Pharmacy Fraud: Data Tells the Story

Today’s Topic:  Did you know the DOJ never tires of chasing the bad guys?

If a pharmacy is going to engage in nefarious activities, it should expect to get caught. Fraud in these cases is generally easy to prove. Simply verifying inventory, orders and dispensing records yields incredible data that when combined with comparative data from peer pharmacies can be used by law enforcement to establish that fraud has been committed.

Latest Enforcement Activity

On April 13, 2022, the U.S. Department of Justice (DOJ) announced a 78-month prison sentence imposed against a 37-year-old owner/operator of several pharmacies in New York, Aleah Mohammed (Mohammed). The sentence was as a result of guilty plea entered by Mohammed in April 2021 for charges of mail fraud, health care fraud and conspiracy to commit health care fraud. As part of her guilty plea, Mohammed agreed to forfeit $5.1 million and pay $6.5 in restitution.

During the course of her criminal conduct, Mohammed engaged in multiple schemes to defraud health care programs, including obtaining more than $6.5 million from Medicare Part D Plans and Medicaid drug plans. Over a five-year period, Mohammed submitted fraudulent claims to Medicare and Medicaid for prescription drugs that were:

  • not dispensed;
  • not prescribed as claimed;
  • not medically necessary;
  • dispensed during a time when one or more of the pharmacies she operated was no longer registered with the State of New York; and
  • often for expensive prescription drugs to treat HIV.

Adding to the mounting evidence against her, Mohammed led a lavish lifestyle and purchased luxury items such a Porsche and jewelry.

Lessons Learned

It seems that criminals never learn. They think that they are smarter than law enforcement and will never get caught. But rarely do those criminals win in the end. It is basic accounting and law enforcement knows how to do that. Law enforcement mines each pharmacy’s data and looks for outlier information as compared to peer pharmacies as well as inventory data. So what information did the DOJ have at its disposal in this case?

  1. On hand inventory. As with any payer audit, the payer (and law enforcement) can obtain information concerning inventory on hand. If the pharmacy never had the inventory, it could not sell the drug.
  2. Drug purchasing records. Again, unless a pharmacy had the drug in inventory or purchased the drug through one of its wholesalers, it is hard for the pharmacy to defend against fraud charges when it is filing a claim for drugs never in its inventory.
  3. Dispensing records. Dispensing records also reveal information essential to determining what was in inventory, what was purchased and what was dispensed.
  4. Comparative data concerning dispensing of high-cost drugs as a proportion of other drugs sold.
  5. Comparative data looking at peer pharmacies for dispensing trends.

Collectively, the data and these records make it easy for law enforcement to identify and prosecute fraudulent claims. Even so, criminals seemingly are undeterred, and schemes like this one are repeated time and again.

Closing Thoughts

Simply put, crime does not pay. It does not matter whether it is in the pharmacy industry or elsewhere, when government funds are involved, law enforcement will surely be looking for wrongdoers. This probably is not the last case of its kind this year, so expect to see more news of pharmacies/pharmacists behaving badly.

Controlled Substances Dispensing Gets Pharmacy in Trouble – AGAIN!

Yet another pharmacy owner was just convicted of unlawfully dispensing over 1.5 million doses of controlled substances, primarily oxycodone and hydrocodone. 

By: Karen Davila

In my last couple of articles, I’ve focused on the controls necessary to safely operate a pharmacy and dispense appropriate prescribed medications, including controlled substances.  And those of you who heed that kind of advice are likely to avoid the unwanted attention of law enforcement.  However, for those who continue to think they can operate with impunity, heads’ up:  the war against opioids in the U.S. is ongoing and enforcement activities are not slowing down.  Below is an article about this recent case out of Texas and some lessons we can all take away from what was reported.

In this most recent case, a federal jury in Texas convicted a Texas pharmacy owner (Carr) on March 7 of one count of conspiracy to unlawfully distribute and dispense controlled substances, four counts of unlawfully distributing and dispensing controlled substances, one count of conspiracy to launder money, and two counts of engaging in transactions in property obtained from the illicit activity.  Carr now faces up to 140 years in prison, among other consequences.Continue reading

Controlled Substances Policies Help Identify Risks Before the DEA Comes Knocking

Today’s Pharmacy Law Topic:  Did you know that your controlled substances policies should be protecting your pharmacy and helping you identify risks before the DEA comes knocking?

By: Karen Davila

As I’ve said in earlier articles, controlled substances are a big part of the business and create significant risks faced by retail pharmacies.  But many of those risks can be mitigated through written policies and procedures and consistent adherence to those policies and procedures.  These are the first line of defense and one of the most important strategies to identify and mitigate the risk of regulatory enforcement action before the DEA comes knocking.

Regardless of the size of your pharmacy, you should have written policies and procedures addressing the core requirements of both federal and state law.  Below is a list of essential controlled substances policies relating to inventory controls, dispensing and destruction/reverse distribution.  Although not an exhaustive list, these are key to decreasing the myriad risks inherent in stocking and dispensing controlled substance prescriptions.Continue reading

Controlling Controlled Substances Risks

As a pharmacy, it is part of the job to stock and dispense controlled substances.  But with all of the headlines about misuse of opioids and DEA raids, pharmacists are concerned about the risks of having controlled substances on hand and confused about when to refuse to fill a prescription.

But there are a few simple steps pharmacies and pharmacists can take to control their risks.  Doing so should help pharmacists feel more at ease in handling CS inventory and evaluating CS prescriptions.

