3 Sentenced in Florida for $175 Million Drug Compounding Fraud Scheme

11 Indest-2008-8By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

On March 24, 2017, three participants were sentenced in Florida federal court, for a scheme that used call centers and kickbacks to generate fake prescriptions for compounding pharmacies. The scheme was able to scam the government and private insurers for $175 million.

U.S. District Judge Daniel T.K. Hurley, sentenced one of the defendants, Todd Stephens, to ten years. He sentenced Todd Hanson to eight years and one month. He sentenced Christopher Mucha to 30 months in prison. Each defendant also received three years of supervised release (probation) after they are released from prison.

Illegal Enterprise.

Stephens, Hanson and Mucha were among 16 defendants the federal government charged in September 2016. The U.S. Department of Justice (DOJ) described an extensive enterprise that operated from 2013 to 2015. According to the DOJ, the enterprise controlled numerous stops along the supply chain, including the selection of ingredients for compounded drugs, solicitation of patients for unnecessary prescriptions, and funneling of kickbacks to “corrupt physicians.”

To learn more about the defendants being charged, click here.

According to prosecutors, the participants purchased pharmacies that functioned as fronts for the illegal conduct and held licenses that made the operation possible. Specific drugs were chosen and produced by the pharmacies based on the amount of money reimbursed by the military health care program TriCare, as well as other private insurers. More than $175 million was eventually paid out in false claims, prosecutors alleged.

Key Component of the Scheme.

The defendants used call centers as a major part of the scheme to generate bogus prescriptions. The call center staff obtained information on potential patients, including military veterans, who had previously been prescribed medications. They then proceeded to contact the patients to convince them to authorize the faxing of the medically unnecessary prescriptions to doctors’ offices.

A group of “corrupt” physicians would then issue prescriptions for compounded medications for the patients regardless of the absence of medical necessity. It was alleged that this was done in exchange for illegal compensation to the doctors such as cash, gift cards and free consulting. The defendants disguised the illegal payments as reimbursement for “data collection.” These were allegedly distributed through a phony software company called ClinicalCorp LLC, prosecutors said.

To read the sentencing memorandum in full, click here.

To read about a similar health care fraud case involving TRICARE, click here to read one of my prior blogs.

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Hale, Nathan. “3 Sentenced In Fla. For $175M Health Care Fraud Scheme.” Law360. (March 24, 2017). Web.

McMahon, Paula. “Feds charge 16 in massive $175M prescription cream fraud based in South Florida.” Sun-Sentinel. (September 1, 2016). Web.

About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.

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