Compound Pharmacy Owner Pleads Guilty to Health Care Fraud In Connection With Kickbacks Paid by Pharmacy Representative to Physicians in Exchanges for Referrals of Prescriptions for Topical Pain Creams

Last month, an owner of a New Jersey compounding pharmacy pled guilty to paying tens of thousands of dollars in cash bribes to physicians in exchange for referrals of pain cream prescriptions, defrauding health care benefit programs out of hundreds of thousands of dollars.

It is alleged that for approximately one year, the pharmacy owner had been utilizing and paying a pharmacy representative, who in turn, had been paying a portion of the amounts he received from the pharmacy to physicians, in the form of bribes for referring prescriptions for a compounded pain cream to the pharmacy. Several of the formulas sought to be prescribed included ketamine, a Schedule III Controlled Dangerous Substance. During his plea proceedings, the pharmacy owner admitted that in a series of meetings in November and December 2013 alone, he arranged for the representative to receive more than $40,000 in cash or checks with the understanding it would be used to pay bribes for the referral of pain cream prescriptions. The pharmacy owner faces a maximum potential penalty of five years in prison and a $250,000 fine, as well as forfeiture of any proceeds derived from his offenses.

This recent investigation and guilty plea highlight two important concepts for compounding pharmacies. First, compounding pharmacies conducting marketing services must have robust and detailed policies and procedures to ensure that any and all marketing activities comply with Federal rules and regulations (including the Anti-Kickback Statute and the Stark Law, as well as the state versions of these laws). Employees and representatives must also be fully-trained on these policies. Most importantly, this criminal case signals a heightened federal and state regulatory focus on marketing activities of compounding pharmacies.

Second, compounding pharmacies must act with further caution when they process formulations containing controlled dangerous substances. In addition to oversight by the OIG and State Medicaid Departments, compounding pharmacies face scrutiny from the Drug Enforcement Agency. Overly aggressive and improper marketing tactics in connection with the prescribing of controlled substances can also land a pharmacy in hot water with the Justice Department.

Pharmacies must be cognizant and vigilant with respect to their commitment to compliance. Frier Levitt can assist pharmacies in this regard, and can draft policies and procedures aimed at ensuring compliance with Federal and State law from top-to-bottom. Frier Levitt also offers assistance in guiding pharmacies on how to contract with marketing representatives within the bounds of the law, and can offer this service on a flat fee basis. Contact us today to speak to one of our attorneys.