Company will pay millions in settlement funds for inflating drug prices.
Fagron Holding USA LLC, a large pharmaceutical drug supplier, is set to pay $22.5 million to settle allegations that its subsidiaries inflated “wholesale prices for compound drug ingredients and submitted fraudulent claims to federal healthcare programs,” according to the United States Department of Justice (DOJ). The DOJ’s release claimed the company increased “Average Wholesale Prices (AWPs) by its wholly owned subsidiary Freedom Pharmaceuticals Inc. (Freedom) for active pharmaceutical ingredients used in compound prescriptions. Freedom’s pricing scheme caused pharmacies that purchased Freedom’s compound ingredients to submit false prescription claims to the Defense Health Agency, which administers the TRICARE Program for the Department of Defense and the Department of Labor’s Office of Workers Compensation Programs (federal healthcare programs).”
“We will not allow the systematic abuse of federal healthcare programs through pricing schemes designed to enrich a few at the expense of federal taxpayers,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “Our commitment to protect these programs extends not only to the pursuit of those that submit fraudulent claims but also those who cause others to submit such claims.”
Compounding pharmacies are responsible for purchasing drug ingredients from other suppliers and preparing medications in a specific way when they are needed. Compounded drugs are formulated in a way that is not widely available.
“Freedom knew that compound prescription reimbursement under these federal programs was based in part on the AWPs it reported to various price listing agencies for its ingredients. Freedom knowingly inflated the AWPs for its ingredients in order to increase the reimbursement that its pharmacy customers received from federal healthcare programs for using Freedom’s ingredients,” the release stated. It continued, “Freedom’s fraudulent pricing scheme for its ingredients enabled its pharmacy customers to bill federal healthcare programs thousands of dollars per prescription for some compound formulations.”
“We have no tolerance for the abuse of federal healthcare programs, especially where it impacts the healthcare program for our veterans and their families,” said U.S. Attorney John Bash of the Western District of Texas.
“Deception and avarice have no place in our healthcare system,” said U.S. Attorney Maria Chapa Lopez of the Middle District of Florida. “Taxpayers expect that the programs they fund be administered according to the law and utilized for the purposes that they were intended. We will continue to guard against abuse of healthcare programs to ensure that patients receive the care they deserve.”
The settlement comes after whistleblowers brought the matter to the attention of authorities. For their part in bringing Fargon to justice, these individuals will receive a combined total of $3,749,000 plus accrued interest from the proceeds of the settlement. The case was handled by the Civil Division, Commercial Litigation Branch, the U.S. Attorney’s Offices for the Western District of Texas and the Middle District of Florida, with investigative support from the Defense Criminal Investigative Service, U.S. Postal Service, Department of Labor, and the U.S. Drug Enforcement Agency, according to the DOJ release.