Insurance Thought Leadership

Kindle
Print Friendly and PDF

May 14, 2013 — 1948 views

5-Year Analysis Of Pharmacy Burglary And Robbery Experience

Summary:

Pharmacy crime involves every part of the distribution chain from manufacture through wholesale, retail, and ultimately to the end user. Pharmacists have been victims of deceptive practices, prescription fraud, employee diversion, burglaries and robberies.

5-Year Analysis Of Pharmacy Burglary And Robbery Experience

Photo courtesy of NNECAPA

Background
Burglaries and robberies represent a significant expense to pharmacies in the United States. Beyond direct insurance costs, which are driven by loss experience, pharmacists experience financial, business interruption and psychological costs. Pharmacists are concerned about armed robberies, and even finding that a store has been burglarized overnight can be upsetting and cause the expenditure of thousands of dollars in an effort to prevent reoccurrence. Beyond what is covered by insurance, customers pay deductibles that can easily be exceeded as a result of criminal efforts to gain entrance. Pharmacists that are victimized face hours of dealing with police, the Drug Enforcement Administration, board of pharmacy, contractors and their insurance company. As state and national efforts increase to address the underlying problem of prescription drug diversion, pharmacists face increasing administrative and regulatory compliance costs.

When we seek methods to effectively combat the problem, it is important to understand the larger problem of prescription drug diversion and how it fuels pharmacy burglaries and robberies. Described by the Centers for Disease Control as having reached epidemic proportions in the United States, demand for prescription narcotics, coupled with a widely available supply, create an environment that is ripe for criminal activity.

  • While the U.S. represents only 4.6% of the world's population, we consume 80% of the global opioid supply.
  • Five million Americans use opioid painkillers for non-medical use.
  • We experience almost 17,000 deaths from prescription narcotic overdoses annually. In a 4 year period, that is more deaths than we experienced during the Vietnam War.
  • Morphine production was at 96 milligrams per person in 1997. By 2009, that number increased eight-fold.

The origins of the problem are complex, but are based on a cycle of over-prescribing that has occurred over the past two decades. While well intentioned, liberal prescribing coupled with aggressive marketing, incentives and even encouragement to physicians to relieve pain at all costs sparked the fire. Unchecked by adequate physician education on drug diversion and dependency, and a lack of appropriate chronic pain management protocols, demand and dependency increased. As demand increased, so did production levels, opportunities for profit and creative methods of diversion.

Pharmacy crime involves every part of the distribution chain from manufacture through wholesale, retail, and ultimately to the end user. Pharmacists have been victims of deceptive practices, prescription fraud, employee diversion, burglaries and robberies. According to the Centers for Disease Control, prescription drug diversion, measured by drug overdose deaths and pharmacy crime, is at epidemic proportions.

National And State Actions Taken To Address The Problem
Significant efforts continue to be taken at the national and state levels to combat the problem, with various degrees of success. Each of these has a direct impact on how customers conduct business. Unfortunately, most will have no short term impact on reducing the probability of pharmacy burglaries, robberies or employee diversion.

Prescription Drug Monitoring Programs — Inputting data on prescriptions written and prescriptions filled, particularly for opioid based narcotics is an effective measure for identifying doctor shoppers, abusers and other drug seekers. While the programs are in place in 49 states, most do not connect with each other. This allows a drug seeker to get a prescription in one state and have it filled in another. Use of the program varies significantly by state between being mandatory, voluntary or somewhere in between. In addition, many of the programs are set up on a "free trial" basis for 5 years. As the trial periods are expiring, funding is becoming difficult to continue the programs, notably in California and Florida. Most pharmacists support these programs; however, there has been some resistance by major chains and various state medical associations — in large part objections are based on the time it takes to enter data.

Drug Courts — Intended to allow persons committing crimes to recover, many of these courts eliminate or significantly reduce sentencing for burglars and, in some cases, robbers. This results in a significant level of resentment by pharmacists who are victims of crime.

Drug Enforcement Administration Strike Forces — In the past several years, the Drug Enforcement Administration has shifted a major portion of resources from illicit drug enforcement activity to prescription narcotics. One of the focal areas has been on monitoring the flow of narcotics to pharmacies. These efforts have resulted in sanctions and subpoenas against distributors such as Cardinal Health and Amerisource Bergen, as well as arrests of physicians and pharmacists. In some areas of the country, there are complaints of narcotic shortages as distributors restrict shipments. This pushes drug seekers to other states and areas where enforcement is not as aggressive.

Changing Prescription Patterns — Where states have increased penalties against prescribing physicians and pharmacists for filling prescriptions when they "should have known better," some physicians have decreased or stopped writing scripts for certain narcotics and some pharmacists have pulled them from the shelves. As chronic pain treatment guidelines are implemented and physician education on drug diversion and addiction increases, we can expect tighter controls on the management of prescription narcotics.

Treatment For Abuse And Addiction — A reality in the war against prescription narcotic diversion is that the demand exists and that the long term solution requires treatment programs that take time, cost money and are much more difficult to manage than writing and filling prescriptions. Until these programs become more available and acceptable, drug seekers will continue to find ways to obtain narcotics, including committing crimes against pharmacies.

Key Findings Presented In This Report
This report covers a 5-year analysis of burglaries and robberies occurring to Pharmacists Mutual customers.

These claims impact our bottom line. Data collected comes from claims department data as well as interviews with each customer victim by our claims department over the past two years. In many cases (where requested by the customer or due to the nature of the loss), follow-up investigation is also conducted by risk management. Information obtained has been used to educate customers, underwriters and field representatives about how the crimes are committed and preventive measures that can be employed to minimize the extent of loss.

