Iowa Pharmacist ‘Vehemently Denies’ Fraud Charges

An Iowa City pharmacist will contest federal criminal charges alleging that he improperly filed insurance claims for expensive drugs needed to treat patients with hemophilia, his attorney said.

Michael F. Stein made an initial appearance in federal court in Des Moines on June 10, pleading not guilty to a 10-count indictment charging him with health care and mail fraud. Stein operates Pharmacy Matters, an independent retail pharmacy with locations in Iowa City and North Liberty, and his attorney issued a statement vowing to fight the charges.

“Michael Stein vehemently denies that there was anything illegal about the way in which he helped provide life-saving medications to hemophilia patients,” attorney Mark Weinhardt said.

Stein has been released on his own recognizance pending a trial scheduled to start July 29.

The charges stem from a lengthy dispute between Stein’s pharmacy and Wellmark, Iowa’s largest health insurer, over millions of dollars in claims for reimbursement for drugs used to treat hemophilia, an inherited condition in which patients suffer excessive bleeding and lack the proteins needed to form blood clots. The medicine at issue, so-called factor drugs, is injected by patients at home so they don’t bleed to death.

Stein’s business, Pharmacy Matters, signed an agreement to join Wellmark’s provider network after opening in 2006.

The indictment alleges Stein signed a deal in 2008 to give Factor Health Management, a now-closed Florida drug wholesaler, access to Wellmark’s network of customers in the Blue Cross and Blue Shield Association by agreeing to distribute its factor drugs.

FHM referred patients to Stein, who sent them drugs provided by FHM and filed for reimbursement from Wellmark. The indictment says Stein would receive 1 percent of revenue, or $100,000, whichever was greater, under the deal.

The indictment says that Wellmark’s contract states that such arrangements are not allowed. It alleges that Stein submitted “false and fraudulent claims” to Wellmark on 9 occasions in August and September 2008 and received $1.6 million in reimbursements for which he was not entitled. The indictment seeks a forfeiture of $3.5 million, which it calls the “total amount of gross proceeds obtained as a result of the offenses.”

Weinhardt, the attorney, noted that Stein’s business has had a lawsuit pending against Wellmark since 2009 in which he contends that the claims were valid and the insurer “wrongfully denied insurance benefits in his pharmacy’s hemophilia cases.”

A key issue in both cases appears to be whether Stein’s arrangement with Factor Health Management and its subsidiary, FCS Pharmacy, was proper. In the lawsuit, Stein’s attorneys contend that the drugs were medically necessary and dispensed “in accordance with the law” to patients who had valid prescriptions and insurance through Wellmark. Obtaining the expensive, specialty drugs from a wholesaler allowed his independent pharmacy to afford to carry the drugs, they say.

The lawsuit alleges that Wellmark refused to pay 117 claims for 24 patients at a cost of $6.3 million, coming up with an ever-shifting set of reasons for the denials. The refusal by Wellmark and other insurers to pay reimbursements forced FHM to close in 2009 after its revenue plummeted, the lawsuit alleges.

District Judge Paul Miller, who sat through a trial on the case, is expected to rule in the coming weeks. Weinhardt said Stein was looking forward to having a decision in that case, and “looks forward to vindicating himself in criminal court if necessary.”

First Assistant U.S. Attorney Kevin VanderSchel said he could not explain why the charges were being brought now, in the middle of the civil case and nearly five years after the claims were filed.

The indictment alleges that FCS Pharmacy clinically managed the patients, assembling patient-specific doses and shipping them to Iowa, complete with shipping labels for Stein to mail the drugs to them. In four cases, Stein admits FHM drugs were sent to patients who needed them on an emergency basis without ever passing through his pharmacy, but says that was proper to save lives.

Some of Stein’s claims for reimbursement included an extra charge generally used when pharmacists actually inject the drugs in patients, which Stein did not do, the indictment alleges.