PBM audits must be handled correctly or severe consequences may result. In this case, HLA was able to persuade prosecutors not to file criminal charges against the pharmacy's owner, but a subsequent civil resolution still involved harsh penalties. It could have been far worse.

HLA is grateful to the Pennsylvania Attorney General Office's for its exercise of discretion in declining criminal prosecution of HLA's client, the owner of a Philadelphia pharmacy, that billed Medicaid nearly $600,000 for medications that were not dispensed to patients. Rather than criminally charge the owner, MFCU agreed to prosecute the pharmacy, a corporate entity, instead.

Prosecutors May Charge Both Individuals & Corporations

Criminal laws apply to "persons," which are defined to include both individuals and corporate entities, such as corporations and limited liability companies. Of course, a corporate entity would not serve a jail sentence. Therefore, given the goals of the criminal justice system, prosecutors primarily focus their efforts on individuals.

There are situations, however, where prosecutors will charge a corporate entity as part of a negotiated resolution. These scenarios are, by their nature, rare. And it is all the more rare that prosecutors will agree to charge a company instead of the individual running it.

PBM Inventory Discrepancies May Result in Fraud Investigations

Government contractors, such as payors and PBMs, are obligated to refer cases of actual or suspected fraud to the government for further investigations. With respect to government claims, referrals are often made to U.S. Attorney's Offices or State Medicaid Fraud Control Units (MFCUs).

In this case, the PBM referred the case to MFCU after an inventory audit uncovered discrepancies. Although the audit was relatively limited, it was mishandled by the Pharmacy and the PBM's concerns were not adequately addressed.

The Government's Investigation

Following the PBM's referral, the MFCU opened an investigation and served grand jury subpoenas on the Pharmacy, its employees, and distributors. Notably, the MFCU investigation was far broader than the PBM's inquiry, which is typically the case.

Ultimately, the MFCU found that the pharmacy and its owner had billed for medications that were not dispensed to patients, either because those medications had never been purchased, or because they had been returned to a wholesaler. In addition, the grand jury determined that the Pharmacy and Owner had billed brand medications while dispensing generic.

HLA's Defense Strategy

Because HLA's attorneys previously served as federal and state prosecutors, we deeply understand the considerations at play in the decision whether to file criminal charges. In this difficult case, Owner faced extremely significant risks apart from a potential prison term, including deportation from his home and family in this country.

We used all our skill and powers of persuasion to change that outcome. For example, in healthcare, given overlapping criminal and civil laws, different outcomes are often reached in cases involving similar conduct. We used examples from our national practice and cases across the country, in different jurisdictions, to appeal to the regulators in this case.

Ultimately, the Attorney General's Office agreed with HLA's arguments and declined to prosecute Owner, who obtained his citizenship while the case was pending.

Civil Settlement & Penalty

Of course, the resolution did not come without cost. Owner was required to reimburse the government for its losses, and agree to a 5-year Medicaid exclusion. Although the punishment was harsh, it could have been far worse.

Accordingly, we are highlighting this case as an example of the range of outcomes that can result from a PBM audit that is not handled correctly in the early stages.

HLA is Available to Help

If you are facing an aggressive PBM audit with inventory or other discrepancies, call or email before the audit gets referred to law enforcement. If you are the subject of an investigation by law enforcement, we can help stop charges being brought. And if you are the subject of filed criminal charges, we can help resolve the matter before trial or defend your innocence in court.

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