A pharmacy supplier will pay $22.5 million to resolve allegations that its subsidiaries in the United States inflated prices for compound drug ingredients by more than 2,000 percent in some cases and submitted fraudulent claims to federal healthcare programs.
And the unnamed whistleblowers in San Antonio and Florida who exposed the alleged fraud will get $3.75 million for their role in resolving the case.
The U.S. Justice Department alleged that Freedom Pharmaceuticals Inc., a subsidiary of Belgium-based Fagron Holding USA, knowingly inflated the average wholesale price for its ingredients so it could increase the reimbursements that its pharmacy customers received from federal healthcare programs.
For example, Freedom established an average wholesale price for the ingredient fluticasone propionate at $3,500 per gram even though it typically sold the fluticasone propionate for about $160 per gram, the Justice Department said. The medication is commonly used to control asthma.
The scheme caused pharmacies that brought Freedom’s compound ingredients to submit false claims to the Defense Health Agency, which administers the TRICARE insurance program for the Defense Department, and the Department of Labor’s Office of Workers Compensation Programs.
“We have no tolerance for the abuse of federal healthcare programs, especially where it impacts the healthcare program for our veterans and their families,” said U.S. Attorney John Bash of the San Antonio-based Western District of Texas.
For its part, Fargon noted the deal ends the Justice Department investigation with no criminal charges against the company.
“The settlement agreement with the US Department of Justice does not contain an admission of wrongdoing, fault or liability of any kind by Fagron,” a company statement said. “With this settlement, all ongoing investigations by the US Department of Justice against Fagron and its subsidiaries will be terminated and there will be no further exposure and associated costs for Fagron.”
Compounding pharmacies purchase ingredients or chemicals from suppliers to prepare and fill compound prescriptions for patients who require a specially made prescription that is not generally available in the marketplace.
The Justice Department says Freedom knew that compound prescription reimbursement under these federal programs was based in part on the average wholesale prices it reported to various price listing agencies for its ingredients.
Freedom promoted its high average wholesale prices and the resulting profit potential from the reimbursement of compound prescriptions as an inducement to pharmacies to purchase its ingredients, the Justice Department alleged.
Freedom’s fraudulent pricing scheme for its ingredients enabled its pharmacy customers to bill federal healthcare programs thousands of dollars per prescription for some compound formulations, the Justice Department said.
The settlement also resolves allegations that Fagron’s wholly owned pharmacy subsidiary, Pharmacy Services Inc. and its pharmacy affiliates, submitted fraudulent compound prescription claims to federal healthcare programs, used sham insurance programs to manipulate pricing, paid kickbacks to physicians for bogus consulting agreements, and illegally waived copays.
It also addresses allegations against another Fagron subsidiary, B&B Pharmaceuticals Inc., that it set an inflated average wholesale price for gabapentin, which can be prescribed to treat seizures or pain from shingles.
Those allegations were in two separate cases filed by whistleblowers against Freedom, Pharmacy Services and B&B under the whistleblower provisions of the federal False Claims Act. They were filed in San Antonio and in Florida, and joined by the Justice Department.
Guillermo Contreras covers federal courts in San Antonio and international legal issues. Read him on our , mySA.com, and on our , ExpressNews.com. | [email protected] | Twitter: @gmaninfedland