Compounded prescriptions, soaring costs, $2B fraud probe
By Dana Treen | The Florida Times-Union, Jacksonville | Published: February 12, 2016
JACKSONVILLE, Fla. (Tribune News Service) — For $4,555.01 in the fall of 2013, Dena Jones received three plastic squeeze bottles of a liquid prescription she needed to ease the pain in her injury-battered back.
She paid a $17 co-pay for the three-month supply.
Tricare, the medical system that provides insurance for active-duty military personnel and retirees and their families, paid Well Health Pharmacy, the Jacksonville company that filled the prescription, the remaining $4,538.01.
The salve, called a compounded prescription because it was a specialized mix of ingredients, was effective, but Jones said the price bothered her.
“Every time I picked up my prescription I said, ‘I’m not wasting my government’s money,’ ” said Jones, whose husband worked for the Department of Defense and was a Navy retiree. “It’s my tax dollars.”
She took care to be careful, she said.
“I didn’t use nearly as much as it was probably recommended to be used,” she said.
Jones’ caution was unlike what the federal government saw in the prescription compounding industry that led investigators to an estimated $2 billion in fraud in claims to Tricare nationally beginning in 2013 and running into last year. There have been civil settlements and federal investigators said criminal charges are likely early this year.
Since March the U.S. Attorney’s Office that covers Florida from Jacksonville to Fort Myers has collected at least $50 million in civil settlements related to compounding pharmacies.
In September Jacksonville’s Well Health and owner pharmacist Rakesh Patel signed a settlement agreement with the Department of Justice over what the government said are compounding pharmacy violations. In December a Baptist Medical Center cardiologist who was a partner with Patel, and three fellow physicians who wrote compound prescriptions through Well Health, also settled.
Together the five agreed to pay about $10 million in cash and assets without admitting wrongdoing.
Of $10 million billed to Tricare from February 2013 to March 2015 in the Well Health case, 40 percent of the prescriptions were written by the four doctors who settled with the government.
The cream Jones bought from Well Health was written by one of the four doctors, though Jones said she doesn’t recall seeing the physician by that name at the medical practice she used at the time.
Across the country compounding pharmacies were charging as much as $10,000 to $20,000 each for prescriptions and some hired marketers who used Facebook and other social media to target military families, enticing them with inclusion in research studies and telling them of creams and salves that were pain relievers, migraine headache medicines and scar reducers, said Jason Mehta, a Jacksonville-based assistant U.S. attorney for the Middle District of Florida.
The cost to actually compound these creams was often only about 5 percent of the submitted cost, according to the Department of Justice. Compounding pharmacies were making in the range of 90 percent profit on each prescription.
Of the $2 billion in estimated fraud, about $500 million is believed to have occurred in Florida, Mehta said. One-quarter to a third of that was in the Jacksonville region.
Jacksonville, with its military and elderly population, was a prime target for fraud, Mehta said.
Tricare, a government agency, was seen as more likely to pay than other insurers, but honing in on military families also said something else.
It was greedy, Mehta said.
“They are living the best lives in Jacksonville,” he said of those who the Justice Department said were perpetrating the fraud.
“Why they need to take advantage of a health-care program designed for military personnel is beyond me,” he said.
Investigations are taking place in other states, Mehta said. In Mississippi recently about 1,000 federal agents conducted a mass seizure of about $15 million, as well as boats, cars and airplanes all related to compounding cases, Mehta said.
So far Florida is the only state to have settlements.
Mehta, who investigates health-care fraud, said Tricare noticed huge increases in compounded prescription costs about the same time that month-to-month data analysis by the U.S. Attorney’s Office was noticing similar trends.
“The spike was particularly acute in Jacksonville,” Mehta said.
He said the office decided to investigate 20 pharmacies in Jacksonville and surrounding counties.
On the Friday afternoon before Memorial Day in 2015 agents were sent to those businesses to serve federal subpoenas.
Well Health stood out among the companies, he said.
Since 2013 there had been astronomical growth in the volume of prescriptions sent to Tricare from the Jacksonville compounding pharmacy. They found similar situations in other investigations, he said.
