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DOJ accuses compounding pharmacy of TRICARE kickback scheme

On Behalf of | Mar 5, 2018 | False Claims Act

The Department of Justice has just brought a mammoth case against a Florida compounding pharmacy, two of its executives, and the private equity firm that owns it. The agency accuses the defendants of paying illegal kickbacks to telemedicine doctors and, in some cases, patients, to induce prescriptions for scar creams, vitamins and pain creams without regard for medical need. These prescriptions were then reimbursed by TRICARE, the federally funded healthcare program for military service members and their families.

The compounding pharmacy Diabetic Care Rx LLC, doing business as Patient Care America (PCA), two PCA executives, and the Los Angeles private equity firm Riordan, Lewis & Haden Inc. are accused in the complaint in intervention.

The complaint accuses the defendants and marketers they hired of paying telemedicine doctors to prescribe the compounded vitamins and creams without bothering to actually see the patients. In some cases, patients were paid to accept these prescriptions.

Moreover, PCA and its marketers allegedly manipulated the compounded prescriptions’ formulas in order to achieve the largest possible reimbursement by TRICARE. The defendants and the marketers then split the profits from these reimbursements.

The scheme is said to have generated tens of millions of dollars in a matter of months, according to the Department of Justice.

“Providers and marketers that engage in kickback schemes drive up the cost of health care because they focus on their own bottom line instead of what is in the best interest of patients,” said a spokesperson for the U.S. Attorney’s Office for the Southern District of Florida, which helped investigate the case.

Whistleblowers to receive a share of any recovery

This case was initially filed under the False Claims Act by two whistleblowers who were former PCA employees. The False Claims Act rewards whistleblowers who spot fraud, waste or abuse in government programs by giving them a share in any financial recovery their actions bring about.

The government can intervene in False Claims Act cases brought by whistleblowers without affecting the whistleblowers’ reward. The Justice Department’s Civil Division is trying this lawsuit, which is aimed at recovering the fraudulent reimbursements.

In addition, the Defense Criminal Investigative Service, an arm of the Defense Department, the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit, the USDA Office of Criminal Investigations, and the U.S. Attorney’s Office for the Southern District of Florida investigated the case. Criminal charges have not been announced against of the defendants but may follow.