Catch of the Week: Smart Pharmacy, Inc.
This week’s Department of Justice (DOJ) Catch of the Week goes to Florida-based compounding pharmacies Smart Pharmacy, Inc. and SP2, and their owner Gregory Balotin. Yesterday, they agreed to pay at least $7.4 million to settle charges they violated the False Claims Act by adding an antipsychotic drug to topical pain creams solely to boost Medicare reimbursement. Not because of any medical purpose the drug served. The government made it clear it would have required an even larger settlement amount but for defendants’ inability to pay it.
The antipsychotic at issue is Aripiprazole, more commonly known as Abilify or Aristada, used to treat such psychological conditions as schizophrenia and Tourette’s disorder. According to the government, the defendant-pharmacies crushed Aripiprazole pills and mixed them into compounded creams for pain treatment. Even though there was no clinical basis for doing so. The government claimed defendants concocted the mixture simply to increase their profits on prescriptions paid by Medicare Part D and TRICARE, which reimburse pharmacies based on the individual ingredients of compounded drugs.
The government also alleged the defendants violated the Anti-Kickback Statute by waiving patient copayments to induce them to accept the pain cream prescriptions. The law, which if violated is also an automatic violation of the False Claims Act, prohibits medical providers from paying or receiving kickbacks, remuneration, or anything of value to induce medical referrals or purchases covered by the federal healthcare programs like Medicare and TRICARE. Waiving patient copayments — unless tied to a particular patient’s financial hardship — falls squarely within this prohibition.
Both practices at issue here are routinely the subject of government enforcement. The government has shown a zero-tolerance approach to fraud in the Medicare Part D prescription drug program, especially when it comes to providing medically unnecessary medications. Going after healthcare kickbacks has likewise been a top priority for DOJ, with the government settling several healthcare kickback actions in the last few weeks alone, one just yesterday against Saint Francis Healthcare System for $36.5 million. A discrete subset of these kickback actions has targeted patient co-pay schemes, often disguised as charity.
In announcing the Smart Pharmacy settlement, the government made clear it will go after these kinds of schemes and “hold accountable those who undermine the integrity of federal healthcare programs for personal profit.” Especially when “they compromise the quality of patient care.”
Like the vast majority of False Claims Act cases involving healthcare fraud, this matter was initiated by whistleblowers under the qui tam provisions of the False Claims Act. They authorize private individuals to bring lawsuits on behalf of the government against those defrauding the government. In return, the whistleblowers may receive between 15 and 30 percent of any government recovery. The whistleblowers who initiated this action are Amy Sanchez and Ashok Kohli, two former Smart Pharmacy employees. The government has not yet determined their share of the recovery, but it likely will exceed $1 million.
Over the past two decades, whistleblowers have received hundreds of millions of dollars in awards under the False Claims Act for their courage and determination in standing up against fraud and malfeasance. If you want more information on what it means to be a whistleblower or think you may have information relating to healthcare fraud or any other kind of fraud against the government, please feel free to contact us so we can connect you with a member of the Constantine Cannon whistleblower lawyer team.
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