Federal prosecutors are expanding a healthcare fraud investigation, charging New York pharmacy owners and employees for violations related to OTC card practices. Health Law Alliance, led by Anthony Mahajan, emphasizes the severity of charges, urging providers to act promptly to limit exposure.

Federal prosecutors have charged numerous New York pharmacy owners and employees with criminal violations relating to OTC card exchanges and nominal benefits. Because these practices are widespread, providers should act immediately to limit their exposure as the crackdown expands.

Government’s Healthcare Fraud Investigation

At the time of this update, the federal government has filed criminal charges against numerous pharmacy owners and employees for violations of the Anti-Kickback Statute and Healthcare Fraud relating to OTC card exchanges and nominal benefits, including $3 supermarket coupons, $2 in-store credits, and waivers of $3 copayments.

The government alleges in these cases that patients, pharmacies, and physicians all participated in a loop of bribery, referrals and billing fraud. These charges are severe and carry prison terms of up to 10 years’ incarceration.

Healthcare Fraud Based on OTC Benefits

Specifically, the government alleges that patients were paid kickbacks by pharmacies in the form of OTC and other common benefits, such as co-pay waivers.

The pharmacies then allegedly referred their patients to physicians, who wrote medically unnecessary prescriptions for high-reimbursing drugs and DME. The patients, in turn, returned to the referring pharmacies, where the prescriptions were filled to the tune of tens of millions of dollars in federal reimbursement.

Although the government has yet to unveil charges against physicians who participated in the scheme, those charges have either been filed under seal and the physicians are cooperating, or they will be filed publicly soon.

Healthcare Fraud Theory of Prosecution

Notably, the theory of prosecution in these cases is incredibly broad.  For example, the government alleges that “a common means of providing kickbacks and bribes to Medicare beneficiaries and Medicaid recipients and facilitating fraud schemes for medically unnecessary medications is to fail to charge such individuals the copayments due for their prescriptions.”

On the other hand, the OIG has recognized that copay waivers may be appropriate based on individualized assessments of financial need, and has never charged a patient with receiving a so-called bribe in the form of a co-pay waiver.

Accordingly, the sweeping charging theory in these cases means that a pharmacist may be criminally charged if he or she has waived copays or offered other nominal benefits to customers, such as accepting OTC cards for non-eligible items, who then filled medically unnecessary prescriptions, irrespective of whether the pharmacist knew the order lacked medical necessity.

This exposure is troubling for a number of reasons. First, pharmacists typically have no insight whatsoever into whether a prescribed drug is medically necessary to treat a patient’s condition. Second, the circumstances in which a pharmacist can legally refuse to fill a prescription vary, and may depend on state law. Third, despite the prevalence of co-pay waivers and OTC violations throughout the industry, federal prosecutors are using data to target “outlier” pharmacies without regard to customer base or underlying patient conditions.

HLA Specializes in Healthcare Fraud Defense

In short, if your pharmacy has offered nominal benefits involving OTC cards and co-pay waivers to customers, you may have criminal exposure. There are a number of immediate steps that clients can take to better understand and limit that risk. At Health Law Alliance, our experienced healthcare defense attorneys have represented numerous clients under federal investigation for the practices described in this article. Our firm’s mission is simple: use unmatched experience and insight to defend our clients against insurance conglomerates, the federal government, and state agencies. We used to work for them. Now let us fight for you. Contact us today for a COMPLIMENTARY consultation. We can help.  

Frequently Asked Questions

Pharmacy Benefit Managers (PBMs) Face Possible FTC Lawsuit

The Federal Trade Commission (FTC) plans to sue the top Pharmacy Benefit Managers (PBMs) for anti-competitive practices, including influencing drug prices and favoring their own networks, which disadvantage independent pharmacies and raise prescription drug costs.


Victories Against Optum Rx: Protecting Pharmacy Clients Nationwide

Health Law Alliance has successfully challenged Optum Rx's termination decisions for numerous pharmacies, ensuring they can continue to operate and serve their communities. These victories highlight the firm's expertise in healthcare law and its dedication to protecting pharmacy clients from unjust PBM actions.


FTC Issues Interim Report Condemning Anticompetitive PBM Practices

The top Pharmacy Benefit Managers (PBMs) are condemned by the FTC for manipulating the healthcare system to generate significant profits, thereby inflating drug costs and overcharging patients, particularly for critical medications like cancer drugs.


Seized Ozempic Shipments Highlight Rising Demand and Safety Concerns

Ozempic, a well-known medication for type 2 diabetes, has gained popularity for its off-label use in weight loss, leading to increased scrutiny by authorities. Recently, U.S. Customs and Border Protection (CBP) officers in Cincinnati seized several shipments of the drug, underscoring the growing demand and associated risks.