GAO 

United States Government Accountability Office

Report to Congressional Requesters

MEDICAID

Fraud and Abuse 

Related to Controlled 

Substances Identified 

in Selected States 

September 2009 

GAO-09-957 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

September 2009

MEDICAID

Fraud and Abuse Related to Controlled Substances

Identified in Selected States

Highlights of GAO-09-957, a report to 

congressional requesters 

One significant cost to Medicaid is 

prescription drugs, which 

accounted for over $23 billion in 

fiscal year (FY) 2008, or about 7 

percent of total Medicaid outlays. 

Many of these drugs are 

susceptible to abuse and include 

pain relievers and stimulants that 

are on the Drug Enforcement 

Administration’s (DEA) Schedule 

of Controlled Substances. As part 

of the American Recovery and 

Reinvestment Act of 2009 (ARRA), 

the Medicaid program will receive 

about $87 billion in federal 

assistance based on a greater 

federal share of Medicaid spending. 

GAO was asked to determine 

(1) whether there are indications of 

fraud and abuse related to 

controlled substances paid for by 

Medicaid; (2) if so, examples of 

fraudulent, improper, and abusive 

activity; and (3) the effectiveness of 

internal controls that the federal 

government and selected states 

have in place to prevent fraud and 

abuse related to controlled 

substances. To meet these 

objectives, GAO analyzed Medicaid 

controlled substance claims for 

fraud and abuse indications for FY 

2006 and 2007 from five selected 

states. GAO also interviewed 

federal and state officials and 

performed investigations. 

What GAO Recommends

GAO makes four recommendations 

to the Centers for Medicare and 

Medicaid Services (CMS) to issue 

guidance to states to better prevent 

fraud of controlled substances in 

Medicaid. CMS generally agreed 

with GAO’s recommendations. 

GAO found tens of thousands of Medicaid beneficiaries and providers 

involved in potential fraudulent purchases of controlled substances, abusive 

purchases of controlled substances, or both through the Medicaid program in 

California, Illinois, New York, North Carolina, and Texas. About 65,000 

Medicaid beneficiaries in the five selected states acquired the same type of 

controlled substances from six or more different medical practitioners during 

fiscal years 2006 and 2007 with the majority of beneficiaries visiting from 6 to 

10 medical practitioners. Such activities, known as doctor shopping, resulted 

in about $63 million in Medicaid payments and do not include medical costs 

(e.g., office visits) related to getting the prescriptions. In some cases, 

beneficiaries may have justifiable reasons for receiving prescriptions from 

multiple medical practitioners, such as visiting specialists or several doctors 

in the same medical group. However, GAO found that other beneficiaries 

obtained these drugs to support their addictions or to sell on the street. In 

addition, GAO found that Medicaid paid over $2 million in controlled 

substance prescriptions during fiscal years 2006 and 2007 that were written or 

filled by 65 medical practitioners and pharmacies barred, excluded, or both 

from federal health care programs, including Medicaid, for such offenses as 

illegally selling controlled substances. Finally, GAO found that according to 

Social Security Administration data, pharmacies filled controlled substance 

prescriptions of over 1,800 beneficiaries who were dead at that time. 

GAO performed in-depth investigations on 25 Medicaid cases and found 

fraudulent, improper, or abusive actions related to the prescribing and 

dispensing of controlled substances. These investigations uncovered other 

issues, such as doctors overprescribing medication and writing controlled 

substance prescriptions without having required DEA authorization. 

Examples of Fraudulent, Improper, and Abusive Controlled Substance Activity in Medicaid 

Nature of 

activity State 

Type(s) of 

controlled 

substance(s) Case details

Fraudulent 

enrollment 

using identify of 

dead individual CA 

Vicodin, MS Contin, 

Dilaudid, and 

Ativan 

Individual used identity of deceased individual to 

enroll in Medicaid program and was prescribed 

thousands of pills. Medicaid paid over $200,000 for 

services rendered while individual was in the 

program. 

Doctor 

shopping IL 

Concerta, Ritalin, 

and Adderall 

Beneficiary’s mother was addicted to her son’s 

attention-deficit/hyperactivity disorder medication, 

and regularly took her son to multiple physicians to 

obtain additional prescriptions, which Medicaid paid. 

DEA 

noncompliance NY 

Oxycodone, 

Fentanyl, Vicodin, 

Ambien, and Xanax

Physician prescribed over 10,600 pills of DEA 

Schedules II, III, and IV drugs to about 100 Medicaid 

beneficiaries without DEA authorization. 

 Source: GAO analysis of CMS, public, and other records. 

States are primarily responsible for the fight against Medicaid fraud; however, 

the selected states did not have a comprehensive fraud prevention framework 

to prevent fraud and abuse of controlled substances. CMS is responsible for 

overseeing state fraud and abuse control activities but has provided limited 

guidance to the states to prevent fraud and abuse of controlled substances. 

View GAO-09-957 or key components.

For more information, contact Greg Kutz at 

(202) 512-6722 or kutzg@gao.gov. 
Page i GAO-09-957 

Contents 

Letter 1

Background 5 

Fraud, Waste, and Abuse of Controlled Substances in Medicaid 

Program in Selected States 7 

Examples of Fraud, Waste, and Abuse of Controlled Substances in 

Medicaid 11 

Improved Fraud Controls Could Better Prevent Abuse and 

Unnecessary Medicaid Program Expenditures 20 

Conclusions 27 

Recommendations for Executive Action 28 

Agency Comments and Our Evaluation 28 

Appendix I Additional Examples of Fraud, Waste, and Abuse of 

Controlled Substances in Medicaid 30 

Appendix II Comments from the Centers for Medicare & Medicaid 

Services 33 

Appendix III GAO Contact and Staff Acknowledgments 36 

Tables 

Table 1: Ten Frequently Abused Controlled Substances 8 

Table 2: Number of Beneficiaries That Received 1 of 10 Controlled 

Substances from Six or More Prescribers in Fiscal Year 

2006 and Fiscal Year 2007 9 

Table 3: Types of Fraudulent, Improper, and Abusive Activities 

Used to Obtain Controlled Substances through the 

Medicaid Program 11 

Table 4: Additional Types of Fraudulent, Improper, and Abusive 

Activities Used to Obtain Controlled Substances through 

the Medicaid Program 12 

Table 5: Fraudulent, Improper, and Abusive Controlled Substance 

Activity in Medicaid 13 

Table 6: Fraudulent, Improper, and Abusive Controlled Substance 

Activity in Medicaid 30 

 Medicaid 
Figure 

Figure 1: Fraud Prevention Model 22 

Abbreviations 

ADHD attention-deficit/hyperactivity disorder 

CMS Centers for Medicare & Medicaid Services 

CSA Controlled Substances Act of 1970 

DEA Drug Enforcement Administration 

DMF Death Master File 

DRA Deficit Reduction Act of 2005 

DUR Drug Utilization Review 

EPLS Excluded Parties List System 

FMAP Federal Medical Assistance Percentage 

GSA General Services Administration 

HHS Department of Health and Human Services 

LEIE List of Excluded Individuals/Entities 

MFCU Medicaid Fraud Control Unit 

MIC Medicaid integrity contractor 

MIP Medicaid Integrity Program 

MMIS Medicaid Management Information Systems 

OIG Office of Inspector General 

PDMP prescription drug monitoring program 

SSA Social Security Administration 

SSN Social Security number 

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Page ii GAO-09-957 Medicaid
Page 1 GAO-09-957 

 

United States Government Accountability Office

Washington, DC 20548 

 

September 9, 2009 

The Honorable Thomas Carper 

Chairman 

The Honorable John McCain 

Ranking Member 

Subcommittee on Federal Financial Management, Government 

 Information, Federal Services, and International Security 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

The Honorable Tom Coburn 

United States Senate 

Medicaid is a joint federal-state program that finances health care for 

certain categories of low-income individuals, including children, families, 

persons with disabilities, and persons who are elderly. The federal 

government matches state spending for Medicaid services according to a 

formula based on each state’s per capita income in relation to the national 

average per capita income. The amount of federal assistance states receive 

for Medicaid service expenditures is known as the Federal Medical 

Assistance Percentage (FMAP). 

As part of the American Recovery and Reinvestment Act of 2009,1

Congress recently increased the federal share of the FMAP for eligible 

states through December 2010. Generally, for fiscal year 2009 through the 

first quarter of fiscal year 2011, the increased FMAP, which is calculated 

on a quarterly basis, provides for (1) the maintenance of states’ prior year 

FMAPs; (2) a general across-the-board increase of 6.2 percentage points in 

states’ FMAPs; and (3) a further increase to the FMAPs for those states 

that have a qualifying increase in unemployment rates. The estimated total 

increase in the federal share of Medicaid spending is about $87 billion. One 

significant cost to the Medicaid program is prescription drugs. During 

fiscal year 2008, prescription drugs accounted for over $23 billion of the 

costs in the Medicaid program, or about 7 percent of total federal and state 

Medicaid outlays. 

1

 Pub. L. No. 111-5, § 5001, 123 Stat. 306, 496-497. 

 Medicaid 
 

Prescription drug abuse is a serious and growing public health problem. 

