Department of Justice prosecutors continue to file numerous cases against pharmacies and their owners for inventory shortfalls and other discrepancies. These cases arise out of referrals by government contractors following a pharmacy audit, and often involve severe potential consequences.

A Pennsylvania pharmacy and its owners have agreed to pay the federal government nearly $5 million to resolve allegations that they billed Medicare and Medicaid between 2018 and 2020 for prescription medicines that were not actually dispensed to patients. As part of the resolution, the pharmacy and owner entered into an integrity agreement with HHS-OIG that permits the pharmacy to remain in business, subject to oversight by an independent monitor.

Government Investigation for Inventory Shortfall

DOJ Has Extensive Experience with Inventory Fraud

The Department of Justice, particularly the U.S. Attorney's Office for the Eastern District of Pennsylvania, has prosecuted many inventory cases in the last four years. Most, if not all, of these cases involve maintenance medicines, including insulins and inhalers, in addition to other, higher-cost drugs such as HIV anti-virals.

In this case, the government alleged that the pharmacy had billed but not dispensed Latuda, Sprycel, Advair Diskus, Genvoya, Tivicay, Anoro Ellipta, Spiriva Respimat, Januvia, Vanos 0.1% cream, Biktarvy, and numerous other medicines. In addition, the government alleged that the pharmacy had billed Medicare for high-cost formulations of certain medications while dispensing lower-cost formulations to beneficiaries.

DOJ Receives Many Referrals from Keystone and ESI

One of the reasons that the Philadelphia U.S. Attorney's Office has filed numerous cases against pharmacies and pharmacists is their close relationship to payors and PBMs, including Keystone and Express Scripts, Inc. Government agencies typically cultivate relationships with private industry in many sectors, and healthcare is no different. In fact, among government regulators, offices and agencies vie with one another for these relationships and the potential headline-grabbing cases they can generate.

Payors and PBMs also benefit from referring matters to government agencies because the government does most of the investigative work. In addition, government contractors are required by federal and state laws to conduct fraud, waste and abuse monitoring, such as audits, and report actual or suspect fraud to federal or state agencies. In this case, it is likely that DOJ's investigation arose from such a referral.

OIG's Self-Disclosure Protocol May Have Helped

In this case, the pharmacy may have been able to avoid a DOJ investigation and settlement had it triggered OIG's self-disclosure protocol following an audit in which the inventory discrepancies came to light. As we have written about previously, OIG's program permits providers to disclose certain conduct to the federal government, including false billing or kickbacks, and limit their liability for those claims. You can access our prior article HERE. OIG's self-disclosure program, however, is very complicated, and should only be used in the right circumstances. Whether to self-disclose or not is a decision that should only be reached with the assistance of qualified counsel based on a number of fact-specific considerations.

HLA Specializes in Pharmacy Defense

We have handled numerous cases with the Philadelphia U.S. Attorney's Office and the Attorney General's Office for the Commonwealth of Pennsylvania. Our goal, however, is for clients to avoid these types of high-risk government enforcement actions altogether. Although that is not always possible, we have developed a number of proprietary techniques and audit strategies to reduce the risk of a government referral, including the use of OIG self-disclosures where appropriate. If you are being audited, don't hesitate to call for assistance.

Federal Prosecutors Decline Criminal Prosecution of HLA Client

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HLA Wins Dismissal of Criminal Charges After PBM Audit

Following a PBM audit that noted huge inventory discrepancies, the Massachusetts Attorney General's Office indicted the pharmacy and its owner, then represented by a different law firm. After HLA was retained, all charges were dismissed.


State Board Declines Case Against HLA Client

PBM audits may result in collateral consequences, including licensing and disciplinary proceedings. In this case, HLA's experienced defense attorneys successfully convinced the State Board to decline further investigation, effectively resolving the matter at an early stage.


SafeGuard Audits: Don't Let CMS's Contractor Infringe Your Rights

Providers need to know their rights when it comes to investigations and audits by CMS UPIC contractors, such as SafeGuard and Qlarant. These investigators are private citizens, with no more authority or power of law than anyone else. Yet, they often employ traditional law enforcement techniques. Don't be fooled.