This is a story (with a moral) of a Mississippi pharmacy that decided to make some money on its compounding pain and scar creams. To accomplish the goal of increasing its market share, it contracted with a marketing company to promote its compounds into other states. So far so good. The marketing company, however, insisted on a share of revenues that it would generate for the pharmacy, namely 35%. The pharmacy… agreed. The marketing company engaged a marketer and instructed him to focus on Tricare patients because “Tricare would pay tens of thousands of dollars per month per patient for compounded drugs.” (Press Release of the U.S. Department of Justice).

The marketer, in turn, paid patient recruiters to find Tricare beneficiaries to receive prescriptions, telling them a doctor would sign the prescriptions without consulting patients. Patient recruiters forwarded beneficiary insurance information to the marketer, who routed them to a local medical assistant, who was paid to file the prescriptions under the name of the doctor for whom she worked.

U.S. Attorney’s Office claims that in less than one year, “the scheme generated over $10 million in compound prescriptions for over 100 Tricare beneficiaries hailing from as far west as Chula Vista, Calif., to as far east as Foxborough, Mass.”

In addition to kickback allegations, the pharmacy is facing other fraud implications, such as waiving co-pays and dispensing unnecessary fills. The record in the case shows that the pharmacy issued monthly refills automatically without enforcing co-payment collections, allowing the beneficiaries to continue receiving monthly shipments at no cost.

So far, six people pled guilty in participating in the conspiracy. Under the terms of their plea agreements, each defendant faces up to five years in federal prison and forfeiture of nearly $1.9 million in illicit proceeds. More charges involving additional defendants are expected.

Compounding pharmacies will continue to be scrutinized by federal government and PBMs as Tricare paid nearly $2 billion for compound prescription drugs in 2015 (according to the U.S. Department of Justice), which constituted an 18-fold increase over previous years and prompted investigations around the country.

The moral of the story is to scrutinize all your marketing agreements, policies and procedures on collecting co-pays, soliciting patients, and billing federally-sponsored programs.