Pharmacy Claims Reversal Defense

Experienced Federal Defense Counsel for Pharmacies Facing Claim Reversals

With the recent changes to the Medicare regulations interpreting the federal Overpayment Statute, pharmacies face new challenges—and risks—regarding Medicare billing compliance. As a result, we expect to see an increase in claim reversals and related criminal investigations in the months and years ahead.

If your pharmacy is facing a federal investigation involving allegations of Medicare fraud, experienced legal representation is essential. At Oberheiden P.C., our lawyers have extensive experience on both sides of investigations and prosecutions targeting pharmacy billing fraud. Our team also includes former investigative agents with the Federal Bureau of Investigation (FBI) and U.S. Department of Health and Human Services Office of Inspector General (DHHS OIG). We can help you make informed and strategic decisions about your pharmacy’s defense, and we can work with federal agents and prosecutors on your behalf to target a favorable resolution that avoids unnecessary consequences.

Potential Issues in Pharmacy Claim Reversal Investigations

Federal investigations arising out of pharmacy claim reversals can involve a wide range of issues. When facing scrutiny from the FBI, DHHS OIG, or any other federal agency, understanding the specific focus of the investigation is critical for executing an effective defense. With this in mind, some examples of potential issues in pharmacy claim reversal investigations include:

Violations of the Overpayment Statute and Regulations

The Centers for Medicare and Medicaid Services (CMS) overhauled their regulations under the Overpayment Statute in 2024, and the new regulations took effect on January 1, 2025. While the new regulations provide some additional clarity for pharmacies that bill Medicare, they present some new challenges as well.

However, these new challenges are not an excuse for non-compliance. The new Overpayment Statute regulations are already in effect, and this means that pharmacies already need to be in compliance. Some of the key changes implemented by the new regulations include:

• Redefining “Identification” of an Overpayment – Previously, the regulations used a “reasonable diligence” standard to determine when an overpayment had been identified (“identification” triggers a 60-day window to report an overpayment and return the funds involved). Now, however, the regulations state that a pharmacy has identified an overpayment when it “knowingly receives or retains an overpayment.” The revised regulations further state that, “[t]he term ‘knowingly’ has the meaning set forth in the [civil enforcement provisions of the False Claims Act].” 
• Revised Deadline for Conducting an Internal Investigation – Under the prior version of the Overpayment Statute regulations, pharmacies had the opportunity to suspend the 60-day report-and-return deadline while conducting a “timely, good-faith investigation.” Under the revised regulations, pharmacies still have this opportunity, however the 60-day deadline can only be extended until the earlier of: (i) the conclusion of the investigation; or, (ii) 180 days after identification of the overpayment at issue. This means that even if a pharmacy’s internal investigation is still ongoing after 180 days, it must still report and return the overpayment (or potential overpayment) in question.

These issues, among others, can present substantial risks for independent pharmacies that do not have effective Overpayment Statute compliance programs in place. Failure to timely report and return overpayments can lead to allegations of criminal healthcare fraud or False Claims Act violations in many cases, and these allegations can expose pharmacies, pharmacy owners, pharmacists, and other individuals to substantial federal penalties.

Issues with Part D Sponsors

Issues with Part D sponsors can lead to unwanted federal scrutiny as well. One example of a potential issue that can lead to criminal scrutiny is claim rejection and reversal based on the alleged failure to submit “clean claims” for reimbursement.

Under CMS’s Part D sponsor regulations, Part D sponsors have a duty to timely pay clean claims they receive from network pharmacies. On the same token, they have a duty to reject claims that are not eligible for reimbursement (or that are not “clean”). To protect themselves, Part D sponsors will often err on the side of rejecting claims that do not clearly meet the requirements for a “clean claim” under the Medicare billing guidelines, potentially leaving pharmacies to rely on appeals to challenge the decision. For Part D sponsors, this will generally be more defensible than improperly disbursing taxpayer funds.

With this in mind, pharmacies can find themselves facing investigations triggered by Part D sponsors’ claim rejections and reversals. These investigations can also involve criminal allegations under the federal healthcare fraud statute and the False Claims Act (among other federal laws). When pharmacies have submitted “clean claims,” being able to affirmatively prove compliance can be essential to achieving a swift resolution where charges may be avoided entirely. When pharmacies haven’t submitted clean claims, determining what next steps are necessary requires a clear understanding of the specific circumstances and risks at hand.

Other Issues Related to Pharmacies’ Medicare Billings

Along with issues under the Overpayment Statute and issues related to Part D sponsors, a wide range of other issues related to pharmacies’ Medicare billings can lead to criminal investigations as well. Some examples of other issues that our pharmacy claim reversal defense lawyers are available to handle include:

• Noncompliance with the Controlled Substances Act (CSA) and Drug Supply Chain Security Act (DSCSA), including noncompliance with these statutes’ recordkeeping requirements for pharmacies.
• Noncompliance with the federal electronic prescription rules and regulations, including (but not limited to) compliance failures that result in pharmacies billing Medicare for medications that are not medically necessary (as defined by the Medicare billing regulations).
• Double-billing, submission of incorrect billing codes, and other common Medicare billing mistakes involving prescription drugs can trigger either civil or criminal penalties depending on the specific circumstances involved. 

Again, these are just examples. From offering and accepting illegal kickbacks to attempted drug diversion, numerous other issues can lead to pharmacy claim reversals and ensuing criminal investigations as well. If your pharmacy is dealing with claim reversals for any reason, our defense team can help, but it is important that you contact us as soon as possible.

Put our highly experienced team on your side

Dr. Nick Oberheiden

Founder

Attorney-at-Law

Lynette S. Byrd

Former DOJ Trial Attorney

Partner

Brian J. Kuester

Former U.S. Attorney

Hon. Kevin McCarthy

55th Speaker, U.S. House of Representatives (ret.)

Government Consultant

Mike Pompeo

Of Counsel

Former U.S. Secretary of State

John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara

Federal Appeals Attorney

Nicholas B. Johnson

Former Prosecutor

Roger Bach

Former Special Agent (DOJ)

Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen

Former Supervisory Special Agent (FBI)

FAQs: Criminal Investigations Involving Pharmacy Claim Reversals