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Press Release

Long-term Care Pharmacy To Pay $31.5 Million To Settle Lawsuit Alleging Violations Of Controlled Substances Act And False Claims Act

For Immediate Release
U.S. Attorney's Office, District of Rhode Island

WASHINGTON – PharMerica Corporation has agreed to pay the United States $31.5 million to resolve a lawsuit alleging that they violated the Controlled Substances Act by dispensing Schedule II controlled drugs without a valid prescription and violated the False Claims Act by submitting false claims to Medicare for these improperly dispensed drugs, the Justice Department announced today. 

“Pharmacies put patients at risk when they dispense Schedule II narcotics, which have the highest potential for abuse of any prescription drug, without a valid prescription from a physician,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Department of Justice’s Civil Division.  “Today’s settlement demonstrates our commitment to the fight against the misuse of controlled substances.”

PharMerica is a long-term care pharmacy that dispenses medications to residents of long-term care facilities, including nursing homes and skilled nursing facilities.  Many of the prescriptions filled by PharMerica are for controlled substances listed in Schedule II under the Controlled Substances Act.  Schedule II drugs, such as oxycodone and fentanyl, can cause significant harm if used improperly and have a high potential for abuse.

The government’s suit alleged that PharMerica pharmacies operating across the country routinely dispensed Schedule II controlled drugs in non-emergency situations without first obtaining a written prescription from a treating physician.  According to the complaint, PharMerica’s actions violated the Controlled Substances Act by enabling nursing home staff to order narcotics, and pharmacists to dispense them, without confirming that a physician had made a medical judgment as to whether the narcotics were necessary and should be administered to the resident.  Under the settlement, PharMerica has agreed to pay $8 million to resolve these allegations. 

The government’s complaint also alleged that PharMerica violated the False Claims Act by knowingly causing the submission of false claims to Medicare Part D for improperly dispensed Schedule II drugs.  The False Claims Act imposes treble damages and penalties for the knowing submission of false claims for federal funds.  PharMerica has agreed to pay $23.5 million to resolve its alleged False Claims Act violations.
“Today’s significant settlement represents a single but critical significant step toward promoting integrity in the administration of public health programs,” said U.S. Attorney James L. Santelle of the Eastern District of Wisconsin.  “This civil litigation and its meaningful resolution demonstrates that our fight against health care fraud is helping to protect all Americans, including the elderly, people with disabilities and other who may be vulnerable to mistreatment and abuse.”

The False Claims Act claims resolved by today’s settlement were originally brought by Jennifer Denk, a pharmacist formerly employed by PharMerica, under the whistleblower provisions of the act, which authorize private parties to sue on behalf of the United States and to receive a portion of any recovery.  The act permits the United States to intervene and take over the lawsuit, as it did in this case with respect to some of Ms. Denk’s allegations.  Ms. Denk will receive $4.3 million as her share of the settlement.

“DEA registrants are responsible to handle controlled substances in compliance with the Controlled Substances Act,” said Special Agent in Charge Dennis Wichern of the Drug Enforcement Administration (DEA) Chicago Field Division.  “Failure to do so increases the potential for diversion and jeopardizes the public health and safety”.

“The DEA is committed to investigating organizations that are not in compliance with the Controlled Substances Act,” said Special Agent in Charge Michael J. Ferguson of the DEA New England Field Division.  “Our obligation is to ensure public safety and public health and we are committed to working with our law enforcement and regulatory partners nationwide to ensure that these rules and regulations are followed.”

 “The legal requirement that narcotics like oxycodone be prescribed by a physician is a crucial patient protection, which is especially important to safeguard the health of the vulnerable elderly and disabled patients in long term care facilities,” said Special Agent in Charge Lamont Pugh of the U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG).  “Our agency is dedicated to protecting the taxpayer-funded Medicare and Medicaid programs as well as the millions of beneficiaries who rely on those programs for their health and well-being.”

As part of the settlement announced today, the settling defendant has also agreed to enter into a corporate integrity agreement with the HHS-OIG, which obligates PharMerica to undertake substantial internal compliance reforms and to submit federal health care program claims for an independent review for the next five years. 

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $24 billion through False Claims Act cases, with more than $15.3 billion of that amount recovered in cases involving fraud against federal health care programs.

 The settlement with PharMerica was the result of a coordinated effort among the Civil Division, the U.S. Attorney’s Office of the Eastern District of Wisconsin, the U.S. Attorney’s Office of the District of Rhode Island, HHS-OIG and the DEA. 

The lawsuit is captioned U.S. ex rel. Denk v. PharMerica Corp., No. 09-cv-720 (E.D. Wis.).  The claims resolved by the settlement are allegations only; there has been no determination of liability.


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Updated June 22, 2015