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Compounded Pain Creams and Gels

As recently reported by CBS News, federal authorities are currently investigating widespread fraud occurring in the area of compounded pharmaceuticals and compounding pharmacies.

Compounding refers to the process by which medications can be turned into topical creams, ointments and gels. Many pharmacies specialize in the manufacture of compounded medications, especially compounded pain and scar medications. These are commonly sold and marketed as migraine creams, pain creams, or scar creams.

The cost of these medications is extremely high and they carry high reimbursement rates from government healthcare programs. As an example, one month’s worth of compounded pain medication can cost as much as $15,000, or more.

According to the CBS report, federal regulators have noted an extreme spike in government spending on compounded medications through TRICARE, which covers healthcare for the U.S. military, and through Medicare and Medicaid, the traditional healthcare programs for the elderly and the poor.

Typical scams work as follows:

Cold calling beneficiaries: Fraudsters will obtain a list of military personnel or elderly persons and cold call them to ask if they are in pain or in need of pain medication. The cold caller will then promise a fantastic and free pain medication offered to them by the government. The cold caller will request the patient’s TRICARE and Medicare information as well as information about the patient’s doctor. The cold caller will then fax a prescription to the doctor. Many doctors sign these prescriptions, either because they assume the patient needs it or because they are too busy to check. If the doctor signs the prescription, the medication is mailed to the patient and billed to the government.

Dishonest doctors: Thankfully, many doctors refuse to sign dubious prescriptions faxed to their offices. To overcome this hurdle, fraudsters frequently make use of a bogus or dishonest doctor who will authorize prescriptions without ever seeing the patient. These doctors are usually paid a kickback for their “services.”

Waiver of co-payments. Most insurance policies, even policies offered through government healthcare programs, require the patient to make a co-payment. This can be a hurdle to a fraud scheme, where the key is to convince the patient to keep (and not complaint about) thousands of dollars of medications being shipped to them. If the patient has to pay anything – even a small co-payment – the patient might refuse to accept the medications.

To overcome this, unscrupulous pharmacies simply waive or fail to collect the co-payment. This is illegal if done on a routine basis. More creative fraudsters will even pay the co-payment themselves in order to cover their tracks in the case of an audit. If the government comes to check, the auditor will see the co-payment was paid – little does the auditor know it was paid by the pharmacy itself.

Paying kickbacks. Many pharmacies will also pay kickbacks to sales agents, contractors and others who agree to locate patients and funnel them to the pharmacy. Paying kickbacks is illegal under the federal Anti-Kickback Statute.

Our law office has seen an increase in the number of potential whistleblowers calling with stories of various scams in the world of compounded pain medications. If you know of fraud being committed in this area, contact one of our attorneys at 877-915-4040 for a free consultation.

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