Purpose

To determine the extent of implementation of the three recommendations included in our initial audit report, Payments for Fraudulent and Improper Claims Submitted by Davis Ethical Pharmacy (2012-S-11).

Background

Our initial audit report, which was issued on August 13, 2013, determined that, for the period January 1, 2008 through December 13, 2011, Medicaid made improper payments totaling $94,460 to Davis Ethical Pharmacy. Based on information obtained from the prescribers (the physicians indicated on the claims), auditors determined that Davis Ethical likely fabricated nearly all of the improper claims. Davis Ethical processed many of the improper claims well outside of normal business hours and often lacked records verifying that patients actually picked-up the drugs billed to Medicaid. Moreover, as a result of our audit, we concluded that Davis Ethical routinely submitted fraudulent claims to Medicaid and received payments for those claims.

We coordinated our audit and investigative work with the Nassau County District Attorney and the New York State Department of Financial Services. On December 10, 2015, William Davis pleaded guilty to Grand Larceny in the Second Degree in Nassau County District Court. He was sentenced on February 9, 2016, and made restitution of $231,919 to the State, of which $94,460 was paid to the Medicaid for the improper payments identified in the initial audit report. We recommended that the Department of Health (Department) recover the improper payments we identified, formally assess the payments we did not test, and formally assess the conduct of William Davis.

Key Finding

• Department officials made progress addressing the problems we identified in our initial audit report. At the time of our follow-up review, William Davis made full restitution of $231,919 to the State, of which $94,460 was paid to Medicaid for the improper payments identified in the initial audit report. Of the initial report’s three audit recommendations, one was implemented and two were partially implemented.

Key Recommendation

• Officials are given 30 days after the issuance of the follow-up report to provide information on any actions that are planned to address the unresolved issues discussed in this report.

Other Related Audits/Reports of Interest

Medicaid Program: Payments for Fraudulent and Improper Claims Submitted by Davis Ethical Pharmacy (2012-S-11)
United HealthCare Insurance Program: Payments for Fraudulent and Improper Claims Submitted by Davis Ethical Pharmacy (2012-S-10)