Bad (fraud) habits die hard

Bad habits are hard to break. For years I've been a nail-biter--and, with the full acknowledgement of how grotesque it is, I've tried desperately to stop. Usually I can go a week or two, but eventually some trigger (usually the stress of a deadline) unconsciously drives a finger to my mouth.

Of course when you compare that to other bad habits--say, routinely defrauding the federal government at the expense of elderly Medicare patients--nail-biting seems sort of petty.

Last week, the long-term care pharmacy PharMerica Corp. paid $31.5 million to settle claims that it routinely dispensed Schedule II drugs without a written prescription. Although that kind of high-priced settlement is nothing to scoff at, it's not particularly groundbreaking. After all, this is not the first time we've seen pharmacies embroiled in fraud allegations.  

However, dig into the settlement--and more generally, PharMerica's habitual violation of anti-kickback and false claims laws--and a much grimmer picture emerges.

First, it's important to recognize the market that PharMerica occupies. It is the second-largest pharmacy operator in the country, operating 97 pharmacies across 45 states. It is a self-described "leader in long term care pharmacy service," specializing in skilled nursing facilities, long-term care facilities, and assisted living facilities.

PharMerica's business revolves around a very specific elderly patient population, many of whom are insured by Medicare. It's clearly a profitable business model. In March, the company reported its first quarter earnings for 2015, pulling in $511.6 in revenue, a 13.1 percent increase from the previous year.

Unfortunately, those profits came, in part, on the backs of a patient population already vulnerable to an overwhelmingly inadequate long-term care industry. A recent Kaiser Family Foundation analysis found that one-third of nursing homes had one or two star ratings on the government's Five-Star Quality Rating System. In 11 states, more than 40 percent have below-average ratings. In other words, nursing home residents have enough to worry about without the added burden of unauthorized addictive narcotics.

If this was a first-time offense, perhaps PharMerica's alleged indiscretions could be chalked up to a simple mistake or procedural flaw that went unnoticed. But that's not the case. In fact, as the Kentucky Center for Investigative Reporting shows, this is the third time in less than 18 months that the Louisville-based company has settled claims for dispensing Schedule II painkillers without a prescription. In January 2014, PharMerica settled civil claims for $1 million; months later the company agreed to pay more than $213,000 for similar charges.

These are slotted amid various other settlements involving overbilling and kickbacks dating back to 2005. In March, PharMerica announced it was in settlement talks to resolve claims that it took kickbacks from Abbot Laboratories to promote the anti-seizure medication Depakote for dementia patients, a case in which Abbott previously agreed to pay $1.6 billion in fines and civil penalties for illegally marketing the drug.

Pending civil suits shed more light into the company's practices. One case in particular alleges that PharMerica took kickbacks from Amgen to promote the anemia drug Aranesp. Amgen already paid $762 million for misbranding and mismarketing the drug, along with another $24.9 million to settle claims that it paid kickbacks to PharMerica, Omnicare and Kindred Healthcare. Last year, Omnicare dished out a $4.9 million settlement related to the charges.

As KYCIR points out, PharMerica was nearly dealt a fatal blow when, in 2004, the Office of Inspector General (OIG) sought to exclude PharMerica from federal healthcare programs for 10 years in light of allegations that it paid an excessive amount for a pharmacy in exchange for Medicare patient referrals. Instead, one year later, the company settled with the government for $6 million and entered a five-year corporate integrity agreement.

Here we are again. The circumstances are slightly different, but the punishment is largely the same: A $31.5 million check and a second try at a five-year corporate integrity agreement.

The problem with repeat offenders like PharMerica is that, like the pharmaceutical manufacturers themselves, no amount of money or government sanctions seems to deter them from sidestepping the law. Routine settlements by large pharmacies such as PharMerica and Omnicare indicate that corporate integrity agreements hold little weight. A decade after its first agreement, PharMerica still engages in similar practices and receives a smilar punishment in return.

Instead, investigators should turn a critical eye the company's top brass. Through most of these indiscretions, CEO Gregory S. Weisher has captained the ship. Weisher was appointed CEO of the company in 2007, not long after OIG threatened the company with exclusion. Based on the string of allegations and settlements since his arrival, it doesn't appear anything has changed since his arrival.

Recently, U.S. Assistant Attorney General Leslie Caldwell indicated that federal prosecutors would be turning investigations toward CEOs and company leaders. PharMerica, a company that just can't seem to shake its bad habits, seems like a good place to start. - Evan (@HealthPayer)

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