In 2013, owners and employees of Kentwood Pharmacy were indicted on federal conspiracy charges. The indictment alleged that Kentwood sold prescription drugs to customers, recaptured unused drugs, then re-sold the drugs to others. For obvious reasons, the re-sale of prescription drugs is illegal under federal law. Because this case involved federal law, this case was handled by the United States Attorney’s Office and filed in the United States District Court for the Western District of Michigan. This court is tough on these cases, and this showed in the way this case was handled. The team of federal criminal defense lawyers at the Barone Defense Firm are very familiar with this court and know firsthand how difficult and specialized these cases are to properly defend.
For example, one of the laws used to charge Kentwood Pharmacy in this case was set out under the Federal Food, Drug, and Cosmetic Act (FDCA). This law says that a drug is misbranded if its label is false or misleading in any way (21 U.S.C. §§ 301). Each prescription bottle should have a label that lists, among other things, its lot number. This lot number is a way to trace the manufacturing history of the drug. That way, if there are any issues with the drug, the lot number on the label can be used to investigate how the issue occurred. If a drug is mislabeled, then it would make it difficult or impossible to understand the manufacturing history and cause of the problem of the drug.
In this case, Kentwood had adult foster care homes and nursing homes as customers. Kentwood sold prescription drugs to these customers. Kentwood then directed employees pick up previously dispensed, unused drugs from these customers. Kentwood would then repackage these drugs and resell them, as if new. This resulted in drugs going into containers that had lot numbers and expiration dates that did not match. Sometimes, the containers that the old drugs were placed in contained no lot numbers. This practice also resulted in Medicare and Medicaid being billed more than once for the same drug.
Several Kentwood employees noticed what was going on and reported the issues.
As several directors and employees of this scheme were complicit and worked together to make it happen, federal conspiracy charges were brought. In a conspiracy, where two or more people act together to commit a crime, all involved in the conspiracy can be charged.
Kentwood was also charged with structuring. 31 U.S.C. § 5324 makes structuring a crime under federal law. Structuring means making deposits or payments in such a way as to avoid federal financial reporting requirements. In this case, Kentwood made bank deposits under $10,000.00 to avoid banks having to report the deposits to the federal government.
The CEO of Kentwood pleaded guilty to the conspiracy to commit healthcare fraud charge, a federal felony that carries up to 10 years in federal prison. The pharmacist in charge pleaded guilty to violating the FDCA law against selling mislabeled drugs. This law is a federal felony that carries up to 3 years in federal prison. In August 2015, the CEO of Kentwood was sentenced to 10 years in prison, 3 years of supervised release after the prison term, and $8 million in restitution.
This case highlights the high stakes involved in healthcare fraud and prescription drug fraud cases. Most people facing healthcare fraud charges have never been charged with a crime and are suddenly faced with losing many years of life in federal prison. Anyone being investigated for healthcare fraud should immediately contact the experienced healthcare fraud attorneys at the Barone Defense Firm for consultation.