Jacksonville compounding pharmacies, owner, settle with DOJ over fraud claims

FLORIDA – The U.S. Department of Justice (DOJ) has reached a settlement of at least $7.4 million with two compounding pharmacies and their owner in Jacksonville to resolve lawsuits alleging they violated the False Claims Act.

Smart Pharmacy, Inc., SP2, LLC, and their owner Gregory Balotin reached a settlement with the DOJ last week that requires the defendants to pay a minimum of $7.4 million, considering their ability to pay, the DOJ announced.

The lawsuits, filed in Jacksonville, accused the pharmacies and their owner of engaging in fraudulent practices. Specifically, they were accused of adding the antipsychotic drug aripiprazole to topical compounded pain creams to inflate reimbursement amounts from insurance providers.

This practice aimed to increase the financial gain for the pharmacies, the DOJ said.

Additionally, the defendants were accused of regularly waiving patient copayment obligations. Although copayments may be waived in certain unique circumstances, such as on the basis of an individualized assessment of a patient’s financial hardship, the defendants allegedly routinely waived copayments without regard to patient need.

These actions were alleged to violate the False Claims Act, which prohibits the submission of false or fraudulent claims for payment to the government.

To resolve the allegations, Smart Pharmacy, Inc., SP2, LLC, and Balotin have agreed to pay a minimum of $7.4 million, said the DOJ. The settlement amount is based on their ability to pay, indicating that they may have financial limitations.

“When pharmacies inflate their revenue with medically unsupported prescription ingredients, they compromise the quality of patient care and waste taxpayer dollars,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division.

“The department will hold accountable those who undermine the integrity of federal healthcare programs for personal profit.”

Aripiprazole, sold under the brand names Abilify, Abilify Maintena, and Aristada, is approved by the U.S. Food and Drug Administration to treat many psychological conditions, such as schizophrenia and Tourette’s disorder.

The United States alleged that the defendants crushed aripiprazole pills approved for oral use and included them in compounded creams used topically for pain treatment while knowing that there was not an adequate clinical basis to do so.

The defendants allegedly included the drug in the pain creams to increase their profits on prescriptions paid for by Medicare Part D and TRICARE, the federal health care program for active-duty military personnel, retirees, and their families.

Both Medicare Part D and TRICARE reimburse pharmacies for the individual ingredients included in compounded drugs. Thus, the defendants increased their reimbursement by adding aripiprazole to the combination of drugs used in their pain creams, the DOJ said.

In connection with the settlement, Balotin has agreed to enter into a three-year integrity agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG), which includes an annual claims review by an independent review organization.

“Pharmacies participating in Medicare are obligated to obey laws designed to protect both the integrity of this program and the quality of care provided to patients,” said Special Agent in Charge Omar Pérez Aybar of HHS-OIG.

“With our law enforcement partners, our agency is committed to investigating alleged health care fraud to protect both federal health care programs as well as the individuals served by those programs.”

The claims asserted against the defendants are allegations only and there has been no determination of liability.