Many compound pharmacists who participated in the TRICARE program learned, in the most painful of ways, that the Department of Justice (DOJ) casts a very long shadow when large amounts of money pour out of a government program. With much fanfare, DOJ issued a series of splashy press releases in 2015 that advertised its successes in prosecuting compound pharmacies. To date, DOJ has recovered nearly $200 million, and more than 100 individuals have been convicted for their alleged role in suspect compound pharmacy arrangements.

Now, amid the coronavirus pandemic, the clock is ticking more loudly than ever. In May 2015, TRICARE cut off reimbursement for compound prescriptions, and most compound pharmacy arrangements began winding down operations in the months that followed. Because criminal prosecutors generally have five years to bring a case, the limitations period for most of the criminal statutes DOJ uses to prosecute suspect compound pharmacy arrangements will come to an end this fall. The statute of limitations for civil cases, which provides a six-year window, is not too far behind. As a result, DOJ employees are scrambling to bring forth the final remaining prosecutions.

Considering these imminent deadlines, practitioners and pharmacists who have escaped liability so far would be prudent to understand the risks associated with the last few months. This article begins by explaining some context for the compound pharmacy prosecutions from 2015 to the present. The article then outlines a few recent indictments. It concludes with some practical compliance strategies for those that might still be on a DOJ watch list.

Historical Context for DOJ Prosecutions

From 2012 to 2015, the TRICARE program, a military healthcare program designed for active-duty and retired military personnel and their families, paid out more than $2 billion for compound prescription medications. This was a meteoric increase from just a few years earlier. In large part, these exponential expenses were the result of pharmacies seeking to profit from the high reimbursement associated with compounded medication.

Since 2015, DOJ, seeking to prosecute profiteering compound pharmacies, has aggressively brought cases under a variety of theories. The vast majority of cases have focused on garden-variety Anti-Kickback Statute (AKS) theories. In these cases, the government has alleged that doctors were improperly compensated for writing prescriptions. The government has also alleged, and proven in some cases, that patients were improperly paid to accept these compounded medications — with salacious allegations of TRICARE beneficiaries receiving Walmart gift cards or free drinks and other inducements simply for accepting compounded medications.

The government has also advanced theories beyond the AKS. In some cases, the government has alleged that entire pharmacy operations were conduits for general “healthcare fraud.” In these cases, the government has taken the position that the entire operation was fraudulent as (a) the prescriptions were not medically necessary, (b) the prescriptions were not written in the ordinary course of practice, (c) the prescriptions were focused on profit, not patient care, or (d) the prescriptions could have been filled using less expensive, alternative treatments.

While rarer, in some cases, the government has also brought charges related to improper pricing. For example, a pharmacy in Florida was forced to repay millions of dollars for improperly setting a “usual and customary” price for patients paying with cash that was lower than the price set for TRICARE patients. And a large pharmaceutical manufacturer in Florida was forced to pay millions of dollars for allegedly inflating the average wholesale price associated with compounded medications.

Recent Indictments

With the statutes of limitation coming to a close, the government has become increasingly aggressive about bringing the last remaining indictments. Just within the last few weeks, these are a few of the recent indictments brought by the government:

• In New Jersey, prosecutors recently charged three individuals, including a doctor and an advanced practice nurse, for their role in allegedly writing improper prescriptions for compounded medications. The government alleges that the defendant compound prescriptions before the patients were examined or, in some cases, without examining them at all. Additionally, the prescriptions were allegedly selected for the purposes of maximizing reimbursement, rather than patient need. 

• In Florida, prosecutors indicted four individuals for their role in a pharmacy that allegedly paid kickbacks to procure prescriptions. Notably, in this case, the government alleged that the kickbacks were not payments to doctors or patients. Instead, the government suggested that the kickbacks were the improper financial arrangements between marketers who were paid a commission-based salary.

• In Mississippi, three individuals were charged for allegedly targeting and paying kickbacks to TRICARE participating physicians to write prescriptions for compound medications. The government alleges that the prescriptions were not medically necessary and were induced by kickbacks.

Practical Advice

Given the increasing scrutiny, industry executives and their companies — particularly those that participated in pharmacies that sought reimbursement for compounded medications — should adopt some basic compliance measures. While these measures will not necessarily prevent government scrutiny, they could help avoid prosecution — or mount a successful defense. These steps include:

• Consult with an attorney now to determine your potential risk and any action you might take to insulate that risk. These steps might include strategies related to proactive outreach to the government, transition planning for business operations in the event of an indictment, and other measures that could minimize the consequences of an indictment or civil lawsuit.
• Collect and organize any compliance or attorney materials that may have been maintained while the pharmacy was operational. By having these materials reviewed and organized now, potential defendants can more readily be prepared for any possible prosecution.
• Where individuals who participated in the TRICARE compounding arrangements partnered with other individuals, make sure that contact information is fresh and relevant. In many cases, potential defendants need to call witnesses. Having accurate contact information can be critically important.
• Finally, in some cases, proactive remittance of funds or self-reporting can be extremely helpful. Be sure to consult with an attorney as to whether these strategies might make sense before contacting the government.

With the clock ticking, now is the time that many individuals need to take the greatest precautions possible. As the adage goes, an ounce of prevention is worth a pound of cure. Nowhere is this adage more apt than in the waning days of possible compound medication prosecutions.