According to the Centers for Disease Control and Prevention drug 

overdoses, including those from prescription drugs, are the second leading 

cause of deaths from unintentional injuries in the United States, exceeded 

only by motor vehicle fatalities. Unlike addiction to heroin and other drugs 

that have no accepted medical use, addiction to some controlled 

substances can be financed by insurance and public programs such as 

Medicaid.2

 There are reports and allegations that criminals and drug 

abusers are able to illegitimately acquire controlled substances by filing 

fraudulent Medicaid claims, seeking treatment from medical practitioners 

for feigned injuries and illnesses, and perpetrating other fraudulent 

activities. The cost associated with controlled substance fraud and abuse 

is more than the cost of drug purchases since there are related medical 

services, such as doctor and emergency room visits, that precede the 

dispensing of these medications. Several criminal cases highlight Medicaid 

fraud and abuse related to controlled substances. 

• An Ohio physician was convicted in 2006 for filing $60 million in 

fraudulent Medicaid, Medicare, and other insurance claims. The 

physician, a pain management specialist, prescribed multiple injections 

of controlled substances for his patients. He then billed Medicaid and 

the other insurance plans for those treatments. The physician was 

found to have fostered an addiction to controlled substances in his 

patients so that he could profit from their habit and increase the 

income he received from their medical claims. Two patients who 

regularly saw him died under his care, one from a multiple-drug 

overdose in the physician’s office and one from an overdose of 

OxyContin taken on the same day that the prescription was written. 

The physician was sentenced to life in prison. 

• In 2006, a Florida physician was sentenced to life in prison following 

his conviction on multiple charges, including wire fraud, illegal 

distribution of controlled substances, and Medicaid fraud. The 

physician, a general practitioner, wrote excessive prescriptions to 

patients for controlled substances without giving them physical 

examinations or additional follow-up treatments. The physician 

directed patients to have their prescriptions filled at specific 

pharmacies and warned them against filling their prescriptions at 

pharmacies that would ask too many questions about the quantity and 

 

2

 For purposes of this report, “controlled substance abuse” refers only to abuse related to 

drugs or substances that are regulated by the Drug Enforcement Administration (DEA). 

Page 2 GAO-09-957 Medicaid
 

combination of controlled substances prescribed. In fact, the physician 

was found to have known some of his patients were addicts feeding 

their drug habits. Five of his patients died from taking drugs he 

prescribed. 

• During 2004 to 2005, a pharmacist created false telephone 

prescriptions for Vicodin, an addictive narcotic pain reliever that 

combines hydrocodone and acetaminophen, and provided thousands 

of the pills to at least two purported customers. The pharmacist also 

submitted false claims for the drugs to Medicaid and other insurance 

companies, stating that they were prescribed for legitimate patients. 

The customers were actually friends of the pharmacist who sold the 

drugs and split the profits with him. In 2009, the pharmacist was 

convicted of health care fraud, Medicaid fraud, and distribution of 

dangerous controlled substances. 

You asked us to determine whether there is fraud and abuse related to 

controlled substances in the Medicaid program. Specifically, this report 

discusses (1) continuing indications of fraud and abuse related to 

controlled substances paid for by Medicaid; (2) specific case study 

examples of fraudulent, improper, and abusive controlled substance 

activity; and (3) the effectiveness of internal controls that the federal 

government and selected states have in place to prevent and detect fraud 

and abuse related to controlled substances. 

To identify whether there are continuing indications of fraud and abuse 

related to controlled substances paid for by Medicaid, we obtained and 

analyzed Medicaid claims paid in fiscal years 2006 and 2007 from five 

states: California, Illinois, New York, North Carolina, and Texas. 

Prescription drug payments to these states constituted over 40 percent of 

all Medicaid prescription drug payments made during fiscal years 2006 and 

2007. These states were primarily selected based on the magnitude of 

Medicaid payments for prescription drugs. To identify indications of fraud 

and abuse related to controlled substances paid for by Medicaid, we 

obtained Medicaid prescription claims data for these five states from the 

Centers for Medicare & Medicaid Services (CMS). For indications of 

doctor shopping, we selected 10 types of controlled substances and the 

criteria of using at least six different medical practitioners based on our 

review of drug diversion literature and discussions with a criminal 

investigator whose recognized expertise is drug diversion. To determine 

the total number of different prescribers a beneficiary visited, we 

identified and totaled the number of different prescribers shown on each 

beneficiary’s claims data. Because the Medicaid prescription claims 

databases did not track doctors who practiced in groups, we could not 

Page 3 GAO-09-957 Medicaid
 

determine the amount of duplication caused by this factor. To identify 

other potential fraud and improper payments, we compared the 

beneficiary and prescriber shown in the Medicaid claims data to the death 

master files from the Social Security Administration (SSA) to identify 

deceased beneficiaries and prescribers. To identify claims that were 

improperly processed and paid by the Medicaid program because the 

federal government had banned these prescribers and pharmacies from 

prescribing or dispensing to Medicaid beneficiaries, we compared the 

Medicaid prescription claims to the exclusion and debarment files from 

the Department of Health and Human Services’ (HHS) Office of Inspector 

General (OIG) and the General Services Administration (GSA). 

To develop specific case study examples in selected states, we identified 

25 cases that illustrate the types of fraudulent, improper, and abusive 

controlled substance activity we found in the Medicaid program. To 

develop these cases, we interviewed pharmacy employees, prescribers, 

law enforcement officials, and beneficiaries, as appropriate. We also 

obtained and reviewed registration and enforcement action reports from 

the Drug Enforcement Administration (DEA) and HHS. 

To identify the effectiveness of internal controls that the federal 

government and selected states have in place to prevent and detect fraud 

and abuse related to controlled substances, we interviewed Medicaid 

officials from the selected state offices and CMS. In addition, we obtained 

and reviewed the appropriate policies and procedures related to 

controlled substances at the selected states. As part of this review, we 

identified the types of investigations and audits performed by the state 

Medicaid Fraud Control Units (MFCU) and the state Medicaid offices of 

inspector general. 

To determine the reliability of the data in Medicaid claims and exclusion 

and debarment files from HHS OIG and GSA, we interviewed officials 

responsible for their respective databases. In addition, we performed 

electronic testing to determine the validity of specific data elements in the 

databases that we used to perform our work.3

 Based on our discussions 

with agency officials and our own testing, we concluded that the data 

elements used for this report were sufficiently reliable for our purposes. 

 

3

 Data validation edits include (1) tests to see if numeric fields contain non-numeric data, 

(2) tests on a value to see if it falls within the range established for the data element, and 

(3) relational tests that compare values of two or more data elements for consistency or 

according to a rational or formula. 

Page 4 GAO-09-957 Medicaid
 

We conducted this forensic audit from July 2008 to September 2009 in 

accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, 

appropriate evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that the evidence 

obtained provides a reasonable basis for our findings and conclusions 

based on our audit objectives. We conducted our related investigative 

work in accordance with standards prescribed by the Council of the 

Inspectors General on Integrity and Efficiency. 

Background 

Medicaid Title XIX of the Social Security Act4

 establishes Medicaid as a joint federalstate program to finance health care for certain low-income, aged, or 

disabled individuals. Medicaid is an entitlement program, under which the 

federal government is obligated to pay its share of expenditures for 

covered services provided to eligible individuals under each state’s 

federally approved Medicaid plan. States operate their Medicaid programs 

by paying qualified health care providers for a range of covered services 

provided to eligible beneficiaries and then seeking reimbursement for the 

federal share of those payments. 

Although the federal government establishes broad federal requirements 

for the Medicaid program, states can elect to cover a range of optional 

populations and benefits. CMS, within HHS, is responsible for 

administering legislation and regulations affecting the Medicaid program, 

including disbursement of federal matching funds. CMS also provides 

guidelines, technical assistance, and periodic assessments of state 

Medicaid programs. 

Title XIX of the Social Security Act allows flexibility in the states’ Medicaid 

plans. Guidelines established by federal statutes, regulations, and policies 

allow each state some flexibility to (1) broaden its eligibility standards; 

(2) determine the type, amount, duration, and scope of services; (3) set the 

rate of payment for services; and (4) administer its own program, 

including enrollment of providers and beneficiaries, processing and 

 

4

 42 U.S.C. § 1396. 

Page 5 GAO-09-957 Medicaid
 

monitoring of medical claims, payment of claims, and maintenance of 

fraud prevention programs. 

Controlled Substances Act The Controlled Substances Act of 1970 (CSA)5

 established a classification 

structure for certain drugs and chemicals used in drug manufacturing. 

Controlled substances are classified into five schedules on the basis of 

their currently accepted medical use and potential for abuse and 

dependence. Schedule I drugs—including heroin, marijuana, and 

hallucinogens such as LSD—have a high potential for abuse, no currently 

accepted medical uses in treatment in the United States, and a lack of 

accepted safety for use under medical supervision. Schedule II drugs—

including methylphenidate (Ritalin) and opiates such as morphine and 

oxycodone—have high potential for abuse and abuse may lead to severe 

psychological or physical dependence, but have currently accepted 

medical uses. Drugs on Schedules III through V have medical uses and 

successively lower potentials for abuse and dependence. Schedule III 

drugs include anabolic steroids, codeine, hydrocodone in combination 

with aspirin or acetaminophen, and some barbiturates. Schedule IV 

contains such drugs as the anti-anxiety medications diazepam (Valium) 

and alprazolam (Xanax). Schedule V includes preparations such as cough 

syrups with codeine. All drugs but those in Schedule I are legally available 

to the public with a prescription. 

