Investigations Newsletter: New York Pharmacy Owners Charged in $30 Million COVID-19 Health Care Fraud and Money Laundering Case

Arent Fox

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DOJ News

New York Pharmacy Owners Charged in $30 Million COVID-19 Health Care Fraud and Money Laundering Case

On December 21, 2020, the Department of Justice (DOJ) announced that two owners of over a dozen New York-area pharmacies were charged for their roles in a $30 million health care fraud and money laundering scheme.

The DOJ alleged that the pharmacy owners used emergency override billing codes, which went into effect due to the COVID-19 pandemic, in order to submit fraudulent claims for expensive cancer drugs that were never purchased by the pharmacies, prescribed by physicians, or dispensed to patients. The DOJ alleged that these claims were often placed when the pharmacies were not operational and by identifying doctors on prescriptions without their permission. The DOJ asserted that the pharmacy owners were ultimately paid over $30 million for these claims. The DOJ further alleged that the pharmacy owners acquired control over dozens of New York pharmacies by paying others to pose as owners and hiring pharmacists as purported supervising pharmacists in order to obtain pharmacy licenses and insurance plan credentialing.

The DOJ also alleged that the pharmacy owners engaged in a complex money laundering conspiracy with the proceeds of their frauds. More specifically, the DOJ alleged that the pharmacy owners created sham pharmacy wholesale companies and falsified invoices to make it appear that funds transferred to the sham pharmacy wholesale companies were for legitimate drug purchases.

The pharmacy owners were each charged with one count of conspiracy to commit health care fraud and wire fraud and one count of conspiracy to commit money laundering. Individually, the pharmacy owners were charged with concealment money laundering. One of the pharmacy owners was also charged with aggravated identity theft.

See here for the DOJ press release.

Three Providers to Pay a Total of $1.72 Million to Resolve Alleged False Claims Act Violations Related to “P-Stim”

On January 4, 2021, the US Attorney’s Office for the Middle District of Tennessee (the USAO) and the Attorney General for the State of Tennessee (the AG) announced that three providers agreed to collectively pay $1.72 million to resolve alleged violations of the False Claims Act for improperly billing for electro-acupuncture using a peri-auricular stimulation device (P-Stim) that is not eligible for reimbursement under Medicare or TennCare.

The USAO alleged that, from May 2016 through November 2018, these providers received reimbursement from Medicare and/or TennCare for acupuncture using P-Stim by using a billing code that required implementation of a neurostimulator with anesthesia in a surgical setting by a physician. Medicare and TennCare do not reimburse for P-Stim as a neurostimulator or as implantation of neurostimulator electrodes.

On June 10, 2020, the AG brought suit against one of these providers under the Tennessee Medicaid False Claims Act for the false claims he submitted to TennCare for P-Stim. This provider has agreed to pay $1 million to the United States and Tennessee over 5 years. The provider also entered into an Integrity Agreement with the Office of Inspector of the U.S. Department of Health and Human Services that requires regular monitoring of its billing practices for three years.

The other two providers have agreed to pay $700,000 and $20,000, respectively, to the United States over five years.

See here for the DOJ press release.

Genetic Testing Lab Agrees to Pay $357,584 to Resolve False Claim Act Allegations

On January 6, 2021 the DOJ announced that Exceltox, a California diagnostic laboratory, would pay $357,584 to resolve allegations that it violated the False Claims Act. According to the DOJ, from September 2015 to November 2015, the laboratory used the services of a New Jersey contractor who persuaded residents of senior housing complexes to submit to genetic testing, despite that Medicare requires orders from a treating physician for such tests. As a result, Exceltox submitted claims to Medicare for testing conducted without the requisite physician oversight.

The contractor at issue previously pleaded guilty in federal court to charges of conspiracy to commit healthcare fraud in connection with this scheme and was sentenced to 50 months in prison.

See here for the DOJ press release.

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Arent Fox

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