Telepharmacy Fraud Enforcement Action Risks

The U.S. Department of Health and Human Services Office of Inspector General (HHS/OIG) recently announced five additional guilty pleas relating to a $1 billion telepharmacy fraud scheme. The health care fraud investigation consisted of personnel from HHS/OIG, the U.S. Department of Justice (DOJ), the U.S. Food and Drug Administration (FDA), the U.S. Postal Services (USPS), the Federal Bureau of Investigation (FBI), the Office of Personnel Management (OPM), and the Department of Homeland Security (DHS).

The apparent business model involved a telemarketing/pharmacy entity that solicited patients’ insurance information using a platform to arrange for telemedicine visits with physicians. During these telemedicine visits, physicians would issue prescriptions for items such as pain creams, vitamins, and other prescription drugs, which the telemarketing/pharmacy entity then sold to pharmacies for mail-order fulfillment at marked-up prices.

The sale and fulfillment of these prescriptions resulted in substantial volumes of false claims being filed with pharmacy benefits managers (PBM), and also generated a quid pro quo kickback for the telemarketing/pharmacy entity (i.e., the pharmacy would pay the telemarketing/pharmacy entity for the opportunity to fill lucrative telemedicine prescriptions).

Many of the individuals involved in the scheme were located in the southeast and Texas. This investigation reflects that the federal government is growing increasingly sophisticated in the manner in which it investigates and enforces fraud, waste, and abuse laws.

It is apparent that owners of a pharmacy and the telemedicine industry must understand the certain activity, produce substantial penalties under state and federal law. Further, participation in health care fraud schemes, even unknowingly, can result in significant criminal, civil, and administrative sanctions as a result of multi-agency investigative activities.

It is clear by the cross-agency investigation that the pharmacy and telemedicine industries entities must educate themselves on, and observe compliant business arrangements and practices, and periodically evaluate whether their current and future business arrangements are susceptible to possible fraud, waste, and abuse investigation and enforcement.