CSA mandates that DEA establish a closed system of control for 

manufacturing, distributing, and dispensing controlled substances. Any 

person who manufactures, dispenses, imports, exports, or conducts 

research with controlled substances must register with DEA (unless 

exempt), keep track of all stocks of controlled substances, and maintain 

records to account for all controlled substances received, distributed, or 

otherwise disposed of. Although all registrants, including pharmacies, are 

required to maintain records of controlled substance transactions, only 

manufacturers and distributors are required to report their Schedule I and 

II drugs and Schedule III narcotics drug transactions,6

 including sales to 

the retail level, to DEA. The data provided to DEA are available for use in 

investigations of illegal diversions. The act does not require pharmacies to 

report dispensing information at the patient level to DEA. 

 

5

 21 U.S.C. §§ 801 and 812. 

6

 Registrants are also required to report certain other drugs, such as gamma-hydroxybutyric 

products listed in Schedule III. 

Page 6 GAO-09-957 Medicaid
 

We found tens of thousands of Medicaid beneficiaries and providers 

involved in potential fraudulent, wasteful,7

 and abusive purchases of 

controlled substances through the Medicaid program in the selected states 

during fiscal years 2006 and 2007. The fraud, waste, and abuse activities 

that we examined in our analysis include the following: beneficiaries 

acquiring addictive medication from multiple medical practitioners, 

known as doctor shopping, to feed their habits, sell on the street, or both; 

medical practitioners and pharmacies barred from receiving federal funds 

nevertheless writing and filling Medicaid prescriptions; and prescriptions 

being paid for with Medicaid funds for dead beneficiaries and for 

prescriptions attributed to dead doctors by pharmacies. 

Fraud, Waste, and 

Abuse of Controlled 

Substances in 

Medicaid Program in 

Selected States 

Tens of Thousands of 

Medicaid Beneficiaries 

Visit Multiple Medical 

Practitioners to Obtain 

Controlled Substances 

Approximately 65,000 Medicaid beneficiaries in the five states investigated 

visited six or more doctors to acquire prescriptions for the same type of 

controlled substances in the selected states during fiscal years 2006 and 

2007.8

 These individuals incurred approximately $63 million in Medicaid 

costs for these drugs, which were painkillers, sedatives, and stimulants.9

In some cases, beneficiaries may have justifiable reasons for receivin

prescriptions from multiple medical practitioners, such as visiting 

specialists or several doctors in the same medical group. However, our 

analysis of Medicaid claims found that at least 400 of them visited 21 to 

112 medical practitioners and up to 46 different pharmacies for the same 

controlled substances. In these situations, Medicaid beneficiaries were 

likely seeing several medical practitioners to support and disguise their 

addiction or to obtain drugs to fraudulently sell. 

g 

 

Our analysis understates the number of instances and dollar amounts 

involved in the potential abuse related to multiple medical practitioners. 

First, the total we found does not include related costs associated with 

obtaining prescriptions, such as visits to the doctor’s office and emergency 

room. Second, the selected states did not identify the prescriber for many 

Medicaid claims submitted to CMS. Without such identification, we could 

7

 For purposes of this report, we consider wasteful purchases to be situations where a drug 

is dispensed and paid for by Medicaid, but the drug is not utilized by Medicaid beneficiaries 

(e.g., drugs dispensed to individuals in long-term care facilities who have already died). 

8

 The approximately 65,000 Medicaid beneficiaries make up less than 1 percent of the total 

number of Medicaid beneficiaries in these five states. 

9

 The $63 million makes up about 6 percent of the 10 controlled substances that we 

analyzed in these five states. 

Page 7 GAO-09-957 Medicaid
 

not always identify and thus include the number of unique doctors for 

each beneficiary who received a prescription. Third, our analysis did not 

focus on all controlled substances, but instead targeted 10 types of the 

most frequently abused controlled substances, as shown in table 1. 

Table 1: Ten Frequently Abused Controlled Substances 

Controlled substance Other name(s) DEA schedulea Description 

Amphetamine derivatives Adderall II Non-narcotic stimulant 

Benzodiazepines (e.g., Diazepam, 

Alprazolam, Lorazepam, Clonazepam, 

Temazepam, and Triazolam) 

Valium, Xanax, Klonopin, Ativan, 

Restoril, and Halcion 

IV Non-narcotic depressant 

Fentanyl Duragesic and Actiq II Narcotic painkiller 

Hydrocodone combinations Lorcet, Lortab, Norco, and Vicodin III Narcotic painkiller 

Hydromorphone Dilaudid II Narcotic painkiller 

Methadone Methadose and Dolophine II Narcotic painkiller 

Methylphenidate Ritalin, Concerta, and Methylin II Non-narcotic stimulant 

Morphine MS Contin, Roxanol, Avinza, and 

Kadian 

II Narcotic painkiller 

Non-Benzodiazepine sleep aids (e.g., 

Zolpidem, Zopiclone, and Zaleplon) 

Ambien, Sonata, and Lunesta IV Non-narcotic sedative 

Oxycodone OxyContin, Roxicodone, Percocet, 

Endocet, and Roxicet 

II Narcotic painkiller 

Source: GAO. 

a

DEA classifies controlled substances in schedules I through V. Schedule I drugs—including heroin, 

marijuana, and hallucinogens such as LSD—have a high potential for abuse and no federally 

accepted medical uses. Schedule II drugs have high potential for abuse and may lead to severe 

psychological or physical dependence, but have currently accepted medical uses. Drugs on 

Schedules III through V have medical uses and successively lower potentials for abuse and 

dependence. 

Table 2 shows how many beneficiaries received controlled substances and 

the number of medical practitioners who prescribed them the same type of 

drug. 

Page 8 GAO-09-957 Medicaid
 

Table 2: Number of Beneficiaries That Received 1 of 10 Controlled Substances from Six or More Prescribers in Fiscal Year 

2006 and Fiscal Year 2007 

Number of prescribers in selected states 

Controlled substance 6-10 11-15 16-20 21-50 51+ Total

Medicaid 

amount paid

Amphetamine derivatives 

(e.g., Adderall) 

2,877 55 2,932 $6,616,000

Benzodiazepine 

(e.g., Valium and Xanax) 

14,006 669 85 22 14,782 7,266,000

Fentanyl 

(e.g., Duragesic) 

777 41 6 1 825 7,810,000

Hydrocodone 

(e.g., Vicodin and Lortab) 

31,364 3,518 723 340 9 35,954 9,172,000

Hydromorphone 

(e.g., Dilaudid) 

590 67 14 11 682 983,000

Methadone 

(e.g., Dolophine and Methadose) 

824 76 9 2 911 546,000

Methylphenidate 

(e.g., Ritalin and Concerta) 

4,821 106 3 1 4,931 10,866,000

Morphine 

(e.g., MS Contin and AVINZA) 

810 50 8 1 869 4,119,000

Non-Benzodiazepine sleep aids 

(e.g., Ambien and Lunesta) 

2,821 49 5 2,875 5,739,000

Oxycodone 

 (e.g., OxyContin and Percocet) 

5,349 435 73 18 5,875 10,163,000

Total 64,239 5,066 926 396 9 70,636 $63,280,000

Source: GAO. 

Note: The numbers in the column totals do not necessarily represent unique beneficiaries. A single 

beneficiary could have been prescribed more than one type of controlled substance by more than one 

doctor. The number of unique beneficiaries represented in this table is 64,920. The maximum number 

of doctors from which a beneficiary received one of the 10 types of controlled substance prescriptions 

was 112. 

Controlled Substances 

Prescribed or Filled by 

Banned Providers 

We found that 65 medical practitioners and pharmacies in the selected 

states had been barred from federal health care programs, excluded from 

these programs, or both, including Medicaid, when they wrote or filled 

Medicaid prescriptions for controlled substances during fiscal years 2006 

and 2007. Nevertheless, Medicaid approved the claims at a cost of 

approximately $2.3 million. The offenses that led to their banishment from 

federal health programs included Medicaid fraud and illegal diversion of 

controlled substances. Our analysis understates the total number of 

excluded providers because the selected states either did not identify the 

prescribing medical practitioner for many Medicaid claims (i.e., the field 

Page 9 GAO-09-957 Medicaid
 

was blank) or did not provide the taxpayer identification number for the 

practitioner, which was necessary to determine if a provider was banned. 

The banned providers we identified had been placed on one or both of the 

following exclusion lists, which Medicaid officials must check before 

paying for a prescription claim: the List of Excluded Individuals/Entities 

(LEIE), managed by HHS, and the Excluded Parties List System (EPLS), 

managed by GSA. The LEIE provides information on health care providers 

that are excluded from participation in Medicare, Medicaid, and other 

federal health care programs because of criminal convictions related to 

Medicare or state health programs or other major problems related to 

health care (e.g., patient abuse or neglect). The EPLS provides information 

on individuals or entities that are debarred, suspended, or otherwise 

excluded from participating in any other federal procurement or 

nonprocurement activity. Federal agencies can place individuals or 

entities on the GSA debarment list for a variety of reasons, including fraud, 

theft, bribery, and tax evasion. 

