The government has been investigating pharmacies that dispense and bill compound creams for the past 5 years as well as the marketing companies that work with them. Much of the focus has been on billings to workers' compensation carriers or billing to TRICARE, military health insurance, and billing to union health plans.
On February 4, 2020, a 48-count grand jury indictment was unsealed naming four defendants relating to an Orange County
compound pharmacy, Professional Compounding Pharmacy (PCP), that allegedly submitted fraudulent bills to the military’s TRICARE
health plan and a labor union health plan for medically unnecessary compound
cream prescriptions in which there was alleged illegal marketing. An indictment is not evidence and all defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.
The indictment – which contains charges of health care fraud, mail fraud,
illegal kickbacks and money laundering – alleges that PCP, its marketers and
a physician fraudulently generated prescriptions for custom-made compound cream
medications. The indictment alleges that some bills charged as $15,000 per tube.
The indictment alleges that two “pain clinics”
in Lawndale and National City recruited beneficiaries of TRICARE and the
International Longshore and Warehouse Union’s (ILWU) Pacific Maritime
Association Welfare Plan.
The defendants allegedly paid beneficiaries $200 each
to receive treatment by doctors who supposedly were conducting “pain studies”
to evaluate the effectiveness of the compound pain creams.
James Nate Bell, the owner of PCP and two medical marketing companies that were allegedly used to funnel kickbacks to PCP marketers;
Regina Piehl who was affiliated with several companies that allegedly received and paid kickbacks to refer and obtain prescriptions for PCP;
Dr. Michael Edwards, a physician who allegedly worked with Piehl to set up clinics to study the efficacy of compound creams, but which the government alleges were "prescription mills" that generated profits for PCP and its marketers; and
Sara Samhat who allegedly worked with Dr. Edwards to route prescriptions to PCP and other companies involved in the arrangement in exchange for receipt of kickbacks from the referral of the prescriptions.
PCP, which operated in La Habra and Brea, allegedly used a network of marketers
and one principal doctor to locate beneficiaries of the TRICARE and ILWU plans.
PCP and its marketers also enlisted the participation of other doctors and a
nurse practitioner to write prescriptions for pain-relief creams, and PCP
ultimately filled prescriptions – including refills – that were allegedly not
medically necessary.
The participants allegedly provided the $200 payments to the
“patients” for agreeing to show up at the clinics for the "pain studies" which are alleged to be fake.
PCP allegedly paid marketers approximately 50 percent of the payments it received from
TRICARE and ILWU Plan manager to provide the marketers with ongoing incentives
to find doctors and patients willing to write or accept the compound cream prescriptions which were also allegedly medically unnecessary. Health
care professionals work at these “pain clinics” were allegedly encouraged to write prescriptions for medically unnecessary compounded creams.
The indictment alleges that the alleged illegal business peaked in the first half
2015 and continued into 2016 and then dropped when the reimbursement rates for compounded creams were lowered.
The alleged losses are high as the indictment alleges that TRICARE sustained losses of approximately $19 million and the ILWU Plan sustained additional losses of approximately $3 million.
As part of the indictment, federal agents obtained warrants to
seize a Cadillac Escalade and two of Bell’s brokerage accounts.
