On March 18, 2019, the Department of Justice (DOJ) filed an amended complaint-in-intervention in the False Claims Act (FCA) case against Diabetic Care Rx, LLC d/b/a Patient Care America (PCA); two of PCA’s executives; and the company’s private equity owner, Riordan, Lewis & Haden, Inc. (RLH). This filing comes on the heels of a March 5 decision by the U.S. District Court for the Southern District of Florida that dismissed for insufficient pleading DOJ’s FCA claim that the defendants submitted or caused the submission of false claims to TRICARE for compound prescriptions obtained through the payment of unlawful kickbacks to marketers, physicians and patients. This case is significant and has been closely watched by the industry because it represents the first time DOJ has intervened in an FCA suit against a private equity firm alongside a healthcare portfolio company accused of submitting false claims.
Government Accused Private Equity Owner of Being Involved in Kickback Activity
This matter involves allegations that PCA paid kickbacks to marketers to target TRICARE beneficiaries for compound pain creams, scar creams and vitamins, regardless of medical necessity. The marketers allegedly paid telemedicine physicians who prescribed the products without ever physically examining the patients, and colluded with PCA to pay many patients’ copayments to induce their acceptance of the lucrative compound drugs. As support for its claim against RLH, as the private equity firm, the government has repeatedly cited to evidence purporting to show RLH’s material day-to-day involvement in the operations of PCA and its awareness of the facts surrounding the alleged kickback conduct. The government has alleged that at all relevant times, RLH managed and controlled PCA through two RLH partners who also served as officers and/or directors of PCA and of two holding companies with an interest in PCA.