A 71-year-old Palm Beach Gardens man who escaped prison in 2019 after resolving a lawsuit alleging that he and others violated the False Claims Act (FCA) through their involvement in a healthcare kickback scheme will spend six months behind bars for lying to federal agents.
In March 2020 Patrick Smith, former CEO and president of Diabetic Care Rx LLC d/b/a Patient Care America (PCA), voluntarily met with investigators who were looking into allegations the Broward County compounding pharmacy was paying kickbacks to marketing groups that solicited TRICARE beneficiaries on behalf of PCA. Those kickbacks were paid to generate referrals of prescriptions for expensive pain creams, scar creams and vitamins, regardless of patient need. TRICARE is the healthcare benefit program for United States military members and their families.
The Lies
During that interview, Smith, lied to agents about his role in the healthcare kickback scheme. Smith falsely claimed, for example, that he played no role in hiring the marketing groups and that he didn’t know they were directly soliciting TRICARE beneficiaries. He pleaded guilty to the charges in July 2023 and was sentenced on Feb. 23, 2024.
Under the civil False Claims Act, each instance of an item or a service billed to Medicare or Medicaid or other federal payor counts as a claim, so fines can add up quickly. The fact that a claim results from a kickback or is made in violation of the Stark law also may render it false or fraudulent, creating liability under the civil FCA as well as the Anti-Kickback Statute (AKS), commonly referred to as the Stark law.
Under the civil FCA, no specific intent to defraud is required. The civil FCA defines “knowing” to include not only actual knowledge but also instances in which the person acted in deliberate ignorance or reckless disregard of the truth or falsity of the information.
The Kickback Scheme
In all, PCA paid more than $40 million in kickbacks to the marketers for recruiting and referring TRICARE beneficiary prescriptions for expensive, unnecessary compounded medications to PCA. To date, over a dozen of PCA’s marketers and employees have been convicted and sentenced for their roles in the healthcare kickback scheme. The government recovered more than $30 million in fraud proceeds from PCA and the individual defendants.
The Earlier Settlement Agreement
In 2019 Smith, along with PCA’s former vice president of operations Matthew Smith and private equity firm Riordan, Lewis & Haden Inc. agreed to pay $21 million. Patrick Smith agreed to pay at least $300,000, Matthew Smith agreed to pay at least $12,788. These settlement amounts were based on their ability to pay.
The Whistleblower Action
The original lawsuit against PCA was the result of a whistleblower action filed by two former employees. They alleged that the marketers hired by PCA paid telemedicine doctors who prescribed the creams and vitamins without seeing the patients, or in some cases, without even speaking to them.
It also was alleged that PCA and a marketer jointly paid the co-payments owed by patients referred by the marketer, without any verification of the patients’ financial needs, and then disguised the payments as coming from a sham charitable organization, which was affiliated with the marketer. And it was alleged that PCA continued to claim reimbursement for prescriptions referred by the marketers despite regularly receiving complaints from patients that revealed the prescriptions were being generated without patient consent or a valid patient-prescriber relationship.
RLH, the private equity firm that managed PCA on behalf of its investors, allegedly knew of and agreed to the plan to pay outside marketers to generate the prescriptions and financed the kickback payments to the marketers.
How We Can Help
The Health Law Offices of Anthony C. Vitale has been representing clients under investigation for more than three decades.
The minute you become aware that you or your company are under investigation is when you should contact a qualified healthcare attorney who specializes in criminal healthcare fraud.
Making a mistake during an investigation may cost you not only time and money, but also your career and freedom. Give us a call at 305-358-4500 or email info@vitalehealthlaw.com.
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