CVS to Pay $37.8 Million to Settle Overbilling Claims

CVS to Pay $37.8 Million to Settle Overbilling Claims

CVS Pharmacy, Inc. agreed to pay $37.8 million to settle several lawsuits in which the United States intervened that alleged that CVS over-dispensed and overbilled government health care programs (GHPs) — including Medicare, Medicaid, TRICARE, and the Federal Employees Health Benefits Program — for insulin pens.

Specifically, the US Department of Justice (DOJ) alleged that, from January 1, 2010, through December 31, 2020, the pharmacy chain engaged in a systematic practice of prematurely refilling prescriptions and under-reporting the days-of-supply on reimbursement claims. Specifically, the government alleged that CVS:

• Dispensed more insulin to GHP beneficiaries than was specified by their prescriptions and refilled GHP beneficiary prescriptions substantially before GHP beneficiaries needed the refills.
• Falsely under-reported the days-of-supply for the insulin, which often prevented pharmacy benefit managers (PBMs) from detecting that the refills were premature.
• Failed to comply with applicable rules when refilling insulin prescriptions requiring pharmacies to calculate refill dates using the actual days-of-supply dispensed.

To ensure reimbursement, CVS allegedly directed its pharmacy staff to enter the maximum days’ supply permitted by each beneficiary’s plan when dispensing full cartons of insulin pens to quickly fill prescriptions and avoid claim denials. That reported figure was frequently lower than the true days’ supply provided. Many CVS pharmacies did not record or rely on the actual days’ supply dispensed to set the next refill date. Instead, CVS’ dispensing system automatically calculated refill timing using the inaccurate days’ supply transmitted to the PBM. This practice led CVS staff to refill prescriptions too early, providing GHP beneficiaries with far more insulin far sooner than their prescriptions required.

The DOJ further alleged that CVS’ management knew of this issue because PBMs identified dispensing violations during audits and issued chargebacks to the pharmacies because of them. Yet, despite the PBM findings, CVS did not make any changes to its insulin-refilling practices.

As part of the settlement, CVS admitted and accepted responsibility for some of the alleged conduct, including that GHPs paid CVS substantial amounts for insulin pen refills that were ineligible for reimbursement and CVS pharmacies dispensed more insulin to GHP beneficiaries than they needed.

The DOJ’s press release is available here.

Except for the facts CVS admitted as part of the settlement, the claims resolved by the settlement are allegations only, and there has been no determination of liability.

Specialty Wound Care Provider Enters $45 Million Settlement to Resolve Fraudulent Billing Allegations

On November 21, Dr. Ameet Vohra and his companies, including Vohra Wound Physicians Management LLC, agreed to pay $45 million to resolve allegations that he caused the submission of false or fraudulent claims for payment to Medicare for overbilled or medically unnecessary medical services. Vohra is a large specialty wound care provider that services nursing homes and skilled nursing facilities around the country.

As we previously reported, the government alleged that Vohra — as orchestrated by Dr. Vohra and implemented by his senior management team — engaged in a nationwide scheme to bill Medicare for surgical debridement procedures that were either not medically necessary or had not been performed. In particular, the government alleged that Vohra pressured, trained, and provided financial incentives for Vohra physicians to perform debridement procedures during as many patient visits as possible regardless of the patients’ needs. This resulted in Vohra billing Medicare for more lucrative surgical procedures when routine non-surgical wound management would have sufficed. Even more, Vohra allegedly programmed its electronic health record and billing software to ensure that Medicare was always billed for the higher-reimbursed surgical excisional procedure and to create false medical record documentation to support the scheme.

Under the settlement, Vohra will enter into a five-year Corporate Integrity Agreement (CIA) with the Office of Inspector General for the US Department of Health and Human Services. Under the CIA, Vohra must develop and maintain a compliance program, implement a risk assessment process, and hire an independent review organization to review its claims and health information technology systems.

In a statement, Vohra asserted that it does “not share the government’s view that the allegations in their complaint are fact.” Moreover, Vohra said that its unrelated lawsuit against the Centers for Medicare & Medicaid Services for “intentional abuse of the suspension process” will also be dismissed as part of a global resolution.

The case is United States v. Vohra, No. 24-cv-21570 (S.D. Fla.).

The DOJ’s press release is available here.

The claims resolved by the settlement are allegations only and there has been no determination of liability.

Jury Acquitted Hi-Tech Pharma CEO of Most Fraud-Related Charges

Following a six-week trial, and two and a half days of deliberation, a jury acquitted Hi-Tech Pharmaceuticals, Inc. CEO Jared Wheat of several fraud-related charges — including money laundering, conspiracy to commit wire fraud, and selling mislabeled drugs — but convicted him of one count of wire fraud. The jury, however, convicted Hi-Tech of two counts of money laundering, one count of wire fraud, and two conspiracy charges. The jury’s verdicts close out a case that was first filed in June 2017 in which the government alleged that Wheat and Hi-Tech fabricated quality certificates for its dietary supplement products.

Back in 2007, the US Food and Drug Administration (FDA) issued new mandatory rules governing proper sanitary, hygienic, and production and process control standards for dietary supplement companies, called Good Manufacturing Practices (GMP), that were designed to ensure the safety of dietary supplements. To that end, dietary supplement manufacturers seek certification from third-party, independent audit companies — not the FDA itself — to certify compliance with GMP.

