Media Release

13 October 2006

Pharmacist sentenced in claims fraud case - Ministry

A South Auckland pharmacist was today sentenced in Manukau District Court to 18 months imprisonment, with leave to apply for home detention, for making fraudulent claims.

Andrew Douglas Pellowe, owner and operator of Dawson Road Pharmacy in Flat Bush, in August pleaded guilty to 47 charges of using a document for pecuniary advantage.

The Ministry of Health's business unit HealthPAC brought the charges after a lengthy investigation found the pharmacy sent in 8390 fraudulent claims worth $219.366.66 between October 2003 and September 2005, said HealthPAC Group Manager Quentin Wilson.

Pellowe has repaid the $219,366.66 and also paid $50,000 towards the cost of the investigation.

Dawson Road Pharmacy gained substantial income from claiming subsidies from Counties Manukau District Health Board for dispensing and supplying pharmaceuticals.

Certain repeat medications were processed through the pharmacy's computer as if they had been dispensed, although they had not been.

Many repeats processed this way were either not collected by patients, or not collected within the 90 days expiry period.

In these cases, both the dispensing fees and the cost of the non-supplied medicine was fraudulently obtained from Counties Manukau DHB through claims processed by HealthPAC.

Each charge relates to a separate “claim period” during which the pharmacy submitted an electronic claim for its costs and services. The total claim amount was electronically paid into bank account of Andrew Pellowe Pharmacy Limited.

HealthPAC accepts some patients requested their repeat prescriptions after the expiry date so estimates the defendant gained about $175,000 from the offending.

"Pellowe has co-operated with us and gave a full and candid interview about how the false claims were made and the extent of the offending," said Mr Wilson.

ENDS


Background

Pharmaceutical claiming

Pharmacists in New Zealand are permitted to claim Government subsidies for dispensing certain medicines to persons who:

1. present a lawful prescription form to the pharmacist, or
2. are entitled to repeat medicines following an initial dispensing of medicine.

For these transactions the pharmacist can claim the manufacturer’s price of the medicine plus a mark-up on the manufacturer’s price. In addition, on each occasion that medicine is dispensed, the pharmacist is entitled to claim for handling, packaging and dispensing each individual medicine for each patient. This is known as a dispensing fee and is currently calculated at $5.80 per item of medicine dispensed.

When the medicine is dispensed the pharmacy prints a label that records the dispensing of the medicine. The label is printed in three parts. One part of the label is stuck to the medicine bottle/packet, one part of the label is retained by the pharmacy and the third part of the label is placed on the prescription form. At the same time that the label is created by the pharmacy’s computer system it creates an electronic record that is used to claim a reimbursement.

Claiming through HealthPAC

To receive payment for medicine they have dispensed, pharmacists submit their claims to HealthPAC, a division of the Ministry of Health, twice monthly, for the period of 1st to the 15th of each month and from the 16th to the end of each month.
Electronic claiming was introduced in July 2000. From that time pharmacists forward a computer copy of the claim information by way of a floppy disc to HealthPAC. Payment is then made to the pharmacy on the basis of the information provided. Some months later the pharmacy provides the hard copies of the prescriptions to HealthPAC but by the time they are received the claim has already been paid.

Pharmacists are not entitled to claim any fees or costs for dispensing a medication unless the medication has passed to the patient and the ‘repeat” medications must have been dispensed, and passed to the patient, within 90 days of the prescription first having been presented to the pharmacy.

Rules for dispensing medicine

Once presented at a pharmacy, a prescription has a ‘90 day’ life in terms of claiming subsidies. The New Zealand Pharmaceutical Schedule lists around 2600 prescription medicines and related products that are subsidised. The Schedule is published three times a year and updated monthly.

The Schedule is distributed free to about 11,000 medical practitioners, pharmacists, medical libraries, professional bodies and support groups, and is offered for sale on a subscription list to other users, including pharmaceutical suppliers. The Pharmaceutical Schedule also covers the procedure for dispensing medicine.

Prior to 1 October 2003, medicine was generally required to be dispensed in monthly lots. This meant a recipient received three individual one month supplies, usually on or about day 1, day 30 and day 60.

On 1 October 2003, the rules for dispensing were changed. The Pharmaceutical Schedule, governing dispensing of all medicines, was amended so that the 90 days supply of medicine had to be dispensed ‘all at once’ unless there was a good reason for not doing so.

Although this meant that pharmacists overall dispensing fees were reduced, the actual dispensing fee received by pharmacists increased from $3.07 per dispensing to $5.80, to compensate for this change.

Exceptions to the new ‘STAT’ dispensing regulation were:

1. Where certain drugs were prescribed.
2. When the prescribing doctor authorised the medication to be dispensed monthly/weekly or even daily. Normally this would only take place in situations were the doctor had concerns about the patient’s ability to properly manage their medication. These cases are known as ‘Close Control’ and the prescriber is required to annotate the prescription as “Close Control weekly” or “Close Control monthly” then initial or sign alongside each such entry.

Pharmacy procedure

When a doctor prescribes the medicine the patient takes the prescription form to a pharmacy. At this stage, a process is automatically commenced on the pharmacy computer system which:

1. records the patient name and address;
2. records the medicines prescribed;
3. allocates a unique prescription number to identify that transaction e.g. 123456;
4. provides a suffix to the unique number to indicate as follows:
   1. 123456/0 - a single dispensing only – no repeats.
   2. 123456/1 - first dispensing of an item – with some repeats remaining.
   3. 123456/2 - second dispensing of an item with possibly one repeat remaining.
   4. 123456/3 - third dispensing of an item – no repeats remaining.

In every case where medication is dispensed from a pharmacy, although the medicines may be ‘made up’ by a pharmacy technician, the full prescription must be checked and certified correct by the pharmacist before it is handed to the customer.

For more information (today only) please contact:
Marita Vandenberg
Communications Contractor
Ministry of Health
DDI: (04) 470 0689