Pharmacies have long been a focus of enforcement actions brought by the Department of Justice (DOJ) and Department of Health and Human Services Office of Inspector General (OIG).  This summer has been no exception, with the DOJ and OIG bringing a number of fraud cases against pharmacies and pharmacists.  Although many enforcement actions under the False Claims Act (FCA) continue to focus on illegal kickback arrangements, this summer we saw an increased focus on enforcement resulting from over-prescribing of opioids and Controlled Substances Act (CSA) violations.  We also saw enforcement against pharmacies for allegedly falsifying prior authorization information and providing more insulin than the pharmacy billed to payors. This blog summarizes some of these and other key pharmacy enforcement trends this summer.

PillPack Insulin Overdispensing Settlement

The summer began with online retail pharmacy PillPack, LLC reaching a settlement of $5.79M on May 2nd with the United States Attorney's Office for the Southern District of New York and OIG (collectively, the Government) regarding the under-reporting of days-of-supply of insulin pens that led to fraudulent billing of government healthcare programs.

According to the Stipulation of Settlement, PillPack fraudulently reported lower days-of-supplies of insulin than it was actually dispensing to patients. This alleged underreporting often led to PillPack pharmacists dispensing insulin pen refills to patients earlier than was necessary based on their current prescriptions. In addition to government healthcare programs approving of and paying for claims they would not have otherwise approved if PillPack had reported the days-of-supply based on the standard pharmacy billing formula used by government programs, patients allegedly received multiple extra pens they did not need based on their prescriptions.

The Government intervened in a qui tam action under the FCA in connection with the filing of the lawsuit and this settlement.

Falsifying Prior Authorizations and Waiver Copayments

In July, Solera Specialty Pharmacy entered into a deferred prosecution agreement and paid $1.3M in civil penalties to resolve allegations that submitted false claims for Evzio, an anti-overdose drug manufactured by Kaleo.  Solera admitted to falsifying clinical information on prior authorization forms and signing the prior authorization forms in the place of the prescribing physicians.  The pharmacy also waived Medicare copayments without determining whether the patient had a financial hardship. 

Interestingly, this settlement comes eight months after Kaleo paid $12.7M to resolve FCA allegations arising from the same FCA claims as Solera.  Specifically, as part of Kaleo’s settlement, the government alleged that Kaleo directed doctors to send Evzio prescriptions to certain preferred pharmacies that in turn (1) submitted false prior authorization requests for Evzio; and (2) dispensed Evzio without collecting or attempting to collect co-payments from government beneficiaries.

As a result, there may be similar cases against pharmacies announced in the coming months.

Controlled Substances Enforcement Actions

There were also multiple judgments and settlements this summer involving dispensing of opioids and violations of the CSA. The conduct at issue in the settlements ranged from dispensing Schedule II controlled substance without a valid prescription to conspiracies to distribute oxycodone by both pharmacies and prescribers.  Below are examples of these enforcement actions:

• Verree Pharmacy Settlement: Mitchell Spivack, owner of Verree Pharmacy in the Philadelphia, Pennsylvania area, was originally charged civilly and criminally by the United States Attorney’s Office for the Eastern District of Pennsylvania and the Pennsylvania Office of Attorney General with conspiracy to distribute controlled substances and healthcare fraud in June. Spivack allegedly filled prescriptions for large quantities of high-dose oxycodone and other dangerous opioids with no legitimate medical purpose and fraudulently submitted claims to health care benefit programs without actually dispensing the drugs. Subject to court approval, Spivack recently agreed to settle $4.1M in civil damages and penalties under the FCA, CSA, and in civil forfeiture. Spivack had previously agreed to pay $500,000 in criminal restitution and criminal forfeiture.

• Rosen Settlement: Norman Rosen, medical director and part-owner of Rosen-Hoffberg Rehabilitation and Pain Management Associates, P.A., pleaded guilty to the United States Attorney's Office for the District of Maryland for conspiracy to distribute and dispense oxycodone. Rosen, among other offenses, allegedly prescribed heavy doses of oxycodone to patients who did not need such high quantities or may have been experiencing substance use disorder.

Illegal Kickback Schemes

The DOJ continued to prosecute illegal kickback schemes carried out by pharmacies, prescribers and manufactures.  Earlier this month, the DOJ announced that Dunn Meadow LLC (Dunn Meadow), a New Jersey pharmacy, agreed to criminal and civil penalties for violating the FCA and CSA.  Its parent company, Allegheny Pharma LLC, also entered into a settlement agreement to settle the civil allegations against Dunn Meadow and both must pay up to $50 million generated from future revenue to resolve the civil claims.  In addition to violations of the CSA, the government alleged Dunn Meadow received remuneration from at least one pharmaceutical manufacturer in the form of payments for “shipping fees,” although the pharmacy routinely shipped medications without manufacturer payment.  Dunn Meadow also provided meals and entertainment to prescribers and pharmaceutical sales representatives.