Pharmacy fraud is costing us millions. Why won’t Ontario take it more seriously?

ANALYSIS: Pharmacists cheat the system to the tune of more than $100 million each year — and the province is doing little to stop them, writes Josh Dehaas
By Josh Dehaas - Published on Jan 24, 2018
The Ministry of Health and Long-Term Care recovers just $5 million per year from its pharmacy inspections, according to a recent report. (peshcov/iStock)



​There’s a way to pump millions of dollars into Ontario’s health-care system without raising taxes. All it requires is that the province take the abuse of its public drug plans more seriously.

Karen Voin, who works in fraud prevention for the Canadian Life and Health Insurance Association, says the industry believes that between 2 and 10 per cent of all health-care dollars are lost to fraud

Even if you take the conservative estimate — 2 per cent — and apply it to Ontario’s $5.9-billion public drug plan system, it works out to $118 million lost each year. That figure will only rise, given that the province now offers free prescription drugs to people 24 and under.

Yet the Ministry of Health and Long-Term Care is recovering only about $5 million per year from its pharmacy inspections, according to a report released last month by Auditor General Bonnie Lysyk. That includes not only fake billing, but also money paid out by the ministry in error.

Most alarming is that when the province does find potential fraud, it don’t always inform police in a timely fashion — or make sure the money is paid back. And the Ontario College of Pharmacists, the self-regulator, doesn’t always take licences from those who abuse the system.

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Put it all together, and it’s clear that not enough is being done to detect and deter fraudsters.

Consider that the auditor general’s office looked at ministry records for 2015-16 and found that $951,900 worth of prescriptions had been paid out for dead people. The ministry recovered just $42,365 of that.

In fairness to the honest pharmacists, many such claims are accidental: long-term care homes fail to inform pharmacies of a resident’s death, the pharmacist charges for drugs in error, and the ministry’s computer system gives pharmacists only seven days to reverse the charge. But if you’re a crooked pharmacist, the unlikeliness that you’ll be asked to pay back errant charges is an incentive to keep billing even if you know a patient has died.

Another incentive to cheat: the ministry went a two full years without reporting any suspected drug plan fraud to the Ontario Provincial Police’s Anti-Rackets Health Fraud Investigation Unit (2013-14 to 2014-15) and reported only two cases in 2015-16. That prompted the OPP to approach them, in August 2016, to ask why files weren’t being sent in for investigation.

The ministry then forwarded 13 cases, eight of which the OPP deemed too old to investigate — including cases in which pharmacies couldn’t show that they’d purchased drugs they’d billed taxpayers for, and in which doctors said they hadn’t prescribed drugs pharmacies claimed to have dispensed. In one case, a pharmacy under watch didn’t seem to have any customers walking through the doors.


In all the above cases, the ministry considered the issues serious enough to terminate the pharmaciesbilling privileges, yet it didn’t forward the cases to police. The ministry wouldn’t explain why, telling it can’t comment on “discussions as they relate to law enforcement.” (The ministry also failed to provide an interview with Minister Eric Hoskins or with Assistant Deputy Minister Suzanne McGurn.)

Lysyk says she’s found, in her experience, that the OPP will seriously investigate suspected fraud as long as they get a referral from the ministry. And she agrees that not bothering with timely criminal investigations might encourage more to cheat.

“Timely referral sends the message the ministry is on top of things,” Lysyk says. “The more the pharmacists are aware that there is an active inspection function and there is a referral to OPP, then obviously that sends a message that problem billings would be found.”

Lysyk also says it’s disappointing that the ministry’s oversight issues still haven’t been addressed — after all, the auditor general’s office warned of insufficient inspection in 1996, 2001, and 2007. (Its 2007 report noted that court action had been “seldom taken to deter repeat offenders” — and that the ministry had missed large amounts of potential fraud.)

One way for pharmacists to cheat is to take a big prescription and fill it for only a few days at a time, so that the pharmacist can charge more dispensing fees. In 2007, the auditor general pointed to 20 dispensaries that had been filling prescriptions for an average of less than three days at a time. Only one of them had been inspected in the previous six years.

The 2007 report also stated that the auditor general’s office had noticed a dispensing agency making an unusually high number of claims per patient and tagged along with inspectors to check it out. That inspection alone revealed $270,000 in overpayments. The auditor general concluded that the “ministry must be more vigilant.”

Fast-forward to 2017, and the ministry is more vigilant in some respects. The number of inspectors has increased from three to 10, and the number of inspections has more than tripled — from 81 in 2007-08 to 286 in 2017.

Yet when the auditor general’s office used analytics to look for inappropriate billing, they found $3.9 million worth that the ministry hadn’t caught, including the aforementioned nearly $1 million for dead people’s drugs.

Lysyk has recommended such obvious changes as software that stops the ministry from paying for drugs as soon as a person has died and automatically not paying for drugs when a person doesn’t meet the province’s age or gender requirements for coverage.

If the ministry were to get those things out of the way, Lysyk says, then inspectors could spend more time focusing on pharmacies that pose a high risk for fraud.

There also seems to be an obvious case for hiring more inspectors. Even with all that they’ve been shown to be missing, the ministry’s 10 inspectors did find and recover $9.1 million last year — that’s $910,000 each.

Of course, the ministry isn’t the only body with a responsibility to protect the public. The Ontario College of Pharmacists’ discipline committee decides whether pharmacists are allowed to practise in the province.

While the college says it doesn’t investigate fraud or keep statistics on fraud, it does investigate “professional misconduct,” which includes “improper billing practices” such as submitting false or misleading claims, falsifying records, and failing to maintain appropriate billing documentation. Sixty-four cases of improper billing were referred to the OCP’s discipline committee between 2010 and 2017.

But it’s unclear whether the punishments for such infractions are enough deter would-be fraudsters: while some pharmacists permanently lose their right to practise, others don’t.

Consider one Peel Region pharmacist. The OCP “observed that he committed professional misconduct and knowingly submitted false claims and billings to the Ontario Drug Benefit Program for reimbursement,” with the “volume of inappropriate activities to the order of approximately $238,000 over a two-year period.” The OCP suspended him for 14 months and imposed further restrictions lasting three years. (The college says it could revisit such a case in the event of a criminal conviction. No criminal charges have been laid, although the OPP confirmed it is investigating.)

Ted Schendera is a detective sergeant with the OPP’s 19-member Health Fraud Investigation Unit, which investigates medical professionals from psychotherapists to GPs. He says that when one health-care professional gets away with a scam, others follow suit.

“And when we end up with some successful prosecutions,” he says, “the fraudsters go, ‘Well, they’ve caught on to us, we won’t try that one.’”

But Schendera’s team relies primarily on the ministry to make them aware of potential fraudsters. In other words, they can’t do their job unless the ministry does its.

Josh Dehaas is a freelance journalist whose work has appeared in Maclean’s and the National Post, among others.

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