The federal government is intent on eliminating fraud and abuse in the health care industry. This includes aggressive targeting of compounding pharmacies. Compounded medications are customized medications made based on a practitioners’ prescription in which ingredients are mixed together in the strength, dosage, and form required to treat a patient’s specific needs. The federal government is also carefully scrutinizing physicians, pharmacists, executives, marketing companies, and others involved with these pharmacies.
As evidenced by recent investigations and settlements, the federal government is increasing scrutiny over the compounding drug industry, which investigators believe is rife with fraud and abuse. Although allegations of fraudulent practices extend throughout the industry, including Medicare and Medicaid, the government has paid particular attention to TRICARE, a government program for military health insurance that paid $1.75 billion for compounded drugs in FY 2015 alone.
In response to such a substantial spike in TRICARE costs, federal authorities are now aggressively investigating fraudulent schemes, including potential false claims, kickback arrangements, and improper auto-refill programs. Typically, these schemes operate through the use of aggressive marketing tactics that obtain patient authorization for physicians to write prescriptions that are sent to a compounding pharmacy, often without a patient ever meeting or speaking to a doctor.
In addition to citing lack of medical necessity and failure to establish physician-patient relationships as a basis for False Claims Act (FCA) violations, the federal government also claims that compounding pharmacies routinely over-bill federal payors to provide incentives and other kickback arrangements to doctors who agree to write prescriptions, in violation of the federal Anti-Kickback Statute (AKS).
Investigations to identify alleged fraud and abuse under the FCA and AKS involve:
Under the False Claims Act and Anti-Kickback Statute, multiple parties involved with compounding pharmacies can face prosecution for their involvement in an alleged fraudulent scheme. For example, government authorities may allege:
As federal authorities allege that many schemes operate without establishing proper doctor-patient relationships, they must investigate whether proper telemedicine protocol was followed. Telemedicine can be legal when it constitutes a proper doctor-patient relationship, treatment is medically necessary, and all the following components are met:
Investigators may also look closely at marketing representatives, including sales reps and others hired to promote compound medications, who relay symptoms to the telemedicine doctor, who then sends the prescription to the compounding pharmacy – especially if they are paid on a percentage of prescriptions they generate. If the initial contract with the marketing company was not a proper contract, and there was a kickback included, then every resulting prescription can be considered tainted, and all claims submitted to a federal health care program for reimbursement subject to being in violation of the AKS.
Investigations are being waged in Texas and other states across the country by the Department of Defense (DOD), Department of Justice (DOJ), Health and Human Services Office of the Inspector General (OIG), State Attorney General, and, to some degree, the FDA and DEA. Depending on the nature of the allegations, structure of companies, and other individual facts, there may be a number of viable defense strategies, including:
Compounding pharmacies, physicians, and others may be notified of an investigation when they receive a civil investigative demand (CID) from the federal government, which requests documentation in regard to possible violations of the False Claims Act. These include documents pertaining to company records, financials, marketing agreements, physician relationships, and medical records. Investigations may also begin with a subpoena or unannounced visits from a federal agent.
Although a CID can trigger many concerns, including concerns over costs, there are steps that can be taken to reduce the scope of documents demanded in the CID, which can dramatically reduce time and expenses required in a response. For example, our team focuses on effectively interpreting the CID and facilitating discussions with federal prosecutors, who are often open to good faith negotiations about providing the government with the evidence it needs without the disproportionate financial expenses companies may incur in producing non-critical information. Such discussions can also facilitate potential resolutions and mitigated penalties.
If you have been made aware of an investigation or have concerns over a potential investigation, you need to act immediately. At Hendershot, Cannon & Hisey, P.C., we have extensive experience defending physicians and health care practices accused of fraud and abuse, and leverage over 150 years of combined experience to provide the counsel and aggressive representation required when clients face investigations and allegations. To discuss a potential case and how our award-winning health care attorneys can help, call (713) 909-7323.