By William Cole
Advertiser Courts Writer
Two whistle blowers who turned in a local pharmaceutical company for illegally recycling prescription drugs used primarily by the elderly will receive $750,000 as part of a state record-setting $4 million medical fraud settlement.
Attorney General Earl Anzai yesterday vowed to step up the fight against such fraud in announcing the award — the first of its kind made as the result of the July passage of the Hawai‘i False Claims Act. The state law allows whistle blowers to share in the recovery.
"We’re really serious" about medical fraud," Anzai said. "We believe this law is a powerful tool."
The payment is being made by pharmaceutical giant Bergen Brunswig Corp., a Fortune 100 company accused of illegal pharmacy and billing practices at its subsidiary, Interstate Pharmacy Corp.
Four individuals who either worked for or with IPC Pharmacy in Liliha have entered no-contest pleas to misdemeanor charges of deceptive business practices for their involvement in the scheme, authorities said.
Attorney Thomas Grande, who represented the two pharmaceutical technicians who alerted authorities, said it took courage for the women to come forward.
"They were tired of seeing the company break the law," he said.
'Put themselves at risk'
Grande said the women contacted state officials about a year ago about the fraud. They had been instructed to repackage drugs that were returned, he said. Grande said the activity had gone on for at least four to six years.
Grande said the two former technicians wish to remain anonymous.
"They kind of put themselves at risk by reporting this and just want to get on with their lives," he said.
They issued a statement saying, "We are proud that we did the right thing by reporting this problem to the state of Hawai‘i. This was not an easy thing to do, but we hope that this serves as an example for other people to come forward to report fraud."
The case was the first use of the state False Claims Act, which was enacted in July and pays whistle-blowers 15 to 25 percent of recoveries.
"The locally-run IPC Pharmacy operations virtually institutionalized the illegal practices long before Bergen took control of IPC in April of 1999," the attorney general’s office said. Bergen representatives could not be reached for comment yesterday.
Medicaid law prohibits returning unused medication to a pharmacy. IPC did that, popping the pills back into bulk bottles for repackaging, said Dewey Kim,of the attorney general’s Medicaid fraud division.
The pills were then resealed in blister packs even though each time the pills were packaged, the heat applied reduces their shelf life by 75 percent, Kim said.
Whether harm was caused to any patients taking out-of-date medication still is under investigation.
IPC has a half-dozen or more pharmacies, but Grande said the Liliha pharmacy was the central distribution point for nursing home medications. Officials said IPC supplies drugs to nearly all long-term care facilities in Hawai‘i.
Four no-contest pleas
Four individuals associated with IPC Pharmacy have entered no-contest pleas to misdemeanor charges of deceptive business practices, but acceptance is being deferred until the case is concluded, Deputy Attorney General Michael Parrish said. Pharmacy consultant Willis Barnhouse, pharmacists Steven Caplan and Lyle Kai, and office manager Carlton Eto, who are cooperating with authorities, also were fined $10,000 each, Parrish said.
Of the $4 million settlement, $2.4 million goes to the state, $750,000 will be split by the whistle blowers, $95,551 is for investigative costs, and $754,448 represents "excessive payments" returned to Medicaid.
In addition to paying the largest medical fraud penalty in state history, Bergen, based in Orange County, Calif., will provide for a database that will enable authorities to more easily uncover illegal practices by all Medicaid providers.
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