The Department of Justice U.S. Attorney’s Office District of New Jersey announced on March 15, 2019 that a federal grand jury has returned a 50-count indictment charging seven people with defrauding New Jersey state health benefits programs and other insurers out of more than $50 million by submitting fraudulent claims for medically unnecessary prescriptions.
The indictment charges that from July 2014 through April 2016, the conspirators recruited individuals in New Jersey to obtain very expensive and medically unnecessary compounded medications from a Louisiana pharmacy, identified in the indictment as the “Compounding Pharmacy.” The conspirators learned that certain compound medication prescriptions – including pain, scar, antifungal, and libido creams, as well as vitamin combinations – were reimbursed for thousands of dollars for a one-month supply.
The conspirators also learned that some New Jersey state and local government and education employees, including teachers, firefighters, municipal police officers, and state troopers, had insurance coverage for these particular compound medications, as did some other insurance plans. An entity referred to in the indictment as the “Pharmacy Benefits Administrator” provided pharmacy benefit management services for the State Health Benefits Program, which covers qualified state and local government employees, retirees, and eligible dependents, and the School Employees’ Health Benefits Program, which covers qualified local education employees, retirees, and eligible dependents. The Pharmacy Benefits Administrator would pay prescription drug claims and then bill the State of New Jersey for the amounts paid.
The Compounding Pharmacy allegedly agreed to pay Boardwalk Medical LLC, a company run by two of the conspirators, a percentage of the amount that the Compounding Pharmacy received for prescriptions obtained by Boardwalk Medical and its associates. The owners then had other conspirators recruit individuals who had coverage for compounded medications, and those conspirators found additional recruiters, including other conspirators, according to the indictment.
The indictment alleges that the conspirators recruited public employees covered by the Pharmacy Benefits Administrator to fraudulently obtain compounded medications from the Compounding Pharmacy without any evaluation or determination by a medical professional that the medications were medically necessary. The conspirators paid individuals to agree to receive prescription medications from the Compounding Pharmacy. The conspirators completed prescriptions for these individuals and selected the most expensive medications with the highest number of refills to obtain the highest possible insurance reimbursement. The conspirators would have prescriptions signed by a doctor who did not examine the patients. The prescriptions were faxed to the Compounding Pharmacy, which filled the prescriptions and billed the Pharmacy Benefits Administrator.
A doctor involved in the fraudulent scheme was allegedly paid for signing prescriptions. The doctor previously pleaded guilty to conspiracy to commit health care fraud and admitted taking payments and signing prescriptions for patients he did not see.
After the prescriptions were filled, the Compounding Pharmacy paid Boardwalk Medical a percentage of each prescription filled and paid by the Pharmacy Benefits Administrator. The Pharmacy Benefits Administrator allegedly paid Compounding Pharmacy over $50 million for compounded medications, and the Compounding Pharmacy paid two of the conspirators over $26 million for prescriptions obtained by the conspiracy. They then allegedly paid a portion of that amount to the other conspirators.
The health care fraud and wire fraud conspiracy count with which all defendants are charged carries a maximum potential penalty of 20 years in prison and a $250,000 fine, or twice the gain or loss from the offense. Each wire fraud count carries a maximum potential penalty of 20 years in prison and a $250,000 fine, or twice the gain or loss from the offense. Each health care fraud count carries a maximum penalty of 10 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. The money laundering conspiracy charge carries a maximum potential penalty of 10 years in prison and a $250,000 fine, or twice the value of the property involved in the transaction. Each charge of monetary transactions in criminally derived property worth more than $10,000 carries a maximum potential penalty of 10 years in prison and a $250,000 fine, or twice the value of the property involved in the transaction.
If you have information regarding false claims having been submitted to Medicare, Medicaid, TRICARE, other federal health care programs, or to other federal agencies/programs, and the information is not publically known and no actions have been taken by the government with regard to recovering the false claims, you should promptly consult with a False Claims Act attorney (also known as qui tam attorneys) in your U.S. state who may investigate the basis of your False Claims Act allegations and who may also assist you in bringing a qui tam lawsuit on behalf of the United States, if appropriate, for which you may be entitled to receive a portion of the recovery received by the U.S. government.
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