Pharma company accused of defrauding military health care program in $100M suit
The company allegedly raked in hundreds of millions of dollars for prescription medications by inflating prices.
A federal lawsuit over alleged fraud related to a U.S. military health care program could be a cautionary tale for regulatory and compliance lawyers.
That’s according to Andrew T. Sarangoulis, senior counsel at CORPlaw in Miami, who’s not involved in the litigation but is watching closely.
The U.S. Department of Justice filed the lawsuit against a Houston pharmaceutical company under the False Claims Act for fraud on TRICARE, a health care program for active-duty military personnel, military retirees and military dependents.
The defendant, Professional Compounding Centers of America Inc., is a supplier of active pharmaceutical ingredients.
Sarangoulis explained that PCCA was not directly benefiting or billing TRICARE, but rather pharmacies that were using the company’s products were the ones reaping the largest monetary benefit from the scheme.
“It’s important for lawyers to understand that when they’re advising their clients about the compliance and regulatory framework and the potential liabilities,” Sarangoulis said. “If they don’t specifically follow the regulations in place, they could be on the hook for damages that they didn’t even remotely consider that mostly benefit a third party that they are dealing with.”
The Justice Department is seeking to recover treble damages and related civil penalties for fraud after the company allegedly raked in hundreds of millions of dollars in excess reimbursements for prescription medications by inflating the prices of ingredients that came out of taxpayer money.
Assisting the Justice Department are attorneys from the U.S. Attorneys’ Offices for the Western District of Texas and Middle District of Florida, who claimed the alleged scheme was “plain and direct.”
PCCA reported inflated average wholesale prices for many of its ingredients relative to the actual prices at which it sold those ingredients to its customers, according to the complaint.
Meanwhile, the TRICARE program uses average wholesale prices for the ingredients in a compound drug to determine the amount to reimburse pharmacies for the compound prescription claims they submit.
The Justice Department alleged in the complaint that these inflated average wholesale prices induced PCCA’s customers to purchase their ingredients, with the foresight that those customers would seek reimbursement from TRICARE.
For instance, PCCA sold the ingredient resveratrol to select customers for less than $2 per gram. However, it reported an average wholesale price of nearly $819 per gram. The roughly $817 difference represented the “spread” or the potential profit that a pharmacy could collect by purchasing, using and billing for PCCA’s ingredients.
Now, the Justice Department aims to prove that PCAA was aware of these allegedly fraudulent acts when the case goes before a judge in the U.S. District Court for the Western District of Texas.
Read the complaint:
In addition, prosecutors alleged that PCCA offered additional inducements to pharmacy customers, such as annual all-inclusive travel packages, in exchange for ingredient purchases and purchase commitments, according to the complaint.
However, authorities have not filed criminal charges yet.
Karin Hoppmann, acting U.S. attorney for the Middle District of Florida, was among the lawyers involved in the investigation that arose due to a whistleblower. The whistleblower was a part owner and pharmacist that purchased compound ingredients for his pharmacy from PCCA.
Hoppmann said the practices they confronted, in this case, created a significant threat to the viability of the TRICARE program, noting, “This effort demonstrates our district’s resolve in the struggle against fraud schemes that prey on the nation’s military personnel and their families.”
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