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NYS Comptroller

THOMAS P. DiNAPOLI

Taxpayers' Guide to State and Local Audits

Department of Health
Medicaid Program: Payments for Fraudulent and Improper Claims Submitted by Davis Ethical Pharmacy


Issued: August 13, 2013
Link to full audit report 2012-S-11
Link to 90-day response

Purpose
To determine whether Davis Ethical Pharmacy (Davis Ethical) inappropriately billed Medicaid for prescription medications. The audit covered the period from January 1, 2008 through December 13, 2011.

Background
The New York State Medicaid Program provides prescription drug coverage for enrollees. Davis Ethical is an independently owned pharmacy located in Rockville Centre, New York. For the period from January 1, 2008 through December 13, 2011, Medicaid paid Davis Ethical $776,849. During this period, Davis Ethical was owned and operated by William Davis, a licensed pharmacist. Pursuant to allegations of improper billing practices, there have been several investigations of Davis Ethical by oversight authorities, including the Nassau County District Attorney (NCDA) and the New York State Department of Financial Services (DFS). In December 2011, Davis Ethical was sold. We limited our audit to claim payments made to Davis Ethical during the time it was owned by William Davis.

Key Findings

  • From January 1, 2008 through December 13, 2011, Medicaid overpaid Davis Ethical $94,460 for 169 of the 267 selected prescriptions that we tested. Nearly all of these improper payments resulted from efforts by Davis Ethical that appear to have been designed to defraud the Medicaid program.
  • The improper payments included $68,307 for 136 prescriptions for medications purportedly dispensed to Medicaid recipients who, at the time the medications were prescribed, were not patients of the purported prescribing physicians. In one instance, the prescribing physician was deceased at the time the prescription was written.
  • The improper payments also included $25,825 for 30 prescriptions that were not authorized by the purported prescribing physicians, although the recipients were patients of the physicians.
  • For the three remaining prescriptions, Davis Ethical billed Medicaid for excessive quantities.

Key Recommendations

  • Coordinate with the NCDA, DFS and other authorities as requested to assist in any further investigation and recover the $94,460 in improper payments made to Davis Ethical, as identified by this audit.
  • Formally assess the payments we did not test and determine the extent to which Davis Ethical submitted other fraudulent or improper claims. Recover improper payments, as warranted.
  • Formally assess the conduct of William Davis and determine whether he should be allowed to continue to participate in the Medicaid program or face other sanctions. Consider referring William Davis to the State Education Department for assessment of his professional conduct as a licensed pharmacist.

Other Related Audits/Reports of Interest

Department of Health: Medicaid Claims Processing Activity April 1, 2010 through September 30, 2010 (2010-S-15)
Department of Health: Rebates and Discounts on Physician-Administered Drugs (2010-S-72)
Department of Health: Inappropriate Medicaid Billings for Dental Services (2008-S-67)


State Government Accountability Contact Information:
Audit Director: Brian Mason
Phone:(518) 474-3271; Email: StateGovernmentAccountability@osc.state.ny.us
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236