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Tricare Fraud: Federal Government Targets Compounding Pharmacies

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In response to claims that fraud has become rampant within Tricare, the U.S. Defense Department’s health care system covering millions of service members (both active duty and retired) and their families, the Department of Justice (DOJ) has launched aggressive probes targeting compounding pharmacies in a number of states, including pharmacies located in Florida, California, Mississippi, New Mexico and Texas.

In the investigations, which began in November 2015 and have continued into early 2016, federal officials claim that the dispensing of compounded drugs has increased exponentially without appropriate medical justification and without adherence to government regulations. They note, for example, that Tricare paid out some $1.75 billion for compound drugs in 2015, 18 times the amount it paid just three years earlier. Even if you are a compounding pharmacy that plays completely by the rules, your business still may be in the crosshairs of the DOJ investigations.

Compound Drugs

In theory and practice, compound drugs are specialized formulations and/or combinations of prescription drugs and other substances designed for specific purposes and used for providing:

  • Reduced dosages for children;
  • Alternative medications where the patient is allergic to one or more components in the commonly dispensed drug;
  • Liquids, instead of pills, for the many patients who find it difficult to consume oral medications; or
  • Topical creams that can be directly applied to the injury.

DOJ May Be Lumping Together the Guilty and the Innocent

In addition to what the DOJ sees is an unjustified explosion in the use of compound drugs in patients covered by Tricare, some DOJ officials say the standard of care and cleanliness at some compounding pharmacies is substandard and dangerous. They point to the 2012 meningitis outbreak linked to a now-closed Massachusetts compounding pharmacy, in which patients from 20 states were affected. In that outbreak, more than 750 patients became ill. In the wake of the tragic incident, which took 64 lives, a number of company officials were criminally indicted under the Racketeer Influenced and Corrupted Organizations (RICO) Act. The incident gave the entire compound drug industry a black eye.

CBS “60 Minutes” investigation

Additional attention to compounding pharmacies came in the form of a 2015 CBS “60 Minutes” story that alleged, among other things, that a loophole in the system allowed some pharmacies to bill the federal government thousands of dollars for topical creams that provided no clinical relief. Furthermore, in some instances these creams had been “prescribed” without the patient ever seeing a doctor. DOJ officials responded with promises to get to the bottom of the problem.

Pressures on the Federal Government to “Deal With the Deficit” Means Investigations are More Aggressive Than Ever

Additional pressures to investigate compounding pharmacies have come through the federal government’s general emphasis on reducing its staggering debt. As is widely known, the Congressional Budget Office projects a deficit during Fiscal Year 2016 of some $544 billion under the Obama-Ryan budget deal. As more and more is added to the national debt each year, the government faces a commensurate rise in the level of pressure to utilize laws, such as the False Claims Act (FCA), to recover settlements and judgments involving fraud and false claims.

Indeed, during the previous Fiscal Year, the DOJ recovered $3.5 billion in settlements and judgments in civil cases involving fraud and false claims. Some of this recovery resulted from cracking down on healthcare fraud. The government is poised to continue and increase its efforts. Combating healthcare fraud is a top priority of the Obama Administration. A number of states are also joining in the effort as they participate in – and sometimes initiate – investigations of compounding pharmacies and related entities.

Have You Been Targeted? Get in Touch with Oberheiden, P.C.

Have you or your pharmacy been targeted by the DOJ or by a state agency in connection with compound drug prescriptions? If so, you need to be represented by attorneys who understand the federal investigative process and who have experience with the FCA. At Oberheiden, P.C., we have extensive experience and provide aggressive representation for our clients. We encourage you to contact us for a free, confidential case evaluation. Our legal team draws on decades of broad experience and is prepared to do whatever it takes to help you win. To get started, call (800) 701–7249 or contact us online today.

  • Tricare Fraud Investigation: Defense of Physician against an Investigation by the Department of Defense and the U.S. Attorney’s Office for Alleged Tricare Fraud.
    Result: No civil or criminal liability, case dismissed.
  • Tricare Fraud Investigation: Defense of Physician against an Investigation by the Office of Inspector General, the Department of Justice, and the Department of Health and Human Services for Alleged Tricare Fraud.
    Result: No civil or criminal liability, case dismissed.
  • Tricare Fraud Investigation: Defense of Physician against an Investigation by the Department of Justice for Alleged Tricare Fraud.
    Result: No civil or criminal liability, case dismissed.
  • Tricare Fraud Investigation: Defense of Marketing Group against an Investigation by the U.S. Attorney’s Office for Alleged Tricare Fraud.
    Result: No civil or criminal liability, case dismissed.
  • Tricare Fraud Investigation: Defense of Nationally Operating Healthcare Company against an Investigation by the Department of Defense and the Department of Justice for Alleged Tricare Fraud.
    Result: No civil or criminal liability, case dismissed.
  • Tricare Fraud Investigation: Defense of a Toxicology Laboratory against an Investigation by the Office of Inspector General, the Department of Justice, and the Department of Health and Human Services for Alleged Tricare Fraud
    Result: No civil or criminal liability, case dismissed.
  • Tricare Fraud Investigation: Defense of a Toxicology Laboratory against an Investigation by the Office of Inspector General, the Department of Justice, and the Department of Health and Human Services for Alleged False Claims Act and Tricare Fraud.
    Result: No civil or criminal liability, case dismissed.
  • Tricare Fraud Investigation: Defense of a Laboratory against an Investigation by the Department of Health and Human Services and the Department of Justice for Alleged Tricare Fraud.
    Result: No civil or criminal liability, case dismissed.
Not all attorneys of Oberheiden, P.C. are licensed in California and nothing contained in here is meant to constitute the unauthorized practice of law.
Orange County 714-294-2000
Los Angeles 310-873-8140
Detroit 313-888-8807
Nationwide 888-452-2503