The owner of two northwest Alabama pharmacies has agreed to plead guilty to obstructing a Medicare audit and to pay a $2.5 million penalty to the government.

According to information provided by the U.S. Department of Justice, Rodney Dalton Logan, 63, of Muscle Shoals was charged with one count of obstructing a 2012 federal audit of Medicare claims submitted by a pharmacy he owned. Logan, a registered pharmacist, owned Leighton Pharmacy Inc., which did business as Sheffield Pharmacy and Homecare in Sheffield, and Russellville Pharmacy in Russellville. At various times, according to the charge, Logan was the lead pharmacist at both Sheffield and Russellville. Prosecutors filed the charge by information in U.S. District Court, along with a plea agreement reached between Logan and the government.

U.S. Attorney Joyce White Vance, FBI Special Agent in Charge Roger C. Stanton, Health and Human Services Office of Inspector General Special Agent in Charge Derrick L. Jackson and FDA Office of Criminal Investigation Special Agent in Charge Robert J. West announced the charge and plea agreement today.

“This case revolves around the falsification of documents in an effort to defraud Medicare, which exists to provide health care services for the elderly,” Vance said. “My office and our law enforcement partners are committed to ensuring the integrity of government programs and to prosecuting those who would provide false information to criminally profit from those programs.”

“Fraud undermines the financial integrity of the Medicare system and combating health care fraud remains a top priority for the FBI,” Stanton said. “This should serve as a reminder to others that the FBI and its law enforcement partners will identify, investigate and present for prosecution those individuals involved in similar activities.”

“Obstructing a Medicare audit is something the OIG takes very seriously,” Jackson said. “Submitting documentation to Medicare to substantiate that tablets or capsules were utilized when, in fact, bulk pharmaceutical powders were actually used is straight-up fraud.”

The Sheffield and Russellville pharmacies operated as both compounding and retail pharmacies. A compounding pharmacy is one that prepares customized medications for individual patients, usually by mixing ingredients in order to create a prescription. The two pharmacies sold compounded prescriptions to patients in Alabama and other states.

According to the information and plea agreement, Logan obstructed a 2012 audit of the Sheffield pharmacy’s claims for Medicare reimbursement on compounded prescriptions as follows:

CVS/Caremark Inc. administered prescription drug claims for Medicare Part D and served as an auditor on Medicare’s behalf. Part D prohibited reimbursement to pharmacies for compounded medications made using bulk pharmaceutical powders. Russellville and Sheffield nonetheless sought Part D reimbursement after February 2009 for compounded medications, primarily topical pain creams, made from bulk powders. The pharmacies, however, used the billing code for the tablet or capsule form of the ingredient.

In response to the 2012 audit, Logan caused Sheffield to submit falsified and misleading documents stating that medications in tablet or capsule form were used as ingredients for the compounded prescriptions.

The maximum penalty for obstructing a federal audit is five years in prison and a fine of $250,000 or twice the amount improperly gained through the defendant’s conduct.

FBI, HHS-OIG and FDA-OCI investigated the case, which Assistant U.S. Attorney Chinelo Diké-Minor and Trial Attorney William Chang of the Justice Department’s Criminal Division Fraud Section are prosecuting.