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CDC 'does not want to talk about the black market' for prescription drugs

CDC statements on prescription drug abuse don't tell the whole story. In this photo, R. Gil Kerlikowske, Director of the Office of National Drug Control Policy, addresses the media on September 4, 2013, in Washington, DC.
CDC statements on prescription drug abuse don't tell the whole story. In this photo, R. Gil Kerlikowske, Director of the Office of National Drug Control Policy, addresses the media on September 4, 2013, in Washington, DC.
Win McNamee/Getty Images

Two months ago, the CDC issued a press release stating that "Physicians are a leading source of prescription opioids for the highest-risk users." A closer look at the data, however, indicates that pill rings operating around the country are the proximal source providing prescription drugs to abusers, and an innovation known as Divert-X may be part of the solution to the problem. The Allentown Family Health Examiner spoke with Jim Harris, PhD, the CSO of Valex Explorations LLC and the inventor of the Divert-X concept, in order to understand the mechanisms underlying America's prescription drug abuse epidemic and how insurance companies may be able to help solve the problem. The text of the interview is provided via the photo links below.

CDC statements on prescription drug abuse don't tell the whole story. In this photo, R. Gil Kerlikowske, Director of the Office of National Drug Control Policy, addresses the media on September 4, 2013, in Washington, DC.
CDC statements on prescription drug abuse don't tell the whole story. In this photo, R. Gil Kerlikowske, Director of the Office of National Drug Control Policy, addresses the media on September 4, 2013, in Washington, DC. Win McNamee/Getty Images

CDC statements on prescription drug abuse don't tell the whole story. In this photo, R. Gil Kerlikowske, Director of the Office of National Drug Control Policy, addresses the media on September 4, 2013, in Washington, DC.

Allentown Examiner: In its press release, the CDC says that physicians are the major source of prescription drugs that are abused. Now, to me, that seems obvious, because they're prescription drugs. I would imagine that it's unlikely that many of them are diverted directly from the manufacturers.

Dr. Jim Harris: It's rare [theft directly from drug manufacturer]. The DEA's scrutiny from the very beginning of the supply chain to the pharmacy door is very tight. There are occasional insider thefts and non-retail robberies, but it in no way supports the magnitude of our current black market. It supports occasional addicted pharmacists, for example. The black market is too large to be supported by a missing truck. The recordkeeping requirements are very stringent. The DEA is under so much pressure to get this right, because they are being so strongly embarrassed by the size of the black market that those things they can control -- from the manufacturer up to the pharmacy door -- they do very well.

The DEA quota is set every year for the various medications that DEA regulates. We can plot every year the broad categories of opiates and stimulants -- those are the two things that are most problematic in society. The quota is the cap on manufacturing and sales every year -- and you can bet that the manufacturers manufacture right up to the cap. The quota is the only objective, national data available; a final version is published in the Federal Register every year.

To give you an idea of how out of control this has become, compare 2013 to 1994 -- 1994 is a useful data point, because it's just before Oxycontin was released, so it serves as a nice baseline to see what America was like back in the Mayberry days, before Oxycontin changed society. It is astonishing, but true, that the quotas for both prescribed stimulants and prescribed opiates have increased, nearly 19-fold. If this were a stock, it would be the envy of Wall Street.

The additional new "legitimate" prescribing could not account for a 19-fold increase. Since 1994, the US population has grown by approximately 20 percent. So that's 1.2-fold. Nineteen-fold is, of course, much larger. The difference between population growth and the new market for these medications is the black market.

I'm very discouraged by what CDC is doing. To be specific, they are indicating to the press through the press release that for people who commonly misuse prescribed controlled substances, they get them through a primary relationship with a physician. It's not true. Their own data, which they misrepresented, shows that the number one source is through secondary or tertiary relationships, meaning that there are people in between the user and the physician that are faking the magnitude and duration of disease. People have gotten very good at faking disease. As a single example only, for a person of low morals and poor employment prospects, this can be very profitable -- people who are criminally-minded will, month after month, game the system. There are people who are hired to do it: it's known as "sponsored relationships." Sponsors will seek people that could, through ongoing disease and situation, claim to have a need for one of these substances. It's a new form of currency. It's a cash equivalent.

Let's say you're getting these medications paid for by Medicaid, Medicare, or private insurance. You can take a $20 co-pay and turn it into $5000 or $6000 easily.