What we've learned:

  • Frequency of pharmacy crimes (81% of PMC crimes are break-ins vs. armed robberies) has been relatively flat over the past 5 years compared to policy count. While we've seen an 18% increase in crimes over the past 5 years, policy count has grown by 21%. RxPatrol, the only other national pharmacy crime database, has seen a slight decrease over the past 2 years, however, 60% of RxPatrol reports are for armed robberies, primarily to national chains, and much of this decrease may have been as a result in aggressive measures to address the robbery problem in chain stores such as Walgreens and CVS.
  • Total incurred and average costs have increased steadily over the past 5 years.
  • Almost 70% of the crimes we see are under $5,000. 50% of costs come from the 9% of claims that are in excess of $25,000.
  • In 52% of cases, criminals enter through the front door or front window. One indication is that video surveillance, while at times helpful in identifying perpetrators, does not deter crime. Some of the most expensive burglaries have been those where criminals entered through the roof. Examination of these and side wall entries indicates the approach targets areas of the pharmacy that may not be adequately protected by alarm systems, or to circumvent motion detectors.
  • In 1/3 of cases, police respond within 5 minutes. When they do, arrests result in 21% of cases. Unfortunately, most crimes take less than 2 minutes. Bottom line, if they can get in, chances are they will be successful and will get away. In areas of the country where police response times exceed 30 minutes (rural and municipalities with budget constraints), pharmacies are effectively unprotected.
  • Most state boards of pharmacy require alarms, but situations remain where alarms are not present, are not functional or are ineffective. In many cases, maintenance and testing are non-existent, and there are suspicions that alarm codes may have been compromised.
  • If a criminal wants to try and burglarize or rob a pharmacy, the pharmacy will likely incur property damage. However, the size of the loss can vary from a few hundred dollars to tens or even hundreds of thousands of dollars depending on control measures that are in place.

    What really makes a difference in keeping loss costs low?

    • A well-designed, tested and reliable alarm system. Alarm codes need to be protected and police response needs to be adequate.
    • Protecting doors and windows to slow down or eliminate the possibility of entry. If the crooks cannot gain entrance within a few minutes, they will usually leave.
    • Installing a safe. The overwhelming majority of criminals are in and out in less than 2 minutes. Locking target drugs in a sound, well-secured safe can make a significant difference in the size of the loss.
    • Having a plan and training employees on what to do if a robbery occurs. This can mean the difference between life and death.

What We've Done At Pharmacists Mutual And What We Will Be Doing In 2013

  • Over the past two years, we have met with over 15 pharmacy associations and buying groups, have published numerous white papers and articles in our semi-annual publication "Pharmacists Mutual Risk Management" and have spoken with hundreds of customers who have experienced pharmacy crime first hand.
  • We have identified vendors of security products based on our loss experience. Where possible, we have arranged discounts for PMC customers who use these services.
  • In the fourth quarter of 2012, we provided training to underwriters about pharmacy trends and tools to assist them in evaluating protection levels at pharmacies and to address specific deficiencies.
  • For 2013, we will be implementing a pharmacy security evaluation matrix. The matrix, based on probability and loss severity data, will be used to assist pharmacies in assessing risk and in underwriting evaluation.
  • We plan to continue publication and education efforts.

Pharmacy Crime Frequency

Number of Pharmacy Commercial Policies

National Data

Pharmacy Crime Total Incurred Claims Cost

Pharmacy Crime Average Incurred Claim Cost

Frequency by Size of Incurred Loss

Robbery vs. Burglary

Method of Entry

Average Cost by Method of Entry

Video Surveillance

Arrest Rates and Video Surveillance

Police Response Times

Arrest Rate by Time of Response

Alarm Notification

Alarm Response Average Cost

Alarms and Sales

Michael Warren photo

About the Author

Mike is the Risk Manager for Pharmacists Mutual Insurance. In this capacity, Mike is responsible for the development of loss prevention and control strategies for pharmacy, home medical equipment and the home health care business segments. Mike is also the editor of Pharmacists Mutual Risk Management, a national publication distributed to pharmacies, home medical and home healthcare organizations.

+ READ MORE about this author ...

Take Action

  1. Share it with your social contacts (use the social sharing buttons at the top)
  2. Email it to your direct reports and colleagues (use the Email button at the top)
  3. Follow Michael Warren and/or the Property & Liability topic to be notified when new articles are added
  4. Read related articles
  5. Add a comment or ask a question

Was This Article Helpful?

If so, you can follow Michael Warren and receive a notification (either in your feed reader or via email) whenever a new article by Michael Warren is published on InsuranceThoughtLeadership.com.

You can also follow the Property & Liability Topic, either in your feed reader or via email notifications:


Add a Comment or Ask a Question

blog comments powered by Disqus

Key Takeaways

  1. Burglaries and robberies represent a significant expense to pharmacies in the United States. Beyond direct insurance costs, which are driven by loss experience, pharmacists experience financial, business interruption and psychological costs.
  2. Described by the Centers for Disease Control as having reached epidemic proportions in the United States, demand for prescription narcotics, coupled with a widely available supply, create an environment that is ripe for criminal activity.
  3. A reality in the war against prescription narcotic diversion is that the demand exists and that the long term solution requires treatment programs that take time, cost money and are much more difficult to manage than writing and filling prescriptions.
  4. A well-designed, tested and reliable alarm system, protecting doors and windows to slow down or eliminate the possibility of entry, locking target drugs in a sound, well-secured safe, and training employees on what to do if a robbery occurs all will make a difference in keeping loss costs low.