Behind the scenes, DHA supports DOJ to fight compound drug fraud

If a child needs medicine in a pill that is too large to swallow, that medication can be mixed into a solution by the pharmacist and given to the child orally. This action is commonly called “compound drugs;” such medications mix or alter a recipe of ingredients to meet a patient’s needs. While patients can be treated with compound drugs without the complications from their commercially sold counterparts, the drugs create a new potential complication: medical fraud from nefarious pharmacies and providers.

Bryan Wheeler, chief of Program and Health Law and former acting general counsel at the Defense Health Agency, has followed and fought compound drug fraud committed through the TRICARE health benefit since 2015.

“We recognized that we [TRICARE] were spending an inordinate amount of money on compound drugs,” Wheeler said, “so we had to follow the money to see where the problem was coming from.”

Compound drugs are not FDA-approved, but because DHA has an open formulary, TRICARE covers and reimburses providers for certain drug ingredients. This reimbursement helped providers looking for a cost-efficient way to cater to their patients’ needs, but without even meeting a patient, individuals looking for easy money wrote false prescriptions to get reimbursed for expensive ingredients.

“In these scams, the folks providing the ingredients make money off this, pharmacists make money off this, even the doctor that writes the prescription makes money off this,” Wheeler said. “What we saw were these networks of people recruiting patients, physicians, and pharmacies to request fake prescriptions under false pretenses. These individuals would the request prescriptions for patients who had not requested them, or request prescriptions that were not medically necessary."

DHA coordinated with the Department of Justice and the Department of Defense’s Criminal Investigative Service in prosecuting individuals and companies who have committed compound drug fraud through TRICARE. So far, the government has improved care for its beneficiaries by recovering over $606 million to TRICARE in court-ordered restitution, civil judgments, and determination of improper payments. Some offenders are currently serving jail time; program exclusion for pharmacies and individuals can range up to 20 years. DHA’s Program Integrity Division and Pharmacy Operations Division work together to observe trends and create policies to prevent future fraud.

“We have numerous controls and indicators that we look at not just for compound pharmaceuticals, but in general, that help to shed some light on areas we may want to look at more closely,” said Jennifer Dietz, head of the Program Integrity Division.

Examples include the implementation of a compound exclusion list. If a provider or pharmacy files a claim through TRICARE to be reimbursed for an ingredient that shows up on the exclusion list, the claim is paused. The provider then must verify its relationship with the patient and justify the choice of ingredients in the prescription. Only then will the reimbursement be processed.

DHA’s Program Integrity Division also compiles “spike reports” to observe trends in claims within peer groups of providers and pharmacies. DHA uses link analysis to look for spikes in ingredients or claims filed within these peer groups. Compiled data can identify other potential fraud cases, add ingredients to the compound exclusion list, and help DHA identify providers or pharmacies that show up frequently in areas that are known for compound drug fraud.

Since these new implementations, DHA has seen a severe drop in new fraudulent compound drug claims. However, since no statute of limitations exists for recovering money from compound drug fraud, the team learns about old cases regularly. These cases are forwarded to agencies like DOJ and the Defense Criminal Investigative Service for actions that include pursuing restitution fees.

“I can say without a doubt that DHA is committed to protecting not only taxpayer funds, but safeguarding benefit dollars for our military,” Dietz said. “And we’ll continue working to keep that promise.”