Beware of Phantom Pharmacies

Why am I not surprised to find out that federal health officials have failed in their efforts to police the emergence of phantom pharmacies?

These pharmacies are fly-by-night storefront operations that bilk millions of dollars in false Medicare bills and then vanish with the cash.

No permits are needed — there is no store or pharmacy as we know them. There are no medicines on the shelves, no employees, no real in-store customers, and yet these fake pharmacies produce huge bills for medication, defrauding Medicare of millions of dollars a year.

It seems the only people making money these days are the crooks.

How is this accomplished? Thieves, crooks and fraudsters use a legitimate address to establish a fake pharmacy business. Then, using stolen ID and patient insurance ID numbers (mostly from seniors), scammers write fraudulent prescriptions for expensive drugs that were never actually prescribed.

Next, they submit these fake prescriptions for reimbursement to insurers, Medicare or Medicaid. In a single claim, a fake pharmacy canmake anywhere from $2,000 to $8,000. Some "fraudster pharmacies" only exist a few days! By the time the fake reimbursements have been collected, the phantom pharmacies have long since closed and their operators have disappeared without a trace.

How could this happen? Apparently, through loopholes in the federal system of accountability. The fraudsters make use of a law that states that insurance companies have to settle bills submitted online by pharmacies within two weeks. The deadline for postal claims is 30 days. By the time authorities find out the storefront is a scam, the fake pharmacy has moved on to new targets.

Also not surprising is that these scams are growing and, although it’s not clear how much money is being stolen from the system, this fake pharmacy fraud costs taxpayers and insurers more than $60 billion a year. Some phantom pharmacy cases follow:

• Senator Charles Grassley from Iowa pointed to eight phantom pharmacies from Miami and Los Angeles that were uncovered in 2008. A fraudster from Miami raked in $245,000 in less than three months before disappearing to Europe.
• Another phantom pharmacy from Miami only existed for two days, but billed $106,000 for HIV medicines. It was only after a neighbor came forward to confirm that the pharmacy did not exist that the insurer stopped the payments.
• Two phantom pharmacies from Los Angeles each billed the same insurance company for one and a half years. One claimed $1.3 million, while the second fake pharmacy billed $5 million. The deception finally came to light in an audit.

Sadly, trained health-care professionals are participating in these schemes. In some cases, "trusted" corrupt doctors write prescriptions, while legitimate pharmacists operate the phantom business on the side.

Organized crime rings have some involvement as well.

If this newest Medicare fraud triggered by independent phantom pharmacies doesn’t highlight the need to resist ANY efforts to dismantle programs that fight fraud, waste, and abuse, please tell us what does!

It is difficult to nail these phantom pharmacies because they move quickly — most last between two and eight months before moving to a new address — and because of the quick disbursement of the claims for Medicare.

The government makes it easy for for these fraudsters to rip off the taxpayers. Medicare and Medicaid do not send out any statements of who charged what or how much, so if fraudulent activity is going on, no one is the wiser.

Although not sending out statements to clients/customers is seen as cost effective, it actually opens the door to fraud.

CNBC’s, CRIME Inc, first aired Deadly Prescriptions, June 27, 2011. It was an eye-opener to the additional havoc wreaked by illegal sales, as 20,000 people die each year from prescription drug sales and use gone awry. The program airs again this week on CNBC.

The senior population is most often targeted by these types of fraud. Be aware of any medicine activity in your family and be on the look-out for illegal prescription drug sales as well.