Medicaid Paid for 

Controlled Substance 

Prescriptions Filled for 

Dead Beneficiaries or 

“Written” by Dead Doctors 

Our analysis of matching Medicaid claims in the selected states with SSA’s 

Death Master File (DMF) found that controlled substance prescription 

claims to over 1,800 beneficiaries were filled after they died. Even though 

the selected state programs assured us that beneficiaries were promptly 

removed from Medicaid following their deaths based on either SSA DMF 

matches or third-party information, these same state programs paid over 

$200,000 for controlled substances during fiscal years 2006 and 2007 for 

postdeath controlled substance prescription claims. In addition, our 

analysis also found that Medicaid paid about $500,000 in Medicaid claims 

based on controlled substance prescriptions “written” by over 1,200 

doctors after they died.10

The extent to which these claims were paid because of fraud is not known. 

For example, in the course of our work, we found that certain nursing 

homes use long-term care pharmacies to fill prescriptions for drugs. One 

long-term care pharmacy dispensed controlled substances to over 50 

beneficiaries after the dates of their deaths because the nursing homes did 

not notify the pharmacy of their deaths before delivery of the drugs. The 

 

10 Certain Medicaid claims did not capture the date of the prescription. If the prescribing 

date was unknown, we based our calculations on the 6-month period before the order was 

filled. This proxy was used as a reasonable estimate to be consistent with the 6-month 

period allowed for valid refills and partial fillings for certain controlled substances. 

Page 10 GAO-09-957 Medicaid
 

nursing homes that received the controlled substances, which included 

morphine, Demerol, and Fentanyl, were not allowed to return them 

because, according to DEA officials, CSA does not permit such action. 

Officials at two selected states said that unused controlled substances at 

nursing homes represent a waste of Medicaid funds and also pose risk of 

diversion by nursing home staff. In fact, officials from one state said that 

the certain nursing homes dispose of these controlled substances by 

flushing them “down the toilet,” which also poses environmental risks to 

our water supply. 

In addition to performing the aggregate-level analysis discussed above, we 

also performed in-depth investigations for 25 cases of fraudulent, 

improper, and abusive actions related to the prescribing and dispensing of 

controlled substances through the Medicaid program in the selected 

states. Table 3 shows a breakdown of the types of cases that we identified 

from our analysis and confirmed through our investigations. 

Table 3: Types of Fraudulent, Improper, and Abusive Activities Used to Obtain 

Controlled Substances through the Medicaid Program 

Examples of Fraud, 

Waste, and Abuse of 

Controlled 

Substances in 

Medicaid 

Type Number

Doctor shopping 8

Dead doctors “writing” or dead beneficiaries “receiving” 

prescriptions 4

Barred medical practitioners and pharmacies prescribing 

or dispensing drugs 5

Source: GAO. 

In the course of our investigation, as we pursued leads produced from our 

data mining, we also found two other types of fraudulent, improper, and 

abusive actions, as shown in table 4. 

Page 11 GAO-09-957 Medicaid
 

Table 4: Additional Types of Fraudulent, Improper, and Abusive Activities Used to 

Obtain Controlled Substances through the Medicaid Program 

Type Number

Doctors prescribing beneficiaries a schedule of controlled 

substance that the doctors are not registered to prescribe 6

Doctors overprescribing controlled substances to beneficiaries 2

Source: GAO. 

As noted in table 4, we are highlighting six examples where a doctor’s 

DEA registration did not authorize the doctor to prescribe a particular 

schedule of controlled substance. Under CSA,11 controlled substances are 

classified into five schedules based on the extent to which the drugs have 

an accepted medical use and their potential for abuse and degree of 

psychological or physical dependence. Schedule II includes what are 

considered by DEA to be the most addictive and abused drugs that legally 

can be prescribed.12 Schedule V, meanwhile, covers those that are least 

likely to cause such problems. 

Each provider must obtain a valid registration from DEA that reflects the 

schedule(s) of controlled substances the provider is authorized to store, 

dispense, administer, or prescribe. For example, if a physician wants the 

authority to prescribe Schedule II drugs, the physician must register and 

be granted authority by DEA to do so.13

As noted in table 4, we also found two cases where the physician 

prescribed controlled substances in excess of medical need. In one of 

these cases, our investigators found that the physician prescribed a 

controlled substance in a manner intended to circumvent Medicaid’s 

dosage limitations. In the other, the beneficiary sold excess controlled 

substances (in this case, painkillers). 

Table 5 summarizes 15 of the 25 cases we developed of fraudulent, 

improper, and abusive controlled substance activities in the Medicaid 

 

11 21 U.S.C. § 822. 

12 Schedule I drugs—including heroin, marijuana, and hallucinogens such as LSD—have a 

high potential for abuse and no currently accepted medical uses. 

13 Schedule II drugs include opiates—such as morphine, oxycodone, and methadone—that 

have currently accepted medical uses as well as high potential for abuse and may lead to 

severe psychological or physical dependence. 

Page 12 GAO-09-957 Medicaid
 

program. Appendix I provides details on the other 10 cases we examined. 

We have referred certain cases to DEA and the selected states for further 

criminal investigation. 

Table 5: Fraudulent, Improper, and Abusive Controlled Substance Activity in Medicaid 

Case State Nature of activity 

Type of controlled 

substance(s)a

Case details 

1 IL Overprescribing Vicodin and Duragesic • Beneficiary received 4,500 pills of Vicodin and 200 

Duragesic patches over 22 months. 

• Beneficiary was prescribed pain medication for injuries 

sustained in an automobile accident in 1999. 

• Beneficiary began receiving pain medication in excess 

of her need in 2005. 

• Beneficiary sold excess prescriptions paid by Medicaid 

for at least $400 each for a 1-month supply. User of the 

prescriptions she sold later died of an overdose. 

• Prescribing physician has been indicted for 

overprescribing painkillers and contributing to the fatal 

overdoses of at least three individuals. 

• The state placed the beneficiary on a restricted 

recipient program from January 2002 through March 

2005. The state released her from the program in 

March 2005 and subsequently restricted her again in 

March 2007, and she remains restricted today. 

Beneficiary received prescriptions linked to a person’s 

death while beneficiary was enrolled in restricted 

recipient program. 

2 CA Fraudulently enrolled 

using identity of 

deceased individual 

Vicodin, MS Contin, Dilaudid, 

and Ativan 

• Beneficiary submitted Medicaid application with Social 

Security number (SSN) of a deceased individual. 

Medicaid office provided beneficiary with Medicaid 

card, which was used by beneficiary for medical 

services and controlled substance prescriptions. 

• Beneficiary received almost 1,200 pills of Dilaudid, 900 

pills of Morphine, and 300 pills of Vicodin over 10 

months. 

• Medicaid accepted the beneficiary’s enrollment 

application although the program was aware of 

discrepancies with the submitted SSN. 

• Medicaid paid over $200,000 for services rendered 

from 2004 through 2007 before removing beneficiary 

from program for not submitting required paperwork. 

Page 13 GAO-09-957 Medicaid
 

Case State Nature of activity 

Type of controlled 

substance(s)a

Case details 

3 NY Doctor shopping Ambien • Beneficiary received almost 1000 pills of Ambien for a 

nearly 3-year supply of the drugs over a 23-month 

period. 

• Beneficiary received prescriptions of Ambien from at 

least 10 prescribers that were then filled by at least six 

pharmacies. 

• Beneficiary routinely had overlapping prescriptions 

from multiple physicians. Beneficiary requested 

additional prescriptions by telling physicians that she 

lost her pills while using public transportation. 

• Beneficiary acknowledged addiction to Ambien. 

• The state has never placed the beneficiary on a 

restricted recipient program because the state did not 

identify beneficiary as a doctor shopper. 

4 CA Prescriptions “written” 

by a dead prescriber 

Methadone, Dilaudid, Kadian, 

Demerol, and Klonopin 

• Pharmacy filled 23 Medicaid prescriptions of controlled 

substances for three beneficiaries. The claims 

indicated that the prescriptions were written by a 

deceased prescriber. 

• Pharmacy surrendered its license following disciplinary 

action by the California Board of Pharmacy. 

• Violations included filling of erroneous prescriptions, 

failure to maintain current inventory for dangerous 

drugs, and filling excessive prescriptions for a patient 

on the same day, for the same medication, from two 

different physicians. 

5 TX DEA noncompliance Ritalin, Concerta, Adderall, and 

Focalin 

• According to DEA, physician was only authorized to 

prescribe Schedule IV drugs. 

• Physician prescribed over 6,000 pills of DEA Schedule 

II drugs to over 50 Medicaid beneficiaries in violation of 

DEA regulations. 

6 NC Doctor shopping Oxycodone • Beneficiary received 1,300 pills of oxycodone over 24 

months. 

• Beneficiary received prescriptions of oxycodone from 

25 prescribers that were then filled by nine 

pharmacies. 

• Employee at one pharmacy stated that the beneficiary 

was known as an abuser of controlled substances. 

• According to police official, beneficiary partnered with 

another Medicaid beneficiary. The partner drove the 

beneficiary and other individuals to physicians to 

receive Medicaid prescriptions. The prescriptions were 

later filled at a pharmacy and sold on the street. 

• The state has never placed the beneficiary on a 

restricted recipient program because the state did not 

identify beneficiary as a doctor shopper. 

Page 14 GAO-09-957 Medicaid
 

Case State Nature of activity 

Type of controlled 

substance(s)a

Case details 

7 CA Prescribing controlled 

substances to 

Medicaid beneficiaries 

while on sanction list 

OxyContin, Vicodin, 

Phenobarbital, Tylenol with 

Codeine, Xanax, Ambien, 

Restoril, Klonopin, Valium, 

Ativan, and Halcion 

• Physician has been excluded from prescribing to 

Medicaid beneficiaries since 1999 as a result of 

incompetence, malpractice, and negligence. 

