The Justice Department announced today that Medisca Inc. (Medisca), has agreed to pay $21.75 million to resolve allegations concerning the establishment of false and inflated Average Wholesale Prices (AWPs) for two ingredients used in compound prescriptions. Medisca’s Pricing scheme allegedly caused pharmacies that purchased those ingredients to submit false prescription claims to the Defense Health Agency, which administers the TRICARE Program for the Department of Defense and the Department of Labor’s Office of Workers’ Compensation Programs (federal health care programs).
The settlement resolves claims brought under the whistleblower or Qui Tam provisions of the FCA by Doug McMakin against Medisca. Mr. McMakin is a pharmacist who owned and operated a compounding pharmacy that dispensed compounded prescriptions. Under the FCA, private parties may sue on behalf of the government for false claims for government funds and receive a share of any recovery. Mr. McMakin will receive $3,425,625 from the proceeds of the settlement. The lawsuit is captioned United States ex re. McMakin v. Medisca Inc. (EDTX). Mr. McMakin was represented by Greg Dykeman and Stacie Augustine with the Moore Landrey law firm.
Compounding pharmacies purchase ingredients or chemicals from ingredient suppliers, such as Medisca, to prepare and fill compound prescriptions for patients who require a specially made prescription that is not generally available in the marketplace. Medisca knew that the compound prescription reimbursement under federal health care programs was based in part on the AWPs it reported to various price listing agencies. The United States alleged that Medisca knowingly inflated the AWPs for resveratrol (NDC No. 38779-2863) and mometasone furoate (NDC No. 38779-2413) in order to increase the reimbursement that its pharmacy customers received from the federal healthcare programs for using those Medisca ingredients.
Medisca acquired resveratrol from manufacturers for approximately $0.37 per gram. It repackaged and sold resveratrol for under $2 per gram. Medisca reported an AWP for resveratrol at $777 per gram, creating a speed of over $775 for each gram of resveratrol used by a pharmacy customer in a compound prescription reimbursed by the federal healthcare programs. Medisca acquired mometasone furoate at over $7,300 per gram, thereby creating a spread of approximately $6,300 for each per gram of the ingredient used by a pharmacy customer in a compound prescription reimbursed by the federal healthcare programs.
Medisca allegedly used the high AWPs it reported and the resulting profit potential it created for its customers as an inducement to its compound pharmacy customers, to purchase those ingredients. Medisca’s alleged fraudulent pricing scheme enabled its pharmacy customers to bill federal healthcare programs inflated amounts—often thousands of dollars per prescription—for compound formulations containing those ingredients.
The claims resolved by the settlement are allegations only. There has been no determination of liability.
