In follow up to the raid on nine Mississippi pharmacies on January 21, the Wall Street Journal is reporting that the Department of Justice investigation is focused on healthcare fraud involving compounded pain creams. TRICARE is believed to have been the biggest victim of the suspected $500 million in the alleged fraud schemes although, Medicare, Medicaid and private insurers were also billed.

Giving the investigation a dose of celebrity is the involvement of Green Bay Packers legend and Mississippi native, Brett Favre as a spokesperson for RxPro, a pain cream made by World Health Industries, Inc. (“World Health”), in Jackson, Mississippi. In a 2013 SiriusXM radio interview, Mr. Favre called himself an investor in World Health and promoted RxPro as a “safe way to treat some of your ailments,” according to the Wall Street Journal article. In another interview with the Milwaukee Journal Sentinel, Mr. Favre was quoted “I can speak volumes on pain and narcotics use,” and “It’s just endless what will happen with this product and this company.”

Also in 2013, Mr. Favre and business partner Byron Barrett formed 3B Medical Group LLC which according to investigators, is being examined to determine if it acted as a marketing and sales generation source for the compounded pain cream. Mr. Barrett and his brother Chad Barrett formed World Health and other entities including AspireRx and Opus Rx LLC, all of which were included in the raids last month. On February 2, Opus and related companies under investigation or tied to the investigation filed for chapter 11 bankruptcy protection.

As reported in January, the raids seized an estimated $15 million in assets from operations in the Jackson, Mississippi area and locations in Alabama, Florida and Utah. The U.S. Attorney for the Southern District of Mississippi is leading the investigation with assistance from the FBI, Defense Criminal Investigative Service, IRS, U.S. Postal Inspectors, and the Mississippi Bureau of Narcotics. To date the seized property includes 24 vehicles, two boats, five planes, and money from 80 bank accounts.

The DOJ acknowledges that the investigation is ongoing and although no one has yet to be charged, the investigation is far from over. While no official information has been released by the DOJ, the Wall Street Journal is reporting that investigators are looking into allegations that some of the products provide little to no medicinal value, and that some pharmacies sent more product than was ordered, overbilled, or automatically refilled prescriptions without being asked.

Since early 2015 the government has focused its attention on TRICARE billing from compounding and specialty pharmacies. At the end of fiscal year 2015, TRICARE had paid approximately $1.7 billion for compounded drugs, a significant increase from previous years. The Department of Defense suspected that most of the billings were fraudulent and therefore implemented new internal controls to prevent fraud. With stronger controls in place, the government is now putting more effort into investigations of marketing activities of compounding and specialty pharmacies. 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

Nicole Hughes Waid

Anthony J. Calamunci