Blue Cross Pharmacy Fraud Investigations Save Group Customers Millions

09.16.2022 | 3 min read

Amy Barczy is a former brand journalist who authored content at Blue Cross Blue Shield of Michigan. Prior to her time at Blue Cross from 2019-2024, she was a statewide news reporter for MLive.com. She has a decade of storytelling experience in local news media markets including Lansing, Grand Rapids, Holland, Ann Arbor and Port Huron.

During the past five years, Blue Cross Blue Shield of Michigan has saved group customers more than $75 million by investigating and blocking 177 pharmacies. Blue Cross’s Pharmacy Fraud, Waste and Abuse Program monitors about 65,000 network pharmacies, including more than 2,400 in Michigan. The program protects the safety of our members and the financial interests of our customers. Oversight has never been more important, said Jim Gallagher, manager of Pharmacy Fraud, Waste and Abuse at Blue Cross. “More and more, pharmaceutical companies are doing direct to consumer marketing on social media,” Gallagher said. The pandemic has accelerated fraudulent schemes, Gallagher said. In the past, members used to discuss issues or new medications with their doctor. Now, telemedicine doctors associated with questionable pharmacies are available 24/7 and are eager to sign up members with high-cost, brand-name prescriptions. “This can be costly for employers, who pick up the tab,” Gallagher said.

The importance of monitoring

Here’s how it works: using robust data analytic tools, Blue Cross can monitor dispensing patterns of pharmacies and prescribing patterns among providers in their networks to identify suspicious trends. Blue Cross can also review the clinical appropriateness of medications being dispensed. If anything is outside of the norm, Blue Cross has a team of internal investigators that can create a case. Ultimately, Blue Cross can block a pharmacy from our network – cutting off their payments and ending the fraud, waste and abuse. The results are significant: in 2021 two pharmacies were blocked, which accounted for $34 million in savings to group customers.

Integrated benefits

This oversight works best for customers who have pharmacy benefits integrated into the medical benefits package. Integrated benefits allow Blue Cross to dive into a member-level clinical analysis to determine whether medication therapy is medically necessary, or if the prescription is the result of fraud, waste or abuse. One common fraudulent scheme involves a pharmacy calling and asking a doctor to switch a patient’s prescription from a lower-cost generic to a brand-name, high-cost drug. The insurance company then gets billed under the member’s pharmacy benefit. With access to integrated benefits information, Blue Cross’ Pharmacy Fraud, Waste and Abuse Program can review the pharmacy claim against medical claims to see if the member has a clinically appropriate diagnosis and if it came from the provider that wrote the prescription. For groups that only have medical benefits with Blue Cross, clinical investigators are unable to integrate pharmacy claim information to evaluate whether prescriptions are medically justified for members. This disconnect potentially creates safety concerns for members and leaves group customers financially vulnerable to unnecessary healthcare costs.