State Alleges Billing Scam by Druggists


Eleven Long Beach pharmacies improperly overbilled the state Medi-Cal program by more than $2 million during the first five months of 1996--in some cases apparently billing for drugs they didn’t have and clients they can’t prove existed, state Controller Kathleen Connell said Wednesday.

“Analyses of billing records of these eleven pharmacies indicate that approximately 75% of the Medi-Cal payments selected for review were based on inflated claims,” Connell said.

In a report obtained by The Times that will be released today, she said the problem was a concern because it could go well beyond the 11 pharmacies said to be guilty of overbilling.

Using some rough arithmetic, Connell said that if only 10% of the billings paid by the state to 5,500 Medi-Cal pharmacies are improper, it could be costing taxpayers $120 million annually.


“If this problem goes well beyond Long Beach it could be really staggering,” she said in an interview.

A spokesman for the California Pharmacists Assn., which has had differences with Connell in the past, strongly questioned the controller’s suggestion that overbilling might be occurring throughout the state. “Yes, there are problems, but do these represent 10% of the billings? Absolutely not,” said association spokesman Carlo Michelotti.

In addition to asking the state Department of Health Services to look into the problem, Connell said she will request further investigation by the state attorney general’s office.

Connell also said her office will seize any future payments to the 11 pharmacies. Her office has issued letters demanding repayment of the $2 million in allegedly improper billings and has already stopped payments of $234,000 to six of the pharmacies.

The pharmacies mentioned in the report cater primarily to Long Beach’s Cambodian and Vietnamese communities. Most were shuttered and locked Wednesday. Several pharmacists who were contacted declined comment.

The trail that led to the discovery of the alleged improper billings began when auditors in Connell’s office became suspicious of a large number of problem claims filed by the pharmacies. The 14 pharmacies investigated initially were within a 2 1/2-mile radius.

Eight of the pharmacies are located along a strip of Anaheim Street, a busy east-west street with a large number of ethnic restaurants, grocery stores, acupuncture and herb shops, and other businesses.

Auditors decided to stake out six of the pharmacies. Despite light foot traffic and no delivery service, the pharmacies inexplicably put in claims for hundreds of thousands of dollars during the two days of the stakeouts, the auditors said.


One pharmacy was submitting bills for an average of 110 patients a day, for example, but when investigators staked out the pharmacy for two days, only one person visited the first day and 15 the second.

Looking into the problem further, auditors found that some of the pharmacies could not prove they stocked the drugs they claim to have sold.

Describing one “typical example,” the controller’s report said a pharmacy was paid $390,000 by Medi-Cal during the first five months of 1996. But the pharmacy could prove only that it had purchased $16,000 worth of drugs during the same period.

Connell’s auditors said that when they pressed the pharmacists to show receipts for the high volume of drugs they were selling, the druggists said they could not because they were purchased from “a person driving a white van, who required payment in cash and would not provide receipts or invoices.”


Connell said purchasing drugs in that manner, if it occurred, would be illegal. It is one of the issues she wants the attorney general to look into, she said.

Connell said that once the audits began and the pharmacists became aware the state was reviewing their business practices, the billings to the state dropped dramatically. One of the pharmacies had been billing an average of $19,848 a week, but dropped to a weekly average of $3,928 after the audit began.

Another pharmacy went from an average of $17,001 to $3,880 a week after the controller’s office began looking into its billing practices. Two of the pharmacies have closed since the audit began.