• Physician prescribed at least 142,000 pills of controlled 

substances to over 600 Medicaid beneficiaries during 

exclusion period. 

• Medicaid paid $109,228 for 3,944 claims during fiscal 

years 2006 and 2007 even though the physician was 

excluded from the Medicaid program. 

• Physician surrendered medical license in 1999 after 

violating terms and conditions of probation, and was 

later reinstated in 2002. 

• Physician currently maintains a valid medical license, 

but is still excluded from prescribing to Medicaid 

beneficiaries. 

8 NY Receiving prescriptions 

using identity of 

deceased individual 

Methadone, Klonopin, and 

Xanax 

• Beneficiary was prescribed almost 1,000 pills of 

controlled substances after her death. 

• Pharmacy employee stated that the beneficiary’s 

husband picked up her controlled substances because 

she was too sick to pick them up herself. Medicaid paid 

for all these prescriptions. After becoming aware of the 

beneficiary’s death 4 months after she died, the 

pharmacy did not fill any more prescriptions. 

• Prescriber stated that physicians will sometimes 

prescribe medication for patients with chronic pain 

without requiring an examination. 

9 IL Doctor shopping Concerta, Ritalin, and Adderall • Over the course of the 2 fiscal years, beneficiary 

received 3,200 pills of controlled substances used to 

treat attention-deficit/hyperactivity disorder (ADHD), 

equivalent to over a 6-year supply. 

• Beneficiary received prescriptions of Concerta and 

Ritalin from 25 prescribers that were then filled by 11 

pharmacies. 

• Beneficiary’s mother stated that she was addicted to 

Ritalin, a controlled substance prescribed to her son, 

and regularly took her child to multiple physicians to 

obtain additional prescriptions, which Medicaid paid. 

• Beneficiary and his mother were banned from several 

medical practices as a result of doctor shopping. 

• Beneficiary’s mother has an extensive criminal history 

involving unlawful acquisition of controlled substances 

with stolen prescription forms. 

• The state has never placed the beneficiary on a 

restricted recipient program because the state did not 

identify beneficiary as a doctor shopper. 

Page 15 GAO-09-957 Medicaid
 

Case State Nature of activity 

Type of controlled 

substance(s)a

Case details 

10 TX Doctor shopping Vicodin • Over the course of the 2 fiscal years, beneficiary 

received 4,700 pills of Vicodin. 

• Beneficiary received prescriptions of Vicodin from over 

70 prescribers that were then filled by at least 40 

pharmacies. 

• Beneficiary routinely received prescriptions at multiple 

hospital emergency rooms. 

• Beneficiary is currently on parole following a felony 

controlled substance conviction in the 1990s. 

• Medicaid paid over $60,000 over the 2 years for 

medical services rendered, including prescription 

drugs. 

• The state has never placed the beneficiary on a 

restricted recipient program because the state did not 

identify beneficiary as a doctor shopper. 

11 TX Prescriptions “written” 

by a dead prescriber 

Vicodin and Ativan • Three pharmacies filled Medicaid prescriptions of 

controlled substances for three beneficiaries. The 

claims indicated that the prescriptions were written by 

the same deceased prescriber. 

• Most of the actual prescriptions were written and 

signed by a physician assistant who previously worked 

for the deceased prescriber. 

• The physician assistant is not a DEA registrant and 

thus does not have the authority to write prescriptions 

for controlled substances. 

• Another physician who works with the physician 

assistant is being investigated, as of June 2009, for 

prescribing the exact same regimen of medication to 

13 patients, using preprinted prescription pads for 

prescribing Vicodin and Soma, charging each patient 

the same amount, and reporting seeing 300 to 400 

patients per week. 

Page 16 GAO-09-957 Medicaid
 

Case State Nature of activity 

Type of controlled 

substance(s)a

Case details 

12 NY Doctor shopping Ambien • Beneficiary used two different Medicaid IDs to doctor 

shop Ambien at two pharmacies and three prescribers. 

• Beneficiary admitted to using different doctors and 

pharmacies in an effort to elude detection and 

acknowledged his wrongdoing. 

• New York Medicaid program did not detect error for 

several years although the same name and SSN were 

associated with both Medicaid IDs. 

• Beneficiary received 1,200 pills of Ambien, which cost 

Medicaid $4,400. This represented a 3.4 year supply 

obtained within 2 years. 

• Medicaid paid over $440,000 for medical services 

rendered during fiscal years 2006 and 2007, including 

prescription drugs. 

• The state has never placed the beneficiary on a 

restricted recipient program because the state did not 

identify beneficiary as a doctor shopper. 

13 NY DEA noncompliance Oxycodone, Fentanyl, Vicodin, 

Tylenol with Codeine, Ambien, 

Xanax, Klonopin, Provigil, and 

Lunesta 

• According to DEA, physician was only authorized to 

prescribe Schedule V drugs. 

• Physician prescribed over 10,600 pills of DEA 

Schedules II, III, and IV drugs to 100 Medicaid 

beneficiaries in violation of DEA regulations. 

• Physician said that he thought that Schedule V was the 

highest and most restrictive DEA schedule, and by 

having that authorization, he assumed he did not need 

separate authorizations for Schedules II, III, and IV. 

14 TX Prescribing controlled 

substances to 

Medicaid beneficiaries 

while on sanction list 

Oxycodone, Dilaudid, Vicodin, 

and Ambien 

• Physician has been excluded from prescribing to 

Medicaid beneficiaries since 2005 as a result of a 

felony controlled substance conviction. 

• Physician was found guilty of a felony count of writing 

fraudulent controlled substance prescriptions. 

• Subsequent to conviction, physician prescribed 2,500 

pills of controlled substances to 10 Medicaid 

beneficiaries. Many of the prescriptions were also in 

violation of the physician’s DEA authority, which was 

restricted as a result of the physician prescribing 

medication to himself. 

• Medicaid paid for 36 claims during fiscal years 2006 

and 2007 even though the physician was excluded 

from the Medicaid program. 

Page 17 GAO-09-957 Medicaid
 

Case State Nature of activity 

Type of controlled 

substance(s)a

Case details 

15 IL Overprescribing Adderall XR • Physician prescribed one patient 64,200 mg of 

Adderall XR over a 2-year period, or a daily average of 

88 mg per day, almost three times the daily maximum 

recommended dose of 30 mg per day. 

• Physician circumvented Medicaid restrictions on the 

amount of Adderall XR that could be prescribed by 

concurrently prescribing multiple dosages. 

• Physician stated that he prescribed Adderall XR to the 

same patient in patterns of 10, 15, 25, and 30 mg “to 

get the prescriptions through Medicaid” because he 

knew Medicaid would not fill three 30 mg prescriptions. 

• Medicaid paid over $11,000 for 115 prescriptions of 

Adderall XR from 2005 through 2007. 

Source: GAO. 

a

The type of controlled substance is the prescribed brand-name drug, which may have been filled with 

a generic version of the drug. 

The following provides illustrative detailed information on four cases we 

investigated. 

• Case 2: The beneficiary used the identity of an individual who was 

killed in 1980 to receive Medicaid benefits. According to a state 

Medicaid official, he originally applied for Medicaid assistance at a 

California county in January 2004. During the application process, the 

man provided a Social Security card to a county official.14 When the 

county verified the SSN with SSA, SSA responded that the SSN was not 

valid. The county enrolled the beneficiary into Medicaid provisionally 

for 90 days under the condition that the beneficiary resolve the SSN 

discrepancy with SSA within that time frame. Although the beneficiary 

never resolved the issue, he remained in the Medicaid program until 

April 2007. From 2004 through 2007, the Medicaid program paid for 

over $200,000 in medical services. This included at least $2,870 for 

controlled substances that he received from the pharmacies.15 We 

attempted to locate the beneficiary but could not locate him. 

• Case 8: The physician prescribed controlled substances to the 

beneficiary after she died in February 2006. The physician stated that 

the beneficiary had been dying of a terminal disease and became 

 

14 In California, Medicaid applications are submitted to the county, which are then 

forwarded to the state following a review. 

15 The controlled substance amount is for fiscal years 2006 and 2007. 

Page 18 GAO-09-957 Medicaid
 

unable to come into the office to be examined. The physician stated 

that in instances where a patient is compliant and needs pain 

medication, physicians will sometimes prescribe it without requiring 

an examination. A pharmacy eventually informed the physician that 

the patient had died and the patient’s spouse had continued to pick up 

her prescriptions for Methadone, Klonopin, and Xanax after her death. 

According to the pharmacy staff, the only reason they became aware 

of the situation was when an acquaintance of the spouse noticed him 

picking up prescriptions for a wife who had died months ago. The 

acquaintance informed the pharmacy staff of the situation. They 

subsequently contacted the prescribing physician. Since this incident, 

the pharmacy informed us that it has not filled another prescription for 

the deceased beneficiary. 

