Three California officials who oversee billions of dollars in Medi-Cal prescription drug spending have failed to disclose free flights, hotel rooms and meals paid for by nonprofit groups funded by drug makers, records and interviews show.
One of those officials, Pilar Williams, accepted free travel even though she has a direct role in negotiating rebates with drug makers. Williams, the pharmacy division chief at the Department of Health Care Services, also helped decide which drugs were among the $8.5 billion worth of medications the state dispensed to low-income patients in the past three years.
The three officials’ travel was paid for by several nonprofit business groups that exist for the sole purpose of funding conferences and meetings, according to a chairman of one of the groups. The business groups raise money by charging registration fees as high as $2,000 per person to drug company representatives and other executives who do business with Medicaid programs.
Since 2005, those corporate executives contributed about $1.8 million to the business groups to pay for conventions – including the costs of travel, lodging and entertainment for the state Medicaid pharmacy directors, California Watch has found.
Last September, Williams attended a convention at a safari-themed resort in the Wisconsin Dells. The agenda for one day of the conference included a 90-minute presentation in the morning and networking, dining and hospitality until midnight.
Four trips taken by Medi-Cal pharmacy officials during the last six months of 2009 came to light under a stringent new gift-reporting regulation administered by the Fair Political Practices Commission, the state’s political watchdog agency.
Officials charged with administering Medi-Cal work for the Department of Health Care Services. A Medi-Cal spokesman confirmed that pharmacy officials have taken roughly a dozen similar trips dating back to at least 2006, which should have been publicly reported as gifts. Spokesman Norman Williams said the omissions will soon be corrected.
The Medi-Cal agency’s own policies – which are separate from those of the Fair Political Practices Commission – prohibit employees from accepting gifts that exceed $320 from any firm, subsidiary or person that “has financial dealings with the department.”
Norman Williams confirmed that each state official who accepted the trips had direct roles in medication spending and policy.
Yet, he said his agency reviewed its conflict-of-interest policy and determined that none of the officials had violated it, noting that the trips were funded by nonprofits and not by companies seeking state business.
Norman Williams did acknowledge that officials strayed from FPPC regulations in failing to report the travel gifts on annual disclosure forms.
FPPC Executive Director Roman Porter declined to comment on the Medi-Cal reporting lapses but said any violation of the political reform act can result in a fine of up to $5,000.
Norman Williams said officials will report future trips to the conventions funded by the nonprofits. He described the conferences as great idea-sharing forums.
“[Pharmaceutical executives] do not try to influence [our] decisions in any way,” he said. “And we would not attend those conferences if that were the case.”
Norman Williams also said the state has safeguards in place to protect the officials from undue influence, including state-legislated guidelines for choosing which medications the state makes available to Medi-Cal patients.
Still, the arrangement is troubling to Stephen Sheller, a Philadelphia attorney who has proven in court that pharmaceutical companies defrauded state Medicaid programs of hundreds of millions of dollars.
Sheller’s cases, and others, were settled after state law enforcement agencies and the U.S. Department of Justice alleged that the companies had engaged in fraudulent marketing, price inflation or unfair business practices.
“I find it unconscionable in today’s climate that they (officials) don’t realize that’s not only inappropriate, but it’s a major conflict of interest,” Sheller said.
The trips are funded by the American Medicaid Pharmacy Administrators Association and its western, southern and eastern chapters, which are each led by a current or former state pharmacy director.
Dorothy Poulsen, the former treasurer of the western group, said she felt that pharmaceutical executives did attempt to curry favor at the meetings.
“They wanted to have a good relationship with us,” said Poulsen, who was a Medicaid pharmacy director in Montana until 2001. “So they were willing to try to be nice to us so we would be nice to them.”
Poulsen said she had limited control over arenas where the industry executives tried to exert influence. She said California officials were frequent participants in meetings during her tenure.
Public disclosures filed this year, which pertain to the conventions, show that since June, officials received $5,400 for travel, including a pharmacy program consultant’s trip to New Orleans. Another official, J. Kevin Gorospe, who was chief of the pharmacy policy branch, traveled to Chicago and Providence, R.I.
Gorospe resigned from the Medi-Cal agency in February to take a position with a health management firm. The third state official, Diane Furukawa, also traveled to New Orleans for a conference funded by a nonprofit group tied to drug makers.
Speakers at the Wisconsin Dells conference attended by Pilar Williams included pharmaceutical experts, an executive from a biotechnology firm and an official from the federal Centers for Medicare & Medicaid Services.
The agenda showed that officials from at least 22 states attended sessions. But it also showed there was ample free time. On one day, sessions ended by 11 a.m. Networking and entertainment was scheduled until midnight at the resort, which featured an indoor theme park and water park.
Benny Ridout, chairman of the Southern Association of Medicaid Pharmacy Administrators, said he is working now to assemble the agenda for the group’s upcoming national meeting.
Ridout, a former North Carolina Medicaid pharmacy chief, is now a consultant working for drug companies, health insurers and technology companies that seek government contracts.
Health insurers that administer managed care for some Medicaid agencies and technology companies that run state data systems also underwrite the cost of the conferences with their registration fees, Ridout said.
The fees are paid to the nonprofit groups, one of which reported $346,000 in annual revenue since 2006. Others reported annual revenue closer to $100,000, most of which goes to holding the conventions, tax forms show.
There is a firewall between the corporate attendees, who fund the nonprofits, and the civil-service officials, Ridout said. He and other Medicaid leaders set the meeting agendas and invite the speakers. Because so many corporate representatives attend the meetings, their influence on state officials is diffused, Ridout said. “You can’t be under undue influence of everyone in the world.”
He also said the conferences would not happen without the funding of the corporate attendees.
But David Egilman, a professor at Brown University who has written about the marketing practices of drug makers, disagrees.
He said if the conferences are the only way for the Medicaid officials to exchange information, they should find another way to fund them. “It’s unethical to take money from someone you’re buying services and negotiating with,” he said.
California officials, though, appreciate the pharmaceutical companies’ support for the conventions and are careful to point out that the nonprofits provide the travel funding. The conventions have led to cost savings, Medi-Cal spokesman Williams said. At one conference, leaders gleaned tips from Georgia officials that saved California $10 million in 2008, he said.
“The [conferences] allow us to go share our best practices and make improvements in our programs,” Williams said.
Poulsen, the former treasurer of the western pharmacists group, agrees with Medi-Cal leaders that the meetings provide a valuable exchange of information. But she said the companies do get a return on their investments.
“I’ve thought about it since, to what extent was I influenced,” she said. “It isn’t the money. It’s more, ‘I know so and so and he’s a nice guy.’”
This story was edited by Mark Katches and copy edited by William Cooley.
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