The owners of a former Fort Madison pharmacy have filed a lawsuit against the State of Iowa, claiming the state improperly withheld millions of dollars in Medicaid payments over allegations of fraud that never resulted in criminal or civil charges.
Rashid Pharmacy is seeking judicial review of a May 22nd decision by the Iowa Department of Health and Human Services, which oversees Iowa Medicaid Enterprises. The pharmacy, which operated in Fort Madison from 1963 until closing in March 2022, alleges Iowa Medicaid suspended all payments in June 2021 based on what it called a “credible allegation of fraud.”
According to the lawsuit, a federal search warrant executed at the pharmacy in 2022 focused on possible Medicare inventory discrepancies, not Medicaid fraud. The pharmacy claims investigators later determined the data had been misinterpreted because it failed to account for different drug packaging, creating the false appearance that medications had been dispensed without sufficient inventory.
The lawsuit also states that no criminal charges, civil claims, or documented patient complaints of fraud have been filed in the more than five years since the investigation began.
An administrative law judge previously acknowledged there was “precious little” evidence indicating Medicaid fraud but ruled the state had enough justification to continue suspending payments while the investigation remained unresolved.
Rashid Pharmacy alleges Iowa Medicaid Enterprises has withheld between $2 million and $3 million for medications that were lawfully dispensed to Medicaid patients. The pharmacy is asking the court to overturn the state’s decision to deny payment, arguing the ruling is unsupported by the evidence and irrational.
The State of Iowa has not yet filed a response to the lawsuit and does not comment on pending litigation.