Source: https://www.fdli.org/2017/12/involved-compound-pharmaceuticals-beware-law-enforcement-focused/
Timestamp: 2019-04-21 16:28:58+00:00

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Compound pharmaceuticals occupy a rather special space within the world of pharmaceuticals. Compound pharmaceuticals are unique pharmaceutical products tailored to meet the individual needs of a patient and so are necessary, beneficial, and key components in the treatment of patients. They are widely used, demanded, needed, and subject to reimbursement and yet they sit largely outside of the purview of FDA and the oversight mechanisms that apply to FDA-approved prescription drugs.
After having focused for years on the pursuit, prosecution, and punishment of illegal kickbacks for FDA-approved pharmaceuticals, law enforcement authorities now are focusing efforts on pursuit of similar healthcare fraud perpetrated by some involved with compound pharmaceuticals. This article provides an overview of compound pharmaceuticals, regulation thereof, and the substantial recent enforcement efforts, including regarding kickbacks.
Compounding is a practice in which a licensed pharmacist, a licensed physician, or, in the case of an outsourcing facility, a person under the supervision of a licensed pharmacist, combines, mixes, or alters ingredients of a drug to create a pharmaceutical preparation to meet the needs of an individual patient.1 Such drugs are generally referred to as compound pharmaceuticals. Compound pharmaceuticals may be necessary, for example, when a commercially available drug does not meet the needs of a patient, e.g., when a patient cannot tolerate the commercially available drug due to allergy or other reasons, a shortage occurs, or a drug is discontinued. Examples of compound pharmaceuticals include capsules, creams, liquids, and other specially prepared pharmaceuticals.
Of the approximately 56,000 community-based pharmacies in the United States, about 7,500 pharmacies specialize in compounding services. The pharmacists in these pharmacies compound special preparations for patients. Compounding also takes place in hospital pharmacies and at other health care facilities.2 Without question, compounding pharmacies are needed and of great value for healthcare and the market promises to continue to grow with the demand for personalized medicine, the need for pain medications, and the need for compounding pharmacies and the well-trained individuals involved therewith who can create equivalent products in the event of drug shortages.
Outsourcing facilities generally refer to larger pharmacies that distribute high volumes of sterile compounded drugs. Such entities can register as a designated outsourcing facility under Section 503B of the FDCA. Drugs compounded by an outsourcing facility can qualify for exemptions from the FDA approval requirements and the requirement to label products with adequate directions for use, but not from current good manufacturing practice (CGMP) requirements.
Law enforcement authorities have made a concerted effort in recent years to target those involved with compound pharmaceuticals to prosecute healthcare fraud and abuse. Such enforcement authorities include state and federal law enforcement nationwide, including agents from the FBI, the Department of Health and Human Services Office of the Inspector General (HHS-OIG), Drug Enforcement Administration (DEA), Department of Defense Criminal Investigative Service (DCIS) and state Medicaid Fraud Control Units; the U.S. Department of Justice (DOJ); U.S. Attorneys’ Offices nationwide; and Medicare Fraud Strike Force teams from the Criminal Division’s Fraud Section. The breadth of involvement of law enforcement authorities alone signifies the focus on compound pharmaceuticals.
It is undeniable that enforcement authorities have placed a particular emphasis on pursuit of healthcare fraud perpetrated by those involved with compound pharmaceuticals. Compound pharmaceuticals may be subject to higher reimbursement under publicly funded healthcare programs and so can present a lucrative opportunity for those involved in healthcare fraud. Considering their wide use, they are just as susceptible to healthcare fraud as FDA-approved drugs. Such fraudulent activities are particularly disturbing as the increased law enforcement focus it attracts interferes with or prevents legitimate patients such as veterans from receiving and legitimate compounders from providing necessary compound pharmaceuticals.
Where such a false claim for payment has been made, the federal government may bring a civil action to enforce the FCA. Fines can be substantial as each instance of an item billed to a federal program counts as a claim. Specifically, 31 U.S.C. § 3729(a) states that persons or entities are liable under the FCA where they “knowingly present , or cause to be presented, a false or fraudulent claim for payment or approval.” Violations in the form of claims resulting from a kickback under the AKS can create liability under the FCA in addition to the AKS. Other counts include counts for criminal conspiracy, money laundering, wire and mail fraud, and identity theft to name a few.