“What we saw in a lot of these pharmacies is that one or two, or in this case four, doctors would make up a vast majority of the prescriptions,” he said. “And that raised alarm bells for us.”
According to the Defense Health Agency that oversees Tricare, costs for compound drugs skyrocketed from $5 million in 2004 to $514 million in 2014. Costs topped $1 billion in the first six months of 2015.
Tricare went to Congress for help so the agency could make the payments, and rules were changed to make approvals of compound prescriptions more stringent.
The agency was on track to lose $2 billion in 2015 alone until the controls were put in place in May, said George Jones, chief of pharmacy operations at the agency.
The safeguards have resulted in a 98 percent reduction in cost, he said.
Foundations of fraud
Well Health was an existing compounding pharmacy in Jacksonville, owned by Patel, who was an acquaintance of cardiologist Manish Bansal. Mehta said the men decided to form a second compounding pharmacy, Topical Specialists, in 2013.
Proper compound prescriptions are effective and often designed for people who cannot take pills or perhaps have unwanted reactions to conventional medications. Bansal enlisted three colleagues to join in the company, which they planned to use to produce the compounds.
Melissa Nelson, an attorney who represents the three physicians who became partners with Bansal, said the trio believed in the effectiveness of the creams and consulted other attorneys about the partnership and did not see red flags in the business arrangements.
Nelson said the doctors, pain-management physician Marisol Arcila, neurologist Syed Asad and primary practice physician Mehul Parekh, chose not to comment outside a statement.
“As physicians, we have always acted in the best interests of our patients,” the statement said. “In every instance we prescribed medication in good faith; the topical compounded pain creams at issue in this matter are an effective alternative to narcotic medications, which can have serious side effects.
“When we were recruited to invest in a pharmacy to fill our prescription orders,” the statement continued, ”we consulted legal counsel and trusted our partners who assured us that the business was acting strictly in compliance with the law. Our trust was misplaced. We fully and willingly cooperated with the government’s investigation and look forward to putting this regrettable business decision behind us.”
Mehta said the government realizes some individuals were more culpable than others, but there were signals that should have been alarms. Civil actions such as the ones the government took in the cases so far can be based on reckless behavior.
“They started getting hundreds of thousands of dollars in checks but didn’t ask any questions,” he said.
The Justice Depatment said the four wrote hundreds of prescriptions, recruited other doctors and Well Health received up to 40 percent of the reimbursements.
Attorney Rob Williams, who represents Bansal, said he instructs his clients not to speak publicly about cases.
“The settlement agreement speaks for itself,” he said.
A call to an attorney representing Patel was not returned.
Mehta said several thousand people in the Jacksonville area got prescriptions from the nearly two dozen shops that were investigated.
In order to recruit patients some companies — although Well Health was not among them — hired marketers familiar with the medical field who would use Facebook and other social media to connect with military groups to find potential patients.
Those marketers would find doctors willing to write prescriptions through the compounding pharmacy the marketers worked for. Mehta said some doctors were paid. Patients also were sometimes paid and told they would be participating in a study.
Payments are often considered kickbacks, which are illegal, he said.
“That spotlight will be intensifying,” he said.”
The Defense Department also is investigating and will prosecute criminal cases they uncover.
Mehta said in interviews with patients, investigators found many were baffled by what they were receiving.
“It’s being pitched as these miracle creams,” he said. “We have not talked to many patients who said it worked. Ninety-eight percent tell us ‘I didn’t use it, I didn’t want it, it didn’t work.”
He said while the prescriptions are intended to be tailored to an individual with specific needs, that was not being done. Instead, some were making a stock supply of 10 or so mixtures that were sent to different patients.
Jones, the Tricare pharmacy chief, said the 9 million beneficiaries in the program made a soft target. Part of Tricare’s role he said made it more open than other insurance programs.
“A very strong interest is assuring our folks have good pain management,” he said.
That too became a target of unscrupulous companies.
“They preyed on that population,” Jones said.
©2016 The Florida Times-Union (Jacksonville, Fla.)
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