When I was a child, I hated to go to the dentist. My parents tell me I was grounded after I hid the car keys hoping that would keep me from the dentist. Not only didn’t it work, I was also grounded. Unfortunately, some healthcare providers think if they try to obstruct a Medicare fraud audit, somehow their tactic will work. It doesn’t.
Today, the owner of two pharmacies in northwest Alabama is facing prison after being convicted of obstructing a Medicare audit.
Rodney Logan owns and operates pharmacies in Sheffield and Russellville, Alabama. In 2012, Logan’s businesses were audited by CVS/Caremark. CVS, which is no stranger to Medicare fraud, served as an auditor for Medicare.
Logan’s Medicare Fraud Scheme
Logan’s pharmacies offered compounded medications. Most druggists dispense medications that have already been made and packaged. A small percentage of drug sales come from so called compounding pharmacies that are able to customize a drug for a specific patient. For example, perhaps a doctor wishes the patient to have a specific dosage not commercially available or a cocktail of different ingredients.
Medicare Part D doesn’t allow pharmacies to bill for compounded medications made from bulk pharmaceutical powders. The government’s regulations on how pharmacists can make their own compounded remedies are pretty strict. Since February, 2009, the FDA stopped approving compounded formulations made from bulk pharmaceutical powders.
In 2012, CVS was acting as the pharmacy benefits manager in Alabama. That meant CVS was charged with insuring that claims submitted to Medicare were proper.
According to the criminal complaint, CVS notified Logan’s two pharmacies that it was going to audit the business’ compounded drug sales. To insure that no non-FDA approved bulk powders were being used, CVS wanted Logan to document the origin of the ingredients for its compounded products. Had Logan cooperated in the audit, he would have been caught and had to reimburse the government for any payments he received from Medicare.
Logan apparently thought he could outsmart the auditors. Instead of cooperating, he had one of the pharmacies send falsified records.
Even though CVS is a private company, it was acting as a federal auditor. Misleading or obstructing a federal auditor in performance of its duties is a felony. Lying to the CVS auditor in this instance was the same as lying to the FDA or Medicare.
Logan was charged with criminal obstruction of the audit. At his arraignment he entered into a plea agreement and pleaded guilty.
As part of his plea agreement, Logan admitted that he profited over a million dollars by using non-FDA approved ingredients in his compounded products.
When sentenced, Logan faces five years in prison. Sentencing has been set for January 2017.
According to federal sentencing guidelines, however, he is looking at a probable sentence of 12 to 18 months. His plea agreement allows to him to cooperate with prosecutors in the hopes of getting an even lower sentence. He also agreed to immediately pay $2.5 million in fines.
Cash Whistleblower Awards for Inside Information on Medicare Fraud
Medicare fraud is a huge problem in the United States. As this case shows, trying to pull the wool over the eyes of an auditor may take you from a civil fine to both a fine and prison time.
Most Medicare fraud schemes come to light when a concerned insider decides to become a whistleblower. In about 80% of the cases, whistleblowers first try to bring problems to the attention of their boss. Only when ignored or punished do they become whistleblowers.
The federal False Claims Act allows whistleblowers with inside information about Medicaid and Medicare fraud to step forward and receive an award for their bravery in stepping forward. Awards can vary between 15% and 30%. In this case, that means a potential award of $750,000.
For more information and to see if you qualify, give us a call. All inquiries are confidential. You can also visit our Medicare fraud information pages.
Potential whistleblowers are invited to contact attorney Brian Mahany at (414) 704-6731 or by email at .
MahanyLaw – America’s Medicare Fraud Lawyers