Statement regarding evidence of Medicaid fraud

Submitted to Michigan Attorney General, October 2009.
Submitted to Federal Bureau of Investigation, 15 September 2010.
Submitted to U.S. Senate Committee on Finance, 8 November 2010.
Submitted to USDHSS Office of Inspector General, 16 November 2010.
Posted online 11 January 2011.

In November 2005, we made the first of a series of Freedom of Information requests to the Michigan Dept. of Community Health regarding psychotropic medication prescribing data in Michigan's Medicaid system, focusing mainly on the number of Michigan children on psychotropics paid by Medicaid. During that time, we've also conducted an independent investigation of Behavioral Pharmacy Management (BPM) programs implemented in at least 24 state Medicaid systems under contract with Comprehensive NeuroScience, Inc. (CNS), funded by Eli Lilly.

Our investigation has focused primarily on Michigan's Lilly-funded BPM program, the Michigan Pharmacy Quality Improvement Project (PQIP), but we have also collected information on similar programs funded by Eli Lilly in other states, submitting formal FOIA requests to more than a dozen states besides Michigan, including Pennsylvania, Minnesota and Oregon.

During the course of our investigation, we've uncovered evidence of possible wrongdoing, some related to the aforementioned BPM programs and some related to state Medicaid mismanagement in general. We believe the weight of evidence points to the need for a serious investigation by competent authorities. Two examples of possible wrongdoing are described in detail below.

1. Evidence of Gross Cost Accounting Discrepancies and Billing Fraud.

We obtained a 29,563-page document released by the Mich. Dept. of Community Health in response to a Freedom of Information request. This MDCH document may be viewed at   (Note: this huge file takes several minutes to download.)
The above PDF file lists all psychotropic drug prescriptions for children under 18 reimbursed by Michigan Medicaid in the year 2005, listed by Label Name (drug name and dosage), Approved Amount (dollars), Provider Name (physician or hospital), and License Number. The prescriptions are not listed in any particular order and no totals or subtotals are provided.

After consulting a computer data specialist and purchasing the necessary software to crunch the numbers from the 29,953-page file into a user-friendly format, we were able to sort and examine the data by category, compiling totals and subtotals which allowed us to detect a number of irregularities and anomalies. Note: the facts below relate to psychotropic drugs only. Total dollar amounts would be much higher if other classes of prescription drugs were included in the analysis. In addition, this data relates to patients under age 18 only; dollar amounts would be several times higher if Medicaid patients of all ages were included. Finally, this data is for one year only, 2005. After initially indicating that our FOIA request for similar data from 2006 and 2007 had been granted, the Michigan Dept. of Community Health inexplicably refused to release the data to us (Exhibit 1).

The first obvious irregularity is that of the 898,562 psychotropic prescriptions for children in 2005 amounting to $72.2 million, more than 25% (265,625 prescriptions totaling $20.5 million) show no provider name and no license number. Thus, no provider is identified for over a quarter of a million prescriptions, although Medicaid paid for these drugs.

Another irregularity is that the top provider of psychotropics to Michigan Medicaid patients under age 18 in 2005, a physician who supposedly wrote 7,410 prescriptions totaling $547,523, is listed as Donald R. Paugh, MD -- but a verification of license number 4301407338 at shows that Dr. Paugh's Michigan license expired in 1992. In fact, Dr. Paugh neither resides nor practices in Michigan; he's an ear, nose and throat specialist in Wenatchee, Washington. Contacted by telephone in December 2008, Dr. Paugh confirmed serving his medical residency at University of Michigan Hospitals in Ann Arbor two decades ago, but he has not lived in Michigan for many years. Dr. Paugh asserts he has never prescribed antipsychotic drugs for any patients.

Michigan is not the only state whose top provider of psychotropic drugs used a so-called "dummy" license number for Medicaid reimbursement. We refer to the following item, copied verbatim from the Minnesota Dept. of Human Services Drug Utilization Review Board May 18, 2005 Meeting Minutes:
Dr. Reinke explained that a group will need to be excluded for intervention due to a pharmacy using a "dummy" physician number. Unfortunately, this "dummy" physician was the number one provider of 2nd generation antipsychotics. The State expects to address this problem with additional programming that will not allow paying of a pharmacy claim if the physician listed is not actively licensed in Minnesota.

{ Minnesota DUR meeting minutes may be accessed at: }

Thus, top providers of Medicaid antipsychotic prescriptions in both Michigan and Minnesota utilized false license numbers. This practice may be widespread throughout the nation's entire Medicaid system, raising many troublesome questions which merit investigation.

