Wall Street Journal: U.S. Probes Possible Fraud Linked to Compounding Creams

Investigators suspect half a billion dollars in health-care fraud linked to specialty treatments; raids, searches conducted on a number of pharmacy businesses

The Justice Department in Washington, D.C. Authorities are investigating possible health-care fraud linked to compounding creams. Photo: Associated Press

By Devlin Barrett

Updated Feb. 7, 2016 10:42 a.m. ET

The Justice Department is investigating what authorities suspect is half a billion dollars in health-care fraud linked to specialty creams used to treat pain and other ailments, and believe an insurance program for veterans may have been the biggest victim.

Sales of these so-called compounding creams have surged recently thanks in part to a marketing blitz, including pitches by retired NFL quarterback Brett Favre that has promoted them to the elderly, athletes and others. Investigators are looking into allegations that some of the products provide little to no medicinal value, and that some pharmacies sent more product than was ordered, overbilled, or automatically refilled prescriptions without being asked, according to people familiar with the matter. Some companies charged more than $10,000 for a single tube or prescription of cream.

Tricare, the health-insurance program for U.S. military personnel, veterans, and their families, is believed to have been bilked for the most money in the suspected fraud, though Medicare, Medicaid and private insurers were also billed, according to people close to the investigation. It is illegal to charge government health programs for medical services not provided, not necessary, or not ordered.

The investigation is still in its early stages, and no one has been charged with any crime, said people close to the probe.

The creams are often pitched on the Internet or by telemarketers as a safe way to help athletes heal quickly or alleviate types of pain or cramping, according to officials investigating the industry. The creams also are often marketed to seniors as a way to ease the aches of aging, they said.

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Mr. Favre, who was named to the Pro Football Hall of Fame Saturday night, has promoted a pain cream called Rx Pro made by World Health Industries Inc. of Jackson, Miss., which is one of the companies under investigation by the Federal Bureau of Investigation, according to people close to the probe.

World Health Industries also does business as Aspire Rx, according to Mississippi business records. On the company’s website, Aspire Rx says that it is “the pre-eminent provider of compounding pharmacy services in the U.S.” and “utilizes the latest technologies, superior ingredients, and the highest ethical standards to provide custom compounded therapies.” The company didn’t respond to requests for comment.

Mr. Favre’s agent, James “Bus” Cook, didn’t respond to requests for comment. Mr. Favre called himself an investor in WHI in a 2013 radio interview. That same year, he, Mr. Cook and Byron Barrett created a business called 3B Medical Group LLC, according to Mississippi business records. Investigators are now examining that company, and whether it may have acted as a marketing and promotional arm for the cream business, according to people close to the probe.

Mr. Favre, who retired from football after the 2010 season, said in an appearance on a sports talk show on SiriusXM in 2013 that Rx Pro was “a safe way to treat some of your ailments,” adding, “It even works with cramps, stomach pain.”

Authorities are examining the activities of Mr. Barrett and his brother, Chad Barrett, in creating and running companies under investigation, including WHI and Opus Rx LLC, also of Jackson, Miss., according to people close to the probe.

Chad Barrett couldn’t be reached for comment, and his lawyer didn’t respond to messages. Byron Barrett died of cancer in 2015. ​

When a Wall Street Journal reporter called Opus seeking comment, Cindy Barrett, Mr. Barrett’s widow, answered the phone. She later sent an email saying, “As far as the involvement of my late husband Byron Barrett, the information presented to me by you…is full of untruths and you should be ashamed of yourself. My husband died with a clear [conscience].” She didn’t respond to requests to comment further.

On Feb. 2, Opus and a half dozen related companies under investigation or tied to firms under investigation filed for chapter 11 bankruptcy protection, according to court records. Lawyers representing those companies didn’t return messages seeking comment.

The U.S. attorney for the Southern District of Mississippi is overseeing the probe. The FBI, as well the Defense Criminal Investigative Service, the Internal Revenue Service, U.S. Postal Inspectors, and the Mississippi Bureau of Narcotics led a series of raids last month on a number of pharmacy businesses in and around Jackson, Miss., as well as locations in Alabama, Utah and Florida. Simultaneously to the raids and searches, authorities seized an estimated $15 million in property, including 24 vehicles, five planes, two boats, and money from 80 different bank accounts as suspected proceeds of fraud.

Investigators have found many instances in which a single customer’s account for pain cream racked up bills of tens of thousands of dollars, according to the people.

According to Defense Department data, Tricare paid $1.75 billion for compounded drugs including creams during its 2015 fiscal year that ended in September—18 times the amount paid three years earlier. Investigators suspect most of those bills are fraudulent, according to people familiar with the matter. Tricare has implemented new internal controls to crack down on fraudulent billing.

The products made by compounding pharmacies, which mix pharmaceutical and prescription ingredients to meet specialized medical needs, often for people who have difficulty taking pills, aren't as tightly regulated as mass-market drugs. Compounded creams frequently aren’t approved by the Food and Drug Administration because they are mixed in very limited amounts, and it is considered impractical to test all the variations.

Under federal law, compounding pharmacies don’t have to prove the efficacy or safety of their products. The industry is primarily regulated by states, which exercise varying degrees of scrutiny.

The International Academy of Compounding Pharmacists said “legitimately prescribed and dispensed compounded topical creams and gels bring tremendous relief to those suffering from bone and joint pain. They have the added—and very significant—benefit of being non-addictive. IACP believes public and private health care payers should aggressively address health care fraud, including taking aggressive action against any health care provider that has allegedly broken the law.”

In Mississippi, investigators suspect some of the creams that were sold have no medical value.

As part of the investigation, federal and state agents searched locations last month in Jackson, Hattiesburg, Ridgeland and Ruleville, all in Mississippi. One of the targeted businesses, according to investigators, was Rx Remedies in Ridgeland, which declined to comment.

Picton Evans, a pharmacy manager at Rx Remedies, said in an interview that FBI agents questioned him about how they handled orders. The company accurately fills prescriptions from physicians, Mr. Evans said, and ensures that patients receive the appropriate medications.

He predicted investigators will conclude his company has done nothing wrong. “It’s not like we’re selling drugs out the back door,” Mr. Evans said. “This isn’t Pablo Escobar’s house, this is a medical profession, for crying out loud.”

Write to Devlin Barrett at devlin.barrett@wsj.com

 

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