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Friday, January 12, 2001

Rewards inspire whistle-
blowers in medical fraud

By Helen Altonn

The state has sent a $4 million message to health care businesses that it is aggressively pursuing those who bilk medical programs for the poor and elderly.

That's the amount of a settlement reached in a state lawsuit alleging illegal pharmacy and billing practices by Interstate Pharmacy Corp., which supplies drugs to nearly all long-term care facilities in Hawaii.

In announcing the largest medical fraud case in state history yesterday, Atty. Gen. Earl Anzai said investigations are continuing into other pharmacies and "culpable individuals" under a state false-claims law passed last year.

"It is a powerful tool," he said, because it encourages citizens to report violations of state and federal laws governing health care by sharing 15 to 25 percent of recovered payments.

Two unidentified women who formerly worked as pharmacy technicians at IPC in Honolulu will receive $750,000 -- about 20 percent -- of the $4 million settlement with the company's national owner, Bergen Brunswig.

Dewey Kim, head of the state Medicaid Fraud Unit, said the investigation is part of a broad campaign begun by Anzai against schemes targeting the elderly.

No criminal charges were issued against Bergen, a giant pharmaceutical corporation that bought IPC Pharmacies 18 months ago and assisted with the investigation, Kim said. Bergen started an internal audit that stopped some cheating and it seized pills to make sure no contaminated drugs were distributed, Kim said.

He said illegal practices had been a "very systematic process" at IPC Pharmacies for at least seven years. Among "myriad schemes," he said, the company repackaged, relabeled and resold prescription drugs to nursing homes that were returned for various reasons. It also overbilled Medicare and Medicaid programs -- doubling costs in some cases, he said.

Such practices not only cheat taxpayers out of millions of dollars and threaten public health programs, but they endanger patients with critically needed drugs that may be outdated or mispackaged, Kim said.

Deputy Atty. Gen. Michael Parrish, handling criminal matters in the case, said investigations are continuing to determine whether any patients were affected.

He said IPC pharmacy consultant Willis Barnhouse, pharmacists Steven Caplan and Lyle Kai, and office manager Carlton Eto entered no contest pleas to misdemeanor charges of deceptive business practices.

They are cooperating with the investigation, and each is obligated to donate $10,000 to a charity, Parrish said.

Other individuals and entities also are under investigation, but IPC is "off the hook criminally," Parrish said.

Attorney Thomas Grande, who represented the two unidentified whistleblowers and the state with attorney Warren Price III, said the case shows "two individuals can dramatically improve health care in Hawaii."

He praised the women for their courage in reporting the IPC abuses, which he said will benefit thousands of long-term care patients, as well as businesses and taxpayers.

"This case is about more than money," Grande said. "It's about making sure the quality of health care in Hawaii is not diminished by fraudulent practices."

The $4 million settlement includes $2.4 million to the state, $750,000 to the whistleblowers, $95,551.20 for investigative costs and $754,448.80 to the Medicaid Program for excessive dispensing fees and contaminated drugs.

Bergen will provide for a computer database to help the state detect illegal practices by Medicaid providers. It also will support elder abuse and fraud prevention training for law enforcement agencies statewide.

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