Affiliated Pharmacies to Pay Over $150,000 to Settle False Claims Act Allegations

Two affiliated Oklahoma pharmacies have agreed to pay over $150,000 to settle allegations that they violated the False Claims Act by improperly billing Medicare for prescription medications, federal prosecutors announced Tuesday.

Medistat Pharmacy in Midwest City and Med-Econ Pharmacy in Newcastle will pay $151,298 to resolve claims that they billed Medicare for prescription drugs that were either never dispensed to patients or were dispensed in smaller quantities than what was billed to the federal healthcare program.

The settlement comes after a lengthy investigation by the U.S. Department of Health and Human Services Office of Inspector General, working in conjunction with the U.S. Attorney’s Office for the Western District of Oklahoma. Authorities uncovered a pattern of billing discrepancies that occurred between January 2016 and December 2021.

“Pharmacies that participate in federal healthcare programs must maintain accurate records and submit truthful claims for payment,” said U.S. Attorney Robert J. Troester in a statement. “This settlement demonstrates our commitment to protecting the integrity of these vital programs and ensuring that taxpayer dollars are properly spent.”

According to investigators, the pharmacies routinely submitted claims to Medicare Part D for medications that patients never received. In other instances, the pharmacies dispensed partial quantities of prescribed medications but billed Medicare as if they had provided the full amount.

The False Claims Act prohibits individuals and companies from defrauding governmental programs. It allows the government to recover damages and penalties from anyone who knowingly submits false claims to federal programs. Violations can result in significant financial penalties, including triple damages in some cases.

The settlement with Medistat and Med-Econ Pharmacy is part of a broader national effort to combat healthcare fraud. The Department of Justice has recovered over $2 billion in settlements and judgments involving fraud against federal healthcare programs in the past fiscal year alone.

Healthcare fraud investigations have intensified in recent years as federal agencies implement more sophisticated data analytics to identify unusual billing patterns. The Centers for Medicare & Medicaid Services estimates that improper payments cost taxpayers billions of dollars annually.

Both pharmacies cooperated with the investigation and have agreed to implement enhanced compliance measures as part of the settlement. These include improved inventory tracking systems, regular internal audits, and additional staff training on proper billing procedures.

Neither pharmacy admitted liability as part of the settlement agreement, which is common in such cases. The pharmacies will be permitted to continue participating in federal healthcare programs, subject to compliance with the settlement terms.

“This settlement should serve as a warning to healthcare providers that improper billing practices will not be tolerated,” said Special Agent in Charge Mike Stapleton of HHS-OIG’s Dallas Regional Office. “We will continue to work with our law enforcement partners to protect the financial integrity of our federal healthcare programs.”

The case highlights the growing scrutiny of independent pharmacies, which face increasing regulatory pressures amid changing reimbursement models and consolidation within the industry. Independent pharmacies across the country have struggled with tight profit margins and complex compliance requirements in recent years.

Industry experts note that proper documentation and rigorous inventory management are essential for pharmacies to avoid similar legal issues. The National Community Pharmacists Association recommends regular compliance audits and staff training to ensure adherence to Medicare billing requirements.

For patients, the case underscores the importance of reviewing Medicare Summary Notices to ensure that charges reflect medications actually received. Medicare beneficiaries can report suspected fraud through the HHS-OIG Hotline.

The settlement was handled by Assistant U.S. Attorney Ronald R. Gallegos of the Western District of Oklahoma, who specializes in civil healthcare fraud cases. Federal officials indicated that the investigation into similar practices at other healthcare providers remains ongoing.