Effective Controls on CS Inventory

Ordering and accounting for controlled substances can be a challenge.  But many risks can be controlled by having well-written policies and procedures that are strictly followed, as well as assuring adequate security and periodic inventory/audits.Continue reading

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.Continue reading

Telemedicine Pharmacy Fraud Trial Ends in Convictions

Telemedicine pharmacy arrangements continue to be of significant interest to fraud enforcement.  A 2018 case in which four individuals and seven companies were indicted ended in a month-long jury trial of one of the individuals, a Florida pharmacy owner.  The federal jury trial in the billion-dollar telehealth pharmacy fraud scheme resulted in conviction on 22 counts of mail fraud, conspiracy to commit health care fraud and introduction of misbranded drugs into interstate commerce.  Sentencing in the case is set for May of 2022.  Other co-conspirators entered plea agreements along the way, pleading guilty to various charges including felony conspiracy to commit health care fraud, felony misbranding, conspiracy to commit wire fraud, and fraudulent telemarketing of dietary supplements, skin creams and testosterone.  Many of these are still awaiting sentencing, also expected to be scheduled sometime in 2022.

THE SCHEME

The scheme involved several individuals, compounding pharmacies and telemarketers engaged in a conspiracy to commit health care fraud, mail fraud and introducing misbranded drugs into interstate commerce.  Peter Bolos, along with two other co-conspirators, owned and operated Synergy Pharmacy in Palm Harbor, Florida.  Working with HealthRight, a telemarketer, the co-conspirators generated prescriptions for drugs such as pain creams, scar creams, and vitamins.  Using the HealthRight telemarketing platform, they would call consumers and deceive them into providing their personal insurance information and accept the drugs. HealthRight then communicated the prescription requests to physicians who authorized the prescriptions without ever interacting with the patients, and paid those physicians for issuance of the prescriptions. Through this scheme, the co-conspirators were able to solicitate insurance coverage information from consumers across the county for prescription pain creams, fraudulently obtain prescriptions, mark up the prices of the drugs and bill private insurance carriers.Continue reading

Compounding Pharmacies Remain at the Tip of the Enforcement Spear

Compounding pharmacies are subjected to special licensing and permitting rules because of the heightened risk of the very nature of what they do- customizing a prescription by combining, mixing or altering ingredients to create a sterile or non-sterile medication for a given patient.  Pharmacies may only compound drugs where a commercially available drug/dose/formulation is not available.  Because of the heightened risk coupled with the high cost of compounded drugs and the increased prescribing of these expensive drugs, compounding pharmacies continue to be at the tip of the enforcement spear and a target for investigations.   This and the fact that the number of compounding pharmacies is only a fraction of the number of licensed pharmacies in the U.S., contributes to the increasing visibility when the U.S. Department of Justice prosecutes violators.

Growth of Compounding

From 2006 to 2015, the U.S. experienced a sevenfold increase in the prescribing of compounded drugs.  Recently, the compounding pharmacies market was valued at more than $9 billion and is projected to grow by another $5 billion over the next 30 years.Continue reading

Health Care Fraud Enforcement Continues to Rock Pharmacy Industry

pharmacy fraud

pharmacy fraudBy: Karen Davila

Yet again, the fraud enforcement arm of the DOJ strikes out against fraud in the pharmacy industry.  Two new cases shed continuing light on the ongoing fraud.

Announced last week by the DOJ, the owner/operator of five pharmacies in New York pled guilty to charges stemming from a scheme to defraud Medicare and Medicaid by billing for prescription drugs that were not dispensed, not prescribed, not medically necessary or dispensed when the pharmacy had no authority to dispense the prescription drugs.  This blatant disregard for the law was magnified when the owner/operator used the ill-gotten gains of her scheme to purchase luxury items like cars and jewelry.  Nothing screams “come and get me” like openly flaunting the money taken from the government.Continue reading

Drug Waste A Big Money Issue & How Providers Can Recoup The Cost of Unused Drugs on Medicare Part B Claims

drug waste

drug wasteBy: Zach Simpson

In today’s practices there are many circumstances that call for the discarding of unused portion of drugs, and because of this drug waste can be a big-money issue for many practices. A perfect example is Botox which must be used within five hours of reconstitution, and if it is not used within that timeframe the only option a provider has is to discard the unused supply. What many providers may not be aware of though is that money can be recouped for drugs that have been discarded. The aim of this article is to educate providers that when applicable they may report drug waste in addition to the drug and its administration for Medicare Part B claim reimbursement.

How to Properly Report

For a provider to recoup and report the drug waste they must report the administered drug using the appropriate HCPCS Level II supply code, and the correct number of units in box24D of the CMS-1500 form. As a second line-item providers will want to enter all of the wasted units. It is very important to ensure that the provider documentation verifies the exact dosage of the drug injected, and the exact amount of and any reason for waste. Be aware If the provider did not assume the cost of the drug or administer the drug to the patient they may not bill for the unused portion.

In addition to listing the wasted units as a second line-item certain local contractors may require you to use the modifier JW Drug amount discarded/not administered to any patient to identify an unused drug from single-use vials or single-use packages that are appropriately discarded. Be aware that is inappropriate to use the modifier JW with an unlisted drug code. Therefore, it is imperative to be aware of the local contractor requirements, and appropriate drug codes.Continue reading

2021 Pharmacy Enforcement Actions in Full Swing

By: Michael Silverman

The new year has brought with it no lull in pharmacy fraud crackdowns and enforcement actions, with allegations related to over one billion dollars in false claims.

Here’s a breakdown of the latest:

Mississippi Man Sentenced to 18 Years in Prison and $287,659,569 in Restitution

This individual spearheaded a scheme involving kickbacks to marketers and prescribers to defraud TRICARE and other healthcare programs by submitting claims for unnecessary compounded medications, which also involved routine waiver of patient financial responsibility. Continue reading