Security News: U.S. Attorney Announces Settlement Of Fraud Lawsuit Against Online Pharmacy For Overdispensing Insulin

Damian Williams, the United States Attorney for the Southern District of New York, and Scott J. Lampert, Special Agent-in-Charge of the U.S. Department of Health and Human Services Office of the Inspector General (“HHS-OIG”) New York Regional Office, announced today that the United States filed and settled a healthcare fraud lawsuit against online retail pharmacy PillPack, LLC (“PillPack”), a wholly-owned subsidiary of Amazon.com, Inc.  The settlement resolves allegations that PillPack improperly billed Government healthcare programs (“GHPs”), including Medicare and Medicaid, for more insulin pens than patients needed according to their prescriptions and falsely under-reported the days-of-supply of insulin dispensed.  Under the settlement, PillPack agreed to pay approximately $5.79 million to the United States and various States that were fraudulently overbilled for insulin.  As part of the settlement, PillPack also admitted and accepted responsibility for certain conduct the Government alleged in its Complaint, including that it dispensed insulin pens that exceeded days-of-supply limits imposed by GHPs.

U.S. Attorney Damian Williams said:  “Pharmacies are trusted to provide accurate information to Government healthcare programs and to prevent waste when dispensing medications to patients.  PillPack abused this trust by dispensing insulin refills long before patients needed them and by falsely reporting the days-of-supply of insulin actually dispensed to prevent its claims for reimbursement from being denied.  This Office will continue to hold pharmacies accountable when they submit false information and waste taxpayer dollars.”

Insulin pens (hard plastic pen-shaped cases containing syringes filled with insulin solution) are a common way for diabetic patients to self-administer insulin.  Manufacturers most frequently distribute insulin pens in five-pen cartons with each pen containing 300 units (3 mL) of insulin solution.  Pharmacies can dispense such pens to patients only with valid prescriptions from licensed prescribers.  Valid insulin prescriptions must set forth the “directions for use,” which typically designate both how much insulin to administer and the frequency and/or timing of when to administer it.

When PillPack sought reimbursement from GHPs for insulin pens, it was required to report, among other data, the quantity dispensed and the days-of-supply.  The “quantity dispensed” specifies the amount of medication being dispensed to a patient when the pharmacy fills the prescription, and the “days-of-supply” refers to the number of days that the dispensed medication should last if the patient uses it according to the directions for use in the prescription.  Typically, to calculate days-of-supply, a pharmacist divides the total quantity of medication being dispensed to a particular patient by that patient’s “daily dose,” i.e., the amount of medication that the prescriber directs the patient to use each day. 

GHPs impose dispensing limits for prescription drugs, including insulin pens, in terms of quantity and days-of-supply and will deny a claim if the reported days-of-supply exceeds those limits, unless an override is obtained.  GHPs typically calculate the date on which a prescription refill would be needed (the “refill due date”) based on the date when a patient last filled a prescription and the days-of-supply reported by the pharmacy for that prior fill.  GHPs also typically establish automated processes to deny claims for reimbursement for refills that are submitted too far in advance of the refill due dates.  The reliability of these processes depends on the accuracy of the days-of-supply reported by pharmacies.

As alleged in the Government’s Complaint:

From April 2014 through November 2019 (the “Covered Period”), PillPack’s general practice was to dispense insulin pens to patients using full cartons.  PillPack would dispense and bill for the full carton, and falsely under report the days-of-supply to make it appear that the dispensing did not violate the program’s days-of-supply limit.

The practice of under-reporting days-of-supply also led PillPack to dispense premature refills to program beneficiaries.  Whenever PillPack recorded in its internal system the inaccurate lower days-of-supply that were submitted to conform with the GHP’s days-of-supply limit, the system would generate a premature refill due date.  As a result, PillPack pharmacists frequently dispensed insulin pen refills days or weeks before patients actually needed them according to their prescriptions. 

The settlement requires PillPack to pay $5,616,136.85 to the United States, and PillPack has agreed separately to pay $175,522.55 to state governments, for a total of $5,791,659.40.  Under the settlement, PillPack admitted, among other things, that:

• During the Covered Period, PillPack’s insulin pen dispensing practice was to supply patients with a full carton of insulin pens.  In many instances, this resulted in exceeding the GHP’s applicable days-of-supply limit.  Instead of accurately reporting the days-of-supply and contacting the GHP or its agent to attain the requisite override, in many instances PillPack would dispense and bill for the full carton, and reduce the days-of-supply reported to the GHP to conform to the GHP’s days-of-supply limit.   As a result, for those claims, PillPack reported days-of-supply data to GHPs that were different from, and lower than, the days-of-supply that should have been reported had PillPack calculated days-of-supply according to the typical pharmacy billing formula of dividing the quantity of insulin dispensed by the daily dose.
• Prior to April 2019, PillPack’s prescription management and dispensing software determined refill dates based on the reported days-of-supply.  Thus, during this time period, when PillPack pharmacists reported inaccurate lower days-of-supply data to GHPs and payors working on their behalf, the software used this inaccurate data to generate premature refill due dates, causing PillPack pharmacists to dispense insulin pen refills to patients days or weeks before the patients actually needed them according to their prescriptions. 
• During the Covered Period, PillPack received audit reports from pharmacy benefit managers, acting on behalf of GHPs, requesting that PillPack repay the overpayments it had received for insulin pen prescription claims due to inaccurate days-of-supply reporting.
• GHPs and payors working on their behalf approved and paid claims submitted by PillPack for insulin pen refills that they would not have approved if PillPack had accurately reported the days-of-supply for previous fills according to the typical pharmacy billing formula of dividing the quantity dispensed by the daily dose.  Specifically, PillPack’s practice of dispensing and submitting reimbursement claims for insulin pen refills using inaccurate lower days-of-supply data prevented GHPs and payors working on their behalf from reliably calculating refill due dates and confirming that refills had not been prematurely dispensed before approving PillPack’s claims for reimbursement. 
• In certain instances, over time, patients accumulated multiple extra insulin pens that they did not need according to their prescriptions.

In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act.

Mr. Williams praised the outstanding investigative work of the Office of Inspector General, Department of Health and Human Services.  He also thanked the Medicaid Fraud Control Units for Washington and Texas for their assistance in this case.

This case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Danielle Levine and Pierre Armand are in charge of the case.