All of us are familiar with common fraud types. Insurance fraud, credit card fraud, identity theft, and tax evasion are among the most recognized areas.  But, there are many other fraud types that have a big impact on our daily lives, yet receive little attention in the media and among fraud fighters.

Prescription drug fraud is one such area.  Don’t know much about it?  The extent of the problem will shock you.

Prescription drug abuse has reached epidemic proportions in the United States.  In 2012, over 41,500 people died from drug overdoses.  60% of these deaths are specifically because of prescription drugs, not just illicit drugs.

Let’s put those figures into perspective.  5 people die every hour in the US because of drug overdoses.  Think traffic accidents kill more people each year?  You’re wrong.  What about gun violence?  Wrong again.  Drug overdoses are now the leading cause of accidental death in the US.

Fraud fighters are a skeptical bunch.  “So," you might ask, “What in the world does this have to do with fraud?”

As it turns out, there’s a strong connection.

The federal government has put tight restrictions on the ability to get certain types of prescription drugs – especially those that have high potential for addiction or abuse.  This is good public policy.  But, those restrictions have created a black market for drugs such as oxycodone, morphine and valium.

If the history of economics has taught us anything, it's that a black market creates fertile ground for fraud.

Doctor shopping is a great example of the fraudulent behavior that is unintentionally created by restricting access to prescription drugs.  A “doctor shopper” is a patient who sees multiple physicians in a short period of time, all in an attempt to get prescriptions for a pain killer (or other controlled substance).  The patient fills the scripts, then uses them to feed a drug addiction or sells them on the street.  How is this fraud?  The patient is lying about his or her condition to get the prescriptions.  Likely, the patient is also using health insurance to pay for both the doctor’s visit and the drugs.  It’s a classic case of fraud. 

Just ask Jennifer and Bryce Charpentier.  The San Diego couple was arrested earlier this year, based in part on evidence of doctor shopping.  Between the two, they obtained 150 prescriptions for drugs like hydrocodone from 13 doctors while using at least 17 different pharmacies – all in a two year period.  The ironic part of the story is that both Jennifer and Bryce are police officers!

Some fraud schemes have become highly sophisticated.  One example is a drug diversion scheme,  in which a group of doctors, patients, and pharmacists collude to write and fill prescriptions for drugs that have significant “street value.”  This network will sell the drugs on the black market, then split the ill-gotten gains.

Some folks may dismiss prescription drug fraud as just another form of healthcare fraud.  That’s a big mistake.

The costs of prescription drug fraud go well beyond the losses by private insurers and government healthcare programs.

The best estimate?  $55.7 billion.  Each and every year.  That estimate is the total costs from lost productivity, treatment for addiction, and criminal justice efforts -- and is in addition to the losses experienced by insurers and government.

Oh… and remember those stats on the number of deaths from prescription drugs each year? Add it all up, and you’ve got one heck of a problem… mixing healthcare fraud with public health, medicine with law enforcement.

The great news in all of this is that government is quietly tackling this pressing public issue.

State governments have created Prescription Drug Monitoring Programs (PDMPs).  These programs require that pharmacies report prescriptions filled for controlled substances on a daily or weekly basis.  Any pharmacy operating in the state (including mail order pharmacies) must submit data on the prescription, including prescriber information and patient information.

States place this prescription data into a consolidated database.  Some have gone so far as to make it mandatory for doctors to consult the database before writing a prescription for a controlled substance.

The most innovative states – like New York and California – are beginning to harness the power of their PDMP databases quite effectively.  For instance, those states are designing programs that proactively identify doctors who have unusual prescribing patterns, or pharmacies that dispense suspicious volumes of controlled substances.  Importantly, they are using analytics to pinpoint such behaviors, while allowing the vast majority of “good” doctors and pharmacists to continue to care for patients without interference.

With continued investment, PDMP’s will be a potent weapon in fighting this often-overlooked area of fraud.  And, if states start to link with law enforcement data on illicit drugs like heroin, we’ll see an even bigger impact on drug abuse and fraud.

Isn’t it great to see a government program that has such a positive impact on the lives of its citizens?