Health boards in Wales lack the capacity and resources to effectively monitor and review the risk of fraud in community pharmacy dispensing activity, according to a report by Audit Wales.

The independent public body outlined its conclusion in a report it sent to the chief pharmaceutical officer for Wales, Andrew Evans, following a pilot it carried out with NHS Counter Fraud Service Wales in which it analysed community pharmacy dispensing data to get an idea of where high costs and potential fraud can occur.

The pilot, carried out between April 2018 and March 2021, focused on Swansea Bay University Health Board and Cwm Taf Morgannwg University Health Board but involved a range of other stakeholders and looked at three areas that Audit Wales said had “known risks around fraud and cost.” Those included “expensive items” dispensed by community pharmacy contractors and prescribed by hospital prescribers, specials and “higher cost formulations”.

Expensive items were defined as having a net ingredient cost of £100 or more while higher cost formulations were different formulations such as liquids, tablets, capsules, creams, branded and non-branded, of the same active substance which can vary in price.

The report noted that in September 2020, a pharmacist was struck off after being convicted of fraud involving higher cost formulations totalling £76,475 after he had submitted false claims to the NHS.

Community pharmacy has considerable expenditure and fraud risks

The pilot, however, found no “immediate evidence of fraud” although Audit Wales said it only “focused on a small number of fraud risks” and suggested community pharmacy was “an area of considerable expenditure with known fraud risks”.

It analysed a large amount of dispensing data, which it accessed under the Auditor General’s data matching powers under the Public Audit (Wales) Act 2004 and produced “an interactive data tool that flagged outliers and formed the basis of facilitated discussions with health boards”.

The analysis identified outliers that revealed two pricing errors with overpayments totalling £22,000. In one instance, an item was submitted for reimbursement in May 2020 costing £205 for one contractor but then costing £14,228 when submitted for reimbursement in June 2020 by another contractor.

Audit Wales said the large discrepancy was “due to an error in the source data” and revealed the correct cost was £1,428, not £14,228, although the higher price was reimbursed to the contractor.

Audit Wales also concluded the cost of specials could have come down by about £700,000 “if each instance of the highest cost dispensing of a special was reduced to the special’s average dispensing cost”.

The report said the pilot highlighted “a specific risk” in relation to specials because there were “no price restrictions” in place for them, “presenting various opportunities for fraud or error”.

The data tool also identified five contractors who dispensed more than £1m of expensive items. Audit Wales said that “as a general principle, it may be advisable for health boards to carry out additional checks for contractors dispensing expensive items at high levels such as this”.

Capacity and resource is hindering health boards

The report said health boards may be missing potential risks because they were failing to share and compare their dispensing activity data with that of other health boards. It also said the “processes for monitoring dispensing activity vary” and “a lack of capacity and resource can limit health boards’ work”.

The report concluded there was “scope for more analysis of community pharmacy dispensing on a national basis for the purposes of detecting or preventing fraud and ensuring value for money”.

Audit Wales stressed it was not making specific recommendations but urged NHS Wales and its directors of pharmacy to consider whether they are satisfied with each health board’s approach to identifying and investigating potentially high cost and risk of fraud, and whether boards were sharing “key lessons and best practice” including where fraud has been identified to make other boards aware of risks.

Audit Wales also said the question of whether there was scope for NHS Wales to “put extra cost-effective controls in place around the variable costs of specials” needed to be considered. Audit Wales also urged the chief pharmaceutical officer to explain what action he intends to take on those issues.

In 2022-23, NHS Wales spent about £772m on drugs, appliances and services relating to community pharmacy activity, £162m of which was for remuneration for community pharmacy services while the remaining £610m was for reimbursement for medicines and appliances purchased by pharmacies and dispensed against NHS prescriptions.

Using the Public Sector Fraud Authority’s estimate that between 0.5 per cent and 5 per cent of all Government spending is lost to fraud and error, Audit Wales said anything from £3.9m to £38.6m of that £772m could be lost.