Texas pharmacy accused of paying kickbacks to doctors
By Kevin Krause | The Dallas Morning News (Tribune News Service) | Published: February 6, 2016
Federal authorities are investigating a North Texas compounding pharmacy accused of paying illegal kickbacks to physicians for writing prescriptions, according to court documents obtained by The Dallas Morning News.
RXpress Pharmacy and related entities in the Dallas area also paid sales reps commissions to market the pharmacy’s services to doctors in apparent violation of federal anti-kickback laws, according to lawsuits.
The claims are similar to what federal authorities are examining in multistate criminal and civil investigations that have already resulted in indictments and multimillion-dollar civil settlements.
The lawsuits and investigations raise legal and ethical questions about business relationships between doctors and pharmacies. Federal law prohibits pharmacies from giving physicians anything of value in exchange for prescription referrals.
The fraud investigations are the latest blow to compounding pharmacies, which have already been subjected to intense federal scrutiny following a succession of drug contamination scandals. A Farmers Branch pharmacy, Downing Labs, is under a federal order to improve safety measures before it can continue operating due to problems with contaminated drugs and unsanitary facilities.
Disgruntled business partners and a pharmacy tax adviser leveled the accusations against RXpress in separate lawsuits. The tax adviser said doctors invested in the pharmacy and wrote prescriptions to drum up business for the company. RXpress paid them kickbacks in the form of investor dividends, she said.
Lewis Hall, the pharmacist in charge at the Fort Worth-based company, said his pharmacies follow all rules and regulations. Rob Myers, an attorney who represents Hall and his son, Richard Hall, said that mistakes were made early on and that the pharmacy is currently following state and federal laws. But Myers said there are a lot of things his clients don’t know about their partners’ business activities.
The Halls are suing their partners, Scott Schuster and Dustin Rall, claiming they skimmed more than $17 million off the pharmacy’s revenue.
Schuster, 44, and Rall, 40, both of Fort Worth, and their attorney could not be reached.
RXpress Pharmacy has received taxpayer money from Tricare, the military’s health insurance program. Myers said he does not know how much.
Last month, the FBI and other police agencies raided nine compounding pharmacies in Mississippi and seized more than $15 million in assets. And several Florida pharmacies agreed last year to pay millions to settle civil allegations that they had improper financial relationships with doctors.
The scope and nature of the investigation involving RXpress are unclear. The Defense Department did not respond to questions. The FBI said it could not confirm or deny the existence of an investigation.
Lewis Hall, 67, said his pharmacy has not received any federal subpoenas or other inquiries from the federal government.
Michael Elliott is a defense attorney who oversaw health care fraud investigations for the U.S. attorney’s office in Dallas.
He said his office has received calls from pharmacies in the Dallas area — he wouldn’t say which ones — whose business relationships with doctors are being scrutinized by federal authorities. Elliott said he knows that subpoenas have gone out to pharmacies and he believes indictments could be issued within a year.
Compounding pharmacies tailor certain drugs to individual patients, usually in small batches, by altering dosages, mixing medications and converting pills into liquids, for example.
RXpress says it provides customized medications such as pain and scar creams.
The military went from spending $23 million on compounded drugs in 2010 to $1.7 billion by the first nine months of the 2015 fiscal year.
Tricare stopped paying for the controversial pain creams — a big business for pharmacies like RXpress — in May so that federal authorities could investigate fraud suspicions. The government also suspended Tricare payments to some pharmacies, saying they filled prescriptions for doctors who may not have even seen patients.
But RXpress and other pharmacies quickly spun off a new line of business involving lab tests — and Tricare is picking up the tab. Tricare is now spending millions of dollars for DNA tests that use a cheek swab to measure one’s cancer risk and reactions to certain drugs.
Although lucrative for pharmacies, genetic tests have shown mixed results. And federal officials suspect fraud is also creeping into that industry.
Richard Hall, 45, said in his lawsuit, filed in January, that he and his father became partners in the pharmacy with Schuster and Rall in 2013.
When they started, each partner charged the pharmacy a sales commission “for prescriptions written by physicians,” Hall said in the lawsuit. He said pharmacy lawyers told them they could not do that because it violates the federal anti-kickback law.
Hall said he and his father returned their commission money, but Schuster and Rall did not.
The Halls claim in the lawsuit that the actions of their partners have subjected the pharmacy to “potential liability” from regulators and insurers.
The kickback allegations surfaced when RXpress Pharmacy sued its accountant last year for causing the company excessive tax liability.
RXpress said in the suit that a parent company, The Medicine Store, restructured its ownership in 2013 to allow outside investors to hold an interest in the business.
Those investors included physicians who were paid to refer patients to RXpress, said Ruth Haynes, who was hired to provide the company accounting and tax consulting services.
The doctors were paid dividends for writing prescriptions, she said. Haynes said she knew this because she prepared the doctors’ tax forms.
The federal Stark law prohibits physicians from referring Medicare and Medicaid patients to a health care company if the physician or an immediate family member has a financial relationship with the company. A violation of that law — which does not apply to Tricare — is a civil matter.
The anti-kickback law protects patients from “inappropriate medical referrals or recommendations by health care professionals who may be unduly influenced by financial incentives,” the U.S. Health and Human Services inspector general said in a June 2014 special fraud alert.
Doctors may be inclined to order tests from a lab that pays them rather than one with the best and most appropriate services, the alert said. Doctors also may order more tests than are medically necessary, especially when the payments are tied to the number of prescriptions they write.
Violations of the anti-kickback law, which does cover Tricare, carry criminal penalties.
Myers said his clients did not pay any kickbacks.
‘Go after the money’
Xpress Laboratories was formed in January 2015, with Schuster and Rall serving as officers, corporate records show. Lewis and Richard Hall serve on the board.
The lab is in Dallas near Love Field and performs DNA and blood and urine toxicology testing. It also conducts DNA tests to see how people react to certain drugs so that medications can be tailored to them.
Xpress Laboratories says it also offers cutting-edge genetic cancer screening that only two other labs in the world perform.
“New science and technology has made it possible for physicians to screen their patients’ genes for all of the common types of gene mutations that increase the risk of hereditary cancer with a simple non-invasive test,” an Xpress Labs pamphlet says.
Some medical experts, however, question the effectiveness of the genetic tests.
Myers said that Schuster and Rall are running the lab operation and that he and his clients do not know if it is receiving Tricare money or if doctors are being paid.
Federal officials are concerned about fraudulent practices. Three labs across the country that offered various health screenings were accused last year of getting doctors to order unnecessary tests to generate profits from federal health insurance programs like Medicare.
Jeffrey Baird is an Amarillo attorney whose firm specializes in health care fraud and represents pharmacies in Texas and across the U.S. He said that it was natural for many pharmacies to search for a niche or new angle like DNA testing once the government stopped paying for pain creams.
Unscrupulous companies, he said, will “bill the hell” out of government health care programs for such tests until the government puts a stop to it.
“They will go after the money,” Baird said.
©2016 The Dallas Morning News
Visit The Dallas Morning News at www.dallasnews.com
Distributed by Tribune Content Agency, LLC.