Press Release  Audit of State Pharmacy Agency Finds Poor Management and Potential Conflict of Interest

Boston — State Auditor Suzanne M. Bump today released an audit of the State Office of Pharmacy Services (SOPS) which identified a potential conflict of interest scenario, costly system inefficiency, and other management deficiencies.

As an agency within the Massachusetts Department of Public Health (DPH), SOPS is responsible for overseeing pharmacy-management services and the procurement of pharmaceuticals for 51 public facilities including state hospitals, prisons, and human service agencies. Comprehensive Pharmacy Services (CPS) is a national private pharmacy-services provider under contract to manage and operate the pharmacy program on behalf of SOPS. The duties of CPS include on-site oversight and staffing of the daily functions at individual state-facility pharmacies and administrating the pharmaceutical distribution center at Tewksbury State Hospital.

Today’s audit found that a former executive director of SOPS was simultaneously employed by a subcontractor of the agency’s primary vendor, creating a potential conflict of interest.

“The former executive director’s relationship with an agency subcontractor must be further investigated,” said Auditor Bump. “This audit raises disturbing questions regarding both his participation in the award and oversight of the pharmacy contract. These circumstances, as well as the failure of SOPS to accomplish its mission of integrating pharmacy services within state government and reducing costs to taxpayers, make this a significant audit.”

The former executive director led the team which recommended CPS for the $86 million pharmacy-management contract and was responsible for overseeing the vendor’s performance. At the same time, he was also an employee of Integrated Pharmacy Solutions (IPS), a company that provided consulting and recruitment services for CPS under the state pharmacy contract. The former executive director did not disclose his potential conflict of interest to DPH until state auditors discovered it. DPH stripped the former executive director of check-signing authority and he subsequently resigned from his state position.

During the audit period, the former executive director was the sole signatory authority for monthly payments to CPS, whose monthly billings included services identified as having been rendered by IPS. Further, the audit identified $196,000 in questionable payments made to CPS under the state contract for IPS services claimed as completed but lacking adequate supporting documentation.

The audit report was referred to the Inspector General’s and Attorney General’s offices for further review.

Other audit findings concern the operation of SOPS. It identified $10 million in labor costs for prescription data re-entry necessitated by SOPS’s failure to make its central ordering system compatible across state government. Without a comprehensive ordering system, some state agencies were forced to fax prescription orders to the central processing office, resulting in approximately 257 man-hours per day in necessary data re-entry.

“Beyond his personal ethical appearance, the former executive director was failing in his managerial responsibilities,” said Auditor Bump. “The agency he ran was behind the times.”

Other findings in today’s report noted significant inconsistency in fees charged to state agencies, state agencies receiving pharmacy services independent of SOPS, and compounding pharmacy equipment and practices not complying with best practices.

In response to audit findings, DPH stated that it is improving its central ordering system, is standardizing fees charged to member agencies, and is updating compounding pharmacy equipment and facilities

The Office of the State Auditor conducts technical assessments and performance audits of state government’s programs, departments, agencies, authorities, and vendors. With its reports, the OSA issues recommendations to improve accountability, efficiency, and transparency.

The State Office for Pharmacy Services audit is available here.

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