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Federal and state enforcement activity involving pharmacy fraud tops the list of categories in this edition of Rivkin Rounds’ Fraud Week. We’ll list just a sampling of cases.

On October 19, the U.S. Department of Justice (DOJ) announced that Jerry May Keepers of Kingswood, Texas was sentenced to 36 months of supervised probation for writing and referring compounded drug prescriptions in exchange for illegal kickbacks. The crooked pharmacy, OK Compounding, made kickback payments to referring physicians through sham “medical director” or “consulting physician” contracts.

On October 11, DOJ announced that a Houston pharmacist was sentenced to 27 months in prison for a $22 million fraud scheme that involved paying kickbacks to doctors in exchange for compounded pain medication prescriptions from 2012 to 2018. Khyati Undavia, the owner of Memorial Pharmacy, also paid $12 million in restitution and will have three years of supervised release after the jail term. Many of the patients never saw a doctor and had no need for the medicated creams. Some of the kickbacks were paid for fake “medical director” or consulting services to the pharmacy.

On September 27, DOJ announced that Michael Murphy of Fort Lauderdale, Florida, who co-owned Cure Pharmacy in Jacksonville and two other pharmacies, pleaded guilty to conspiracy to commit healthcare fraud in an $8.3 million scheme. Murphy paid kickbacks and bribes to telemarketing companies to recruit Medicare beneficiaries to accept medically unnecessary prescriptions, and to the telehealth providers who wrote the prescriptions. He faces up to 10 years in prison.

DOJ announced on October 12 that several Georgia compounding pharmacies and affiliated entities agreed to pay more than $6.8 million to resolve allegations that they violated the False Claims Act by waiving copays, charging the government impermissibly high prices for expensive compounded pain creams, and trading federal healthcare business with other pharmacies. The pharmacies included DermaTran Health Solutions in Georgia, Legends Pharmacy in Texas, and Lake Side Pharmacy and TriadRx, both in Alabama. DermaTran sold its out-of-network prescriptions to the Texas and Alabama pharmacies, which filled the scripts and paid portion of the proceeds to DermaTran as kickbacks. Pharmacy Insurance Administrators, which handled the billing for DermaTran, will pay $6.5 million of the settlement. The whistleblower, a former DermaTran accountant, will receive more than $1.4 million of the proceeds.

Finally, for those who may think a large company should know better, Massachusetts Attorney General Maura Healey announced on September 29 that Centene Corp. will pay $14 million to resolve claims that its pharmacy benefits manager (PBM) subsidiary overbilled MassHealth, Massachusetts’ Medicaid program, for pharmacy services. Centene is the largest Medicaid managed care organization in the U.S. and its PBM, Envolve Pharmacy Solutions, Inc., had already reached similar settlements with numerous other states. Massachusetts alleged that Envolve and Centene failed to disclose or pass on some retail discount fees to MassHealth, inflating fees and drug costs reported to MassHealth.

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