DaVita Rx: Unshipped Drugs, Refill Consent and Beneficiary Charges

In the DaVita Rx settlement case, the pharmacy agreed to pay $63.7 million to resolve allegations of improper prescription billing and unlawful financial inducements to patients. The government alleged bills for drugs never shipped, returned shipments and prescriptions that did not meet requirements for proof of delivery, refill requests or patient consent.

DaVita Rx specialized in serving patients with severe kidney disease and operated nationwide from its base in Coppell, Texas. The Department of Justice announced the settlement on December 14, 2017. It brought together allegations from the company’s own disclosures and a later qui tam case filed by two former employees.

Unshipped Drugs, Returned Packages and Delivery Proof

The government alleged that DaVita Rx billed federal healthcare programs for medicines that never shipped and for medicines that shipped but came back. It also alleged failures to meet requirements for documentation of delivery.

For an unshipped prescription, the comparison begins with the bill and the missing shipment. For a returned package, there is an outward shipment and a later return. For an allegation about delivery proof, the question is what documentation supported the billed prescription.

With uncollected prescriptions, the problem extends into the billing system. A return-to-stock entry records an inventory event. A reversal changes a claim, and a refund or recoupment changes the money.

Walgreens offers a concrete parallel. In one of its settlement agreements, the government alleged that its Intercom Plus system moved unsold or undeleted orders into a central Unaccounted-For Status outside local work queues, without a separate process to resolve them at the back end. That example makes the system question tangible: where did the order go after the local queue stopped showing it, and what happened to the claim?

Putting medicine back on a shelf does not put money back into a public program.

Refill Requests and Patient Consent

The DaVita Rx settlement also covered allegations that billed prescriptions failed requirements for refill requests or patient consent. A shipment record answers where a package went. The request and consent records answer who wanted the refill and whether the required authorization existed.

Medco’s mail-order case shows why shipment alone can leave important questions unanswered. The government alleged in its settlement agreement that Medco shipped unordered medicines, dispensed less medicine than prescribed and billed, and fabricated physician-contact records. The agreement concerned mail-order contracts serving federal employees and TRICARE beneficiaries. Its allegations put the order, the quantity and the claimed professional work beside the package.

Beneficiary Charges and Financial Inducements

The government separately alleged that DaVita Rx used manufacturer copayment discount cards, routine debt write-offs and credit-card discounts as unlawful financial inducements to federal health care program beneficiaries. This part of the settlement concerned the patient’s financial relationship with the pharmacy.

Specifically, the announcement said DaVita Rx allegedly accepted manufacturer discount cards instead of collecting copayments from Medicare beneficiaries. It also alleged that the company routinely wrote off unpaid beneficiary debt and discounted medications for beneficiaries who paid by credit card. The Justice Department alleged that these practices violated the Anti-Kickback Statute.

The accounting detail matters. A manufacturer card involves a source of payment. A debt write-off concerns a balance the pharmacy stops collecting. A credit-card discount changes the amount charged under a particular payment arrangement. An employee handling beneficiary accounts may see the card, adjustment or discount even when someone else handles the prescription claim.

The government’s concern was the use of financial incentives to influence patient care decisions. A lower patient bill can be a way to draw business paid for by a public program. That is why the patient account belongs in the story alongside the prescription claim.

What the Settlement Total Included

The settlement total included approximately $22.2 million that DaVita Rx had already repaid to federal healthcare programs following its self-disclosure. The company agreed to pay an additional $38.3 million to the United States. Another $3.2 million was allocated for Medicaid claims by states electing to participate in the settlement.

The earlier refunds were part of the announced total. We see the absurdity in the billing allegations: taxpayers paying for medicine while the shipment never leaves, or comes right back.

Self-Disclosures Came Before the Employee Case

DaVita Rx’s self-disclosures concerned the billing and financial-inducement allegations that the settlement later resolved. Those disclosures preceded the former employees’ whistleblower case. The company had already returned money, but the employee allegations still formed part of the eventual settlement.

The Department of Health and Human Services Office of Inspector General, the Justice Department’s Civil Division Commercial Litigation Branch and the U.S. Attorney’s Office for the Northern District of Texas conducted the investigation.

What a Pharmacy Insider Can Connect

Someone in dispensing may know what left the pharmacy. Someone handling claims may know whether a reversal received an acknowledgment and whether the payer recovered the money. Someone in beneficiary accounts may know how a copayment became a manufacturer-card payment or a written-off balance.

The original claim, a rejection, an override, a reversal and a rebill can explain how the billed prescription changed. The final remittance shows the payment result. A return entry supplies another part of that history, while the refill request and consent supply the authorization record.

Medicare Part D adds the plan’s Prescription Drug Event record. In its July 3, 2013 guidance on claim adjustments, the Centers for Medicare & Medicaid Services addressed a pharmacy billing for a drug that was never dispensed. It called for the plan to recoup the cost and delete the event record, explaining:

The same guidance treats a claim with the wrong drug code differently: where the medicine dispensed was appropriate for coverage but the product or financial fields were wrong, the correction should reflect the drug actually dispensed. The physical event determines what the payment record should say.

Inventory, billing, money and federal reporting can each need their own correction. An insider’s knowledge of where those records diverged can explain a problem that a payment total conceals. Connecting that knowledge to the government’s loss is work we do with you.

The DaVita Rx Whistleblower Award

The Justice Department reported that the two former employees would receive roughly $2.1 million from the federal recovery.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know What Happened to the Prescription

If you saw shipments return while claims stayed paid, or know how the pharmacy handled refill consent and patient charges, speak to one of our whistleblower experts about those prescriptions. We build your strongest pharmacy whistleblower case from what you know, bring in pharmacy fraud whistleblower lawyers who understand dispensing and reimbursement, and stay beside you through the case.