February 26, 2018

United States Targets a Private-Equity Firm and Pharmacy in a Whistleblower Case

By the C|C Whistleblower Lawyer Team

On Friday the Wall Street Journal reported on the U.S. government’s decision to intervene in a False Claims Act qui tam case against pharmacy Diabetic Care Rx LLC and the private equity firm that holds a controlling stake in the pharmacy, Riordan Lewis & Haden Equity Partners (“RLHEP”). Diabetic Care is a compounding pharmacy that mixes different ingredients to create personalized medications for patients. RLHEP is a Los Angeles based private equity firm that has held a controlling stake in Diabetic Care since 2012. The suit also individually names current and former executives of Diabetic Care.

The lawsuit first alleges that Diabetic Care, operating under the name Patient Care American, paid third-party marketing companies to target TRICARE recipients in order to obtain prescriptions Diabetic Care could fill. TRICARE is the U.S. military health program. The lawsuit also alleges that Diabetic Care would manipulate the ingredients in its compounded medications in an attempt to receive the highest possible reimbursement from TRICARE. Diabetic Care also allegedly paid doctors to prescribe treatments including creams and vitamins without ever seeing the patients.

Chad A. Readler, acting assistant attorney general for DOJ’s civil division stated “the Department of Justice is determined to hold accountable health-care providers that improperly use taxpayer-funded health-care programs to enrich themselves.” Attorneys for both Diabetic Care and RLHEP both stated that their clients are cooperating fully with the investigation. Attorneys for the current and former executives named in the lawsuit either did not respond or declined to comment.

Over the time period of the alleged fraud, Diabetic Care has received over $68 million in reimbursements for compounded medications from TRICARE. The government’s complaint in intervention does not clearly state the amount they are seeking from the defendants.

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