It's considered to be very safe. Your supply chain is safe. As the cops like to say, "Walgreens doesn't shoot anyone." The end consumers, too, tend to be financially well-off, and not in the mood to rob and shoot the dealers. The customer base is safer and more serene. People would much rather make the same money dealing pills [than illegal drugs], because the risks are lower. The risks of getting caught are lower, because it's much more difficult for law enforcement to make a case.

Anybody that's doing this long-term -- and DEA has admitted to me that they only catch the dumb ones -- the thoughtful people, they generally fake clinical activity or disease themselves, so they have medications in bottles with their own names on them, so when people are busted for gaming the medical system and dealing pills, what the cops often find are boxes full of empty pill bottles. For somebody that's dealing pills, an empty bottle is a get-out-of-jail card, because when they get medications from their network of sponsored patients, they transfer them into bottles with their own name on them. Now they can drive around with those medications with impunity. The bottles could be eight years old, but the excuse is that they never took them, and left them in the glove compartment.

CDC distinctions between "buying from drug dealer" and "buying from friend" may be misleading. In this photo, bottles of the generic prescription pain medication Buprenorphine are seen in a pharmacy on February 4, 2014 in Boca Raton, Florida.
CDC distinctions between "buying from drug dealer" and "buying from friend" may be misleading. In this photo, bottles of the generic prescription pain medication Buprenorphine are seen in a pharmacy on February 4, 2014 in Boca Raton, Florida. Joe Raedle/Getty Images

CDC distinctions between "buying from drug dealer" and "buying from friend" may be misleading. In this photo, bottles of the generic prescription pain medication Buprenorphine are seen in a pharmacy on February 4, 2014 in Boca Raton, Florida.

AE: You recently contacted the CDC to take issue with their press release, and you told them that by your calculations, using their own data, if you add "buying from friends or relatives" and "buying from drug dealers," you get 38 percent of all illicitly used prescription opioids.

JH: The way that CDC is shaving the data is that they're differentiating between who you buy it from. But the truth is that if the medication is sold, and that includes for things that are not cash, but cash equivalents such as sex -- well, the way that they do their surveys is all screwed up -- but even as screwed up as it is, they're sending the reporters in the wrong direction, because it doesn' t matter whether you buy it from a "friend" or from a drug dealer, because you still bought it. For someone abusing drugs, what is a friend?

I provided 14 different citations to the medical literature [in my email to CDC], and they show that dealers are very, very important. For reasons that I cannot understand, the federal government does not want to talk about the black market. I think it's important for parents to recognize that their kids in high school -- if their kids have grown to like pills, they graduate from getting them from the medicine cabinet at home. It's just like the liquor cabinet -- kids can only drain the whisky bottle so far before it becomes obvious. The medicine cabinet may get people started, but that's not what they rely on going forward. They rely on national, highly organized, customer-focused dealer networks, that are sort of run like Zappos. These are not mail-order -- it's all face-to-face activity -- but they have basically a customer focus that encourages the dealers to give store credit, if you will -- if somebody's not happy with the experience, they can try something else. These people will sell them pills as long as the kids can afford it. They keep them on pills as long as they can afford it, because the margins are high and pills seem safe, and then after that they hand them off to their cohort: the people selling the brown stuff in the bag. We call it the pipeline of addiction, with pills upstream and illicit [substances] downstream.

We've set up a very efficient way of ruining the best prospects this country has. The ability to hijack these kids at a very young age is streamlined. Some in law enforcment see this as a "Fall of Rome" event because it is rot from the inside.

I live in the Dallas-Fort Worth area of Texas. To give you an idea of how these things are set up, our local police tells me that our local high school kids have gotten so lazy that they don't even try to buy beer, because buying beer is considered to be difficult in comparison. The kids don't even try because the pill networks are so streamlined.

We have a text message-based one-hour delivery service for benzodiazepines here. The guys are very wily, and it's a trusted marketplace.

These medications are so commonly available, that they're part of the street market for every wealthy community in America. Fundamentally, this is a white wealthy problem, not an inner city problem, at this point.

Allentown Examiner: Is it possible that kids think prescription drugs are a "safer" way to get high?

JH: Absolutely. They halfway listen to their parents. They avoid the brown stuff in the bag. [They think,] This is a pill. It came from a doctor.

