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3-year sentence, $3.1 settlement show danger in compounded drug prescribing

An orthopedic surgeon had to pay back millions and was sentenced to years in prison in a case involving compounded drugs – a recurrent theme in recent DOJ health care prosecutions.

Thomas Raley, Jr., M.D, of Baltimore, Md., was sentenced to three years in prison and, with a co-defendant, required to pay over $3.1 million to settle civil claims under various fraud statutes for his participation in a compounded medications scheme.

According to the felony complaint, a pharmacist co-conspirator “developed potential compounded formulas and investigated whether insurance companies would pay for particular formulas” and, with Raley and other co-conspirators, “looked for ways to generate the most profits from compound prescriptions.” (In legitimate cases, compounded drugs are standard pharmaceuticals combined and/or altered to suit the circumstances of individual patients e.g. in case of a specific drug allergy.)

Raley then “wrote prescriptions for high reimbursing compounds when alternative cheaper prescriptions were available for patients,” says the complaint, and he and his co-conspirators made millions billing Medicare, Virginia Medicaid, and TRICARE for these prescriptions.

Raley pleaded guilty to conspiracy to receive health care kickbacks and conspiracy to commit wire fraud on Nov. 18, 2022.

Compounded drugs have figured in a number of 2022 federal prosecutions and injunctions  – e.g., “Florida Man Admits Role in $35 Million Pharmacy Compounded Medication Scheme” (Feb. 15); “Former Owners of Telemarketing Company Agree to Pay At Least $4 Million to Resolve False Claims Act Allegations” involving “schemes to generate prescriptions for compounded drugs” (March 16); “District Court Enjoins Vermont Pharmacy from Distributing Drugs Not Made in Compliance with FDCA” (June 13), etc.

In October, Part B News reported on a doctor whose illegal sharing of patient records in furtherance of a compounded drug fraud scheme led to a charge of “conspiracy to wrongfully obtain and disclose individually identifiable health information” – a rare case of a HIPAA charge carrying prison time (link; subscription).

Perhaps not coincidentally, compounded drugs are on the OIG's radar – having broached the subject in a 2015 report, when it noted “an increasing number of fraud investigations related to compounded drugs.” The OIG is performing “a risk assessment of CMS's oversight of pharmacies compounding drugs for beneficiaries to determine whether systemic vulnerabilities affecting the integrity of Medicare Part D,” with results due next year.
Blog Tags: anti-fraud, compliance, OIG
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