As those in the health care industry are well aware, the Department of Justice and the Department of Health and Human Services, along with their state and federal law enforcement partners, have continued their rigorous enforcement efforts to prevent fraud and abuse involving government reimbursement programs like Medicare, Medicaid and TRICARE, the federal government payor for military health insurance.
As one example, the recently announced 2018 National Health Care Fraud Takedown described fraud schemes involving more than 600 defendants and over $2 billion in losses.
One significant area of focus for federal investigators of health care fraud involves compounding pharmacies — pharmacies and pharmacists that combine, mix or alter ingredients "to create a medication tailored to the needs of an individual patient," according to the FDA, which does not approve compounded drugs.
A recent search of civil and criminal enforcement actions involving compound pharmacies since 2015 shows that health care providers have paid more than $200 million in fines and penalties for alleged fraud and abuse related to compounding.
We've included a summary below of these matters, which involved individual physicians, pharmacists and pharmacies. Each of the cases underscores how important it is for health care providers to monitor closely their practices and policies for compounding pharmacies, to implement rigorous internal compliance protocols, and to respond promptly and effectively to inquiries from federal agencies or the DOJ.
Summary of government recoveries in civil and criminal matters involving compounding
Party: Michael Frey M.D.
Date: 5/11/2018
Court: U.S. District Court for the Middle District
of Florida
Description: From April 1, 2013, until April 30,
2015, Dr. Frey knowingly caused the submission of false claims to
TRICARE for pharmaceutical pain cream prescriptions by receiving
cash payments from Ryan Williamson in exchange for referrals of
pharmaceutical pain cream prescriptions in violation of the
Anti-Kickback Act, 42 U.S.C. § 1320a-7b. Ryan Williamson was a
sales representative for RX To You Pharmacy, Inc., located in
Stuart, Florida.
Amount: $3 million
Party: MedMax LLC
Date: 2/14/2018
Court: U.S. District Court of New Jersey
Description: Steven M. Butcher, a former
pharmaceutical sales representative turned owner and operator of
MedMax LLC, admitted that from July 2014 through April 2016, he
organized a large-scale scheme to defraud health insurance plans by
submitting phony claims for medically unnecessary prescription
compounded medications, including scar creams, pain creams and
metabolic supplements marketed by MedMax for certain compounding
pharmacies.
Amount: $45 million
Party: Express Plus Pharmacy
Date: 11/30/2017
Court: U.S. District Court for the Southern
District of Florida
Description: The United States contends that it
has certain civil claims against Defendants arising from
Defendants' knowingly billing TRICARE for prescriptions for
pharmaceutical products written by Dr. Vijil K. Rahulan that were
invalid and not reimbursable because: there was no valid
prescriber-patient relationship; the prescriptions were based on
telephone consultations with patients that violated applicable law
and regulations on telemedicine; the prescriptions were medically
unnecessary; and/or the prescriptions were tainted by kickbacks,
all during the period from January 1, 2015 through May 31,
2015.
Amount: $170,000
Party: A to Z Pharmacy
Date: 11/06/2017
Court: U.S. District Court for the Middle District
of Florida
Description: According to admissions made as part of his plea
agreement, Nicholas A. Borgesano Jr, president and owner of A to Z
Pharmacy, owned and operated numerous pharmacies and shell
companies that he and his co-conspirators used to execute a fraud
scheme involving prescription compounded medications. The scheme
generated over $100 million in fraud proceeds, he admitted.
Borgesano acquired and controlled A to Z Pharmacy in New Port
Richey, New Jersey, Havana Pharmacy, Medplus/New Life Pharmacy and
Metropolitan Pharmacy in Miami, Florida and Jaimy Pharmacy and
Prestige Pharmacy in Hialeah, Florida. He admitted using these
pharmacies to cause the submission of false and fraudulent
reimbursement claims for prescription compounded medications,
chiefly pain creams and scar creams, to private insurance
companies, Medicare and TRICARE.
