Medicare and Medicaid Fraud Conducted by Criminals Posing as Pharmacies

Criminal enterprises are stealing millions from the health care system as they pose as pharmacies. federal officials say these so-called “phantom pharmacies” are billing Medicare, Medicaid and private insurance companies for fake prescriptions.

Pharmacy Scams Getting Out of Control

According to the Department of Health and Human Services (HHS), the scams are growing by the day. Shimon Richmond, a field agent with the HHS told CNN Money that the scams are “a huge issue for the department.”

While the department isn’t clear exactly how much money is being drained from the health care system as a result of the phantom pharmacy schemes, it says taxpayers and the health insurance industry as a whole are losing more than $60 billion a year.

Unfortunately, this increase in fraud is also contributing to rising health care costs, says the HHS.

How the Scam Works

According to experts, here’s how the scheme typically works:

  1. Criminals use a legitimate address to establish a fake pharmacy business.
  2. Using stolen doctor ID and patient insurance ID numbers, the scam artists will write fraudulent prescriptions for expensive drugs that were never prescribed or dispensed.
  3. They submit the fake prescriptions for reimbursements to insurance companies like Medicare or Medicaid for large returns. A fake pharmacy can rake in anywhere from $2,000 to $8,000 in a single claim.

The HHS is pursuing hundreds of phantom pharmacy cases, but is having a tough time cracking down because the pharmacies operate quickly and quietly. The entire span of their operation could run in as little as 60 days before disappearing and popping up again somewhere else under a new address.

Regulators also say that because Medicare requires pharmacies to be reimbursed quickly, fake claims are often paid out before they’re validated. They say there are just not enough law enforcement officials to stop it all.

With the scam artists being extremely clever–and often receiving the help of trained health-care professionals who want in on the money–the HHS says its fight against phantom pharmacies is likely to be an uphill battle for years.