The Divert-X system is designed to gather objective data to help insurers find patients abusing medications or gaming the system for profit.
The Divert-X system is designed to gather objective data to help insurers find patients abusing medications or gaming the system for profit. Divert-X.com

The Divert-X system is designed to gather objective data to help insurers find patients abusing medications or gaming the system for profit.

Allentown Examiner: Tell me about the Divert-X system.

JH: It's a dispensing system and management system. We're gathering objective data through a unique system, and the purpose is for insurers to try and take back control -- to find patients that are getting addicted to their medications or gaming the system for profit. These are the most addictive substances known, yet our modern medical system is attempting to manage it with a bottle and a pharmacy label and a pat on the back.

The drugs have been there for decades, and diversion has always been a problem, but this 19-fold increase -- that is driven by the fact that people -- they really do want the Rolls Royce of abusable substances, hence the profitability. People have recognized that they can just simply fake the duration and magnitude of symptoms, and make a huge amount of money. If it wasn't super-profitable, it wouldn't be driving the growth. The current growth on a compounded annual basis averages 30 percent -- 27 percent for prescribed opiates and 33 percent for prescribed stimulants.

Diversion of prescription medications can be extremely profitable -- a $20 co-pay can turn a profit of thousands of dollars.
Diversion of prescription medications can be extremely profitable -- a $20 co-pay can turn a profit of thousands of dollars. Mark Wilson/Getty Images

Diversion of prescription medications can be extremely profitable -- a $20 co-pay can turn a profit of thousands of dollars.

Allentown Examiner: I think there are something like 100 million opioid prescriptions written annually in the US?

JH: We don't focus solely on opioids. We focus on controlled substances generally, meaning anything that has a street price, that the street wants. The number of prescriptions for controlled substances in the US is a bit more than 500 million per year.

Allentown Examiner: Does that mean that everyone in America is on at least one controlled substance?

JH: It means that people are ensuring that every month, they have [some income] coming in the door. This is a replacement for honest work, for many people. Criminals now seek disability, not because they want a disability check, but because it's a path to getting free clinical care in order to get pills. That's where the cash is -- not in the disability check, [but in the resale value of the pills].

A Florida pharmacy is raided in this photo. At present, true "pill mills" are responsible for a relatively small portion of illicitly used prescription drugs, in part because the costs to drug dealers are prohibitively high.
A Florida pharmacy is raided in this photo. At present, true "pill mills" are responsible for a relatively small portion of illicitly used prescription drugs, in part because the costs to drug dealers are prohibitively high. Joe Raedle/Getty Images

A Florida pharmacy is raided in this photo. At present, true "pill mills" are responsible for a relatively small portion of illicitly used prescription drugs, in part because the costs to drug dealers are prohibitively high.

Allentown Examiner: Tell me more about how Divert-X works.

JH: Let me give you the results of a research study from Florida. It was conducted by a university in South Florida in 2009 and 2010. This university has a very great relationship with drug dealers. They're known as people that can be trusted -- they're not the cops. Dealers will cooperate with them and take surveys. From a surveillance perspective, that's pretty valuable.

During 2009 and 2010, that was the apex of the Florida pill mill crisis. That was just before the state changed everything from a law and law enforcement standpoint. Now Florida has a much diminished problem compared to what they had at those times.

What this study showed is that -- when they went out and interviewed dealers that specialized in pills, 44 percent of them obtained their medications only from patients because this yields a higher ROI. That's during a time when there were open-air drug markets. The reason for such a high focus of professional dealers on patients is very simple: pill mills are one of the most expensive ways to obtain these medications. Why? Because at its core, everyone knows that running a pill mill is a criminal activity. You have to pay the clinic a very high fee for its "services." The pharmacies all know who the pill mills are -- some of the pharmacies are owned by the pill mills -- and the pharmacies that will serve a pill mill know they're taking extra risk, so the cost of those meds is very high. It's to pay the operator for the risk that they're taking. Generally, pill mills don't serve ROI-savvy dealers; they serve addicts. Addicts don't have any self-control, and are so focused on acquisition that they're not focused on getting the best deal.

Smart dealers are focused on the highest return on investment, and that comes from sponsored patients. Sponsored patients generally have insurance coverage. They blend in. They just look like regular people. Individual entrepreneurs exist, too.

