Investigation: Insurance billed $18,000 for unwanted pain meds

Last April, John Picard got a call from a telemarketer about an alternative treatment for pain. The person on the phone asked Picard if he ever has pain and if he has needs for medication. Picard gave the caller permission to speak to his doctor but did not authorize them to seek a prescription - which is why Picard and his wife Meryl were surprised when jars of prescription creams and gels showed up three months later.

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John Picard, left, and his wife Meryl
CBS News

"Our immediate reaction was, 'Oh my goodness, someone else ordered medication and they sent it to us by mistake,'" said Meryl.

It wasn't a mistake and their insurance had been billed $2,500 for a pain cream; $3,600 for a migraine cream; and nearly $13,000 for a scar gel.

It totaled $18,680 and change, according to the Picards.

"All I saw was egregious billing for something John didn't want, we had no idea how to use, we didn't know what was in it," Meryl said.

The call came from a company in American Fork, Utah, that went by several names, including Action Medical and Western Medical. Rachel Wurtz - a worker in the company's billing department - told us the $18,000 price tag for three creams was not unusual.

"$18,000 for one-month supply, three creams, that's about right," said Wurtz.

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The jars of prescription creams that were sent to John Picard
CBS News

Western Medical pitched the creams as a "free benefit" paid by insurance. If a patient said "yes" Western Medical told their doctor: "One of your patients has expressed interest in a non-invasive topical cream to help alleviate pain." It also sent over pre-written prescriptions for the doctor to sign.

John Picard believes a prior conversation he had with his doctor may have led the doctor to sign the prescription.

"We had been discussing the topic of pain and they took advantage of that in the ways that that memo, that fax implied," said John.

Sources linked to Western Medical tell CBS News the company collected up to 200 prescriptions a day, billing them to Medicare and private insurance for more than $1 million a week.

"This is really abuse in the marketplace," said Dr. Steve Miller.

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Dr. Steve Miller
CBS News

Dr. Miller is the chief medical officer at Express Scripts, the nation's largest pharmacy benefit manager. They paid for John Picard's creams, but recently stopped covering many of them because, Dr. Miller said, there's no research proving they work.

"If you talk to almost any pain expert, they'll tell you these things are working strictly through a placebo response and not through a physiological response through the pain receptors," said Dr. Miller.

The creams were formulated and produced at Downing Labs -- a compounding pharmacy in Dallas. Ashley Downing and her husband and co-owner Chris Downing recently hosted a red-carpet event to celebrate their pharmacy's multi-million dollar growth.

Last month, we sat down with the Downings to ask them about their business.

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Ashley Downing, left, walks out of an interview with CBS News correspondent Jim Axelrod
CBS News

"Did you have any knowledge that products produced by Downing Labs were being shipped to people who hadn't asked for them, and insurance companies were being billed at these kinds of rates?" I asked.

"We became aware there were issues being made and that people were not happy," answered Ashley. "And we then sat down as a company and decided that we are no longer going to have a relationship with them."

"So if I am talking to somebody who was working at Western Medical, and they're telling me that the sale..." I started to ask before Ashley interjected.

"I think we should just go ahead and just..." said Ashley.

"And just what?" I asked.

"Not do this anymore. I was not prepared for this at all," Ashley answered.

"Let me ask you one more question, what is in those creams that is worth $18,000?"

"So we don't determine the formulas, on that," Ashley said. "You know, we're done, I'm done on this."

The Downings said the insurance company sets the price. They declined our repeated requests to explain their relationship with Western Medical, but during our visit, we saw sales orders for a pharmacy affiliated with Western Medical, for the exact same products they shipped to the Picards.

"We're all paying for this," said Meryl Picard. "This is not just me and John and our little account. These numbers are eventually spread across everyone, in terms of what all of us pay in health care."

In a statement to CBS News following our interview, Downing Labs said they "did not have any involvement in billing or submitting claim for Mr.Picard" and received only "the cost of the medication, plus a small compounding fee." Through an attorney, the owners of Western Medical declined to comment on this story. As for John and Meryl Picard, after making numerous complaint, they did get the charges to their insurance reversed.

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CBS News
  • Jim Axelrod

    Jim Axelrod is the anchor of the Saturday edition of the "CBS Evening News" and a national correspondent for CBS News, reporting for the "CBS Evening News with Scott Pelley" and other CBS News broadcasts.