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Pharmacy Enforcement Remains Top Priority

Today’s Topic:  Did you know that pharmacies and pharmacists continue to be a top enforcement priority for the U.S. Department of Justice and the myriad health care fraud task forces around the country?

Recent Sentencing in Compounding Pharmacy Fraud Case

This past week, a Mississippi pharmacist was sentenced to 5 years in prison for defrauding TRICARE (the government healthcare payer for the U.S. military and veterans) and some private insurance companies of $180 million through various kickback schemes.  These schemes might sound familiar because they all take on common characteristics- essentially payments to someone in exchange for referral of prescriptions to boost the pharmacy’s numbers.  And, more often than not, these prescriptions are medically unnecessary and driven by the greed of the people involved instead of the best interests of the patients.

This particular case became known as the “Mississippi Pain Cream Scheme” and led to three individuals who pled guilty, were sentenced to jail time and lost virtually everything. This past week’s announcement involved the sentencing of David “Jason” Rutledge, a pharmacist and co-owner of several compounding pharmacies.  Two others pled guilty earlier, including a Louisiana veteran, Tommy Shoemaker, who in December was ordered to pay $1.7 million in restitution and forfeit proceeds from the sale of his luxury vehicles.  And the Florida connection- Mitchell “Chad” Barrett of Gulf Breeze, was the mastermind behind this scheme as well as a larger national scheme that resulted in more than $1.5 BILLION in fraud nationwide!  It’s no wonder the government is on the hunt.

In this case, Rutledge, co-owner of several compounding pharmacies (no surprise there, as my last article reminded everyone that compounding pharmacies are still at the tip of the enforcement spear) distributed medically unnecessary compounded medications.  The formulas for these compounded medications were designed to assure the highest reimbursement from payers.  Once the pharmacist determined the optimal formula for the highest profit margin drugs, the pharmacist solicited recruiters to get prescriptions referred by prescribers for those drugs and paid the recruiters a percentage based on the reimbursements generated from those referred prescriptions.

But wait, there’s more!  This pharmacist and the related pharmacies also routinely waived copays, concealing that fact by claiming copayment assistance from dubious programs designed to help patients with high-cost drugs.

In the end, did the pharmacist and his pharmacies ultimately win?  The answer is a resounding “NO”.  In addition to serving the 5-year prison sentence, the pharmacist and his pharmacies will forfeit all the assets traced to the criminal activity and will also pay restitution of the $180 million fraudulently taken.  Restitution of $180 million?  That’s a bit hard to do from prison, don’t you think?

Lessons Learned?

Similar to other fraud enforcement cases in the pharmacy industry, fraudsters seem to follow very common patterns:

  • Acting in their own self-interest, not in the best interests of patients
  • Pursuing opportunities to make more money in flagrant violation of law and ethics
  • Paying someone to refer prescriptions, often for drugs that have a high profit margin
  • Increased prescribing of high-cost drugs

The game “Whack-a-Mole” serves as a metaphor for these cases.  If you stick your head up too high, your bound to get whacked!  Burgeoning health care costs justify the government and its enforcement agencies expending significant resources in the pursuit of fraudsters.  The government has the ability to data mine to identify outliers on numerous data metrics in pharmacies just like they do in every segment of the health care industry.  In many other segments of health care, this data mining has led to a movement away from cost-based reimbursement towards prospective payment and value-based payments.  But in pharmacy, reimbursement is still heavily driven by costs and, as those costs increase, so too will the government efforts to find and prosecute those who take advantage of the system.

For all of these reasons, it is important to remember to stick to the basics:

  • Never pay anyone to refer prescriptions to you. There are legitimate ways to increase your volumes and profitability.
  • Always act in the best interests of the patient. Ultimately, doing so is also in your best interests.
  • Always validate that there is a valid prescriber-patient relationship before filling a prescription.
  • Always validate that the prescription is medically necessary.
  • Always collect patient co-payments or document thoroughly the reasons you didn’t.
  • If you own a pharmacy, periodically assess your data and make sure you are not an outlier on the government’s radar.

The time is now to evaluate any strategies you are considering for increasing your profits.  Taking proper care to implement those plans ensures you will not end up in the government’s crosshairs.