Texas Pharma Company Inflated Prices Over 400 Times Above Cost to Claim Fraudulent Reimbursements: DOJ

A bottle of antidepressant pills Effexor in Miami, Fla., on March 23, 2004. (Joe Raedle/Getty Images)

The Department of Justice has filed a complaint against a Houston-based company for falsely inflating pharmaceutical ingredient prices to over 400 times the actual cost for the purposes of defrauding TRICARE, a federal health care program.

According to a press release on Nov. 8, the DOJ filed the complaint under the False Claims Act against Professional Compounding Centers of America Inc. (PCCA), for blowing up Average Wholesale Prices (AWPs) of pharma ingredients that are used in compound drugs.

After purchasing ingredients from PCCA, compounding pharmacies would then submit these inflated prices for reimbursements from TRICARE. Suppliers like PCCA establish and report the AWPs for ingredients to pricing compendia used by health care programs like TRICARE and insurance companies.

TRICARE provides insurance for active-duty military personnel, military retirees, and military dependents. Based partially on the reported AWPs, TRICARE would calculate the amounts of reimbursements distributed to pharmacies. According to the report, “in 2014, PCCA typically sold the chemical Fluticasone Propionate to its top customers for between approximately $135 and $197 per gram, but it reported an AWP for that ingredient of $3,630.90 per gram—approximately 18 to 27 times the actual selling price.”

Another ingredient, Resveratrol, was sold for under $2 per gram, but PCCA reported an AWP of $818.68 per gram which comes to around 410 times the actual cost.

The profit potential was marketed as incentives to pharmacies to purchase ingredients from PCCA. Besides cash inducements, there were annual all-inclusive travel packages for customers. Based on the complaint, the actions resulted in pharmacies submitting tens of thousands of false prescription claims to TRICARE, “costing the program hundreds of millions of dollars in excess reimbursement.”

The investigation was the result of a coordinated effort between the Civil Division’s Commercial Litigation Branch and the U.S. Attorneys’ Offices for the Western District of Texas and Middle District of Florida, with assistance from the Drug Enforcement Agency among other agencies.

“We diligently investigate fraud on the federal healthcare system, especially where it impacts our veterans and their families,” said U.S. Attorney Ashley Hoff for the Western District of Texas in the press release. “We will continue to guard the system so patients receive the care they deserve and federal taxpayer dollars are not wasted.”

The lawsuit was initially filed by Peter Hueseman, a pharmacy owner that purchased ingredients from PCCA. Under the False Claims Act, a private party can file an action on behalf of the United States and permit the justice department to intervene in the lawsuit.