reached the insurer, speak with our whistleblower experts about the authorization process you saw. We connect your knowledge of the scripts, instructions and referrals to the payment claims and build the case with you. We bring in pharmaceutical fraud whistleblower lawyers who understand manufacturer reimbursement schemes and stay beside you throughout the case.