According to the Defense Department, Tricare paid $1.75 billion for compounded drugs during its 2015 fiscal year—an astounding 18 times the amount paid in 2012. In 2015, compounded drugs represented 19% of Tricare’s $9.14 billion prescription drug budget, up from a miniscule 1.3% in 2012, according to DOD. United States Attorney Lee Bentley, of the Middle District of Florida, was quoted as saying, “I believe that the increase is due almost entirely to fraud.” Based on recent relevant False Claims Act settlements in the Middle District of Florida, Mr. Bentley likely has his finger on the pulse of this issue.

The identified fraud is a tried-and-true kickback scheme in which a healthcare prescriber is paid to prescribe a particular drug, regardless of patient need. Specifically, the compounding pharmacies, which make customized medicines by combining pharmaceutical ingredients, supposedly employ salespeople who pay prescribers to write prescriptions.

When it comes to kickbacks from compounding pharmacies, though, the payouts were allegedly funneled to prescribers who treated active and retired military members and their families. Tricare may be a target of such schemes, for it is well known that Tricare reimburses compound drugs at a higher rate than Medicare.

To date, there have only been a handful of False Claims Act settlements involving this alleged fraud scheme. However, this may be the tip of the proverbial fraud iceberg, given the tremendous uptick in compounding pharmacy claims hitting Tricare in the past three years. The government could use the assistance of whistleblowers in further exposing this fraud.

More information for whistleblowers is located at the Nolan Auerbach & White website.