Federal Government Investigating Soaring Pharmacy Reimbursement Claims in Military

According to a startling article published in the Wall Street Journal, several compounding pharmacies are facing possible liability under the False Claims Act for illegal billing practices surrounding customers enrolled in coverage through the military’s TRICARE healthcare insurance program. Described by investigators as “widespread fraud,” the investigation spans across at least four states and involves dozens of pharmacies believed to be engaging in double-billing and other fraudulent practices.

Details of allegations against compounding pharmacies

While still in the investigative stage, the inquiry into the alleged fraudulent billing scheme has revealed a potential illegal kickback scheme involving lucrative financial incentives offered to pharmacists in exchange for their agreement to write a certain number of prescriptions per reporting period. More specifically, investigators believe that several of the pharmacies paid cash incentives to area doctors and specialists in exchange for their agreement to increase the number of prescriptions made out to TRICARE patients, even if the doctor had never actually met with the patient.[1.Walker, Joseph, “U.S. Targets Pharmacies Over Soaring Claims to Military Health Program,” Wall Street Journal http://www.wsj.com/articles/u-s-targets-pharmacies-over-soaring-claims-to-military-health-program-1447032619 (Retrieved Nov. 10, 2015).]

In addition, the allegations reveal that the pharmacies may have offered tens of thousands of dollars in commission payments to marketers able to retain the highest number of TRICARE customers. As a result, claims for reimbursement on behalf of TRICARE enrollees has since skyrocketed, prompting federal authorities to take a closer look into what is really going on in these establishments.

Unique aspects of the fraud and history of abuses

The allegations in today’s case highlight an emerging trend toward the use of compounding pharmacies, which are designed to alter the dosage or formulaic makeup of a drug to better meet the needs of patients and customers. These pharmacies are generally utilized to address the pharmacological needs of patients whose conditions are not remedied by a “one-size-fits-all” medicinal approach. In 2014, TRICARE reimbursed a total of approximately $500 million worth of compounded drugs. By contrast, the program has reimbursed a total of $1.75 billion in 2015 so far.[2.Whitman, Elizabeth, “US Military Pharmacy Fraud Case: Federal Prosecutors Investigate Claims Of False Billing Amid Sharp Increase In Prescription Drug Spending,” International Business Times, http://www.ibtimes.com/us-military-pharmacy-fraud-case-federal-prosecutors-investigate-claims-false-billing-2175459 (Retrieved Nov. 10, 2015).]

This is not the first cause of action targeting compounding pharmacies, and several Florida-area establishments faced significant False Claims Act liability in 2014. For instance, the Jacksonville-area compounding pharmacy MediMix settled with the Department of Justice for $3.77 million amid claims of illegal kickbacks and physician referral agreements. Likewise, the company was targeted after a whistleblower alerted authorities that the pharmacy’s number one referral source was the spouse of the pharmacy’s senior vice president – an illegal referral source.

According to U.S. Attorney for the Middle District of Florida, A. Lee Bentley III, the government also plans to pursue possible criminal charges against any pharmacy believed to be engaging in this type of fraud – which can also include offering TRICARE patients direct incentives to switch pharmacies.