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New York State Health Insurance Program
United HealthCare: Payments for Fraudulent and Improper Claims Submitted by Davis Ethical Pharmacy

Issued: August 13, 2013
Link to full audit report 2012-S-10

To determine if Davis Ethical Pharmacy inappropriately billed United HealthCare for prescription medications under the State's employee health insurance program. The audit covered the period from January 1, 2008 through December 13, 2011.

The New York State Health Insurance Program (NYSHIP) provides health insurance coverage to active and retired State, participating local government and school district employees and their dependents. The Empire Plan (Plan) is the primary health benefits plan for NYSHIP and includes prescription drug coverage. The Department of Civil Service (Department) contracts with United HealthCare (United) to administer the prescription drug benefit portion of the Plan. Based on the primary contract, the Department reimburses United for all properly adjudicated claims.

Davis Ethical Pharmacy (Davis Ethical) is an independently owned pharmacy located in Rockville Centre, New York. For the period from January 1, 2008 through December 13, 2011, the Department paid United more than $6.2 million for 52,485 claims submitted by Davis Ethical. 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, NYSHIP overpaid $137,459 for 147 (26 percent) of the 572 selected prescriptions that we tested. Nearly all of the improper payments resulted from efforts by Davis Ethical that appear to have been designed to defraud NYSHIP.
  • The improper payments included $54,055 for 57 prescriptions for medications purportedly dispensed to NYSHIP members who, at the time the medications were prescribed, were not patients of the purported prescribing physicians.
  • The improper payments also included $71,462 for 67 other prescriptions that were not authorized by the purported prescribing physicians, although the members in question were patients of the physicians. This includes four prescriptions for William Davis or a family member for which the physician of record indicated the drugs were never prescribed.

Key Recommendations

  • Coordinate with the NCDA, DFS and other authorities as requested to assist in any further investigation and to recover the $137,459 in improper payments, as identified by this audit.
  • Formally assess the payments we did not test and determine the extent to which Davis Ethical submitted other fraudulent and/or improper claims. Recover overpayments, as warranted.

Other Related Audits/Reports of Interest

New York State Health Insurance Program: Payments for Repackaged Drugs Dispensed Under the Empire Plan (2010-S-38)
New York State Health Insurance Program: Payments for Prescription Drugs Dispensed by Kings Pharmacy Under the Empire Plan

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