Amount: $7.6 million forfeited
Party: Bridget McCune
Date: 08/17/2017
Court: U.S. District Court for the Northern
District of Alabama
Description: Bridget McCune of Destin, Florida, pleaded guilty to
conspiracy to commit health care fraud, wire fraud and mail fraud
and to conspiring to solicit and receive kickbacks in return for
referring prescriptions under Medicare and TRICARE. McCune also
pleaded guilty to four counts of health care fraud and to two
counts of money laundering for spending proceeds of the
crimes.
Amount: $401,628
Party: Clifford Carroll, Todd Stephens, Tim
Clinton*, Michael Kenna, Joel McDermott, Todd Hanson, Lisa
Goldberg*, Christopher Mucha, Ian Flaster, Kyle O'Brien, Rhett
Gordon*, William Earl, Frederick Thomas Giampa*, Peter Williams,
John Johnson*, Brett Nadel*
Date: 05/16/2017
Court: U.S. District Court for the Southern
District of Florida
Description: The settlement amount of $130 million
is the amount of restitution ordered from the six starred
defendants (*) as of May 16, 2017. All defendants were charged with
and pled guilty to a $172 million health insurance fraud scheme
involving the manufacturing and distribution of compounded
medications. Clifford Carroll was the scheme's ringleader, and
participants in the scheme illegally gave doctors pre-printed
description pads, solicited potential patients through
misrepresentations, and paid illegal kickbacks to doctors.
Amount: $130 million
Party: Robin Gary Lowry
Date: 05/09/2017
Court: U.S. District Court for the Northern
District of Alabama
Description: The U.S. Attorney's Office
charged Robin Gary Lowry of Columbus, Mississippi, with conspiring
between October 2014 and November 2015 to defraud Blue Cross and
Blue Shield of Alabama and Prime Therapeutics, the entity that
processed prescription drug reimbursement claims for BCBSAL. The
information also charges Lowry with three counts of health care
fraud for submitting fraudulent claims for payment to BCBSAL.
Amount: $272,405
Party: Topical Specialists LLC
Date: 02/11/2016
Court: U.S. District Court for the Middle District
of Florida
Description: The United States contends that it
has certain civil claims against Topical Specialists for knowingly
causing the submission of claims for reimbursement of prescription
medications to the federal health care programs that were not
reimbursable. Specifically, the United States contends that from
February 26, 2013, to May 31, 2015, Topical Specialists caused
claims for reimbursement of prescription medications to be
submitted through WellHealth Pharmacy that were ordered by referral
sources that had a financial interest in the filling of the
prescriptions. The United States contends that Topical Specialists
caused WellHealth Pharmacy to fill these prescriptions and submit
claims for reimbursement of prescription medications to the federal
health care programs in exchange for remuneration paid from
WellHealth Pharmacy to Topical Specialists for such submitted
claims for reimbursement. The United States also contents that
Topical Specialists paid, through a third-party company,
remuneration in the form of research fees that exceeded fair market
value, to several physician referral sources who prescribed
prescription medications through Topical Specialists.
Amount: $2.2 million
Party: Mehul Parkeh
Date: 02/11/2016
Court: U.S. District Court for the Middle District
of Florida
Description: The United States contends that it
has certain civil claims against Dr. Parekh for knowingly causing
WellHealth to submit claims for reimbursement of prescription
medications to federal health care programs that were not
reimbursable. Specifically, the United States contends that from
February 26, 2013, to May 31, 2015, Dr. Parekh, by his writing of
prescriptions for prescription medications filled by WellHealth,
caused WellHealth to submit claims to Federal health care programs
that were improper as a result of remuneration paid from WellHealth
to Topical Specialists, and subsequently distributed to its member
for such submitted claims. The United States further contends that
Dr. Parekh, as a referral source to WellHealth who prescribed
prescription medication for which WellHealth submitted claims to
Federal health care programs, was involved in recruiting physicians
for a research study evaluating the efficacy of pain creams that
compensated physicians' research fees that exceeded fair market
value.
