AUGUSTA — In 2001, Trues Pharmacy in Oakland, owned by incoming Speaker of the House Robert Nutting, bought medical gloves for $4.39 per package. By the time Trues sold them to a Medicaid provider, the price had gone up to $11.11.
That markup — 153 percent — was much more than was allowed by Maine’s Medicaid program, known as MaineCare, which permits only a 40 percent markup.
Nutting contended in state hearings that his use of a different formula to calculate the markup — a formula which put more money in his pocket — was the accepted method.
Although the state ruled its Medicaid formula — not Nutting’s — should have been followed, the state said that even if it allowed Nutting’s formula, Trues still “overcharged MaineCare 100 percent of the time ...”
Such inflated charges — multiplied by thousands of gloves, adult diapers and other supplies — and the failure to keep adequate records led to the state’s finding that Nutting’s pharmacy overbilled the state $1.6 million, of which he failed to pay back $1.2 million after the pharmacy went bankrupt.
Nutting is the presumptive speaker of the House, selected by fellow Republican legislators two weeks ago. His election to the third most powerful post in state government will not become official until he is approved by the full Legislature in January.
Despite the recent revelations that Nutting left the state and federal Medicaid programs with the $1.2 million in bad debt, Republicans and even some Democrats have said it will not harm his chance to become speaker.
The debt sparked a state investigation.
The records of the state Department of Human Services, as it was called 10 years ago, show that Nutting’s pharmacy pushed its prices up that high in two steps:
First, Trues charged the 40 percent markup allowed by Medicaid, but based it on the sales price of the product. Medicaid rules say the markup should be based on the acquisition cost — what it cost the pharmacy to buy the product from the supplier.
Second, Trues then added another markup.
Take the medical gloves, for example.
In 2001, Nutting bought 4,800 packages of latex and other medical gloves for $4.39 per package. If he had followed state regulations, he would have sold them to a Medicaid provider, such as a nursing home, for no more than $6.22 — a 40 percent markup.
But Nutting told the state he used a different formula — one he had learned in pharmacy school — that is based on the sales price, not the acquisition price, to set the markup. He did that by dividing what he paid for the product by 0.6.
That is contrary to state regulations. If he had used that improper 0.6 formula, he would have sold the gloves for $7.31 per package.
In fact, the state said he sold them for much more. He sold the packages of gloves for $11.11, a markup of $6.72, or 153 percent.
When the state added up all the gloves Trues billed Medicaid for between 1997 and 2001, it concluded, “ ... Medicaid overpaid Trues by $531,792.73.”
The state’s research of pricing formulas cited a survey that would appear to partially support one part of Nutting’s markup method.
Of 23 New England pharmacies responding to a poll, 16 used Trues’ 0.6 markup formula and six marked up prices the way the state mandates. But the survey was not related to Medicaid charges.
A DHS audit of 13 medical suppliers like Trues showed that none used the 0.6 formula that Trues used.
In interviews, Nutting said the overbillings were “honest,” “unintentional” and the result of “confusing regulations.”
John Christie is the publisher and senior report for The Maine Center for Public interest Reporting, a nonpartisan journalism organization based in Hallowell. Email: firstname.lastname@example.org . Web: pinetreewatchdog,org. Steve Mistler of the Sun Journal contributed to this report.