'If you build a system to uncover aberrant behavior and do something about it, that is really catering to the financial aims of the payer. You have to align yourself with the money.'
'If you build a system to uncover aberrant behavior and do something about it, that is really catering to the financial aims of the payer. You have to align yourself with the money.' Joe Raedle/Getty Images

'If you build a system to uncover aberrant behavior and do something about it, that is really catering to the financial aims of the payer. You have to align yourself with the money.'

Allentown Examiner: And so insurance companies would do a better job tracking this activity than physicians or the government?

JH: We think this problem of prescription drug abuse and trafficking is not likely to be solved by the government. We think the government should be active, but we're currently in a situation where their mouths work, but their hands don't work. We think the government should tell the truth, but we don't think the government can solve it, and here's why:

The interventions the government uses can be put in three buckets: education, law enforcement, and regulation. People who are addicted to their medications, people who are addicted to other people's medications, and people who are dealing medications aren't sufficiently influenced by any of those levers. Hence, we have astonishing growth. The only way to solve this -- to get things closer to 1994 levels, rather than 2013 levels -- is to focus on insurers or payers. Government programs like Medicare and Medicaid are not really insurers, they're payers, so we'll use that term. If you build a system to uncover aberrant behavior and do something about it, that is really catering to the financial aims of the payer. You have to align yourself with the money. Improving the quality of care by better drug-safety management is a nice bonus.

WellPoint, which is America's second- largest insurer, caught a pill ring -- one of the more modern ways of organizing people -- and they did a retrospective study of the spending habits of this ring. For every dollars in pharmacy benefits these guys were receiving, they were receiving 41 dollars in clinical services. You couldn't choose a more expensive industry to game than our medical system. This has become the number one source of beneficiary fraud to our health care payers. To policy makers: What can we do to increase quality and reduce cost in our health care system? This is it.

Fake clinical activity is totally non-productive. The expense of the medications is actually the minor portion. When people are exaggerating the intensity and duration of their disease, they get a lot of tests. These clinicians are literally trying to figure out what's going on. These folks, they are some of the finest actors and actresses we have. That's the core: that all controlled substances that have a high street price are for diseases that are subjective. The patient's self-report is the only thing the clinician has to go on.

There's a famous study of college students where they were given five minutes' access to Google to research the symptoms of ADHD and then tasked with faking the symptoms of ADHD, and the success rates [were very high]. Now imagine if you had a financial stake in it! This is American entrepreneurship at its best. People in a down economy are looking for things to do with their skills -- what they have available to them -- and if regular employment is not available to them, then maybe they will listen to the cousin and go into a friends-and-family pill ring.

Our company only works in this space, so we know more about it than the government. We have a list of 17 different methods that these pill rings use to scam the system. We know of more mechanisms, but we list 17 because we can back them up with court documents and things like that. For example, one of the new scams that's very popular is -- certain states only require PIP [personal injury protection] auto insurance, very minimal auto insurance. With that very inexpensive insurance, and in certain states, depending on how state law is written, anybody that's in a vehicle that has an injury is guaranteed that all of their medical bills will be paid. So in these states with laws written in that way, what the gangs -- the groups of people in the know -- do, is that they go buy a beat-up car, they will insure it with the cheapest insurance they can get, because they're not after fixing the car. They'll load up the vehicle to capacity -- they like vans, because they have more seatbelt than cars -- and they crash into something, just enough to make the case that they've got some sort of pain. They don't even have to have medical insurance, because the auto insurance will pay for all the medical activity for everyone in the car.

It's because the pills are worth so much money. It's a driving force.

We're building a system to collect objective data to attempt to help -- at present, our system is not proven to work -- but we have been fortunate in finding a health care insurer that's really angry about this, and they've given us a region to pilot our system, in conjunction with four universities. We're the technology provider, and the health insurer and the four universities are working together to determine what sorts of quality-of-care improvements we can bring. Our medical system creates new addicts every day -- iatrogenic addicts -- so decreasing that for example would be an improvement in care. Also reducing spending: finding people who are addicted, and people who are gaming the system for pills.

What the public knows, compared to what's going on, there's a giant mismatch, and it doesn't help that the CDC would purposely send journalists into the ditch. I've been debating with them for perhaps two years now about their loose approach to describing the problem, and how the way they describe it is incompatible with their data and the medical literature.