Special Workers' Compensation Alert - Pennsylvania

Workers’ Compensation Fraud Case Against Pharmacies & Physicians Dismissed By Court

by Francis X. Wickersham, Esq.

On September 13th, a Philadelphia County Court granted a motion to dismiss a lawsuit filed by Liberty Mutual against multiple pharmacies and doctors (Liberty Mutual Group, Inc. et.al. v. 700 Pharmacy, LLC, et. al.), alleging workers’ compensation fraud. In the complaint, Liberty Mutual claimed the defendants created a fraudulent scheme that allowed them to bypass workers’ compensation law, resulting in Liberty Mutual paying thousands of dollars to the defendants for unwarranted compounding pain cream prescriptions written for patients who suffered a work injury or an automobile accident injury. According to the complaint, the scheme worked as follows:

  • Formation of a pharmacy and recruitment of physicians to invest in the pharmacy;
  • Providing physician owners of the pharmacies with pre-printed prescription pads and Letters of Medical Necessity (LMN) for compounding pain medication;
  • Electronic transmittal of prescriptions for pain creams sent to pharmacies in which the physicians had an ownership interest (with billing for one tube of pain cream between $5,000 and $8,000); and
  • Payment of dividends to physicians based on their percentage ownership interest.


The court found that the pre-printed prescription forms and LMNs were not evidence of a material misrepresentation regarding the compound pain prescriptions, nor was the prescription of the compound pain cream itself, since it met FDA requirements for a compound drug. The court further rejected Liberty Mutual’s argument that the ownership structure provided a means for the physicians to be paid kickbacks, in the form of dividends, for the prescriptions they wrote. According to the court, there was no evidence showing that dividend amounts were based on the number of prescriptions a physician owner wrote for pain creams. The court held that owners were paid dividends based on pharmacy profits, which included compound drugs, as well as pills and other medications. Additionally, the court concluded that evidence of illegal self-referrals was lacking, since the record showed that a physician owner would disclose his or her financial interest in a pharmacy to a patient prior to referring that patient to the pharmacy. Finally, the court found that a claim made for unjust enrichment failed as a matter of law, since dividends paid arose from the defendants’ ownership interest in the pharmacies. The court also said that the pharmacies were not unjustly enriched either, because they were paid pursuant to the Workers’ Compensation and Motor Vehicle Financial Responsibility Law fee schedules.

The court’s order granting the defendants’ motion to dismiss serves as final judgement against Liberty Mutual and brings their workers’ compensation fraud lawsuit to an end.


This Special Law Alert is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We would be pleased to provide such legal assistance as you require on these and other subjects when called upon. ATTORNEY ADVERTISING pursuant to New York RPC 7.1 Copyright © 2019 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. No part of this publication may be reprinted without the express written permission of our firm. For reprints or inquiries, or if you wish to be removed from this mailing list, contact tamontemuro@mdwcg.com.