DOJ charges group for generating bogus scripts and cheating government and private insurers

Ned MilenkovichIn September 2016, the U.S. Department of Justice charged 16 individuals in Florida federal court as part of an elaborate fraud scheme that allegedly used call centers and kickbacks to generate bogus prescriptions and bilk government and private insurers for $175 million. 

The charges include conspiracy to commit racketeering, launder money, and commit wire fraud. A criminal information described a breathtaking enterprise that allegedly operated from 2013 to 2015 and controlled numerous stops on the supply chain, including selection of ingredients for compounded drugs, solicitation of patients for unnecessary prescriptions, and funneling of kickbacks to “corrupt physicians.”

The operation’s alleged ringleader was Boca Raton resident Clifford Carroll, who faces up to 23 years in prison. Potential sentences for the other individuals range from five to 15 years.

According to the information, participants secretly purchased failing pharmacies that functioned as fronts for the illicit conduct and held licenses that made the operation possible. Drugs produced by the pharmacies were selected based on the amount of money reimbursed by military program TriCare and private insurers, which did not name any of the private insurance plans.

The medications were usually for skin conditions. Several examples of expensive products were provided, including a $31,000 tube of compounded cream. More than $175 million was eventually paid out, prosecutors allege.

A key component of the scheme was the use of call centers where staffers obtained information on potential patients, including military veterans, who had previously been prescribed medications. The staffers contacted patients and read from deceptive prepared remarks in an effort to convince the patients to authorize the faxing of prescriptions to doctor’s offices.

 “Corrupt co-conspirator physicians issued prescriptions for compounded medications to patients regardless of medical necessity and in exchange for illegal compensation, “such as cash, gift cards, and free consulting,” according to the information, which also described small payments to patients.

Payments were often disguised as reimbursement for “data collection” and were distributed through a sham software company called ClinicalCorp LLC, prosecutors said. Other companies that participated were NuMedCare LLC, which purportedly supplied management services to pharmacies, and two failing compounders: Rx of Boca LLC and Dallas-based Texas Compounding Pharmacy.

NuMed eventually was advised by in-house counsel that its conduct was illegal, and the counsel “continued to assist. . .  in the operation of NuMed by providing legal advice and the preparation of legal documents to conceal and disguise the criminal activity.”
           

[The U.S. is represented by Wifredo A. Ferrer, Paul F. Schwartz and Jeffrey Kaplan of the DOJ. Counsel information for the defendants was not immediately available. The case is U.S. v. Carroll et al., case number 0:16-cr-60227, in the U.S. District Court for the Southern District of Florida.]

Ned Milenkovich is co-chair of the Health Law practice at Much Sehlist PC and vice chair of the Illinois State Board of Pharmacy. Contact him at 312-521-2482 or at nmlienkovich@muchshelist.com.