Florida Men Charged in $54M Pharmacy Fraud Case

Four Florida pharmacy owners were recently indicted for their alleged participation in a $54 million compound pharmacy kickback scheme.

The indictment, announced on June 5, alleges that the men owned and operated Florida Pharmacy Solutions Inc. in Zephyrhills, Fla., “for the purpose of targeting TRICARE beneficiaries and causing the submission to TRICARE of claims for expensive prescription compounded drugs that were not legitimately prescribed.”

Compound pharmacy fraud started to gain the attention of prosecutors a few years ago when various federal agencies, including the Department of Defense, Department of Justice and the FBI, began conducting civil and criminal investigations into the marketing and billing practices of pharmacies and compound marketing companies relating to TRICARE.

TRICARE is the healthcare benefit program of the U.S. Department of Defense that provides healthcare coverage for active duty service members, National Guard and Reserve members, retirees, their families and survivors. 

In most of these cases, violations of the Anti-Kickback Statute (AKS) are alleged. Physicians and others are paid kickbacks in return for prescribing compound drugs (usually not medically necessary) for patients. The AKS prohibits the knowing and willful payment of remuneration for referrals for services that are payable by a federal healthcare program including Medicare and TRICARE.

In the most recent case, James Wesley Moss, 57, of Zephyrhills; Edward Christopher White, 38, of Panama City Beach; David Byron Copeland, 52, of Tallahassee; and Michael Alton Gordon, 56, of Ft. Myers, were each charged in an indictment filed in the Middle District of Florida.

The indictment alleges that between approximately November 2012 and September 2015, the defendants caused the submission to TRICARE of more than $54 million in claims for prescription compounded drugs and that TRICARE paid a total of more than $42 million to FPS on those claims. The indictment further alleges that Moss paid more than $20 million in healthcare kickbacks to White, Copeland and Gordon in return for their procuring and referring prescriptions for compounded drugs for TRICARE beneficiaries to be filled by FPS.  FPS allegedly submitted claims for payment to TRICARE for providing prescription compounded drugs to TRICARE beneficiaries living in approximately 30 states and several foreign countries.

As we have written about in the past, physicians, recruiters and pharmacy owners have been the target of investigations into fraudulent claims involving compounded medications.

More recently, the U.S. Attorney for the Southern District of New York in April announced that it had filed a lawsuit and simultaneously settled civil healthcare fraud claims against FPR Specialty Pharmacy LLC and Mead Square Pharmacy Inc. and their owners for their submission of fraudulent claims for reimbursement to federal healthcare programs for compounded prescription drugs in violation of the False Claims Act and the Anti-Kickback Statute.

While federal agencies have, in the past, cracked down on the compounding pharmacy industry, a new opportunity for questionable activity could emerge following a recent announcement by the Food and Drug Administration allowing hospitals to source drugs from compounding pharmacies to treat some COVID-19 patients.

The FDA said it would allow small compounding pharmacies to supply hospitals that can’t purchase drugs from their usual sources. The FDA also said it won’t take action against compounding pharmacies that make drugs that are a copy of an approved drug, use bulk ingredients not on an approved list, or fail to meet good manufacturing requirements for stability.

The FDA and compounding pharmacies have long found themselves embroiled in regulatory battles. The agency’s decision, although temporary, is significant because of its intense oversight of the drug compounding industry following the death of more than 60 people attributed to an outbreak of fungal meningitis that was blamed on a breakdown of quality control at a compounding facility in New England in 2012.

The FDA’s loosening of restrictions is still in its infancy and therefore it’s early to tell what, if any impact they may have. What is clear is that compounding pharmacies, as well as those who are involved in the referral of compounded medications, need to keep abreast of the changing environment to ensure they are navigating these new waters legally and do not find themselves the target of an investigation.

Such investigations involve complex healthcare and pharmacy matters requiring legal counsel with knowledge and experience in TRICARE and healthcare law. Those involved in the industry would be well advised to educate themselves about best practices.

The Health Law Offices of Anthony C. Vitale is well-versed in these areas and can assist you. For more information call us at 305-358-4500 or email us at info@vitalehealthlaw.com.