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U.S. sues PharMerica over drug dispensing, Medicare fraud

By Jonathan Stempel

(Reuters) - PharMerica Corp has been sued by the U.S. government, which accused the company of dispensing controlled drugs without valid prescriptions and defrauding Medicare by causing claims to be submitted for the illegally dispensed drugs.

The U.S. Department of Justice on Friday joined a whistleblower lawsuit first filed in 2009 by Jennifer Denk, now known as Jennifer Buth, a former PharMerica pharmacy operations manager who worked in Pewaukee, Wisconsin.

According to the complaint, PharMerica between 2007 and 2009 dispensed controlled drugs several thousand times without first getting valid written prescriptions from treating doctors, and caused false or fraudulent claims to be submitted to Medicare at least 250 times.

At issue were drugs listed under Schedule II of the federal Controlled Substances Act, such as fentanyl and oxycodone.

Such drugs can be easily abused and cause significant harm if used improperly, and PharMerica routinely distributed them in non-emergency cases without valid prescriptions, the government said.

The lawsuit filed with the U.S. District Court in Milwaukee seeks civil penalties and triple damages under the federal False Claims Act, and civil fines under the Controlled Substances Act.

A spokeswoman for the Louisville, Kentucky-based company had no immediate comment.

Shares of PharMerica closed down 89 cents, or 5.9 percent, at $14.08 on the New York Stock Exchange.

"HARRY POTTER" ROOM

PharMerica dispenses drugs to residents of long-term care facilities such as nursing homes and skilled nursing facilities.

During the period covered by the lawsuit, PharMerica served 300,000 residents, filled 40 million prescriptions annually, and generated 45 percent of its revenue from prescription drugs paid for by the Medicare Part D program, the complaint said.

According to the government, PharMerica would improperly allow nursing home staff to order and pharmacists to dispense narcotics before confirming they were necessary for treatment.

Many unsigned doctors' authorizations would ultimately be boxed and stored in an unmarked Pewaukee storeroom known as the "Harry Potter" room, the complaint said. The government did not explain how the room came to be named.

"Pharmacies are prohibited by law from dispensing Schedule II narcotics, which have the highest potential for abuse of any prescription drug, without a valid prescription from a physician," said Stuart Delery, assistant attorney general for the Justice Department's civil division.

"The Department of Justice will take action to protect the integrity of federal health care program funds and hold those who violate the law accountable," he added.

Buth's lawsuit has been consolidated with a whistleblower lawsuit by Eric Beeders and Lesa Martino, who worked for a PharMerica predecessor as pharmacists in Largo, Florida.

The case is U.S. ex rel Buth v. PharMerica Corp, U.S. District Court, Eastern District of Wisconsin, No. 09-00720; and U.S. et al ex rel. Beeders and Martino v. PharMerica Corp in the same court, No. 11-00706.

(Reporting by Jonathan Stempel in New York; Editing by Richard Chang)

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