Amount: $10,000
Party: WellHealth Inc
Date: 02/11/2016
Court: U.S. District Court for the Middle District
of Florida
Description: The United States contends that it
has certain civil claims against WellHealth arising from WellHealth
knowingly billing the federal healthcare programs for services that
were not reimbursable. Specifically, the United States contends
that from February 26, 2013 to March 20, 2015, WellHealth sought
reimbursement for pharmaceutical prescriptions that were written by
referral sources that had a financial interest in the
prescriptions. The government contends that WellHealth filled
prescriptions from an affiliated pharmacy that indirectly paid,
through a third-party company, remuneration in the form of research
fees that exceeded fair market value, to several referring
physicians. The referring physicians, in exchange for the research
fee, gathered information and generated documentation regarding the
efficacy of topical medications. During the same time frame, the
physicians also wrote prescriptions for various medications that
were ultimately filled by WellHealth, and billed to federal
government programs.
Amount: $1.9 million
Party: Manish Bansal
Date: 02/11/2016
Court: U.S. District Court for the Middle District
of Florida
Description: The United States contends that it
has certain civil claims against Dr. Bansal knowingly causing
WellHealth to submit claims for reimbursement of prescription
medications to Federal health care programs that were not
reimbursable. Specifically, the United States contends that from
February 26, 2013, to May 31, 2015, Dr. Bansal, by his writing of
prescriptions for prescription medications filled by WellHealth,
caused WellHealth to submit claims to Federal health care programs
that were improper as a result of remuneration paid from WellHealth
to Topical Specialists, and subsequently distributed to its
members, for such submitted claims. The United States further
contends that Dr. Bansal, as a referral source to WellHealth who
prescribed prescription medication for which WellHealth submitted
claims to federal health care programs, was involved in recruiting
physicians for a research study evaluating the efficacy of pain
creams that compensated physicians' research fees that exceeded
fair market value.
Amount: $1.2 million
Party: Syed Asad
Date: 02/11/2016
Court: U.S. District Court for the Middle District
of Florida
Description: The United States contends that it
has certain civil claims against Dr. Asad for knowingly causing
WellHealth to submit claims for reimbursement of prescription
medications to federal health care programs that were not
reimbursable. Specifically, the United States contends that from
February 26, 2013, to May 31, 2015, Dr. Asad, by his writing of
prescriptions for prescription medications filled by WellHealth,
caused WellHealth to submit claims to Federal health care programs
that were improper as a result of remuneration paid from WellHealth
to Topical Specialists, and subsequently distributed to its
members, for such submitted claims. The United States further
contends that Dr. Asad, as a referral source to WellHealth who
prescribed prescription medication for which WellHealth submitted
claims to Federal health care programs, was involved in recruiting
physicians for a research study evaluating the efficacy of pain
creams that compensated physicians' research fees that exceeded
fair market value.
Amount: $10,000
Party: Marisol Arcila
Date: 02/11/2016
Court: U.S. District Court for the Middle District
of Florida
Description: The United States contends that it
has certain civil claims against Dr. Arcila for knowingly causing
WellHealth to submit claims for reimbursement of prescription
medications to Federal health care programs that were not
reimbursable. Specifically, the United States contends that from
February 26, 2013, to May 31, 2015, Dr. Arcila, by her writing of
prescriptions for prescription medications filled by WellHealth,
caused WellHealth to submit claims to Federal health care programs
that were improper as a result of remuneration paid from WellHealth
to TS, and subsequently distributed to its members, for such
submitted claims. The United States further contends that Dr.
Arcila, as a referral source to WellHealth who prescribed
prescription medication for which WellHealth submitted claims to
Federal health care programs, was involved in recruiting physicians
for a research study evaluating the efficacy of pain creams that
compensated physicians' research fees that exceeded fair market
value. Recital A and Recital B constitutes the "Covered
Conduct" referred to in this Agreement.
Amount: $400,000
Party: Blanding Health Mart Pharmacy
Date: 07/15/2015
Court: U.S. District Court for the Southern
District of Florida
Description: The United States contends that it
has certain civil claims against Blanding arising from Blanding
knowingly billing TRICARE for services that were not reimbursable.
Specifically, the United States contends that from February 9,
2015, to April 13, 2015, Blanding sought reimbursement for
pharmaceutical prescriptions that were not medically necessary and
were written by physicians that had never actually seen the
patients. The United States contends these prescriptions were not
appropriately reimbursable. Recital B constitutes the "Covered
Conduct" referred to in this Agreement.
Amount: $8.4 million
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