Physicians who prescribe compound pharmaceuticals should detail the necessity of the unique pharmaceutical product for the particular patient.
Those who sell compound pharmaceuticals should employ strong training regimens for marketers directly employed by them as to what constitutes kickbacks and to avoid them.
For marketers not directly employed by sellers, those who sell compound pharmaceuticals can take special care in their written agreements with marketers, including appropriate representations and warranties.
For independent marketers, be well informed of the broad definition of kickbacks in order to avoid them.
Law enforcement has been focused on attacking healthcare fraud related to compound pharmaceuticals and promises to continue to do so. Kickbacks, reimbursement schemes, and related illegal activities have been a focus of recent prosecutions. Government authorities will continue to investigate and pursue those involved with such healthcare fraud nationwide. Those involved in the industry would be well advised to learn and follow best practices to protect themselves and preserve their clean practices.
Section 503A(a) (21 U.S.C. 353a(a)) (“Section 503A).
The Drug Enforcement Administration (DEA) also oversees any controlled substances used in compound pharmaceuticals.
U.S. Department of Justice, February 26, 2016 Release (https://www.justice.gov/opa/pr/fact-sheet-health-care-fraud-and-abuse-control-program-protects-conusmers-and-taxpayers).
Office of Inspector General: Medicare Fraud Strike Force (https://oig.hhs.gov/fraud/strike-force/).
U.S. Department of Justice, June 22, 2016 Release (https://www.justice.gov/opa/pr/national-health-care-fraud-takedown-results-charges-against-301-individuals-approximately-900).
The breadth of jurisdictions involved in the take-down show law enforcement’s seriousness in pursuing healthcare fraud. The Strike Force locations included the Southern District of Florida, Southern District of Texas, Northern District of Texas, Central District of California, Eastern District of Michigan, Middle District of Florida, Northern District of Illinois, Eastern District of New York, and Eastern District of Louisiana. Individual U.S. Attorney’s Offices and/or respective Medicaid Fraud Control Units were also involved in investigations and cases brought in the states of Alabama, Alaska, California, Connecticut, Georgia, District of Columbia, Florida, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Minnesota, Missouri, New Hampshire, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Vermont, West Virginia, and the District of Puerto Rico. U.S. Department of Justice, June 22, 2016 Release (https://www.justice.gov/opa/pr/national-health-care-fraud-takedown-results-charges-against-301-individuals-approximately-900).
California Department of Insurance, June 22, 2016 Release (https://www.insurance.ca.gov/0400-news/0100-press-releases/2016/22-Defendants-Named-in-Health-Care-Fraud.cfm).
U.S. Department of Justice, August 9, 2016 Release (https://www.justice.gov/opa/pr/eight-individuals-charged-multimillion-dollar-compounding-pharmacy-fraud-scheme).
U.S. Attorney’s Office, Northern District of Texas, October 14, 2016 Release (https://www.justice.gov/usao-ndtx/pr/ten-additional-defendants-charged-100-million-tricare-fraud-scheme).
U.S. Attorney’s Office, Northern District of Texas, March 24, 2016 Release (https://www.justice.gov/usao-ndtx/pr/federal-grand-jury-indicts-eight-individuals-charged-158-million-health-care-fraud).
U.S. Department of Justice, July 13, 2017 Release (https://www.justice.gov/opa/pr/national-health-care-fraud-takedown-results-charges-against-over-412-individuals-responsible).
More than 60 of the defendants arrested are charged with fraud related to the Medicare prescription drug benefit program known as Part D, which is the fastest-growing component of the Medicare program overall. California Department of Insurance, June 22, 2016 Release (https://www.justice.gov/opa/pr/national-health-care-fraud-takedown-results-charges-against-301-individuals-approximately-900).
See 42 U.S.C. § 1320a-7b(b).
See 42 U.S.C § 1320a-7.
See 42 U.S.C § 1320a-7a(a) and (a)(7).
See 42 U.S.C. § 1320a-7a(a).
See 31 U.S.C. § 3729-3733.

References: § 3729
 § 1320
 § 1320
 § 1320
 § 1320
 § 3729