Specialty Pharmacy Fraud

Pharmacy Benefit Managers (“PBMs”) have become prolific in the last twenty years and typically act as intermediaries between pharmaceutical manufacturers and third party payors to administer prescription drug benefits. These third party payors can include Medicare Advantage Plans, Medicare Part D Prescription Drug Plans (“PDP”), and Federal Medicaid programs. PBMs make huge profits through service fees from large customer contracts for processing prescriptions, operating mail-order pharmacies, and negotiating product prices and rebates with pharmacies and drug manufacturers. In recent years, this very close, and often symbiotic, relationship between PBMs and drug companies has been exploited, and has resulted in the evolution of a multitude of fraudulent schemes.

The proliferation of fraud within this arena has resulted in increased scrutiny over PBMs by the Department of Justice, which has historically focused its attention on pharmaceutical manufacturers. Today, PBMs are a prime target for False Claims Act actions because over 80% of pharmaceuticals in the U.S. are purchased through PBM networks, and a significant portion of government funds flow through these PBMs. Moreover, a recent FCA amendment makes companies liable for wrongfully retaining overpayments of government funds, which fits neatly into the practice of PBMs failing to pass along rebate savings to government health plans.

Whistleblowers have helped to expose this fraud and recover billions of dollars for the government.

PBMs and Specialty Pharmacy Fraud

Specialty Pharmacies are most often focused on dispensing specialty drugs, specifically products that are high in cost, require special handling and shipping, and require special administration to a patient.

The financially lucrative and “specialty” nature of many of the drugs dispensed by these pharmacies, coupled with their close, often “captive” relationships with pharmaceutical companies, PBMs and insurance providers, makes specialty pharmacies fertile ground for fraud. Many of the bigger specialty pharmacies are owned by insurers or PBMs like CVS and Express Scripts.

Examples of Fraud involving PBMs and Pharmacies

  • Misclassification of manufacturer rebates as “purchase discounts”
  • Retaining manufacturer rebates instead of passing savings to patient
  • Paying kickbacks and/or offering inducements to providers and manufacturers to induce them to sign contracts
  • Improper therapeutic substitution (switching)
  • Restocking and shipping previously dispensed and returned drugs
  • Dispensing expired or adulterated drugs
  • Shorting medications

Kenney & McCafferty has a long and well established history in representing whistleblowers with knowledge of various types of pharmaceutical fraud, including the precise kickback schemes currently being used by PBMs and major pharmaceutical companies. K&M has had tremendous success in representing pharmacists, pharmaceutical employees, physicians, and other whistleblowers with knowledge of kickbacks relating to major pharmaceutical companies.

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