This past week, the U.S. Department of Justice announced the arrest of ten additional defendants – doctors, pharmacy owners, and marketers – charged in connection with an alleged $100 million compounded pain and scar cream scam on TriCare.
The ten join two other defendants charged in the same scheme earlier this year.
The government alleges that the scheme involved the payment of kickbacks by the owners of a marketing/compounding pharmacy business to TriCare beneficiaries, to prescribing physicians, and to marketers.
The illegal payments to TriCare beneficiaries were said to be disguised as “grants” for participating in a (nonexistent) medical study. The government reported that the true purpose of the “study” was to compile a list of TriCare beneficiaries who had filled prescriptions so that the defendants could calculate how much to pay the beneficiaries.
A physician defendant served as the “Chief Medical Officer” for the marketing company and designed the so-called study. Another physician defendant was alleged to have been paid to prescribe compounded drugs to the TriCare beneficiaries. He wrote thousands of prescriptions for compounded drugs for patients he never met in person and for whom he conducted only a cursory consultation via telephone.
The government alleges that the compounding pharmacies paid kickbacks, disguised as employee wages, to individual defendants involved in the scheme in return for the referral of the pain and scar cream prescriptions.
Each of the defendants is charged with one count of conspiracy to commit health care fraud, which carries a maximum statutory penalty of 10 years in federal prison and a $250,000 fine.
Two of the defendants were also each charged with 14 counts of payment and/or receipt of illegal remuneration. Most of the remaining defendants were charged with at least one count of payment and/or receipt of illegal remuneration. The maximum statutory penalty, upon conviction for each of those counts is five years in federal prison and a $250,000 fine.
The court also has the power to order restitution of ill-gained profits, and the government has alleged the right to cause the defendants, upon conviction, to forfeit to the U.S. any property traceable to the offense, including real estate, funds in bank and investment accounts, numerous vehicles, boats and recreational vehicles, firearms, jewelry and artwork.
With lots of money at play (the government claims that more than $100 million was lost to the scamsters) it’s not hard to see how many who might otherwise have legitimate business and medical practice interests become attracted to fast and easy money.
With lots of money at play, it’s not hard to see why the government is motivated to investigate and prosecute in order to obtain huge fines and the benefit of the forfeiture (generally to the investigating agency) of scores of millions of dollars.
The take-away for you:
There are many legitimate ways for physicians to increase their practice income. They include, depending on state law, investments in compounding pharmacies and the direct dispensing of pharmaceuticals.
But any deal must be structured in compliance with the federal Anti-Kickback Statute, Stark, and various state law counterparts and other restrictions.
Go ahead, I encourage you, think entrepreneurially. But please be smart about it.