BLOG: Look beyond pharmacy claims to detect fraud


Advanced analytic solutions are being used to detect improper payments in pharmacy claims.


Improper pharmacy claims have long been some of the most difficult anti-fraud efforts for health payers. It begins with the fact that pharmacy fraud strategies continue to be “pay and chase.”

Public payers, private insurers and large employers do not seem to have the stomach for stopping a prescription from being filled when fraud is suspected-because of resulting life-threatening issues, as well as liability concerns. Nor does a plan want to stop the fill on a patient’s heart medication because there may be something improper in the way it is billed. 

As a result, fraud investigators most often build cases against prescribing doctors, the patients or the pharmacy only after the claims are paid. Each script might only be a $50 or $100 exposure so putting the time and effort into each investigation is difficult to justify. 

Pharmacy benefit managers are in a better position to detect pharmacy fraud since they aggregate data across many payers. However, they are not incentivized to do so.

Use of sophisticated analytics on behalf of many payers-when it is not the PBM’s money being protected-doesn’t offer lucrative payback for the PBM’s software and investigator time, unless health plans are willing to pay a premium for that service. Some PBMs may also have a conflict of interest if their partner pharmacies are being investigated.  

Advanced analytic solutions are being used to detect improper payments in pharmacy claims and can uncover some previously unseen cases, such as narcotics being paid under a plan when the drugs were, in fact, diverted for their street value. If it is obvious that the activity is occurring, then how does a payer establish the return on investment?

The key is to look beyond the pharmacy claims alone. Consider other medical care being provided, overall care management, other unnecessary hospitalizations or medical care that result when drug interactions or overdoses occur.

Consider the impact of misrepresented pharmacy claims on a person’s future medical history, for example, when a doctor may unnecessarily change his plan of treatment. Also consider better overall outcomes for accountable care organizations, patient-centered medical homes, and other shared risk environments when accuracy of pharmacy claims is ensured.

When looking at the care picture holistically, the return on investment of pharmacy fraud detection efforts should become crystal clear.  


Julie Malida is the Principal for Health Care Fraud Solutions in the Security Intelligence Practice at the SAS Institute Inc.  She is a 30 year veteran of the health insurance industry and is a Fellow of the Society of Actuaries and a Member of the American Academy of Actuaries.

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