Warrants Pending in Utah, Florida, Alabama

Members of the FBI and The Mississippi Bureau of Narcotics (“MBN”) along with multiple other agencies raided 9 pharmacies in a statewide sweep yesterday, reporting more than $15 million in assets seized. According to officials, the warrants are related directly to medical facilities, and deal with drugs and health care fraud.

“The FBI along with multiple other federal and state agencies are executing multiple search warrants at locations in the metro Jackson area, Southern and Northern Mississippi. Because the matter is ongoing, we aren’t able to provide additional detail,” FBI Jackson Special Agent Jason Pack said.

In addition to the FBI and MBN, the U.S. Postal Inspection Service and the Department of Defense Criminal Investigation Service are participating in the investigations. Delores Lewis, spokesperson for MBN says that a healthcare fraud investigation was initiated by them before it was turned over to a federal investigation. According to reporting by Mississippi News Now, MBN also confirmed that search warrants pertaining to this investigation are out in Utah, Alabama and Florida.

While no further information concerning the investigation has been made available at this time, the participation of the Department of Defense and U.S. Postal Service indicates the source of the alleged healthcare fraud more than likely concerns compounding pharmacies submitting claims to TRICARE in suspected violation of the False Claims Act.

Since early 2015 the Department of Defense has widely publicized their focus on combating inappropriate and potentially fraudulent activity in the compound drug industry. Tougher screening procedures took effect May 1, 2015 in an effort to offset the defense health budget shortfalls alleged to have been partially caused by the significant increase in pricey compound drugs. Since 2010, military outpatient pharmacy costs for compound drugs has risen from $23 million spent to $515 million in 2014. In the first nine months of fiscal 2015, compound drug costs tripled again for TRICARE, to $1.7 billion.

The Mississippi raids and asset seizure are the news of the day however, similar criminal investigations are ongoing throughout the country. Florida and more specifically, South Florida has seen an increase in government investigations. Recently the Department of Justice sent criminal investigation target letters to staff of compounding and specialty pharmacies, including marketing staff, a clear indication that the government is keenly focused on marketing activities. If you are a specialty or compounding pharmacy who employ or engage sales and marketing professionals to drive your business, it is imperative that you have expert counsel review operations and business arrangements for compliance with federal regulations.

For further information on the subject matter of this alert, please contact the following FisherBroyles attorneys:

Brian E. Dickerson
brian.dickerson@fisherbroyles.legal
202.570.0248

Nicole Hughes Waid
Nicole.waid@fisherbroyles.legal
202.906.9572

Anthony J. Calamunci
anthony.calamunci@fisherbroyles.legal
419.376.1776