Medicaid Drug Fraud:

Federal Leadership Needed to Reduce Program Vulnerabilities

HRD-93-118: Published: Aug 2, 1993. Publicly Released: Aug 2, 1993.

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Pursuant to a congressional request, GAO provided information on prescription drug diversion in the Medicaid Program, focusing on: (1) the extent of diversion activities; (2) the reasons diversion persists; and (3) efforts to combat diversion activities.

GAO found that: (1) prescription drug diversion is widespread and part of the overall Medicaid fraud problem because there are substantial economic incentives involved; (2) drug diversion persists because Medicaid agencies do not have systematic procedures or adequate staff to detect aberrant billing and referral patterns; (3) states have developed effective pursuit and punishment controls to combat drug diversion activities and overall Medicaid fraud; (4) preventive efforts have had limited success in deterring diversion activities; and (5) drug diversion remains widespread because of the lack of enforcement and litigation resources for diversion cases that are lengthy and often unproductive.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: HHS originally responded that the recommendation is reasonable but not feasible unless new staff resources can be identified and allocated.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, Health Care Financing Administration (HCFA), to develop an overall strategy to address prescription drug diversion as part of the larger problem of Medicaid fraud. This would highlight the importance of lessons learned from state initiatives and their applicability to health care in general. One key element of such a strategy might be the designation of a unit within HCFA responsible for: (1) conducting continuing evaluations of state initiatives targeting prescription drug diversion and other Medicaid fraud; and (2) providing guidance and technical assistance tailored to individual state problems.

    Agency Affected: Department of Health and Human Services


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