On June 16, 2023, the U.S. Department of Justice announced the settlement of civil allegations arising from two related whistleblower lawsuits in which the government intervened.
The reported facts are in part odd and in part common. In any event, they should be highly interesting to you.
Pursuant to the settlement, two Jacksonville, Florida compounding pharmacies, Smart Pharmacy, Inc., and SP2, LLC, and their owner, Gregory Balotin, will pay a minimum of $7.4 million to resolve lawsuits filed in Jacksonville, Florida, alleging they violated the False Claims Act. Note that as is the case in any civil settlement, the claims asserted against the defendants are allegations only, and there has been no determination of liability.
The Odd Allegation
The odd allegation resolved in the settlement was that the defendants violated the False Claims Act by adding the antipsychotic drug aripiprazole to topical compounded pain creams to boost reimbursement.
Both Medicare Part D and TRICARE reimburse pharmacies for the individual ingredients included in compounded drugs.
The government alleged that, to increase their profit from those federal programs, the defendants crushed aripiprazole pills approved for oral use for psychological conditions such as schizophrenia and Tourette’s disorder and included them in compounded creams used topically for pain treatment, while knowing that there was not an adequate clinical basis to do so.
The DOJ’s announcement does nothing to satisfy several curious issues:
1. Were the medications adulterated in the sense that the underlying prescriptions didn’t (somehow) call for aripiprazole to be compounded into the creams?
2. Antipodally, did physicians actually write prescriptions for an antipsychotic drug to be added into a pain medication, and, if so, why?
3. Did the alleged scheme morph compounding pharmacies into pharmaceutical manufacturers?
The Common Allegation
The common allegation resolved in the matter, “common” in the sense that it’s far less mind blowing than the first allegation and that it likely occurs on a frequent basis, was that the compounding pharmacies improperly waived patient copayments to induce patients to accept the pain cream prescriptions.
Although copayments may be waived in certain circumstances, such as on the basis of an individualized assessment of a patient’s financial hardship, the defendants allegedly routinely waived copayments without regard to patient need.
Thoughts and Takeaways for You
1. Just because you don’t run a compounding pharmacy doesn’t mean that the allegation of adding an “ingredient” to bump up reimbursement doesn’t constitute a lesson for you. The compliance hall of shame is jamb packed with physicians who’ve routinely packed on completely analogous tests and procedures, for example, those who’ve urine tested (at their own labs) every patient who can pee, to bump up reimbursement.
2. Compounding pharmacies greatly contribute to patient care. The problem is that compounding compounds compliance issues. Because compounding is supposed to start with a prescription, compounding schemes and scams, especially when involving a telemedicine component, can pull unwitting, or perhaps witting, physicians into the mix. That is, until they cream out as co-conspirators, if not “just” for unprofessional conduct and, perhaps, the unlicensed practice of medicine in some foreign state.
3. Although you might stay miles away from anything related to compounded medication, the waiver of co-pay issue haunts many medical groups and other providers. Although most often thought of in relation to government reimbursement programs, waivers also implicate issues of insurance fraud in regard to commercial plans: Accepting $80 from a carrier together with $20 from Patient X, for a total reimbursement of $100 is one thing, but routinely waiving the $20 is easily seen as creating a claim “worth” only $80 for which the carrier alleges you defrauded it out of $16. 4. The original allegations underlying the government’s case in the lawsuit discussed above arose from two whistleblower actions filed, respectively, by Amy Sanchez and Ashok Kohli, two former employees of Smart Pharmacy. Beware of creating your own whistleblowers.