An additional anomaly detected in the 2005 Michigan Medicaid data is the appearance of duplicate and even triplicate billing. For example, pages 3,365 through 3,461 of the 29,953-page PDF file list prescriptions by Dr. Gerard Dynkowski (license # 4301056253) and Dr. Jan E. LeBow (license # 2901015116) which are duplicates of each other. Each physician wrote 1,443 identical prescriptions equaling $145,918.16, for a total of $291,836.32 billed to Medicaid.

As another example, pages 4,798 through 4,937 list identical prescriptions by three different providers: Henry Ford Health System, Dr. Sonya M. Lozowski (license # 4301054220), and Dr. Jennifer R. Price (license # 4301076861). Each of these providers wrote 1,383 prescriptions amounting to $122,364.87, for a total of $367,094.61 billed to Medicaid.

See Exhibits 2 & 3, showing sample pages from the 29,953-page PDF file. In addition to the cases of Dynkowski/Lebow and HenryFord/Lozowski/Price, we identified at least seven more instances of duplicate billing, altogether amounting to over one million dollars. This points to sloppy accounting practices at best and outright fraud at worst.   In either case, investigation is warranted.

2. Evidence Eli Lilly Uses Medicaid "Behavioral Pharmacy Management" to Promote Off-Label Prescribing of Eli Lilly Products.

On the Eli Lilly web site and in promotional material such as Eli Lilly's leaflet, Behavioral Pharmacy Management Program: Frequently Asked Questions (Exhibit 4), Lilly's involvement in BPM is described this way:
Lilly recognizes the short-term budget crisis that our state Medicaid customers face. In an attempt to help our customers through these difficult times and to never lose sight of the patients and the quality of care they receive, we have financially supported the program with many public sector customers.

Some experts, including Stephen W. Schondelmeyer, professor of health care economics at the University of Minnesota, have called Lilly's BPM "thinly disguised marketing." (Stephanie Saul, In Some States, Maker Oversees Use of Its Drug, New York Times, March 23, 2007.) We've uncovered numerous examples of how Eli Lilly has utilized this program as a "Trojan Horse" to gain access to and influence over state Medicaid officials, and numerous ways the program is designed to promote Lilly products, expanding Lilly's share of the Medicaid market.

Records obtained through FOIA requests to the Mich. Dept. of Community Health show that Molly A. Bodenschatz, an Eli Lilly account representative and member of Lilly's Zyprexa Brand Team, routinely sat at the table during Michigan PQIP Workgroup meetings when Medicaid prescribing data were analyzed and discussed. A March 2005 memo written by MDCH employee and PQIP Co-Project Leader Joyce Hight (Exhibit 5) outlines the reasons for allowing Bodenschatz to participate in PQIP Workgroup activities. Those reasons include:
    * Lilly is paying for it.
    * Lilly can fill in the blanks for CNS - they don't know the political environment.
    * Lilly can work with sales staff when bad vibes are received from prescribing physicians.

Lilly and CNS consistently misrepresent the true nature of BPM by distributing false and misleading promotional material to Medicaid officials and the public. A May 21, 2007 Lilly press release, Pharmacy Management Initiative in 19 States Strives for Best Possible Care for Medicaid Patients, boasted that in the first six months of Michigan's program, "A 22% reduction in claims and 21% reduction in cost were realized for the time period May 2005 through January 2006." However, data contained in CNS "Behavioral Pharmacy Reports" obtained through FOIA requests to the Mich. Dept. of Community Health (Exhibit 6) reveal that in the succeeding 12 months of Michigan's PQIP, from Jan. to Dec. 2006, some dramatic increases occurred:
    # children age 13-17 on 4 or more psychotropics rose from 59 to 163 (177% increase);
    # children age 6-12 on 3 or more psychotropics rose from 114 to 402 (250% increase);
    # children age 6-12 on 4 or more psychotropics rose from 14 to 67 (97% increase);
    # children under age 6 on 3 or more psychotropics rose from 1 to 11 (1,000% increase).

At a meeting of Oregon's Partnership for Psychiatric Medication Access Advisory Group on April 19, 2006, CNS employees reported that Oregon's BPM had achieved a dramatic 83% reduction in the number of children on 3 or more psychotropics, falling from 639 children in May 2004 to 111 children in Dec. 2005. However, data contained in CNS Behavioral Pharmacy Reports obtained through FOIA requests to the Oregon Dept. of Human Services show that between April 2004 and Dec. 2005, the number of children on 3 or more psychotropics actually rose from 206 to 219 (Exhibit 7).

