The Justice Department has announced that Medisca Inc. (Medisca) has agreed to pay $21.75 million to resolve allegations concerning the establishment of false and inflated Average Wholesale Prices (AWPs) for two ingredients used in compound prescriptions.
Medisca’s pricing scheme allegedly caused pharmacies that purchased those ingredients to submit false prescription claims to the Defense Health Agency, which administers the TRICARE Program for the Department of Defense and the Department of Labor’s Office of Workers’ Compensation Programs (federal health care programs).
“We will not tolerate fraudulent pricing schemes targeting health care programs that support veterans and other federal beneficiaries,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “As today’s settlement demonstrates, we will hold accountable not just those who submit false claims, but all who participate in schemes designed to defraud the American taxpayers.”
Compounding pharmacies purchase ingredients or chemicals from ingredient suppliers, such as Medisca, to prepare and fill compound prescriptions for patients who require a specially made prescription that is not generally available in the marketplace.
Medisca knew that compound prescription reimbursement under federal health care programs was based in part on the AWPs it reported to various price listing agencies.
The United States alleged that Medisca knowingly inflated the AWPs for resveratrol (NDC No. 38779-2863) and mometasone furoate (NDC No. 38779-2413) to increase the reimbursement that its pharmacy customers received from the federal healthcare programs for using those Medisca ingredients.
Medisca acquired resveratrol from manufacturers for approximately $0.37 per gram. It repackaged and sold resveratrol for under $2 per gram. Medisca reported an AWP for resveratrol at $777 per gram, creating a spread of over $775 for each gram of resveratrol used by a pharmacy customer in a compound prescription reimbursed by the federal healthcare programs.
Medisca acquired mometasone furoate from manufacturers for under $8 per gram. It repackaged and sold that ingredient to compound pharmacies for over $1,000 per gram. Medisca reported an AWP for mometasone furoate at over $7,300 per gram, thereby creating a spread of approximately $6,300 for each gram of the ingredient used by a pharmacy customer in a compound prescription reimbursed by the federal healthcare programs.
Medisca allegedly used the high AWPs it reported and the resulting profit potential it created for its customers to induce its compound pharmacy customers to purchase those ingredients. Medisca’s alleged fraudulent pricing scheme enabled its pharmacy customers to bill federal healthcare programs inflated amounts – often thousands of dollars per prescription – for compound formulations containing those ingredients.
Companies should not view the systems establishing federal reimbursements for compounded pharmaceuticals as an opportunity to inflate reimbursements from federal payors such as TRICARE artificially, said U.S. Attorney Damien M. Diggs for the Eastern District of Texas.
“When federal healthcare programs are defrauded, it hurts all Americans,” added U.S. Attorney Jaime Esparza for the Western District of Texas.
The settlement resolves claims brought under the whistleblower or qui tam provisions of the FCA by Doug McMakin against Medisca. Mr. McMakin is a pharmacist who owned and operated a compounding pharmacy that dispensed compounded prescriptions.
Under the FCA, private parties may sue on behalf of the government for false claims for government funds and receive a share of any recovery. Mr. McMakin will receive $3,425,625 from the proceeds of the settlement. The lawsuit is captioned United States ex rel. McMakin v. Medisca Inc. (EDTX).
