February 9. 2015
By Mary Ann Roser
A specialty pharmacy that drew the attention of state officials worried about possible kickbacks to doctors is now being investigated by the Texas attorney general’s office and is asking a judge to block demands for certain financial documents.
State lawyers are examining HealthScripts Specialty Pharmacy for possible violations of the Texas Deceptive Trade Practices Act, according to a petition filed by HealthScripts and three affiliates: HealthScripts of America in North Austin, Houston and Midland-Odessa. HealthScripts custom-makes, or compounds, prescription drugs for patients and seeks physician investors who refer patients to the pharmacy and share in the profits.
Legislation proposed by a state senator who calls the arrangements “unethical and certainly fraudulent” could ultimately derail the company’s attempts to keep its corporate and financial documents out of the hands of investigators. State Sen. Charles Schwertner, R-Georgetown, said Monday that he authored Senate Bill 460, in part, to give the Texas State Board of Pharmacy access to any pharmacy’s financial information. Existing state law bars that access.
“I think they are hiding the ball,” Schwertner said of the pharmacies in question. Schwertner, a pharmacist and an orthopedic surgeon, began raising concerns in 2013 about compounding pharmacies courting doctors to become investors in Austin and other cities.
HealthScripts says in the petition it filed Jan. 30 in Travis County District Court that the attorney general’s consumer protection division is “attempting to make an end run around the Texas Rules of Civil Procedure” in its demands for documents. Such efforts “ultimately impose an undue burden” on the company and its investors, the petition says, adding that many of the documents are confidential and some are protected by attorney-client privilege.
The petition also says that the attorney general’s vague, overly broad document demands were made to a foot doctor in Midland, Vincent Rascon, and to pharmacy company executive Bruce V. Gingrich, who lives in the Houston area. He is listed as a top executive at HealthScripts and LifeChek in Texas Secretary of State filings.
The American-Statesman first published an article on the pharmacy-doctor deals in November 2013. It said that HealthScripts, LifeChek and a third company, PharmaCo, were among those soliciting physician investors in Austin. Investigators’ demands for documents from all three companies are mentioned in the petition.
These demands came “on the heels of news articles” questioning the arrangements, the petition says. Follow-up articles were published last year, and the House Public Health Committee held a hearing to gather information.
It was not the first time state officials heard of Gingrich or his pharmacies.
In 2010, Greg Abbott — who was Texas attorney general before being elected governor in November — settled a case involving LifeChek and another Gingrich company, Medical Discount Pharmacy, accused of improperly buying and distributing misbranded prescription drugs. Under the agreement, Medical Discount Pharmacy had to destroy hundreds of thousands of dollars worth of drugs and pay $84,000 in penalties and fees.
Rascon was disciplined 10 years ago by the Texas State Board of Podiatric Medical Examiners for incorrectly advertising himself as a fellow of the American College of Foot and Ankle Surgeons. He was required to correct the information and pay a $500 fine.
Neither Rascon nor Gingrich could be reached for comment Monday.
Schwertner’s bill was assigned Monday to the Senate Health and Human Services Committee, which he chairs. “Entities and industries trying to skirt … federal and state anti-kickback laws should be held to account,” he said.
Gay Dodson, executive director of the state pharmacy board, told lawmakers last year that her agency was stymied in its ability to investigate such pharmacies because of the law barring access to financial documents. In 2013, her agency issued a warning but no punishment to Gingrich after it reviewed a complaint about a possible kickback scheme.
“If we’re going to be able to do anything, we have to have access to the financial information,” Dodson said Monday. “We certainly are looking forward to getting some legislation that will help us investigate this.”
Audra Conwell, executive director of the Alliance of Independent Pharmacists of Texas, which counts compounding pharmacies among its members, said the alliance also supports Schwertner’s bill.
“We encourage that transparency … especially for the patient to know if a doctor has an interest in a pharmacy they are referring them to,” Conwell said. “We do have concern about these relationships. We not believe that is in the best interest of the patient.”
A spokeswoman for the attorney general’s office declined to comment. “We don’t comment on active litigation nor do we discuss investigations,” said Lauri Saathoff.
A lawyer for HealthScripts also declined to comment on the petition Monday. “We have no comment on pending litigation,” said Lorinda Holloway with Husch Blackwell in Austin.