03/18/2012 05:30 EDT | Updated 05/18/2012 05:12 EDT

Manitoba pharmacy probed by Health Canada over gift-basket scheme

OTTAWA - Health Canada called in the Mounties after investigators found a Manitoba pharmacy used a gift-basket scheme to allegedly fleece the federal government's health plan for aboriginals.

The department estimates it overpaid Winnipeg's Pharm Azeem pharmacy by up to $160,389 through the Non-Insured Health Benefits program, a newly released document shows. Health Canada has since reached a settlement with the pharmacy to recover $25,000.

But the former owner of the pharmacy categorically denies any wrongdoing and blames the government for costing him his business — and his health.

"Because of their actions, I lost my business," Rehan Azeem told The Canadian Press during a lengthy interview.

"We lost everything. I lost everything."

An access-to-information request about a just-reported loss in the Public Accounts of Canada uncovered an audit that described how the drug store would allegedly give away "gift baskets" of dandruff shampoo, condoms and other items along with prescriptions, then bill the government plan for both the prescription and over-the-counter items.

"Improper billing for over-the-counter (OTC) products was found," says the 2006 audit by Health Canada. "A pattern of bundling five (5) over-the-counter products for gift baskets leads the auditors to believe that this action was to inflate billing costs to the Non-Insured Health Benefits program (NIHBP) for financial gain."

The Non-Insured Health Benefits program does cover some over-the-counter medications with a doctor's authorization.

In this case, Health Canada claimed the pharmacy was routinely adding so-called verbal prescriptions to written prescriptions. Doctors can call pharmacies with verbal prescriptions, and the Non-Insured Health Benefits program normally accepts these phoned-in prescriptions.

But the pharmacy's rampant use of verbal prescriptions caught Health Canada's attention.

"The pervasive use of this practice was a concern," the audit says.

"The practice was so institutionalized that a review of the pharmacy's records found that the provider was using a pre-typed sticker with exactly the same five items for almost all clients. ...

"It appears that the pharmacist planned what would be prescribed prior to receiving the verbal orders. This practice became apparent after the pharmacy began 'giving' (and billing) the same five items consistently to (Non-Insured Health Benefits program) clients."

The audit says that at one point, seven out of every 10 people received a gift basket when they filled their prescriptions at the drug store. At first, the pharmacy bundled different items. The audit says it was only later that the gift baskets began to include the same five items: dandruff shampoo, antibacterial soap, anti-fungal cream, ulcer bandages and latex condoms.

Azeem tells a different story. "There was no such thing as gift baskets, first of all," he said. Azeem insisted all prescriptions were properly authorized.

"There's no such thing as five items ... there was not (always) five items," he said.

"Of course there was a verbal prescription, I agree to that, but those prescriptions were authorized by the physicians, so there was nothing wrong. ... They (Health Canada) have not found anything which was not authorized."

He said the pharmacy provided a service to the community.

"Some of the patients had those diseases ... some of the patients had dandruff because of the poor hygiene conditions ... it is a very common scenario there. Most of the people who are in that north end of Winnipeg, they were basically on welfare," he said.

"So by doing so, by providing those over-the-counter prescriptions ... we were actually doing a service to that neighbourhood."

The pharmacy would bill the Non-Insured Health Benefits program for a $5 dispensing fee plus the cost of the medication whenever it filled a prescription, the audit says. But the drug store also billed the plan for the cost of the items bundled in the gift baskets, plus a $25 dispensing fee.

Azeem explained that he was just covering his costs. There was a mark-up on prescription medicine and the Non-Insured Health Benefits program paid the pharmacy between $8 and $10 for its dispensing costs, he said. Throw in the cost of over-the-counter products and staff salaries and expenses start to soar.

"You have to look at the technician. You have to look at my overhead costs, and the pharmacist costs," Azeem said.

"I was not making a big chunk of money."

The drug store's billings to the Non-Insured Health Benefits program rose substantially once it started to use the gift baskets. In 2001, two years before it started bundling items, the pharmacy ranked as the 837th biggest biller in Canada among Non-Insured Health Benefits program pharmacies. By 2005, it had become the 250th biggest biller.

The Non-Insured Health Benefits program paid out $301,434 to the pharmacy in 2005, up from $32,032 in 2001. That is an increase of $269,403, or 841 per cent, over four years.

Azeem maintains he did nothing wrong.

"There was nothing hanky-panky going on."

The audit also found the pharmacy was bundling condoms with prescriptions for children as young as two years old.

"This bundling is a consistent pattern across all age groups and can be characterized as an attempt to inflate billing costs to the (Non-Insured Health Benefits) program for financial gain," the document says.

Azeem blamed a computer-entry error for the condom mix-up.

"It was not intentional," he said. "What was it, $6? We're trying to rob $6 from Health Canada? Come on. This is really insane. No intention was there. It was an entry error. I think probably the technician entered it in wrong. That's it."

Health Canada suspended the pharmacy's billing privileges in February 2006. The auditors wanted their findings passed on to Royal Canadian Mounted Police for "investigation for potential fraudulent billings" to the Non-Insured Health Benefits program.

Health Canada says it asked the RCMP to look into the matter.

"Health Canada initiated a recovery action against the pharmacy and also referred the file to the RCMP in 2006," spokesman Stephane Shank said in an email.

"A settlement for $25,000 was reached and the file was considered closed by Health Canada in January 2011."

The RCMP refused to confirm or deny any investigation, either past or ongoing.

"It is not the RCMP's practice to confirm or deny who or what, may or may not be the subject of an investigation," spokeswoman Cpl. Laurence Trottier said in an email.

"To do so may infringe on the privacy of individuals directly or indirectly, and also, to do so could jeopardize the integrity of any possible ongoing investigation."

The audit says the pharmacy handed over documentation, receipts and records to explain the billings, but most of the paperwork had either already been submitted, or it was deemed unsatisfactory or unacceptable. Azeem disagreed.

"We have provided each and every document," he said. "Prescriptions signed by the physician. Copies of prescriptions."

He said the pharmacy stayed in business for a few months after Health Canada cut off its billing privileges because he felt duty-bound to keep filling prescriptions. But he soon ran out of money and had to close up shop.

The Manitoba Pharmaceutical Association no longer lists the pharmacy in its directory of licensed pharmacies in the province.

Azeem said he tried to sue the federal government over the ordeal, but he dropped the lawsuit when he ran out of money.

"I ended up losing my business. I had to sell my building and everything," Azeem said.

"On top of it, I was on stress (leave) for a whole year, because, you know, it's a big loss. Then besides that, it physically and mentally affected me."

He has since moved to Barrie, Ont., where he works at the military hospital at nearby CFB Borden. Azeem said he is taking online courses through the University of Colorado toward a doctor of pharmacy degree.

"It was a very, very bad impact on my life," he said of what happened at the pharmacy. "I lost my confidence. I lost everything."