Mary Anne Atkinson Cheryl Prachyl Carol Sullivan American Accounting Association Annual Meeting Atlanta, Georgia August 2014

Why exposing students to these cases is important. Healthcare fraud losses are estimated to be about 80 billion dollars per year. These losses contribute to rapidly increasing healthcare costs for all Americans. Healthcare fraud differs from the types of fraud that accounting students generally study. Reviewing healthcare fraud cases can expand students’ knowledge of how different types of healthcare fraud might be perpetrated and the extensive list of stakeholders involved when healthcare fraud is committed.

Suggested Classroom Use Review cases and discuss how the frauds might be perpetrated and/or discovered. Discuss ethical issues including determining the stakeholders, impacts of the frauds, and possible rationalizations of the perpetrators. Consider possible control mechanisms that might be used to prevent such frauds and discuss how these controls might impact patients, health care providers, and businesses involved in delivering heath care products and services. Discuss perpetrators and how they differ from those who commit financial frauds.

Appropriate Classes Accounting Information Systems – especially in considering controls and detection methods Ethics – Useful in helping students recognize the broad range of stakeholders who may be affected by fraud. Introductory Financial – Provide a good introduction to the concept of fraud and stakeholder identification.

Who Commits Health Care Fraud?

Example Provider Fraud Methods Billing for services not performed Billing duplicate times for one service performed Falsifying a diagnosis Misrepresenting procedures (billing for a covered service when a non-covered service was performed) Upcoding – billing for a more costly service than was performed Accepting kickbacks for patient referrals Waiving co-pays or deductible amounts and overbilling insurance plan

Healthcare Spending in Perspective Healthcare spending in 2011 was $2.7 billion. This represents 17.9% of Gross Domestic Product (GDP) – a significant increase from the 1970 health care spending of 7.2% of the GDP. A 2013 study reported that about 25% of all senior citizens declare bankruptcy due to medical expenses and 43% either mortgage or sell their primary residence because of financial problems. Healthcare fraud impacts the economy as well as individuals.

Where To Find Cases A good resource to identify cases of healthcare fraud is the Department of Justice web site The site can be searched by company name and will provide details of allegations against companies as well as settlements that may have been reached. The information provided there is brief enough that the readings could be used in class to foster discussion of various topics related to fraud and/or ethics.

Case Examples Glaxo Smith-Kline Purdue Frederick Company Bristol-Myers Squibb Company Amerigroup Pfizer Sanofi-Aventis WellCare Health Plans, Inc. Amgen Inc. Johnson & Johnson Wyeth Genzyme RehabCare Group, Inc. VA Hospital

Glaxo Smith-Kline In 2006, Glaxo Smith-Kline paid $14 million to settle charges of patient fraud and related violations. They were found to have attempted to block the generic versions of their antidepressant drug Paxil from reaching the market. In 2010, Glaxo Smith-Kline pled guilty to charges related to the manufacture and distribution of certain adulterated drugs and paid a $600 million civil settlement as well as another $150 million in criminal finds and forfeiture.

Purdue Frederick Company The government alleged that Purdue fraudulently misbranded OxyContin as being less addictive and less subject to abuse than other pain medications. The company pled guilty to charges of misbranding the addictive and highly abusable drug in Purdue forfeited $276.1 million to the United States (about $160 million to resolve liability for false claims made to Medicaid and other government healthcare programs) and paid a total of $634.5 million as a global resolution for their criminal and civil liabilities.

Bristol- Myers Squibb Company In 2007, Bristol-Myers Squibb (BMS) paid the United States $328 million and $187 million to state governments to resolve allegations related to illegal drug pricing and marketing activities for its generic division, Apothecon. The allegations were that (1) BMS and Apothecon set and maintained inflated prices (2) BMS paid kickbacks to doctors to induce them to purchase BMS’s drugs; (3) BMS paid kickbacks to wholesalers and retail pharmacies to induce purchases of generic products; (4) BMS promoted Abilify, for uses that were not approved by the Food and Drug Administration (FDA) (5) BMS violated the Medicaid Drug Rebate Act by reporting false “best prices” to the government which resulted in BMS underpaying quarterly rebates owed to the Medicaid program.

Amerigroup Amerigroup was contracted to provide managed health care to all eligible low income individuals in Illinois. The corporation was alleged to have avoided enrolling pregnant women and unhealthy individuals in its managed care program, thereby cutting its costs and increasing its profits. In 2008, Amerigroup Corporation agreed to pay $225 million to resolve allegations that it defrauded the Illinois Medicaid system.

Pfizer Pfizer pleaded guilty in 2009 to charges of misbranding several drugs with the intent to mislead or defraud: Bextra, Geodon, Zyvox, and Lyrica. Pfizer promoted the use of these drugs for “off-label” purposes. Pfizer also was charged with paying kickbacks to health care providers to induce them to prescribe the drugs. Pfizer agreed to pay $2.3 billion to settle the charges and Pfizer subsidiary Pharmacia & Upjohn will pay a $1.195 billion criminal fine for similar charges for the unapproved use of their drug Neurontin.

Sanofi-Aventis In 2009, Sanofi-Aventis paid $95 million to settle charges that it misrepresented drug prices in the Medicaid Drug Rebate Program.

WellCare Health Plans, Inc. WellCare Health Plans agreed to a settlement of $80 million for claims that the firm overcharged the Florida Medicaid program for behavioral health services. The fraud was perpetrated through the creation of an intermediary entity that increased service expenses to equal the amounts paid by insurers for those services In 2012, WellCare Health Plans, Inc., agreed to pay $137.5 million to resolve FCA allegations that WellCare had falsely inflated claimed expenses in order to avoid returning money to Medicaid, falsified patient records, knowingly retained overpayments, and engaged in marketing abuses by cherry-picking healthy patients.

Amgen Inc. In 2012, Amgen Inc. agreed to pay $762 million to resolve criminal and FCA liability related to the marketing and promotion of certain drugs. Amgen agreed to pay $612 million to resolve civil FCA allegations that Amgen engaged in off-label promotion for uses and doses that were not approved by the FDA, offering kickbacks to healthcare providers, and false price reporting practices.

Johnson & Johnson Paying kickbacks to physicians and pharmacies to recommend and prescribe Risperdal and Invega (antipsychotic drugs) as well as Natrecor (used to treat heart failure) were the allegations. In November 2013, Johnson & Johnson agreed to pay over $2.2 billion to resolve criminal and civil allegations of promoting three prescription drugs for off-label uses not approved by the Food and Drug Administration.

Wyeth Wyeth illegally marketed a transplant drug called Rapamune for uses that had not been approved by the Food and Drug Administration. In 2013, Pfizer, Inc., who owns Wyeth, will pay $257 million to resolve civil allegations that Wyeth engaged in illegal marketing and will pay another $234 million of the settlement to cover criminal fines and penalties.

Genzyme Corp. In 2013, Genzyme Corp. agreed to pay $22.28 million to resolve allegations that it marketed and caused false claims to be submitted to federal and state health care programs for use of a “slurry” version of its Seprafilm adhesion barrier.

Rehabcare Group, Inc. In 2014, nationwide contract therapy providers, RehabCare Group, Inc. agreed to pay $30 million to resolve the claims that they violated the False Claims Act by engaging in a kickback scheme related to the referral of nursing home business.

VA Hospital Audit reports released in 2014 indicate that schedulers falsified records to conceal wait times for veterans to receive initial primary care appointments. The push to falsify the wait times are likely related to tying bonuses and salary increases to decreased wait times.