Hayat Pharmacy will pay $2 million to settle a federal Medicare, Medicaid fraud lawsuit

Hayat Pharmacy has agreed to pay more than $2 million to end a federal lawsuit alleging it defrauded Medicare and Medicaid. 

The settlement follows a federal court case in which the U.S. Department of Justice argued that the pharmacy, which has 23 locations across Milwaukee, submitted more than 200 false claims to Medicare and Medicaid throughout 2019.

According to federal prosecutors, Hayat Pharmacy operated a two-part scheme: "dispense and submit claims for exorbitantly priced drugs that nobody needs and/or that nobody prescribed."

The company would submit fraudulent claims for two prescription medications: a multi-vitamin called Azesco and a cream used to treat skin infections, the government alleged in the suit.

Hayat pharmacists would submit the claims to federal and Wisconsin health care programs when no valid prescription existed and/or significantly inflate the prices of the medications to more than five times their average value in some cases, reaping thousands of dollars in profit, according to the suit. The company conducted the fraud across 23 separate limited liability corporations it created, the suit alleged. 

Hayat Pharmacy denies the allegations. The settlement is not an admission of guilt in the case. 

"As a family-owned business, our mission is and always will be helping under-served populations in our community obtain proper health care," the company said in a statement.

"We agreed to settle this dispute in order to put this matter behind us so it does not distract from that mission. We are eager to move forward and to continue serving our neighbors in the Milwaukee community.”

In addition to the money Hayat must pay, the company also agreed to conduct annual training on waste, fraud, abuse and compliance with rules concerning medication switches, according to the U.S. Attorney's Office. 

“Medicare and Medicaid only pay for prescription medications that are needed by patients, not prescriptions dispensed by pharmacies simply to increase their profits,” said United States Attorney Richard Frohling. “This settlement imposes a significant penalty on Hayat Pharmacy and will make the federal government whole for the pharmacy chain’s wrongdoing.”

The case was brought under the Federal Civil False Claims Act, a federal statute known as the "Lincoln Law" that aims to recoup money from fraudulent claims against the U.S. government. The law was enacted in 1863 in response to defense contractor fraud during the Civil War.

In recent years, many cases have come to court through through private citizen/government partnerships where whistleblowers initiate a case by reporting fraud. 

The claims against Hayat were brought by a former employee, Magdy Hussein, who noticed that the multivitamin and skin cream medications were being dispensed by the pharmacy in large volumes and at high prices and suspected fraud,  according to the lawsuit. For his part in bringing a case against company, Hussein will reap a portion of the settlement money which is scheduled to be paid by Hayat through 2024. 

"The courage of individual whistleblowers is what makes most of the government’s recovery under the False Claims Act possible. They act at great personal risk for the sake of patients and taxpayers," said Hussein's attorney, Nola Hitchcock Cross, in a statement. 

She said the case will serve as a significant deterrent to other fraudster pharmacies and emphasized the importance of training in the settlement to prevent abuses.  

"Mandatory and on-going compliance training is essential for all pharmacies to create a culture that corrects, not condones fraud," she said.

Hayat Pharmacy was founded in 2011 and is one of the largest minority-owned and operated businesses in the Milwaukee area. It serves 70,000 Medicare and Medicaid patients annually. 

Katelyn Ferral is an investigative reporter looking into reader tips for the Journal Sentinel. Email her at kferral@gannett.com.