In November 2010, a third-party audit company identified several deficiencies with Hi-Tech’s GMP after inspecting its facilities. Rather than fix the quality and safety issues identified by the audit company, Wheat and Hi-Tech allegedly fabricated a certificate in March 2011 purportedly issued from a Wheat-owned company, PharmaTech Consulting, that did not conduct an inspection or audit, stating that Hi-Tech complied with GMP. The certificate allegedly listed one of Wheat’s former attorneys in Belize as the general manager of PharmaTech whose signature was forged. Even more, Hi-Tech allegedly altered the inspection report issued by the third-party audit company to make it seem like PharmaTech had issued a favorable report.

Additionally, the government alleged that Hi-Tech fabricated FDA export certificates called Certificates of Free Sale, which indicate that food products are marketed in the United States and eligible for export, by altering dates and product names. Between 2011 and 2013, Hi-Tech sent PharmaTech audit reports, GMP certificates, and Certificates of Free Sale to its customers on several occasions.

The above actions allegedly caused customers to forward the above documents to foreign regulators, allowing Hi-Tech to sell its products abroad. From March 2011 through April 2013, the government alleged that customers who received the suspect documents paid almost $5 million to Hi-Tech.

The court has not scheduled a date for sentencing. Wheat faces a maximum of 20 years of imprisonment followed by three years of supervised release. Moreover, Hi-Tech faces a fine of up to twice the value of the criminal proceeds involved in the offenses, which could total nearly $10 million, and probation of up to five years.

The case is United States v. Wheat, No. 1:17-cr-0229-AT-CMS (N.D. Ga.).

The DOJ’s press release is available here.

States Intervene in FCA Suit Against Abbott Labs for its Role in Infant Formula Recall

On December 1, seven states — California, Connecticut, Maryland, Massachusetts, Michigan, New York, and Tennessee — intervened in a False Claims Act (FCA) lawsuit filed by the federal government in which they alleged that Abbott Laboratories failed to manufacture its powdered infant formulas at its Sturgis, Michigan, facility in a manner that ensured its products complied with its federal and state statutory, regulatory, and contractual obligations. Medicaid and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) covered the cost of Abbott’s formula for those who qualify. According to the complaint, Abbott has yet to reimburse the relevant federal and state agencies for the tainted formula powder that was subject to a recall.

In short, the complaint alleges that Abbott knowingly produced and distributed infant formula under unsafe, non‑compliant conditions, concealed contamination and quality issues, and misrepresented its compliance with federal and state standards, causing false claims to be submitted to Medicaid and WIC.

The case is United States v. Abbott Laboratories, No. 1:22-cv-994 (W.D. Mich.).

Michigan Pharmacist Sentenced to Almost Four Years in Prison for Medicare Scam

On November 24, a court in the Eastern District of Michigan sentenced former pharmacist Nabil Fakih to 46 months in prison for his role in a health care fraud scheme at a pharmacy that he operated. The court also ordered Fakih to pay $4 million in restitution and to forfeit four real estate properties and more than $700,000.

As part of his plea agreement, Fakih pleaded guilty to one count of health care fraud, admitting that, from January 2011 to March 2017, he billed Medicare for prescription medications that he did not dispense at the pharmacy he owned and operated in Dearborn Heights, Michigan. These prescriptions were unnecessary, and Fakih’s pharmacy lacked the inventory to dispense and submit the claims. Fakih’s scheme caused Medicare to lose approximately $4 million.

The case is United States v. Fakih, No. 19-cr-20285 (E.D. Mich.).

The DOJ’s press release is available here.

Georgia Man Sentenced to Almost Four Years in Prison for Medicare Fraud Scheme

Recently, a court sentenced Patrick Moore to 46 months in prison and ordered him to pay $7.2 million in restitution for his role in a kickback scheme that induced Medicare beneficiaries to accept medically unnecessary genetic tests. Moore, through his health care marketing and recruiting companies, instructed a network of recruiters to target Medicare beneficiaries and induce them to accept genetic tests that were not provided as represented, not medically necessary, or not eligible for reimbursement. These recruiters would gain access to Medicare patients’ insurance information and DNA samples by soliciting them at storefronts, senior centers, and health fairs. Also, Moore would use the signatures of doctors who had not even seen Medicare patients to order unnecessary testing and steered the bills to laboratories who paid Moore kickbacks.

Moore received approximately $4.3 million in kickbacks from his co-conspirators in exchange for the referral of beneficiary insurance information, DNA specimens, and accompanying doctors’ orders for genetic testing. Moore then, in turn, paid kickbacks to his network of recruiters. To conceal the scheme, Moore and his co-conspirators created sham invoices that fabricated numbers of hours worked instead of the per-referral payments he received. In total, the laboratories associated with Moore and his co-conspirators billed Medicare approximately $24 million and received approximately $7.2 million in kickbacks.

Earlier this year, Moore pleaded guilty to one count of conspiracy to defraud the United States.

The case is United States v. Moore, 1:22-cr-014 (S.D. Ga.).

The DOJ’s press release is available here.

Audio Electronics Company Settles FCA and Duty Evasion Allegations for $11.8 Million

The DOJ recently announced that Harman International Industries, Inc. agreed to settle allegations that it violated the FCA when it imported goods and failed to pay the required antidumping and countervailing duties (i.e., “tariffs”) for $11.8 million. Harman is a leading audio electronics company for automakers, consumers, and enterprises worldwide based in Farmington Hills, Michigan. The government alleged that, from June 1, 2011, through March 31, 2023, Harman knowingly imported heat sinks that contained extruded aluminum from the People’s Republic of China without paying the required tariffs. Harman also allegedly concealed its wrongdoing by failing to disclose its non-payment of the tariffs.

The case is United States v. Harman International Industries, Inc., No. 2:20-cv-12487 (E.D. Mich.)

The DOJ’s press release is available here.

The claims resolved by the settlement are allegations only and there has been no determination of liability.