Pharmacy Owner Pays $175,000 to Settle Claims Under the Controlled Substances Act and False Claims Act

SACRAMENTO, CA—United States Attorney Benjamin Wagner announced today that Ronald T. Lim, of Redding, has paid $175,000 to settle the government’s claims for civil statutory violations occurring at his three pharmacies: Lim’s Family Pharmacy, in Redding; Susanville Family Pharmacy, in Susanville; and Lim’s Shasta Lake Pharmacy, in Shasta Lake.

The Controlled Substances Act authorizes the Drug Enforcement Administration to regulate controlled substances to create a “closed” system of distribution that provides the legitimate drug industry with a unified approach to narcotic and dangerous drug control. The CSA establishes a classification system for all controlled substances, including prescription medications, based upon the potential for abuse, dependence profile, and medicinal value of the drugs. The CSA requires pharmacies to maintain certain records and inventories of these controlled substances to allow the DEA to protect the distribution system, and to prevent drug diversion and abuse. The government contends that Lim’s Family Pharmacy and Susanville Family Pharmacy violated the CSA by failing to maintain certain records and failing to accurately record certain transactions involving controlled substances. In addition, audits of the pharmacies’ inventories demonstrated shortages of several controlled substances, along with overages of several others.

The False Claims Act allows the United States to recover damages and penalties for fraud. The government contends that Ronald Lim submitted or caused to be submitted claims for payment to the Medicare Program and the California Medicaid Program, in violation of the False Claims by billing for certain drugs that were not dispensed to beneficiaries; instead of reimbursing the government, Lim kept the monies and returned the subject drugs to inventory.

In addition to the monetary payment, the settlement requires the three pharmacies to engage in certain record keeping and return to stock compliance measures, including: to maintain a real-time inventory using a perpetual inventory log for all Schedule II drugs; to run a daily computer inventory report for all Schedule II drugs dispensed on every business day to compare with the perpetual inventory log on each day; to reimburse all federal health care programs within three weeks for any and all drugs billed but ultimately not dispensed; and to designate a DEA Compliance Officer who will confirm reimbursement for drugs that are not dispensed and perform a quarterly audit of 50 individual drugs that were dispensed but not picked up to assure that the subject federal health care program was refunded for the drug.

This settlement is the product of a joint investigation by the DEA Sacramento Diversion Group, the Department of Health and Human Services (HHS) Office of Inspector General, and the Federal Bureau of Investigation. It was negotiated by Assistant United States Attorney Catherine Swann.