United Pharmacy Partners, Inc. says Cardinal Health used a rent-a-vet scheme to win drug contracts.
United Pharmacy Partners, Inc. (UPPI), the largest group of independent nuclear pharmacies in the U.S., is alleging Cardinal Health used front companies as part of a rent-a-vet scheme to win government contracts set aside for small businesses owned by disabled military veterans, which, according to the Small Business Administration, account for at least 3% of federal contracting funds annually. The allegations come as part of a whistleblower lawsuit. UPPI was established in 1988 and represents greater than 80 independent and institutional operating sites across the U.S. Its purpose is to provide its members with access to high-quality radiopharmaceutical products.
The False Claims Act protects taxpayers from dishonest contractors by allowing private parties, such as UPPI, to filed lawsuits on behalf of the United States to recoup funds received under fraudulent contracts. Radiopharmaceutical products are purchased by the government through competitive contracting with the highest bidder typically awarded the deal and a small portion set aside for small businesses. Rent-a-vet agreements have become a widespread practice and the government has been cracking down on these schemes as of late as they continue to disable small businesses from successfully competing for contracts.
The front companies, according to the lawsuit, “were unable to perform specialized work required under the contracts,” so Cardinal Health, in turn, did most of the work and received almost all of the revenue. The trade group contended the scheme “hurt the government by undermining programs designed to help disabled veterans, preventing other small businesses from obtaining contracts, mitigating the opportunity for competitive bidding process, and causing the federal government to pay money to companies that would not otherwise have received funds.” Yet, the Department of Justice (DOJ) declined to join the case.
“The front companies kept a share, which was, in essence, a kickback for allowing Cardinal to unfairly bypass its competition. The result is that Cardinal — a health care behemoth — made millions from contracts set aside for small businesses,” United Pharmacy Partners said.
A Cardinal spokesperson said the company is “pleased that the Department of Justice chose not to participate in the lawsuit.” He added, “Cardinal Health has been transparent throughout the contracts in question and operates in strict accordance with all applicable state and federal regulations in its preparation and distribution of radiopharmaceuticals.”
In 2019, the Department of Veterans Affairs (VA) announced plans to award at least 15% of its total contract dollars to service-disabled veteran-owned small businesses. In fiscal year 2017, the VA awarded $5.1 billion in contracts to this sector. The trade group noted that none of its members are service-disabled veteran-owned small businesses and, as a result, contended some pharmacies had a difficult time competing.
There have been many claims of rent-a-vet schemes over the years while regulators continue to attempt to crack down on the practice. As large pharmaceutical companies dominate the market, it has become more difficult for small business to win contracts despite laws to help them maintain a competitive advantage.