A number of Philadelphia-area pain-management doctors, pharmacists, and related entities have been sued for prescribing $4.7 million in allegedly fraudulent pain creams — some costing nearly $8,000 per tube.

Liberty Mutual Insurance filed the lawsuit Sept. 14 in Philadelphia Common Pleas Court, claiming that 18 doctors have been sending workers' compensation patients to pharmacies in which the doctors have a financial interest. The pharmacies would then bill employers' insurance carriers for "vast quantities" of compounded pain creams at inflated prices, the suit says.

The suit alleges the doctors and pharmacists formed "illegal, collusive relationships" that exploited weaknesses in Pennsylvania's workers' comp system. It contends they created and prescribed compounded creams that are not included in the system's fee schedule, leading to "highly inflated" bills of $5,000 to $8,000 per tube of cream.

Liberty Mutual also alleges that compounded creams were not tailored to individual patients, but rather "manufactured in batches," in violation of Food and Drug Administration regulations. Many medical experts say there is little evidence that such creams are safe or effective.

Dr. Rishin Patel, of Allentown, was the top prescribing physician in the lawsuit, writing $506,163 worth of prescriptions for compounded pain cream that were filled at 700 Pharmacy then billed to Liberty Mutual, according to the complaint. One prescription claim from May 19, 2014, came to $14,447, of which Liberty paid $12,956.

Patel owns 12.25 percent of 700 Pharmacy, records show.

Liberty Mutual says that it has fought many of the bills but that the state's workers' comp insurance and automobile insurance coverage regulations "limit the ability to refuse coverage of compounded creams." An attorney for Liberty Mutual declined to comment on the lawsuit.

The suit names two other doctors who are co-owners of 700 Pharmacy who have sent prescriptions to the pharmacy: Miteswar Purewal ($312,966) and Shailen Jalali ($121, 657). Each of those doctors also owns 12.25 percent of the pharmacy, records show.

Of the eight pharmacies named in the suit, 700 Pharmacy's bills account for nearly one-third of the $4.7 million First Mutual is seeking to recover.

Patel, Purewal, and Jalali are founders of Insight Medical Partners, a Conshohocken consulting firm that operates area pharmacies. Principals of the company own portions of three of the pharmacies named as defendants: Empire Pharmacy, Omni Pharmacy, and Armour Pharmacy. Insight Medical Partners is not a defendant.

Why are some pain creams so expensive?

This Pennsylvania Department of Labor & Industry PowerPoint slide describes a hypothetical price escalation of a compounded medication. In the workers’ compensation system, payments are typically capped at 110 percent of the Average Wholesale Price (AWP).

Pa. Dept. of Labor
Pa. Dept. of Labor & Industry, Bureau of Workers Compensation

At least six of the 41 defendants are either part owners, managers, or, in one case, a former employee of Workers First, a pharmacy principally owned by three name partners at Pond Lehocky Stern Giordano, a major workers' comp law firm in the area.

Last week, the Inquirer and Daily News reported that Pond Lehocky has been referring clients to doctors, then asking the doctors to send the patients to Workers First, which has charged upward of $4,000 per tube of compounded pain cream. Workers First is not named as a defendant in the Liberty Mutual lawsuit, nor is Pond Lehocky or any of its lawyers.

Insight Medical Partners manages and owns a portion of Workers First.

Jeff Jubelirer, a spokesman for Insight as well as for Patel, Purewal, and Jalali, said it was premature to comment because attorneys were still reviewing the lawsuit.

In addition to Patel, Purewal, and Jalali, the defendants in the lawsuit include pharmacy consultant Phil Shin, pharmacist Stephen Katsarakes, and Dr. Gerald Dworkin.

Shin, of Villanova, is listed as the contact person on Workers First's state pharmacy board application.

Katsarakes, of Chalfont, is the former pharmacist at Workers First, according to pharmacy board records.

Dworkin, chairman of the department of physical medicine and rehabilitation at the Philadelphia College of Osteopathic Medicine, has testified in a deposition that he owns 3 percent of the pharmacy. Records show that Dworkin has sent patient scripts to Workers First.

Reached Thursday at his Bryn Mawr home, Dworkin said that physician-owned pharmacies are necessary to get medications quickly to his patients. He described the compounded creams as "extremely efficacious."

"Liberty Mutual needs to look at their actions in not supplying medically necessary treatment to injured workers," Dworkin said.

The defendants have not yet filed a response to the suit in Common Pleas Court.

Pond Lehocky declined to comment. Sam Pond, a founding partner of the law firm and co-owner of Workers First, released a statement Tuesday responding to the original Inquirer and Daily News story.

"We are proud of the alliance between attorneys and the medical community that works together to protect our clients from a very strong and determined opponent: the insurance industry," Pond wrote.

Staff writers Mark Fazlollah and Dylan Purcell contributed to this article.