In Pennsylvania (Exhibit 8), an October 27, 2005 CNS presentation to the Medical Assistance Advisory Committee included a graph reporting to show a dramatic 69% decrease in the number of children on three or more psychotropics, falling from 2,773 in Nov. 2004 to 847 in July 2005. However, actual numbers in CNS "Behavioral Pharmacy Reports" obtained through FOIA requests to the Pennsylvania Dept. of Public Welfare tell a different story. From Nov. 2004 to July 2005, the number of children on three or more psychotropics fell from 2,009 to 1,800, a decline of 10%, not 69%. Furthermore, subsequent reports reveal dramatic increases between Dec. 2005 and Aug. 2007:
    # children age 13-17 on 4 or more psychotropics rose from 56 to 82 (45% increase);
    # children age 6-12 on 3 or more psychotropics rose from 136 to 249 (90% increase);
    # children age 6-12 on 4 or more psychotropics rose from 20 to 39 (97% increase);
    # children under age 6 on 3 or more psychotropics rose from 1 to 6 (500% increase).

One of the ways BPM is supposed to work is this: prescribing patterns are analyzed, and when a medically unaccepted practice is identified (for example, a physician prescribes a certain drug at higher than recommended doses), that physician is then alerted and educated about proper prescribing practices. Educational materials may be sent through the mail, or the physician may receive a telephone call or personal visit (peer consultation).

There's abundant evidence that Eli Lilly's program is designed to promote Eli Lilly products. For example, the program's "educational monographs" downplay the adverse side effects of Lilly's Strattera while emphasizing adverse side effects of Strattera's competitors Clonidine, Guanfacine, and Bupropion. Physicians are warned that high doses may cause "increased risk of side effects" but no specific Strattera side effects are named, while adverse reactions for Clonidine, Guanfacine, and Bupropion are specifically identified:
ADHD Non-Stimulant [Strattera] - Increased risk of side effects.
Clonidine - Increased risk of side effects such as hypotension, somnolence, bradycardia, irritability and weakness at high doses.
Guanfacine - Increased risk of side effects such as mid-sleep awakening at high doses.
Bupropion - Increased risk of side effects such as nausea, vomiting, rash and possible seizures at high doses.
(See Exhibit 9 for CNS monographs of all four drugs. Strattera was the only "non-stimulant" approved for ADHD prior to 2007.)

As another example, physicians prescribing 6mg Risperdal (2mg below the FDA-approved maximum dose of 8mg) are targeted for "educational intervention" while physicians prescribing up to 30mg of Lilly's Zyprexa (50% higher than the FDA-approved maximum dose of 20mg) are not targeted for intervention. CNS BPM "high dose thresholds" are listed in the Minnesota DHS DUR March 8, 2006 Meeting Minutes, Exhibit 10. The FDA-approved maximum dose is significant because many adverse drug reactions are dose-related, i.e., the frequency and severity of adverse reactions correspond to the dosage and may do so in a disproportional (nonlinear pharmacokinetic) manner. Dose-related Zyprexa side effects include: EEG abnormalities; embryo and fetal toxicity; alanine aminotransferase and gamma glutamyltransferase with incident diabetes; somnolence; dizziness; leukopenia; peripheral oedema; postural hypotension; extrapyramidal symptoms including akathisia, dyskinesia and dystonia (see bibliography of references, Exhibit 11). The resultant harm to Medicaid patients and additional expense to the Medicaid budget are incalculable.

By funding a program that systematically condones the off-label prescribing of Zyprexa, Eli Lilly has violated Sections 201 and 301 of the Federal Food, Drug, and Cosmetic Act [21 U.S.C. 321 & 331].

The above violations are even more unconscionable, given that in at least some of the states where it funded the BPM program, Eli Lilly insisted on three conditions:
1. Zyprexa shall be placed on the Medicaid Preferred Drug List.
2. Access to Zyprexa shall not be restricted in any way.
3. Lilly shall pay for the program in lieu of paying supplemental rebates.
(See for example the Kentucky Cabinet for Health and Family Services document, Exhibit 12.)

A serious investigation is clearly warranted.

Signed and dated May 1, 2009.
Bernard L. Hansen
Traverse City, Michigan

1. MDCH response to FOIA no. 2008/719.
2. MDCH FOIA no. 2006/734, page 3,445: Dynkowski, LeBow.
3. MDCH FOIA no. 2006/734, page 4,935: Henry Ford Health, Lozowski, Price.
4. Lilly promotional leaflet, Behavioral Pharmacy Management: Frequently Asked Questions.
5. Joyce Hight memo, March 11, 2005.
6. Michigan CNS BPM Reports, 2006.
7. Oregon CNS child graph and BPM reports.
8. Pennsylvania CNS child graph and BPM reports.
9. CNS Clinical Considerations drug monographs.
10. CNS high dose threshold: Minnesota DUR, March 8, 2006.
11. Bibliography of references to dose-related Zyprexa side effects.
12. Kentucky CHFS documents, December 2006.

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