Pharmacies Targeted for Exclusion Violations by OIG and States

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In what appears to be a growing enforcement trend, the Department of Health and Human Services, Office of Inspector General (HHS/OIG) and State Medicaid Fraud Units are aggressively pursuing pharmacy retailers for exclusion violations.  In recent investigations, pharmacies are being targeted for failing to screen prescribers as well as employing pharmacists who have been excluded from Federal and State health care programs.  This new focus has resulted in sizable settlement recoveries, and evidences a broadening of the scope of Federal and State exclusion enforcement efforts.

Significant State Exclusion Enforcement Actions

New York Attorney General Eric T. Schneiderman entered into an agreement with a pharmacy in May 2016 to resolve allegations that it had billed Medicaid for prescriptions written by an excluded Medicaid provider.  Between April 2010 and January 2013, the pharmacy submitted and received payment for approximately 4,600 Medicaid claims for prescriptions written by an excluded physician.  Under Medicaid rules, prior to filling a prescription pharmacies are required to first determine whether the prescriber’s services are eligible for reimbursement.  In this case, they had not done so and had filled and delivered prescriptions written by a provider ineligible to receive Medicaid reimbursement.  As a result of the settlement, the pharmacy agreed to pay New York State $442,000 plus $36,000 in damages pursuant to the New York False Claims Act.  In a statement, A.G. Schneiderman says, “My office will continue working to root out Medicaid fraud and recover unlawfully claimed funds, so that Medicaid can continue providing critical services for those in need.”  The Attorney General’s Medicaid Fraud Control Unit (MFCU) investigated, prosecuted, and entered into a resolution independent of any OIG investigation.  The prescriber in this case was excluded under the New York State list first and then under the GSA’s System for Award Management (SAM), but never appeared on the OIG’s List of Excluded Individuals and Entities (LEIE).  This is significant since the State used its own enforcement authority to target this pharmacy and launch its own investigation without any Federal involvement.

However, this is not the first time the States have expressed an interest in pursuing exclusion violations against a pharmacy.  In a prior case from 2011, a large national retail pharmacy entered into a $1 million settlement with the U.S. Attorney’s Office in the District of New Jersey in connection to allegations that it had employed a pharmacist who had been banned from participating in Federal health care programs due to a drug conviction.  The excluded pharmacist had worked at three pharmacy locations in New Jersey and New York for a period of about four years and ending in July 2009.  Prior to his employment, he had been convicted of attempted criminal sale of a controlled substance, and as a result had been excluded from Federal health care programs in September 2005.  Any claims he had submitted while employed by the company were deemed false.  An investigation concluded that the pharmacy was responsible for the amount billed by the excluded individual because it failed to investigate whether he was banned from Federal health programs.  Although the company claims that it maintains a comprehensive pre-employment screening process, it did not follow its own protocols to determine if the conviction excluded the individual from the programs.  If these two cases are any indication, it appears as if the States will be taking more of an initiative in pursuing their own enforcement actions against pharmacies in the future.

Federal Enforcement Efforts Initiated by OIG

The Federal governState Exclusionment has also remained vigilant in cases involving excluded pharmacists.  In August 2016, a Texas pharmacy and pharmacy manager entered into a $30,000 settlement agreement with OIG.  Their investigation reveals that the excluded individual, a store manager and pharmacy technician, had provided items or services that were billed to Federal health care programs.  In another case from January 2015, a Minnesota pharmacist entered into a nearly $100,000 settlement agreement with OIG.  The settlement resolved allegations that from March 2006 to July 2013, the pharmacist owned and managed a pharmacy that participated in Federal health care programs while he was excluded from participating in those programs.

We have previously reported on a case in which OIG entered into a massive settlement with an Ohio-based corporation that operates pharmacies and supermarkets in thirty-four states, in connection to its employment of excluded pharmacists.  In December 2015, the company self-disclosed to Office of Inspector General that they employed and utilized pharmacists who were banned from participation in Federal health care programs.  An investigation confirmed that the company had employed fourteen individuals that were debarred and therefore could not submit claims for items or services they furnished.  In addition to employing excluded pharmacists, the settlement alleges that the company had filled prescriptions from eighty-four excluded providers.  According to OIG’s May 2013 Special Advisory Bulletin, insurance claims for items or services provided by, or at the medical direction of or on the prescription of debarred individuals are not reimbursable.  The company agreed in a civil settlement to pay Federal health care programs $21.5 million in restitution and penalties, and almost $1 million more to the Office of Personnel Management (OPM) for employing individuals who had been debarred from participating in the Federal Employee Health Benefit Program (FEHBP).


These cases highlight some recent trends in enforcement actions against pharmacies that employ excluded pharmacists and fail to properly screen prescribers.  It is evident that both State and Federal entities are interested in pursuing exclusion violations, and have been doing so independent of each other.  Even the most stringent pre-employment background checks can result in omitted excluded individuals, and consequently the pharmacy itself would be liable for submitting false claims.  Pharmacies especially can be susceptible to substantial settlement amounts because of the large volume of prescriptions they handle every day, and since it can be very costly and time-consuming to screen every prescriber.

Screening employees, vendors, and contractors against the LEIE and the SAM, as well as all 41 State lists every month is critical to avoid being found liable of an exclusion violation and consequently having to pay a large settlement amount.

To eliminate the risk of having to self-disclose or undergo a State or Federal investigation, contact the Exclusion Experts at 1-800-294-0952 or fill out our service form below, for a free consultation.

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