Pharmaceutical
firm to pay for
overcharging
The state will get
By Trish Moore
$1.3 million for overcharges
in the Medicaid program
Star-BulletinLIHUE -- A company that runs two pharmacies on Kauai has agreed to pay the state nearly $1.3 million after an investigation by the attorney general's office found it had overcharged the state Medicaid program.
The MedCenter pharmacies at Kauai Medical Clinic in Lihue and Waimea were dispensing brand-name drugs instead of the less costly generic drugs, said Deputy Attorney General Dewey Kim.
An investigative audit found the company overbilled Medicaid $226,171 from 1989 to 1998.
"That's kind of a large amount for small pharmacies," Kim said.
HPI Pharmacies, based in Minneapolis, agreed to repay the overbilled amounts, plus $100,000 in investigative and audit expenses and $952,343 in penalties.
The state Department of Human Services noticed that virtually all drugs dispensed by the pharmacies were brand-name.
According to federal law, generic drugs should be dispensed under Medicaid insurance unless a physician certifies that a brand-name drug is medically necessary.
The generic version of the drug Halperiol, for example, costs $8.09 for 100 pills, compared to nearly $70 for the brand-name version. The price for both includes the standard 2 to 8 percent profit pharmacies generally earn, Kim said.
Investigators found the company uses a software program which falsely indicates that virtually all the prescriptions are certified for name-brand drugs. Typically, physicians will certify the need for name-brand drugs in only about 10 percent of cases, Kim said.
HPI Pharmacies was cooperative, and opened its books and activity records of its employees to investigators, Kim said, which led to the discovery of other fraudulent practices that may lead to criminal charges against some of the employees.
Investigators found the pharmacies also claimed a larger reimbursement for buying smaller amounts of drugs, when they had bought the drugs at a cheaper bulk rate, Kim said.
A MedCenter pharmacist in Lihue deferred comment to company headquarters. Officials there could not be reached yesterday.
As part of the settlement, the company agreed to develop a compliance plan to address the problems.
In a news release, Gov. Ben Cayetano said the attorney general has recovered more than $6 million in Medicaid overbilling and penalties in the last four years.
