PharMerica: Nursing Home Orders, Missing Prescriptions, and Medicare Bills

PharMerica Corporation agreed to pay $31.5 million to settle a controlled-drug fraud case over allegations that it dispensed Schedule II drugs without valid prescriptions and caused false Medicare Part D claims. The government alleged that nursing home staff could order narcotics and pharmacists could dispense them without confirming a physician’s medical judgment. For someone who watched orders become deliveries and deliveries become bills, the missing prescription is the center of this case.

PharMerica supplies medications to residents of long-term care facilities, including nursing homes and skilled nursing facilities. The Justice Department announced the settlement on May 14, 2015. A former pharmacist at the company brought the whistleblower case, and the government joined some of the allegations.

Schedule II Drugs Dispensed Without a Physician’s Prescription

The government alleged that PharMerica pharmacies across the country routinely dispensed Schedule II controlled drugs in nonemergency situations without first obtaining a written prescription from a treating physician. The government described nursing home staff ordering narcotics and pharmacists dispensing them without confirming that a physician had decided the drugs were necessary and should be administered to the resident.

Oxycodone and fentanyl were among the Schedule II drugs identified in the announcement. These drugs can cause significant harm when used improperly and have a high potential for abuse. The prescription requirement put a physician’s medical judgment between a request for a narcotic and its delivery to a vulnerable resident.

The alleged shortcut put residents at risk and sent taxpayers the bill for drugs dispensed without the required prescription.

Why the Settlement Had Two Components

The Controlled Substances Act component addressed the alleged dispensing without valid prescriptions. The False Claims Act component addressed the Medicare Part D claims that followed. The settlement assigned $8 million to the controlled-substance allegations and $23.5 million to the false-claims allegations.

The government specifically alleged that PharMerica knowingly caused the submission of false claims for the improperly dispensed drugs. That connection explains the larger component of the settlement: the same prescription problem reached the federal payment system. A drug could leave the pharmacy, reach the facility and generate a Medicare claim while the required physician authorization was missing.

The payment arrangement matters in long-term care. Under Medicare’s skilled nursing facility billing framework, the Part A facility payment generally bundles drugs with room, board, nursing and other services, subject to exclusions. The facility then pays an outside supplier under its contract. The claims in this PharMerica case were Medicare Part D claims.

The drugs were delivered. The alleged fraud lay in the missing authorization and the claims that followed. The California Research Bureau’s Fraud and Abuse in the Health Care Market of California, published in 1997, challenged the narrow view of healthcare fraud as payment for services never rendered. It examined fraud across the participants and contracts in care delivery. That broader view fits the distinction here: delivery alone leaves the prescription question unanswered.

A Pharmacist’s Case and Five Years of Independent Review

The False Claims Act allegations began with a former PharMerica pharmacist. The Justice Department announced a $4.3 million whistleblower share of the settlement. The pharmacist’s position inside the dispensing business matters: the alleged failure occurred where facility requests met the pharmacy’s responsibility to obtain a physician’s prescription.

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

PharMerica also agreed to a corporate integrity agreement with the Department of Health and Human Services’ Office of Inspector General. It required substantial internal compliance reforms and independent review of federal health care program claims for five years.

Different Pharmacy Practices, Different Cases

PharMerica’s controlled-drug settlement concerned missing physician authorization and the resulting Medicare claims. Other proceedings involving the company concerned the financial incentives behind drug recommendations and pharmacy contracts.

In the separate Depakote kickback case, the government alleged that PharMerica received rebates, educational grants and financial support from Abbott to recommend Depakote to nursing home residents. The alleged payments influenced the recommendations consultant pharmacists made during medication reviews.

Another whistleblower alleged below-cost Part A drugs offered to obtain profitable Part D and Medicaid business. That alleged swapping arrangement turned on what the pharmacy gave the facility in return for access to other prescriptions. Here, the central question was who authorized the drugs before the pharmacy dispensed them.

When a New Prescription Number Replaced a New Prescription

The government’s separate case against Omnicare and CVS Health shows how a dispensing system can keep moving after authorization runs out. That case concerned noncontrolled drugs supplied to assisted living and other residential long-term care settings. The government alleged that pharmacies continued filling prescriptions after they expired or exhausted their authorized refills. Its complaint quoted an internal compliance officer describing the system:

The alleged system supplied a new prescription number without renewed authorization. The government also alleged that Omnicare sent payors false information making the dispensations appear supported by valid prescriptions. A jury later found Omnicare and CVS liable in that separate case. The common question is what authorized the dispensing, even when the pharmacy’s system kept producing a prescription record and a bill.

What Evidence Is Needed to Prove Fraud?

For this alleged prescription scheme, the evidence connects the facility’s order, the treating physician’s authorization, the pharmacy’s dispensing record and the Medicare Part D claim. We examine those records together to establish what the pharmacy had when it supplied the drug and what it then represented for payment.

A facility employee may know who requested the medication. A pharmacist may know whether a valid prescription arrived before dispensing. A billing employee may know how the dispensed drug became a claim. Those are different views of the same transaction, and the case turns on connecting them.

The timing matters because the government alleged dispensing without first obtaining the prescription. We look at the sequence of the request, physician authorization, dispensing and billing, along with what the people responsible knew. That is how an insider’s account of a missing clinical safeguard can connect to the claim taxpayers paid.

You Saw How the Drug Became a Bill

If you worked with pharmacy orders, physician prescriptions or Medicare Part D billing, speak to one of our whistleblower experts about where authorization went missing. We bring in healthcare fraud whistleblower lawyers who understand pharmacy dispensing and federal drug claims, and stay with you to build your strongest pharmacy whistleblower case.