Kmart just paid out $59 million to settle a law suit brought about the government for numerous violations of the False Claims Act (FCA). The once proud retailer, now almost an anachronism in the world of retailing, is accused of overcharging Medicare, Medicaid, Tricare, and private insurers for generic drugs. Hum…looks like this is a Medical Ethics issue turned fraud.
However, as unethical as Kmart may have proven itself to be, it further opens up a much larger discussion into the entire world of pharmaceuticals, a shadowy world where abuse and fraud are undoubtedly costing all of us, collectively, billions of dollars each year. We ask about medical ethics and yet it’s so easy to see abuse at so many turns.
Medical Ethics – Deserving of their fine
Before I make it sound as though Kmart’s fraud scheme was “just an example of –,” or no big deal, it is very clear that they were masters at healthcare fraud which is way down the slipperly slope of poor medical ethics. They played an interesting game of having a 2-tiered pricing system.
For example, a customer able to pay cash “the Kmart cash price” for a medication, let’s say $5 for a month’s supply, got a very good Kmart deal. Then Kmart turned around and billed the government for many multiples of that price.
The $5 Kmart cash price translated into Medicare being billed for as much as $152 for a month’s supply. Kmart played a game of juggling the co-pays and cash prices and then sticking it to the government. It was a case of medical ethics unhinged, pure fraud and incredible profit. It was also created because the government has virtually no way to police and protect itself from prescription fraud.
When the Kmart law suit was settled, the Department of Justice rushed to congratulate itself, but it is apparent they are almost clueless as to the lack of medical ethics and what is transpiring in the market.
One specific example given was for the generic high blood pressure medication (Lisinopril/HCTZ), where customers might have a cash price of $5 for a 90-day supply, which it added onto a $10 copay for a $15 total. Kmart then turned around and billed government insurance such as Medicare $50.84. Kmart charged the government 25 times what Walmart was charging for Lisinopril/HCTZ. Considering that the two chains compete for the same demographic it surely must have seemed odd of how out of whack the charges stacked up between the two chains.
The Kmart Preferred Drug List
Kmart published what it called the “Preferred Generic Drug List.” On that list were posted cash prices for generics. I need to stop here to explain that by and large, generic drugs are very cheap. They are medications that are widely and inexpensively manufactured. It is the essence of generics. It seems that no one in the government ever compared the Kmart “Preferred Generic Drug List” to the astronomical prices being charged to the healthcare agencies.
The whistleblowers in this case were legitimate pharmacists who gained access to pricing information. The so-called cash-paying customers were paying one seemingly low price for commonly prescribed drugs such as simvastatin, pravastatin, tramadol, and sertraline, but Kmart was absolutely gouging the government for the same generics. But should Kmart be held to a medical ethics standard? YES!
We are told that this practice took place for 12 years in 46 states. If it weren’t for the whistleblowers, the government healthcare insurance agencies would still be getting gouged. It is hardly victimless. Every taxpayer in America is affected, even the same patients who are naïve enough to believe Kmart’s “Preferred Generic Drug List.”
Kmart, and undoubtedly other retailers who have yet to be caught, know the system can be played. No one is at home. This is how easy it is to violate medical ehtics and how this type of fraud will continue unless there is a review process in place. Here is the joke: the government would rather keep paying the bills than to hire people to review the bills.
I am fully cognizant of the fact that we want to reduce, rather than keep expanding the size of government. What I can’t believe is that we lack the technical abilities to at least throw up red flags when the true cost is vastly lower than the charged cost. If the government wishes to do nothing (or relatively little), there will no longer be an incentive for whistleblowers.
There are obvious solutions, from people paying for all drugs directly to throwing offenders in jail. Until that is done, the Kmart’s of the world will continue to play the system and all of us will lose.
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