STEALING WELLNESS: Detecting drug diversion fraud within hospitals is a collaborative process.

Author:Mark, Scott
Position:Fraud Findings

While attending a conference, Angus Munro, the CEO of a large academic medical center, heard from colleagues about their experiences with drug diversion, something he was increasingly concerned about within his hospital. Drugs represented almost 20 percent of his costs and were increasing annually. Conversations with his director of pharmacy left him unsatisfied with the rigor of controls in place for these multimillion-dollar inventory stores. While his primary concern was centered on the exceptionally expensive noncontrolled drugs, he also was aware of the growing opioid abuse problem in the community. If a newspaper story implicated the hospital in contributing to the crisis through poor internal controls, it would be devastating. He immediately contacted Mary Nicholls, the chief audit executive (CAE), to test internal controls.

After some research, Nicholls learned that pharmaceutical diversion was on the rise nationally, and the methods had become more sophisticated. Recent diversion rings involved multiple hospitals and several actors actively collaborating at numerous levels of the organization. Historically, prescription drug diversion from pharmacies almost exclusively involved controlled substances (narcotics and other commonly abused drugs), primarily schedule II narcotics and other opioids that have a high potential for abuse and dependence. These medications were sold on the street directly to addicted individuals.

Also contributing to diversion was the emergence of "pill parties" and "rave parties." These were common among middle and high school students who raided their parents' medicine cabinets or worked in areas to obtain access to random medications for party guests.

Even more troubling to Nicholls were reports of amateur chemists making illegal drugs using noncontrolled prescription drugs and over-the-counter (OTC) drugs. For example, the commonly used OTC cold medication pseudoephedrine can be used to make methamphetamine or crystal meth. Because of this, some OTC medications became available only via prescription, and some prescription drugs were made controlled. Nicholls concluded that there was sufficient risk to perform a rigorous audit of controls around medication use.

While Nicholls knew she may not detect any active diversion, she also knew that people often compromise their ethics out of necessity during times of distress, uncertainty, and economic hardship. Many healthcare insurance plans do not cover new...

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