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Compounding Pharmacy Pays Nearly $500,000 to Settle Fraud Claims

April 16, 2020

DOJ announced another compounding pharmacy fraud settlement against two pharmacies and their owner.  SPR Specialty Pharmacy, Mead Square Pharmacies and their owner paid nearly $500,000 to settle claims under the False Claims Act.  The government alleged the defendants waived required co-payments and paid sales staff illegal commissions.  These attempts to induce more prescriptions violate the False Claims Act.

As part of the settlement, the defendants admitted to multiple illegal activities; for example:

  • Selling prescriptions to customers in states in which the defendants did not have licenses.
  • Refusing to charge copays or coinsurance.
  • Utilizing independent sales agents and illegally paying per-prescription commissions.

Compounding Pharmacy Fraud has Cost the Government Billions in Recent Years

We (and John Oliver) have extensively discussed drug compounding pharmacy fraud. These defendants like many others, targeted Tricare beneficiaries with largely useless pain creams. They did this because, as the Wall Street Journal explained, “the program was known to reimburse compounded drugs more generously than other federal health programs like Medicare.”

These pharmacies essentially designed products – usually pain creams – to be as expensive as possible under Tricare reimbursement.  They did so without consideration for patients’ health or concern for massively driving up government costs. Before 2013, Tricare typically spent $100 million annually on compound drug reimbursements. However the scam was so devastating that by 2014, that figure had grown to $1.4 billion of which Jason Mehta, the Assistant United States Attorney overseeing these cases in the Middle District of Florida, estimated that 95 percent was fraud.

To facilitate this fraud, compound pharmacies regularly waive copayments, bribe doctors, sales staff and patients, and violate other rules regarding consistent pricing. The government has, for years, made clear that waiving copayments to induce patients to use – or doctors to prescribe – medicines is a violation of the Anti-Kickback Statute.  It can also lead to False Claims Act liability, as it did in this case.  It is thus no surprise that the government has taken serious action against compounding pharmacy fraud and obtained settlements and convictions in dozens of cases.