• Case 9: A mother with a criminal history and Ritalin addiction used 

her child as a means to doctor shop for Ritalin and other similar 

controlled stimulants used to treat ADHD. Although the child received 

overlapping prescriptions of methylphenidate and amphetamine 

medications during a 2-year period and was banned (along with his 

mother) from at least three medical practices, the Illinois Medicaid 

Program never placed the beneficiary on a restricted recipient 

program. Such a move would have restricted the child to a single 

primary care, pharmacy, or both thus preventing him (and his mother) 

from doctor shopping. Over the course of 21 months, the Illinois 

Medicaid Program paid for 83 prescriptions of ADHD controlled 

stimulants for the beneficiary, which totaled approximately 90,000 mg 

and cost $6,600. 

• Case 11: Claims indicated that a deceased physician “wrote” 

controlled substance prescriptions for several patients in the Houston 

area. Upon further analysis, we discovered that the actual 

prescriptions were signed by a physician assistant who once worked 

under the supervision of the deceased physician. The pharmacy 

neglected to update its records and continued filling prescriptions 

under the name of the deceased prescriber. The physician assistant has 

never been a DEA registrant. The physician assistant told us that the 

supervising physicians always signed prescriptions for controlled 

substances. After informing her that we had copies of several Medicaid 

prescriptions that she had signed for Vicodin and lorazepam, the 

physician assistant ended the interview. 

Page 19 GAO-09-957 Medicaid
 

Improved Fraud 

Controls Could Better 

Prevent Abuse and 

Unnecessary 

Medicaid Program 

Expenditures 

CMS Conducts Limited 

Oversight of Controlled 

Substances in Medicaid 

Program 

Although states are primarily responsible for the fight against Medicaid 

fraud and abuse, CMS is responsible for overseeing state fraud and abuse 

control activities. CMS has provided limited guidance to the states on how 

to improve their control measures to prevent fraud and abuse of 

controlled substances in the Medicaid program. Thus, for the five state 

programs we reviewed, we found different levels of fraud prevention 

controls. For example, the Omnibus Budget Reconciliation Act of 1990 

encourages states to establish a Drug Utilization Review (DUR) Program.16

The main emphasis of the program is to promote patient safety through an 

increased review and awareness of prescribed drugs. States receive 

increased federal funding if they design and install a point-of-sale 

electronic prescription claims management system to interact with their 

Medicaid Management Information Systems (MMIS), each state’s Medicaid 

computer system. Each state was given considerable flexibility in how to 

identify prescription problems, such as therapeutic duplication and 

overprescribing by providers,17 and how to use MMIS to prevent such 

problems. The level of screening, if any, states perform varies because 

CMS does not set minimum requirements for the types of reviews or edits 

that are to be conducted on controlled substances. Thus, one state 

requires prior approval when ADHD treatments like Ritalin and Adderall 

are prescribed outside age limitations, while another state had no such 

controlled substance requirement at the time of our review. 

 

16 Pub L. No. 101-508, 104 Stat. 1388 (1990). 

17 Therapeutic duplication is the prescribing and dispensing of the same drug or two or 

more drugs from the same therapeutic class when overlapping time periods of drug 

administration are involved and when the prescribing or dispensing is not medically 

indicated. 

Page 20 GAO-09-957 Medicaid
 

Recently, under the Deficit Reduction Act of 2005 (DRA),18 CMS is 

required to initiate the Medicaid Integrity Program (MIP) to combat 

Medicaid fraud, waste, and abuse.19 DRA requires CMS to enter into

contracts with Medicaid integrity contractors (MIC) to review provider

actions, audit provider claims and identify overpayments, and cond

provider education.

uct 

ct of 

 

20 To date, CMS has awarded umbrella contracts to

several contractors to perform the functions outlined above. According to

CMS, these contractors cover 40 states, 5 territories, and the Distri

Columbia. CMS officials stated that CMS will award task orders to cover 

the rest of the country by the end of fiscal year 2009. CMS officials stated 

that MIC audits are currently under way in 19 states. CMS officials stated 

that most of the MIP reviews will focus on Medicaid providers and that the 

state Medicaid programs will handle beneficiary fraud. Because the 

Medicaid program covers a full range of health care services and the 

prescription costs associated with controlled substances is relatively 

small, the extent to which MICs focus on controlled substances is likely to 

be relatively minimal. 

Selected States Lack a 

Comprehensive Fraud 

Prevention Framework for 

Controlled Substances 

The selected states did not have a comprehensive fraud prevention 

framework to prevent fraud and abuse of controlled substances paid for 

by Medicaid. The establishment of effective fraud prevention controls by 

the selected states is critical because the very nature of a beneficiary’s 

medical need—to quickly obtain controlled substances to alleviate pain or 

treat a serious medical condition—makes the Medicaid program 

vulnerable to those attempting to obtain money or drugs they are not 

entitled to receive. Instead of these drugs being used for legitimate 

purposes, these drugs may be used to support controlled substance 

addictions and sale of the drugs on the street. As shown in figure 1, a welldesigned fraud prevention system (which can also be used to prevent 

waste and abuse) should consist of three crucial elements: (1) preventive 

controls, (2) detection and monitoring, and (3) investigations and 

prosecutions. In addition, as shown in figure 1, the organization should 

also use “lessons learned” from its detection and monitoring controls and 

18 Pub. L. No. 109-171, 120 Stat. 4 (2005). 

19 Although individual states are responsible for the integrity of their respective Medicaid 

programs, the MIP represents CMS’s first national strategy to detect and prevent Medicaid 

fraud and abuse. 

20 In addition, CMS is required to provide effective support and assistance to states in their 

efforts to combat Medicaid provider fraud and abuse. 

Page 21 GAO-09-957 Medicaid
 

investigations and prosecutions to design more effective preventive 

controls. 

Figure 1: Fraud Prevention Model 

Preventive controls: Fraud prevention is the most efficient and effective 

means to minimize fraud, waste, and abuse. Thus, controls that prevent 

fraudulent health care providers and individuals from entering the 

Medicaid program or submitting claims are the most important element in 

an effective fraud prevention program. Effective fraud prevention controls 

require that where appropriate, organizations enter into data-sharing 

arrangements with organizations to perform validation. System edit 

checks (i.e., built-in electronic controls) are also crucial in identifying and 

rejecting fraudulent enrollment applications, fraudulent claims, or both 

before payments are disbursed. Some of the preventive controls and their 

limitations that we observed at the selected states include the following. 

• Federal debarment and exclusion: Federal regulation requires 

states to ensure that no payments are made for any items or services 

furnished, ordered, or prescribed by an individual or entity that has 

been debarred from federal contracts, excluded from Medicare and 

Medicaid programs, or both. Officials from all five selected states said 

that they do not screen prescribing providers or pharmacies against 

the federal debarment list, also known as the EPLS. Further, officials 

from four states said that when a pharmacy claim is received, they do 

not check to see if the prescribing provider was excluded by HHS OIG 

from participating in the Medicaid program. 

Page 22 GAO-09-957 Medicaid
 

• DEA registration: DEA, on behalf of the Attorney General of the 

United States, is the agency primarily responsible for enforcing CSA. 

Federal regulations require physicians and pharmacies to be registered 

with DEA for the controlled substance schedule(s) that they are 

authorized to prescribe or dispense. According to DEA officials, DEA 

can take administrative action against a provider who violates CSA or 

its implementing regulations, such as revoking DEA registration. Legal 

action against the provider is also a possibility. Although DEA’s 

registrant database is available for purchase by the public through the 

Department of Commerce’s National Technical Information Service, 

none of the five state Medicaid offices obtained the database at the 

time of our study to determine if physicians are authorized to prescribe 

particular controlled substances.21 Thus, the selected state Medicaid 

programs do not screen prescription claims for controlled substances 

to ensure that a health care provider is authorized to prescribe the 

particular drug(s). Further, DEA officials stated that pharmacies have 

corresponding responsibility to determine if a prescription is 

legitimate, which includes determining whether a health care provider 

is authorized to prescribe the particular schedule of controlled 

substance before filling a prescription. However, none of the pharmacy 

boards of the selected states said that this is a requirement they 

monitor. In fact, four pharmacy boards stated that the states only 

require that their pharmacists check to see if the DEA number on the 

prescription appears to be a valid DEA number, without verifying it 

with the DEA registration database. 

• Duplicate enrollment: Medicaid officials in two states said that they 

did not have pre-enrollment checks in place to provide assurance that 

duplicate applications are not approved. One state does not even 

require the beneficiary to furnish an SSN when applying for the 

Medicaid program, thus making this fraud difficult to identify. In fact, 

during the period covered by our work, this state had 4,296 Medicaid 

beneficiaries who were enrolled without SSNs. These beneficiaries 

were approved for about 8,300 controlled substances claims, totaling 

$193,500. We did not investigate these beneficiaries for fraud or abuse. 

• DUR: As mentioned earlier, states perform DURs and other controls 

during the prescription claims process to promote patient safety, 

reduce costs, and prevent fraud and abuse. The DURs include 

prospective screening and edits for potential inappropriate drug 

 

21 Officials from one state said that they now obtain copies of the DEA registration 

database. 

Page 23 GAO-09-957 Medicaid
 

therapies, such as overutilization, drug-drug interaction, or therapeutic 

duplication.22 In addition, selected states also require health care 

providers to submit prior authorization forms for certain prescriptions 

of drugs because those medications have public health concerns, are 

considered high risk for fraud and abuse, or both. Each state has 

developed its DUR differently, and some of the differences that we saw 

from the selected states include the following: 

• Officials from certain states said that they use the results of 

prospective screening (e.g., findings of overutilization, 

overlapping controlled substance prescriptions, etc.) as an 

automatic denial of the prescription. Officials from the 

other states generally use the prospective screening as 

more of an advisory tool for pharmacies, which pharmacies 

can override by entering a reason code. As such, the 

effectiveness of the tool for preventing fraud and abuse in 

these states is more limited. 

