Passavant Memorial Homes to Pay $1.85 Million to Resolve Allegations of Improperly Dispensing Controlled Substances without a Prescription

United States Attorney William M. McSwain announced that Passavant Memorial Homes, and its subsidiaries Passavant Development Corporation, PDC Pharmacy Philadelphia, PDC Pharmacy Pittsburgh, and PDC Pharmacy Colorado, have agreed to pay the United States $1,850,000 to resolve allegations that Passavant dispensed controlled substances to patients without a valid prescription, in violation of the Controlled Substances Act, and, in some cases, submitted claims for the drugs to Medicare and Medicaid, in violation of the False Claims Act.  Passavant has implemented a policy change to require that patients have valid prescriptions before Passavant will dispense controlled substances.

Passavant’s pharmacies serve individuals with intellectual disabilities and other mental health needs through community residential programs, residential treatment facilities, intermediate care facilities, and other facilities.  In many cases, Passavant billed federal healthcare programs, including Medicare and Medicaid, for dispensing controlled substances to these individuals.

In 2015, the government launched an investigation into these practices after Passavant voluntarily disclosed to the United States that between January 1, 2009 and December 31, 2014, Passavant had dispensed controlled substances on Schedules III, IV, and V of the DEA Controlled Substances List to patients for a legitimate medical purpose, but without a valid prescription and with only a physician order.  In many cases, Passavant submitted claims to Medicare and Medicaid for dispensing these drugs without a prescription.  Passavant voluntarily disclosed that it had dispensed controlled substances without valid prescriptions and cooperated with the government’s investigation to identify the nature and scope of the problem.

“Providers like Passavant have a special responsibility to ensure that they are complying with the prescribing and billing regulations put in place to protect patients,” said U.S. Attorney McSwain.  “Passavant discovered problems internally and took swift, corrective action to bring its pharmacy and billing practices into compliance with the law.  Passavant’s proactive approach in this case sets a good example for other providers who might find themselves facing similar challenges.”

“Registrants such as Passavant are entrusted to dispense controlled substances in accordance with federal regulations, which are intended to safeguard the public and insure that these substances are used when medically appropriate,” said Jonathan A. Wilson, Special Agent in Charge of the Drug Enforcement Administration’s (DEA) Philadelphia Field Division.  “Our office commends Passavant for voluntarily disclosing this information and cooperating with DEA’s Diversion Control Division to rectify their prescribing practices.” 

“Ensuring patient safety and compliance with the law is a team effort,” said Maureen R. Dixon Special Agent in Charge, for the U.S. Department of Health and Human Services, Office of the Inspector General, Philadelphia Regional Office (HHS-OIG).  “HHS-OIG encourages health care providers to self-disclose issues and to work with HHS-OIG, USAO, and our federal partners to comply with laws and regulations.”

The case was handled by Assistant United States Attorneys Mark J. Sherer and Anthony D. Scicchitano of the Eastern District of Pennsylvania, Colin J. Callahan of the Western District of Pennsylvania, and Amanda Rocque of the District of Colorado.  It was investigated by the Diversion Control Division of the U.S. Drug Enforcement Administration, and the Office of Inspector General of the U.S. Department of Health and Human Services.