Drug Fraud Since 2018
A number of civil settlements and criminal convictions involving pharmacy and drug fraud in 2018 have highlighted a longstanding problem that imperils patient health and burdens American taxpayers with costs measured annually in the millions of dollars. Pharmacy and drug fraud takes many different forms and can involve everyone in the supply chain from small pharmacy operators to large pharmaceutical distributors.
Illegal Repacking of Cancer Drugs
In October of last year, the Department of Justice (“DOJ”) announced a settlement with AmerisourceBergen Corporation and several of its subsidiaries (collectively “ABC companies”). According to allegations in three separate qui tam complaints, the ABC companies operated a facility that improperly repackaged oncology-supportive injectable drugs into pre-filled syringes. Those same syringes were then sent to physicians who treated cancer patients with drugs such as Procrit®, Aloxi®, Anzemet®, Neupogen®, Kytril® and its generic form granisetron.
The United States alleged that the ABC companies established a pre-filled syringe program through a subsidiary that it claimed was a pharmacy. This “pharmacy” was alleged to be nothing more than a repackaging operation that created and shipped millions of pre-filled syringes to oncology practices. In some instances, the pre-filled syringes were allegedly prepared in non-sterile conditions, contaminated with bacteria and other unknown particles, and failed to meet minimum quality and purity standards.
The ABC companies allegedly intended to profit from the excess amount of drug contained in the original FDA-approved sterile vials for these drugs. It was further alleged that no safety, stability, or sterility data was ever submitted to the FDA to ensure the safety and efficacy of the repackaged drugs.
The civil settlement and criminal penalties in the case totaled $885 million. The relators’ share of the federal portion of the civil settlement amounted to more than $93 million. Remarkably, this settlement came in the wake of another fraudulent scheme involving an AmerisourceBergen subsidiary. In 2017, AmerisourceBergen Specialty Group pled guilty to illegally distributing misbranded drugs and agreed to pay $260 million to resolve criminal liability for its distribution of drugs distributed from a facility that was not registered with the Food and Drug Administration.
Medicare Billed for Phantom Drugs & Nonexistent Patients
In November 2018, a California pharmacy owner was convicted of one count of healthcare fraud and two counts of wire fraud for her involvement in a Medicare fraud scheme. Over a period of two years, the pharmacy owner submitted fraudulent claims to Medicare Part D plan sponsors. The submitted claims involved prescription drugs which the pharmacy never ordered from wholesalers.
The pharmacy owner attempted to conceal the fraud by creating fake invoices that were intended to substantiate the pharmacy’s nonexistent wholesale drug purchases. The pharmacy submitted $1.3 million in claims for reimbursement to Medicare for prescription drugs that were never purchased nor dispensed to patients.
Several months earlier, another southern California pharmacy owner was indicted for submitting $2.9 million in claims to Medicare Part D sponsors. In a strikingly similar scheme, the prescription drugs were never ordered from a wholesaler nor dispensed to Medicare beneficiaries. The owner also fabricated phony invoices that attempted to show the drugs had been purchased from wholesalers.
The two California pharmacy cases were part of a larger nationwide sweep of fraud in the healthcare industry. As part of the enforcement effort, U.S. Attorneys in Los Angeles filed sixteen cases involving allegations of more than $660 Million in fraudulent healthcare billings.
Pharmacy Restocking of Returned Drugs
An investigation by FBI and Drug Enforcement Administration revealed that a Michigan pharmacy was restocking drugs that had been returned from nursing homes and adult foster care facilities. The pharmacy picked up unused drugs that were no longer needed after prescriptions changed or the patients had moved or died. Employees of the healthcare facilities where the drugs were picked up believed the drugs would be destroyed by the pharmacy.
However, the pharmacy placed the returned drugs back on its shelves where they were stored in stock bottles and other containers. Due to its mishandling, the pharmacy failed to maintain accurate lot numbers and expiration dates for the drugs.
As result of a confidential tip, eighteen pharmacy employees were convicted of crimes, including felony convictions for six pharmacists. The CEO of the pharmacy was sentenced to ten years in prison and ordered to pay $8.8 million in restitution.
Federal Health Programs Overbilled for Generic Prescription Drugs
DOJ announced in December 2017 that Kmart Corporation agreed to pay $32.3 million to settle allegations arising from a qui tam lawsuit filed by a whistleblower under the False Claims Act. The complaint alleged that Kmart’s in-store pharmacies offered discounted generic drug prices to cash-paying customers through various club programs. However, the company allegedly failed to disclose those discounted prices when it reported its usual and customary prices to federal healthcare programs. Federal programs rely on the accuracy of pharmacy pricing data because it is used to establish reimbursement rates.
The settlement agreement was part of a global $59 million settlement that included resolution of state Medicaid and insurance claims against Kmart. Although the government declined to intervene in the action, the whistleblower who litigated the case received $9.3 million.
The Importance of Speaking Out
Many vulnerable patients depend on the quality and purity of the drugs they take for their very survival. If not for the courage of the whistleblowers who witnessed and reported the fraud described above, some of those practices might still be taking place today. If you have evidence of potential healthcare fraud, contact the experienced whistleblower attorneys at Young Law Group for a free, no obligation consultation by filling out our confidential form or calling us at (800) 590-4116.