• The types of drugs that require prior authorization vary 

greatly between the selected states. In states where it is 

used, health care providers may be required to obtain prior 

authorization if a specific brand name is prescribed (e.g., 

OxyContin) or if a dosage exceeds a predetermined amount 

for a therapeutic class of controlled substances (e.g., 

hypnotics, narcotics). 

Detection and monitoring: Even with effective preventive controls, 

there is risk that fraud and abuse will occur in Medicaid regarding 

controlled substances. States must continue their efforts to monitor the 

execution of the prescription program, including periodically matching 

their beneficiary files to third-party databases to determine continued 

eligibility, monitor controlled substance prescriptions to identify abuse, 

and make necessary corrective actions. Such actions include the 

following. 

• Checking death files: After enrolling beneficiaries, Medicaid offices 

in the selected states generally did not periodically compare their 

information against death records. Specifically, two of the five selected 

states said that they did not obtain death records from SSA or the state 

vital statistics office to determine if a Medicaid beneficiary was still 

alive. Officials from two states said that Medicaid offices primarily rely 

 

22 In addition, state Medicaid offices also perform retrospective analysis to identify patterns 

of potential waste and abuse of drugs so that pharmacies and Medicaid providers are 

notified of this potential problem. 

Page 24 GAO-09-957 Medicaid
 

on obituaries, providers, family members, or others to report the status 

change of the beneficiary. 

• Increasing the use of the restricted recipient program: In the 

course of DURs or audits, the state Medicaid offices may identify 

beneficiaries who have abused, the Medicaid prescription drug 

program, defrauded the program, or both. In those cases, the selected 

states may place the beneficiaries into a restricted recipient program.23

Under this program, the state Medicaid office restricts the 

beneficiaries to one health care provider, one pharmacy, or both for 

receiving prescriptions. This program only applies to those 

beneficiaries in a fee-for-service arrangement since managed care 

organizations are responsible for determining the quality of care 

treatments for their enrollees. Thus, a significant portion of the 

Medicaid recipients for some of the selected states are not subject to 

this program. 

• Fully utilizing the prescription drug monitoring program:

Beginning in fiscal year 2002, Congress appropriated funding to the 

Department of Justice to support prescription drug monitoring 

programs (PDMP). These programs help prevent and detect the 

diversion and abuse of pharmaceutical controlled substances, 

particularly at the retail level where no other automated information 

collection system exists. States that have implemented PDMPs have 

the capability to collect and analyze data on filled and paid 

prescriptions more efficiently than those without such programs, 

where the collection of prescription information can require a timeconsuming manual review of pharmacy files. If used properly, PDMPs 

are an effective way to identify and prevent diversion of the drugs by 

health care providers, pharmacies, and patients. The PDMPs at the 

selected states have the following limitations: 

• For PDMPs to be useful, health care providers and 

pharmacies must use the data. Officials from the five 

selected states said that physician participation in the 

PDMP is not widespread and not required. In fact, one state 

did not have a Web-based PDMP; a health care provider has 

to put in a manual request to the agency to have a 

controlled substance report generated. 

 

23 One of the eight “doctor shoppers” in our report was placed in the restricted recipient 

program. The other seven doctor shoppers in our report were never placed in this program. 

Also, one of the two “overprescribers” was placed in the restricted recipient program. 

Page 25 GAO-09-957 Medicaid
 

• Program officials at the selected states said that their 

systems were primarily used to respond to requests for 

controlled substance information on specific patients from 

medical practitioners. None of the selected states 

compared all the prescribers of controlled substances to 

the DEA authorization list to identify medical practitioners 

who are illegally prescribing drugs that they are not 

authorized to prescribe.24

• Although the PDMPs generally capture the name and 

address of the patient, the controlled substance prescribed, 

the date of the prescription, and the identity of the 

prescriber, they generally do not capture the method of 

payment that the patient used. Thus, the system will not 

differentiate between prescriptions paid in cash and those 

paid using health insurance. 

• One state restricts law enforcement access to the PDMP to 

only the state bureau of investigation. As such, local police 

and sheriff’s departments cannot access the data, which 

impedes their ability to conduct prescription drug diversion 

investigations. According to state officials, the limitation 

was enacted because of privacy concerns. 

• No nationwide PDMP exists, and only 33 states had 

operational PDMPs as of June 2009. According to an official 

in one of the selected states, people would sometimes cross 

state borders to obtain prescription drugs in a state without 

a program. 

Investigations and prosecutions: Another element of a fraud 

prevention program is the aggressive investigation and prosecution of 

individuals who defraud the federal government. Prosecuting perpetrators 

serves as a preventive measure; it sends the message that the government 

will not tolerate individuals stealing money. Schemes identified through 

investigations and prosecution also can be used to improve the fraud 

prevention program. The MFCU serves as the single identifiable entity 

within a state government that investigates and prosecutes health care 

providers who defraud the Medicaid program. In the course of our 

investigation, however, we found several factors that may limit its 

effectiveness. 

 

24 Officials in one state said that its PDMP generates a report on nurse practitioners who 

write prescriptions outside their authority for further investigation. 

Page 26 GAO-09-957 Medicaid
 

• Federal regulations generally limit MFCUs from pursuing beneficiary 

fraud. According to MFCU officials at one selected state, this limitation 

impedes investigations because agents cannot use the threat of 

prosecution as leverage to persuade beneficiaries to cooperate in 

criminal probes of Medicaid providers. In addition, the MFCU officials 

in this selected state said that this limitation restricts the agency’s 

ability to investigate organized crime related to controlled substances 

when the fraud is perpetrated by the beneficiaries. 

• Federal regulations do not permit federal funding for MFCUs to engage 

in routine computer screening activities that are the usual monitoring 

function of the Medicaid agency. According to MFCU officials in one 

selected state, this issue has caused a strained working relationship 

with the state’s Medicaid OIG, on whom the MFCU relies for claims 

information. The MFCU official stated that based on fraud trends in 

other states, the state MFCU wanted the Medicaid OIG to provide 

claims information on providers who had similar trends in that state. 

The Medicaid OIG cited this prohibition on routine computer screening 

activities when refusing to provide these data. In addition, this MFCU 

official also stated that the state Medicaid office and its OIG did not 

promptly incorporate improvements that the MFCU suggested 

regarding preventing the abuse of controlled substances. 

DEA Monitoring of 

Pharmacy and Physician 

Prescription Practices 

Related to Controlled 

Substances 

DEA officials stated that although DEA monitors purchases of certain 

Schedule II and III controlled substances by pharmacies, it does not 

routinely receive information regarding written or dispensed controlled 

substance prescriptions. In states with PDMPs, a state agency collects and 

maintains data relating to dispensed controlled substance prescriptions. In 

the course of an investigation regarding the diversion or abuse of 

controlled substances, DEA may request information from a PDMP. In 

those states without PDMPs, DEA may obtain controlled substance 

prescription information from an individual pharmacy’s records during the 

course of an inspection or investigation. 

Fraud and abuse related to controlled substances paid for by Medicaid 

exist in the five selected states. Given that states are responsible for 

administering Medicaid and investigating and prosecuting any fraudulent 

activities, each state must set its own course to ensure the integrity of its 

Medicaid program, including its monitoring of the dispensing and use of 

controlled substances. CMS is also responsible for actively partnering with 

and providing guidance to the states to ensure that they succeed in 

minimizing fraud and abuse in the Medicaid program. 

Conclusions 

Page 27 GAO-09-957 Medicaid
 

To establish an effective fraud prevention system for the Medicaid 

program, we recommend that the Administrator of CMS evaluate our 

findings and consider issuing guidance to the state programs to provide 

assurance that 

• claims processing systems prevent the processing of claims from 

providers and pharmacies debarred from federal contracts (i.e., on the 

EPLS), excluded from the Medicare and Medicaid programs (i.e., on 

the LEIE), or both; 

• DUR and restricted recipient program requirements adequately 

identify and prevent doctor shopping and other abuses of controlled 

substances; 

• effective claims processing system are in place to periodically identify 

both duplicate enrollments and deaths of Medicaid beneficiaries and to 

prevent the approval of claims when appropriate; and 

• effective claims processing systems are in place to periodically identify 

deaths of Medicaid providers and prevent the approval of claims when 

appropriate. 

We provided a draft of this report to DEA and CMS for comment. DEA 

provided us technical comments by e-mail. CMS comments are reprinted 

in appendix II. CMS stated that it generally agrees with the four 

recommendations. CMS stated that it will continue to evaluate its 

programs and will work to develop methods to address the identified 

issues found in this report. 

Recommendations for 

Executive Action 

Agency Comments 

and Our Evaluation 

CMS provided us two comments regarding our recommendations. First, 

CMS stated that we should be more specific as to the databases that the 

states should access in screening for debarred providers. Second, CMS 

also stated that we recommend that DEA make its registrant database 

available to the states without a fee. Third, CMS stated that information on 

deceased providers and beneficiaries could be provided by a feed from 

SSA. CMS also provided us two technical comments to the report. 

