bad medicine

MTA Suit Contends Benefits Manager Missed Rx Fraud by Worker and Retirees

The MTA sued Express Scripts for allegedly failing to police fraudulent prescription claims by transit workers.
The MTA sued Express Scripts for allegedly failing to police fraudulent prescription claims by transit workers. Photo: Courtesy of Express Scripts

It’s not just farebeaters who are costing the MTA big bucks.

The largest pharmacy benefits manager in the U.S. is accused of costing the New York City Transit Authority tens of millions of dollars by failing to police “fraudulent, abusive or excessive” claims for compounded medication prescriptions, according to a lawsuit obtained by THE CITY.

A complaint filed in Manhattan Supreme Court charges that Express Scripts Inc. — which was No. 25 on last year’s Fortune 500 list — breached its contract with the Transit Authority, a division of the MTA, by failing to stop a surge in fraudulent claims filed by transit workers, retirees and others covered by the benefits plan.

“New York City’s massive and aged subway and bus system is facing substantial financial challenges,” the lawsuit states, charging Express Scripts “failed in its role as pharmacy benefits manager.”

Brian Henry, an Express Scripts spokesperson, told THE CITY, “We disagree with the allegations and will defend ourselves vigorously.”

In March, the MTA board voted to end its deal with Express Scripts, citing “exceedingly high cost overruns” in the contract awarded to the company in April 2016.

A new $944.6 million contract with CVS Health is set to kick in next month.

“MTA’s dire financial condition makes avoiding such cost overruns critical, so immediate action was required,” board documents say.

New York City Transit staff first noticed a spike in claims for pricey compounded medications in as claims surged from less than $500,000 a month in 2015 to $8.8 million in March 2017.

In June 2016, MTA officials noticed one of those claims was $405,326 for three months of compounded medication for erectile dysfunction, according to the lawsuit.

“The $400,000 erectile dysfunction claim proved non-fraudulent,” the suit notes. “Yet, compound medication costs continued to rise for suspicious reasons that should have provoked an aggressive response from ESI.”

Compounding the Problem

Compounded medications, which can cost tens of thousands of dollars more than standard prescription drugs, are mixed by pharmacies to create substances customized to a patient’s needs.

According to the lawsuit, NYCTA paid $20 million in 2016 for compounded medication prescribed by a single California orthopedic surgeon who, in the previous year, was snared in a workers’ compensation kickback scheme.

And in 2017, the suit says, one Utah pharmacy was responsible for $20 million of New York City Transit’s compounded medication tab.

“Policing and preventing prescription fraud, abuse and excess was not NYCTA’s duty under the contract,” according to the court filing. “It was ESI’s.”

The MTA, which says it lost $225 million last year from fare evasion, has endured previously problems with compounded medication schemes.

In February, MTA bus driver Enver Kalaba was sentenced to 20 months in federal prison after pleading guilty to a scheme to rip off the MTA’s health benefits plan through bogus billing of “medically unnecessary” compounded medications that included scar creams and pain creams.

Another MTA bus driver, Christopher Frusci, pleaded guilty last year in Newark federal court to conspiracy to commit health care fraud through a $5 million compounded medication scheme.

MTA Inspector General Barry Kluger told THE CITY that an investigation by his office is ongoing.

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