On May 10, 2024, two South Florida men pleaded guilty to conspiracy to commit healthcare fraud for their role in a diversion scheme involving the distribution of adulterated and misbranded diabetic test strips.
The scheme involved the acquisition of non-retail or international diabetic test strips (i.e., diabetic test strips intended by manufacturers for distribution only outside of the United States), for sale to licensed retail pharmacies as retail diabetic test strips to make a higher profit. The fraud scheme resulted in around $12 million in fraudulent proceeds.
Defendant 1, of Marco Island, Florida, owner of two diabetic test strip wholesale businesses, and Defendant 2, of Miramar, Florida, former president of another diabetic test strip wholesale business, acquired the diabetic test strips through illegal importations, theft, or by buying the diabetic test strips from patients who obtained prescriptions but chose to sell them rather than use them.
The wholesale company owners then sold the adulterated and misbranded diabetic test strips to licensed retail pharmacies, some of which they also owned. These licensed retail pharmacies sold the adulterated and misbranded diabetic test strips to patients who did not know the real source of the diabetic test strips. In turn, these licensed retail pharmacies then submitted claims for reimbursement through private and government health benefit plans as retail diabetic test strips.
To deceive auditors and inspectors, the defendants altered invoices, purchase orders, and shipping records, counterfeited National Drug Code (NDC) numbers, bar codes, and accompanying labeling, to appear like they had acquired the diabetic test strip from legitimate manufacturers.
Defendant 2’s sentencing hearing is scheduled for May 29 in West Palm Beach. He faces up to 10 years in prison. Defendant 1’s sentencing hearing is scheduled for Aug. 2 in West Palm Beach. He faces up to 10 years in prison. To date, a total of four defendants have been indicted in connection with this scheme.
Compliance Perspective
Issue
Glucose meters and test strips are medical devices regulated by the US Food and Drug Administration (FDA). US consumers rely on FDA oversight to ensure that the drugs and medical devices they receive are safe and effective. Medications and medical devices obtained from unlicensed sources may present safety issues since they have been manufactured or held outside of the jurisdiction of the FDA’s oversight. These medications and medical devices may not be safe and effective for their intended uses and must be avoided in healthcare settings, where medications and medical devices may only be obtained from authorized sources. Billing federal healthcare programs for a more expensive medication or medical device than what was used constitutes a false claim. Failure to promptly report a false claim can result in lawsuits, fines, and other sanctions.
Discussion Points
- Review your medication management policies to ensure they include the requirement for purchasing all medications and medical devices for residents from licensed pharmacies and reputable suppliers in the United States. Also review policies and procedures for preventing and reporting false claims. Update as needed.
- Train appropriate staff about F755 Pharmacy Services requirements for obtaining medications and medical devices only from US licensed pharmacies and reputable suppliers. Offer education to residents and resident representatives at the time of admission and through Resident Council on approved pharmacies and suppliers used by the facility, including that medications and medical devices from unauthorized sources may not be brought to the facility for resident safety purposes. Document that this training occurred and place a signed copy of the training record in the employee’s education file, in resident records, or in Resident Council meeting minutes. Also train all staff on the False Claims Act and what can be considered a false claim. Include information on how to report concerns and suspected violations, and that prompt reporting is mandatory. Ensure that those who live or work in all levels of care in your settings are aware of the dangers of purchasing pharmaceuticals and medical devices from unapproved sources.
- Audit to ensure that all medications and medical devices for residents are obtained from a licensed pharmacy or approved supplier in the US and properly labeled. If concerns are identified that residents, their representatives, or visitors are providing counterfeit or other non-FDA approved medications or medical devices from unauthorized sources, immediately secure the suspect items and notify the administrator, director of nursing, compliance and ethics officer, or call the Hotline. Also periodically audit staff understanding to ensure that they are aware of what should be done if they suspect a false claim has occurred.
*This news alert has been prepared by Med-Net Concepts, LLC for informational purposes only and is not intended to provide legal advice.*
