Drug Firm to Pay $10M |to Settle Fraud Case

(CN) - CareMed Pharmaceutical Services agreed to pay just over $10 million to settle claims it repeatedly lied to insurance companies when seeking authorization for coverage of costly drugs to treat cancer and other complex conditions.

According to federal prosecutors, the company, also known as Sorkin's RX Ltd., engaged in an elaborate scheme to maximize the number of prescriptions it could process and the payments it received each day.

In a complaint filed in Manhattan federal court this afternoon, prosecutors alleged the company routinely fabricated Medicare beneficiaries' medical information, and because it knew many insurance companies require the prescribing physician's office to provide any necessary clinical information directly, it had members of its staff pose as doctors' office employees when placing telephone calls to secure prior authorizations.

Prosecutors also alleged CareMed engaged in double-billing by re-stocking unused dosages of Procrit (used to treat anemia caused by chronic kidney disease or chemotherapy) and Rituxan (used to treat non-Hodgkin's lymphoma), re-selling the drugs, and then re-billing insurance companies that provide prescription drug coverage to Medicare beneficiaries or Medicaid.

Finally, prosecutors said, the company submitted false claims for payment for automatic refills of Procrit and Rituxan that were not actually received by patients and their doctors.

"As alleged, to maximize profits CareMed obtained approvals for the coverage of costly drugs by providing insurers with fake clinical information and posing as physician office staff," Manhattan U.S. Attorney Preet Bharara said in a written statement. "CareMed allegedly also re-stocked and re-billed unused medications and stuck the Government - and taxpayers - with the bill for prescription refills that never went to patients or their doctors.

"By entering into this $10 million settlement, CareMed is being held accountable and paying for its fraud," Bharara said.

In the settlement stipulation approved by U.S. District Judge Denise L. Cote, CareMed admitted that some of its employees engaged in the alleged activities, and that it had failed to adequately oversee and train staff responsible for the prior authorization process.

CareMed also admitted that it had inadequate procedures and auditing processes in place to ensure that some claims submitted to third-party payors were properly credited.

Under the settlement, CareMed will pay just over $9.5 million to the U.S. government, and $465,423 to the State of New York.

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