The Department of Justice recently announced that a compounding pharmacy owner was convicted, as part of his role in a telehealth “scheme” of 22 counts of: (i) mail fraud; (ii) conspiracy to commit health care fraud; and, (iii) introduction of a misbranded drug into interstate commerce. Many stakeholders in the drug supply chain, including pharmacies, pharmacists, HUBs, telehealth vendors and marketers can learn from this unfortunate result.
According to the announcement, the pharmacy owner entered into an arrangement with Scott Roix, a Florida telemarketer operating under the name HealthRight, to generate prescriptions for the pharmacy. As part of the arrangement, which took place between 2015 and 2018, the government alleged that HealthRight called consumers, deceived them into accepting the drugs, and caused patients to provide their personal insurance information for billing. Thereafter, HealthRight paid telemedicine doctors to issue prescriptions, even though the doctors never communicated directly with the patients. Instead, the physicians relied solely on the telemarketers’ screening process as the basis for issuing a prescription.
The Department of Justice convinced a jury that the pharmacy owner and HealthFirst entered into a sham marketing agreement for the purpose of concealing the underlying transaction: payment in exchange for the issuance of prescriptions by HealthFirst telemedicine physicians. Specifically, the Department alleged that during the business dealings, the pharmacy owner paid HealthFirst $30,000,000 for 60,000 prescriptions.
Ultimately, the Department alleged that the pharmacy owner and his co-conspirators defrauded various private insurers, including Blue Cross Blue Shield of Tennessee, and public payors, such as Medicaid and TRICARE, as a result of the pharmacy’s submission of claims for payment to various pharmacy benefit managers.
Key Takeaways
This case underscores the willingness of the Department of Justice to pursue all individuals involved in a telehealth model, and to target such participants with all tools at the Department’s disposal. Of note, and in addition to conspiracy to commit healthcare fraud, the pharmacy owner was charged and convicted of both mail fraud and introduction of a misbranded drug into interstate commerce, which are charges not commonly pursued in telehealth prosecutions.
The use of the Food Drug and Cosmetic Act (“FDCA”) to prosecute telehealth schemes is a relatively novel strategy, and one that, in this case, was successful. Pursuant to the FDCA, dispensing prescription drugs without a valid prescription from a licensed practitioner results in the “misbranding” of the drug. A valid prescription, in contrast, is issued in the usual course of professional practice for a legitimate medical purpose. Here, the Department of Justice described how the physicians did not engage in any patient encounter and relied on telemarketer screening questions performed by the telemedicine company to issue a prescription. As such, the government alleged that the prescription orders had no legitimate medical purpose, and that the drugs were thus “misbranded” in violation of the law. Further, the jury likely was influenced by allegations regarding the large amounts of monies involved, a technique the Department utilizes, often improperly, to increase the overall “appeal” of the case.
How Frier Levitt Can Help
From physicians to marketers, telemedicine vendors and pharmacy owners, all participants in a telehealth model play a key role in the model’s regulatory compliance. As such, all participants face significant civil and criminal liability if other stakeholders in the arrangement do not compliantly structure their business dealings. Frier Levitt’s team of healthcare attorneys has extensive experience helping clients develop compliant telehealth and marketing arrangements.
If you are a prescriber engaged in telehealth encounters, if you market for telehealth companies, or if your pharmacy, laboratory, or durable medical equipment company receives orders that result from telehealth encounters, contact Frier Levitt to discuss your legal needs or concerns, and for an evaluation of the compliance of the model in which you are involved. If you have received a grand jury subpoena, civil investigative demand or indictment, our governmental defense department, led by a former Assistant U.S. Attorney, can help.
