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Pharmacy Law and Dangers to Small Pharmacies



Our pharmacy defense lawyers work with the California State Board of Pharmacy to negotiate and resolve pharmacist complaints for relatively minor issues such as record keeping, storage and staffing.  More serious issues involving controlled substances (e.g. ephedrine, opioids) receive expert review and top legal representation.   One of the current hot button issues in pharmacy license law is discussed below.


Pain creams prescribed by physicians and fulfilled by third party pharmacies – the focus of major fraud investigations.

Skin remedies with a mix of barely tested ingredients – the focus of major fraud investigations.

Pharmacist license defense dovetails with physician defense as often the compounding pharmacy and the prescribing physicians are targeted.

Physicians are being prosecuted for dealings with compounding pharmacies. Consider the recent Orange County prosecution of  Tanya Moreland King and Christopher King, who owned the medical-billing and medical-management companies Monarch Medical Group, King Medical Management and One Source Laboratories.  The OCDA claimed that they billed for non-FDA approved creams and other products.

Doctors had agreements where the King’s would pay the doctors each time they prescribed a  cream or medication. The doctors were accused of hiding kickbacks by falsely labeling the payment kickbacks as “marketing expenses.”

Here’s how it works.

Take a $ 10 tube of a high quality topical antibiotic and mix it with your dog’s heartworm medicine and like magic you have a creme that is not available from a pharmaceutical company. The ingredients individually are indicated (although not FDA approved) for the treatment of certain skin conditions. The cost is low, perhaps $ 20 per month and if it works, that is bargain. Imagine that instead of buying the ingredients separately, they were custom mixed in a creme so that you don’t need to use two separate tubes but instead it is “all in one”.

That is the job of a compounding pharmacy and that function is both legal and ethical.

What if your doctor sells you the tube for $ 100 and bills your insurance company ? What if your doctor then gets $ 50 per tube profit making the sale ?  What if your doctor fully discloses this profit to you and to the insurance company?  But ask this question, even with disclosure is the prescription itself – the choice of treatment, truly the best for you?

There are many other issues to think about. First, drugs from a compound pharmacy may be individually FDA approved (or not) but their combination and the claims of effectiveness are usually not extensively tested through a rigorous FDA approval process. Of course neither are many over the counter remedies so this alone does not mean there is anything wrong. However, you have to trust the pharmacy to maintain rigorous standards of cleanliness and proper handling and mixing. This is something that even large pharma companies can fail with and smaller, compounding pharmacies have also at times provided tainted products. In 2017 pharmacist Barry Cadden, co-founder of the defunct New England Compounding Center, received a nine year prison sentence after 76 people died from meningitis after receiving contaminated injections of medical steroids prepared by his pharmacy.

A pharmacy license defense or physician defense attorney knows one reality.  If two are prosecuted, one is likely to point the finger at the other.  This can lead to an unfair result as the “big fish” gets away by cooperating with law enforcement and the “little fish” get caught and eaten.  Our California Pharmacy lawyers and Medical Defense Lawyers can also work together in the instance where a “stick together, we are both honest” defense is being pursued.

It is the job of the State Pharmacy Board to ensure that the compounding pharmacy that you use is clean and professional. The California State Pharmacy Board (California State Board of Pharmacy)  has an website that includes current and past accusations against Pharmacies.  (However it is a bit cumbersome as you must find a name in their accusation page and then look up the profile.  The short version is that compounding, opioid issues, bad storage and bad record keeping are key pharmacy license issues.

You can view that here  (July 2018 Accusations against Pharmacies filed by the Board) The Board has to ensure that a pharmacy complies with Section 503A of the Food Drug & Cosmetic Act and the Pharmacy Board’s own rules and regulations.

The scenario of the doctor prescribing a compounded drug and profiting on the sale invokes several potential criminal acts. The Anti Kickback Statute (AKS) prohibits a pharmaceutical company from providing anything value in exchange for an MD writing a prescription. Many big pharma companies publish specific rules about this.

Here as an example is what the Bayer company has on their website:


Bayer HealthCare LLC (“Bayer”) shall not offer or pay to any person “remuneration” or anything of value intended to induce, influence, encourage or reward that person’s order, referral, use, prescription or recommendation of a Bayer product. Where reasonably possible and practical, Bayer will attempt to structure arrangements with potential sources of sales or referrals in a manner that complies with an applicable regulatory “safe harbors.”

Bayer policy prohibits employees from offering anything of value – (for example, fee-for-service agreements, data purchases, educational grants, clinical research support, charitable contributions, business meals or educational items) – to a healthcare professional or other person (1) to encourage such person to prescribe, purchase, order, refer, use or recommend Bayer products, or (2) as a price term or in lieu of price discounts. Accordingly, Bayer has established the following policies and procedures consistent with the Anti-Kickback Statute, as well as its regulatory safe harbors, governmental guidance documents, and voluntary industry standards, such as the PhRMA Code on Interactions with Healthcare Professionals and the AdvaMed Code of Ethics on Interactions with Healthcare Professionals.

Now in the example in this article, the compounding pharmacy will say that it has no control over what the physician charges for the drug and that it simply provides a tube at $ 50 to the MD. The markup and profit disclosures are the responsibility of the doctor.

This is often a defense used in compounding pharmacy cases where criminal charges have been filed. However, many compounding pharmacies (and other pharmacies) will establish a relationship with the patient and mail the drugs on a regular, subscription basis. The pharmacy then sends checks to the MD for each tube sold. In that instance it is difficult for the pharmacy to claim that it is not kicking back money to the MD.

31 U.S.C. § 3729(a) is the False Claims Act and there are civil reimbursement lawsuits available under that statute

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