Posted and filed under FWA, Healthcare.

…co-owner of numerous compounding pharmacies and pharmaceutical distributors, was sentenced today on his guilty plea to one count of conspiracy to commit health care fraud and one count of conspiracy to commit money laundering.

https://www.justice.gov/opa/pr/compounding-pharmacy-mogul-sentenced-multimillion-dollar-health-care-fraud-scheme

How is it possible that several years into the explosion of these schemes, can they still be there? It’s a bit of a rhetorical question, but one that certainly does spark discussion.

As the example above demonstrates, the money in these frauds is enormous.  For context, we asked our retired OIG agents about it.  They likened this to the “Operation Brace Yourself,” in that the landscape is very similar. Criminals do not need to reinvent the wheel when the playbook is already there.

Like the braces in “Operation Brace Yourself,” there was a trifecta; telemarketers, prescribers, and pharmacies. All play a role in fostering and perpetuating the fraud. The telemarketers create the compound formula. They get a conspirator pharmacy to run a “test claim” to see what gradients pay the most, and re-calibrate to ensure maximum reimbursement. The same telemarketers shop the scrips to pharmacies that have the best PBM contracts. The telemarketers pay a willing provider a nominal fee (maybe $20-$30) per script.  This is another example of how an unscrupulous provider will sell their soul for gas money.

It all ends with a prescription showing up at someone’s door.  Why did the patient accept it? Well, some will think their primary doctor consulted with the name on the compound bottle. Some answered a survey and thought this was the result. Some do nothing because they don’t collect copayments so patients don’t care. One of our retired OIG agents told a story where he interviewed a  Medicare beneficiary and the beneficiary brought out a laundry basket full of compounds. Since he didn’t pay anything for them, he didn’t “make a stink.”

We can trace some of the explosion back to the changes in the way the compounds are billed. In 2012, the method of billing changed from listing only the most expensive ingredient in the compound to being able to list all of them.  So now, instead of being paid for one item, theoretically, pharmacies were now able to be paid for all of them.  

Plans have made strides in curbing this fraud.  Prior authorizations, blacklisting ingredients, days’ supply limits and the like are all tactics that were employed by PBMs to stem the fraud. The playbook of fraud will always be relied upon incoming with a scheme to defraud, and particularly, the senior population.