In response to CMS comment on the specificity of databases, we revised 

the recommendation to specify the two databases that should be used in 

screening claims: (1) the EPLS on federal debarments and (2) Medicare 

and Medicaid exclusions (i.e., the LEIE) maintained by HHS OIG. As stated 

in the report, both of these databases are required to be used by the states 

before they pay prescription claims. We did not recommend that states use 

the DEA registration database in the processing of Medicaid controlled 

substance claims, and thus we do not make any recommendations to DEA 

at this time. In response to CMS’s comment about screening for deceased 

Page 28 GAO-09-957 Medicaid
 

providers and beneficiaries, we agree with CMS that SSA data can be used 

in determining the eligibility of Medicaid beneficiaries and providers. In 

developing its guidance to the states, we believe that CMS should consider 

SSA death records and other sources to identify deceased Medicaid 

providers and beneficiaries. We incorporated the technical comments 

made by DEA and CMS into the report as appropriate. 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

date of this letter. We will then send copies of this report to interested 

congressional committees and the Acting Administrators of CMS and DEA. 

The report also will be available at no charge on the GAO Web site at 

http://www.gao.gov. 

If you or your staff members have any questions about this report, please 

contact me at (202) 512-6722 or kutzg@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on the 

last page of this report. GAO staff who made major contributions to this 

Gregory D. Kutz 

report are listed in appendix III. 

Managing Director 

Forensic Audits and Special Investigations 

Page 29 GAO-09-957 Medicaid
Appendix I: Additional Examples of Fraud, 

Waste, and Abuse of Controlled Substances in 

Medicaid 

Table 5, in the main portion of the report, provides data on 15 detailed 

case studies. Table 6 provides details of the remaining 10 cases we 

selected. As with the 15 cases discussed in the body of this report, we also 

found fraudulent, improper, and abusive controlled substances activities 

in Medicaid for these 10 cases. 

Table 6: Fraudulent, Improper, and Abusive Controlled Substance Activity in Medicaid 

Case State Nature of activity 

Type of controlled 

substance(s) Case details 

16 CA Prescribing controlled 

substances to Medicaid 

beneficiaries while on 

sanction list 

Oxycodone, Vicodin, and 

Tylenol with Codeine 

• Physician has been excluded from prescribing to 

Medicaid beneficiaries as a result of a felony controlled 

substance conviction in 2003. 

• Physician pled guilty to a felony count of writing 

fraudulent controlled substance prescriptions after his 

Drug Enforcement Administration (DEA) registration 

had been revoked. 

17 NY DEA noncompliance Oxycodone, Methadone, 

Morphine, Focaline, Ritalin, 

Concerta, and Adderall 

• According to DEA, physician was only authorized to 

prescribe Schedule III drugs. 

• Physician prescribed over 8,000 pills of DEA Schedule 

II drugs to over 20 Medicaid beneficiaries in violation of 

DEA regulations. 

18 NY Prescribing controlled 

substances to Medicaid 

beneficiaries while on 

sanction list 

Ritalin, Concerta, Adderall, 

Focalin, Tylenol with Codeine, 

Ambien, Klonopin, Ativan, 

Valium, Sonata, Restoril, and 

Lunesta 

• Physician has been excluded from prescribing to 

Medicaid beneficiaries since 2000 as a result of a 

criminal conviction for submitting false Medicaid 

claims. 

• Physician pled guilty to fraudulent billing/cost reporting 

and was sentenced to pay restitution of $210,000. 

• Medicaid paid $764,000 for 9,236 controlled 

substances claims for 773 beneficiaries even though 

the physician was excluded from the Medicare and 

Medicaid programs during fiscal years 2006 and 2007. 

Pills prescribed by physician and paid for by Medicaid 

totaled over 350,000. 

Appendix I: Additional Examples of Fraud, 

Waste, and Abuse of Controlled Substances 

in Medicaid 

Page 30 GAO-09-957 Medicaid 
Appendix I: Additional Examples of Fraud, 

Waste, and Abuse of Controlled Substances in 

Medicaid 

Case State Nature of activity 

Type of controlled 

substance(s) Case details 

19 NC Doctor shopping Oxycodone • Beneficiary received 1,850 pills of oxycodone over 21 

months. 

• Beneficiary received prescriptions of oxycodone from 

27 prescribers that were then filled by eight 

pharmacies. 

• Employee at one pharmacy stated that the beneficiary 

was known as an abuser of controlled substances. 

• According to one pharmacist, the beneficiary would 

present prescriptions from different doctors and 

hospital emergency rooms. On at least one occasion, 

the pharmacist believes a doctor instructed him to 

cancel a prescription after learning beneficiary had 

obtained a similar prescription from another physician. 

• The state has never placed the beneficiary on a 

restricted recipient program because the state did not 

identify beneficiary as a doctor shopper. 

20 IL Doctor shopping Adderall • Over the course of 2 years, beneficiary received 2,000 

pills (42,290 mg) of controlled substances used to treat 

attention-deficit/hyperactivity disorder, equivalent to 

over a 5-year supply. 

• Beneficiary received overlapping prescriptions of 

Adderall from 11 prescribers that were then filled by 

eight pharmacies. 

• Prescribing physicians were not aware beneficiary was 

receiving multiple prescriptions of the same drug. 

• Beneficiary stated that she was addicted to Adderall 

and did not realize she could get into trouble for 

obtaining prescriptions from two physicians 

simultaneously for the same controlled substance. 

• The state has never placed the beneficiary on a 

restricted recipient program because the state did not 

identify beneficiary as a doctor shopper. 

21 IL DEA noncompliance Focaline, Ritalin, Concerta, and 

Adderall 

• According to DEA, physician was only authorized to 

prescribe Schedules III through V drugs. 

• Physician prescribed over 3,500 pills of DEA Schedule 

II drugs to over 20 Medicaid beneficiaries in violation of 

DEA regulations. 

22 NY DEA noncompliance Focaline, Ritalin, Concerta, 

Morphine, and Adderall 

• According to DEA, physician was only authorized to 

prescribe Schedule V drugs. 

• Physician prescribed over 3,000 pills of DEA Schedule 

II drugs to over 50 Medicaid beneficiaries in violation of 

DEA regulations. 

Page 31 GAO-09-957 Medicaid
Appendix I: Additional Examples of Fraud, 

Waste, and Abuse of Controlled Substances in 

Medicaid 

Case State Nature of activity 

Type of controlled 

substance(s) Case details 

23 NY Doctor shopping Ambien • Beneficiary received 970 pills of Ambien over 23 

months. 

• Beneficiary received overlapping prescriptions of 

Ambien from nine prescribers that were then filled by 

five pharmacies. 

• Prescribing physicians were not aware beneficiary was 

receiving multiple prescriptions of the same drug. 

• The state placed the beneficiary on a restricted 

recipient program from April 2007 through April 2009, 

which limited the beneficiary to one primary care 

physician and one primary pharmacy. 

• Medicaid paid over $180,000 for medical services 

rendered in fiscal years 2006 and 2007, including 

controlled substances claims. 

24 CA DEA noncompliance Oxycodone, Methadone, 

Dilaudid, Morphine, Fentanyl, 

Focalin, Kadian, Adderall, and 

Marinol 

• According to DEA, physician was only authorized to 

prescribe Schedules III through V drugs for at least 10 

years. 

• Physician prescribed over 14,300 pills of DEA 

Schedule II drugs to over 60 Medicaid beneficiaries in 

violation of DEA regulations. 

25 IL Dispensing controlled 

substances to Medicaid 

beneficiaries while on 

sanction list 

OxyContin, Concerta, Adderall, 

Vicodin, Tylenol with Codeine, 

Ambien, and Xanax 

• Pharmacy has been excluded from filling prescriptions 

for Medicaid beneficiaries as a result of a felony 

conviction for making false statements in order to 

receive Medicaid payments. 

• Pharmacy was found guilty of billing Medicaid for 

thousands of dollars in medical prescriptions that were 

never filled. 

• Medicaid paid $3,315 for 81 controlled substances 

claims even though the pharmacy was excluded from 

the Medicare and Medicaid programs. Controlled 

substance pills dispensed by the pharmacy and paid 

for by Medicaid totaled 5,200. 

Source: GAO. 

Page 32 GAO-09-957 Medicaid
Appendix II: Comments from the Centers for Appendix II: Comments from the Centers for Medicare & Medicaid Services 

Medicare & Medicaid Services 

Page 33 GAO-09-957 Medicaid 
Appendix II: Comments from the Centers for 

Medicare & Medicaid Services 

Page 34 GAO-09-957 Medicaid
Appendix II: Comments from the Centers for 

Medicare & Medicaid Services 

Page 35 GAO-09-957 Medicaid
Appendix III: GAO

A

 Contact and Staff 

cknowledgments 

Page 36 GAO-09-957 

Appendix III: GAO Contact and Staff 

Acknowledgments 

Greg Kutz, (202) 512-6722 or kutzg@gao.gov 

In addition to the contact named above, the following individuals made 

major contributions to this report: Matthew Harris, Assistant Director; 

Matthew Valenta, Assistant Director; Erika Axelson; Paul Desaulniers; Eric 

Eskew; Dennis Fauber; Alberto Garza; Robert Graves; Barbara Lewis; 

Olivia Lopez; Steve Martin; Vicki McClure; Kevin Metcalfe; Gloria Proa; 

Chris Rodgers; Ramon Rodriguez; and Barry Shillito. 

 Medicaid 

GAO Contact 

Acknowledgments 

(192296) 
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