Court Rulings Could Mean Added Risk for Captive and Long-Term Care Pharmacies

On May 17, 2013, the U.S. District Court for the Northern District of Georgia issued an order that joins an unsettling line of decisions suggesting that before filling prescriptions, pharmacies must serve as the arbiters of whether an off-label prescription is a "medically accepted indication" reimbursable by Medicare or risk liability under the federal False Claims Act ("FCA") when it seeks payment from Medicare for filling such prescriptions.


In United States ex rel. Fox Rx, Inc. v. Omnicare, Inc. et al.,1 the qui tam relator (a private party bringing an action on the government's behalf) — a Medicare Part D plan sponsor — filed a complaint alleging that Omnicare, one of the nation's largest long-term care pharmacies, violated the FCA by seeking Part D reimbursement for filling prescriptions of anti-psychotic drugs that were prescribed by physicians for off-label uses.

In moving to dismiss the complaint, Omnicare argued among other things that the relator had not sufficiently alleged, and presumably could not ultimately prove, that Omnicare knowingly submitted false claims because it did not have actual knowledge of the patients' underlying medical conditions to judge whether the drugs were prescribed for an off-label use. Although the district court had recognized in an opinion dismissing an earlier version of the relator's complaint that "pharmacies do not have a duty to identify off-label prescriptions," it denied Omnicare's motion to dismiss. According to the court, the allegations in the relator's complaint were sufficient to state a claim that Omnicare had at least acted in reckless disregard of the off-label use because its dispensing pharmacies and consultant pharmacists had access to patients' medical records and diagnostic history, which gave Omnicare "actual or constructive knowledge" that the prescriptions were off-label.

Implications for Providers

This decision, as well as a small number of other similar court rulings across the country, may be a sign of things to come. They suggest that long-term care pharmacies — or any pharmacy affiliated with a hospital or other facility with access to patient medical records — now face the prospect of having to decide whether the prescriptions they fill are off-label before seeking reimbursement from Medicare or face the possibility of FCA liability. This is made all the more difficult by the fact that whether an off-label prescription is reimbursable by Medicare depends on whether the use is "supported" by certain statutorily-identified compendia, such as DRUGDEX. This in itself is not a black and white issue. Providers should consider their ability to mitigate this risk from both an operational and a government affairs standpoint.