The Justice Department has joined the lawsuit filed by two former employees turned whistleblowers in Pompano Beach, Florida. Federal prosecutors last week filed a case in Miami, Florida under the False Claims Act against the pharmacy called Patient Care America (PCA) and its Diabetic Care Rx LLC. The federal prosecutors charged the pharmacy of having taken improper reimbursements from TRICARE for the illegal push of its creams and vitamins. TRICARE is a federally-funded health care program for military personnel and their families.
The government is also suing Patrick Smith and Matthew Smith, two pharmacy executives, and the firm that owns and manages the pharmacy, the Riordan, Lewis & Haden Inc. (RLH), a private equity firm based in Los Angeles, California. The firm was founded by former Los Angeles Mayor Richard R. Riordan, but a report said he has long been retired and no longer has a financial interest in the firm based on its public filings.
In its lawsuit, the Justice Department alleged that the pharmacy, its two executives and the firm that owns and manages it paid illegal kickbacks to make TRICARE beneficiaries receive prescriptions for compounded pain creams, scar creams, and vitamins, whether or not the patients needed it for medical reasons.
The government claimed that the pharmacy and its marketers manipulated the compound formulas to obtain the maximum possible reimbursement from TRICARE. As a result, the Patient Care America raked in millions from doubtful reimbursements with TRICARE in just eight months from 2014 to 2015. The complaint alleged that the defendants and the marketers shared in the profits from the scheme.
Two former employees of Patient Care America first complained about the pharmacy’s kickback scheme in a False Claims Act filed in 2015. The lawsuit, United States ex rel. Medrano and Lopez v. Diabetic Care Rx, LLC dba Patient Care America, et al., No. 15-CV-62617 (S.D. Fla.), was first filed in the U.S. District Court for the Southern District of Florida by Marisela Medrano and Ada Lopez. The two former employees filed it under the qui tam or whistleblower provisions of the False Claims Act, which permit private parties to sue for false claims against of the United States and to receive a share of any recovery. The Act permits the United States to intervene in such lawsuits, as the United States has done in this case.
The False Claims Act allows the government to seek payment of three times the proven actual damages. Patient Care America and the involved owner and executives might have to pay the US government more than $200 million in tainted reimbursements with TRICARE if federal prosecutors prevail. The whistleblowers also known as relators are entitled to a portion of the recovery under the False Claims Act and whistleblower settlements under the federal statute can total up to 25% of the amount the government actually recovers, so theoretically, the whistleblower award here can be as high as $50 million dollars.
This case was investigated by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Southern District of Florida, the Defense Criminal Investigative Service, the U.S. Food and Drug Administration’s Office of Criminal Investigations, and the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit.
“Providers and marketers that engage in kickback schemes drive up the cost of health care because they focus on their own bottom line instead of what is in the best interest of patients,” said Executive Assistant Randy Hummel of the United States Attorney’s Office for the Southern District of Florida. “We will hold pharmacies, and those companies that manage them, responsible for using kickbacks to line their pockets at the expense of taxpayers and federal health care beneficiaries.”