Greasy Kickback Residue Is All That’s Left of Pain Cream Fraud

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.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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Future of Healthcare | Technology | The Business of Healthcare

Profiting From 3-D Printed Pills

If the future of surgery is medicine, then the future of medicines is compounding, the individualization of dosages and drug combinations.

Earlier this month, the FDA approved the first 3-D printed drug product, Spritam, developed by Aprecia Pharmaceuticals.

The layering process of 3-D printing allows Apecia to tightly package active ingredients in precise dosages.

A far more complex use of that technology is certainly not far behind. One that will open the door to mechanized compounding of drugs at patient-by-patient, individualized dosages: a customized 3-D printed pill for Mr. Smith and a different one for Ms. Jones.

For compounding pharmacists, the expansion of the use of 3-D printing technology will mean even more demand, whether on a small scale of production (i.e., a local pharmacy) or on a large one (e.g., a centralized facility filling hundreds of thousands or millions of prescriptions for individualized medications).

At the small scale end of this continuum, the move from large scale drug manufacturing to individualized drug compounding via 3-D printing is the equivalent of the morphing of the million dollar printing press into the laser printer or ink jet in your home office. It’s the dematerialization and democratization of drug manufacturing.

For physicians in states that either allow them to own interests in pharmacies or to dispense pharmaceuticals from their practices, the technology opens new doors to patient care and to profit.

Underlying all of this, for physicians and pharmacists alike, is the opportunity to do new types of deals with unique structures. That requires a new way of thinking. It also requires careful compliance with a host of regulatory issues, from the federal Anti-Kickback Statute to Stark to the Federal Food, Drug, and Cosmetic Act.

But those are just the problems on the route to outcomes that will be profitable for patients and profitable for providers.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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