Dirty Dozen

38073417 - pharmacist presenting medications on his hand in the pharmacy

The purpose of a medical research study is to use human participants to add to the body of medical knowledge. (Medical research studies are used to test the efficacy and safety of new interventions and often lead to medical breakthroughs and even cures.) Today, we look at a Dallas, Texas man who conspired with others to use a sham medical study to hide kickbacks paid to TRICARE beneficiaries and participating scammers. The massive healthcare fraud kickback scheme involving compounded medical creams cost the U.S. Military health insurance program more than $100 million over nearly two years.

This case is one of the first federal indictments in Texas connected with the government’s nationwide crackdown on compounding pharmacies and their associated kickback operations. Today’s fraudster is the first out of a dozen co-defendants to plead guilty in the TRICARE healthcare fraud scheme.

Two co-defendants orchestrated the scheme through their marketing company to increase the number of prescriptions for compounded medical creams. They paid illegal kickbacks to physicians who prescribed the unnecessary creams and to the TRICARE beneficiaries who did not need the prescriptions. (In total, four Texas-based compounding pharmacies were involved in the conspiracy.)

The Dallas man in today’s story served as president for one of the compounding pharmacies involved in the TRICARE scam and was responsible for running its daily operations. He admitted that his company received more than $50 million from TRICARE. (He and other pharmacy owners paid kickbacks to marketers to drum up business for their scam, using the funds illegally obtained from the military healthcare program.)

 The illegal kickbacks that were paid to TRICARE beneficiaries and to participating pharmacists were disguised as “grants” for participating in a medical study. The fraudsters lied to the beneficiaries when they explained the study was a TRICARE-approved “Patient Safety Initiative” study, which was supposed to evaluate the safety and efficacy of the prescribed compounded drugs. (So, hundreds of soldiers from Fort Hood in Killeen, Texas were fraudulently used as guinea pigs under the guise of medical advancement.)

 The co-defendants used the fake study to pull together a list of TRICARE beneficiaries with prescriptions, so they could figure out how much to pay them. (Obviously, the PSI Study was not approved by TRICARE. Also important to note is that the study was not overseen by a qualified physician, did not have a control group, and wasn’t designed to gather any useful scientific data related to the safety or efficacy of any drug.)

In addition to paying illegal kickbacks, the former president of the company admitted to filling prescriptions for patients who lived in states where the company was not licensed to do business. Instead of refusing to fill the prescriptions, he and other co-conspirators filled the orders, shipped the prescriptions to a local courier, marketing representative or relative, who then sent the prescriptions to the intended patient. (You would think that at some point, a relative would notice this practice was fishy, or perhaps they were paid off too.) This illegal practice enabled the company to grow the number of claims that could be submitted to TRICARE and other federal healthcare programs for payment.

The 38-year-old pharmacy president pleaded guilty to healthcare fraud. He faces up to 10 years in prison, a $250,000 fine, and restitution. (He and the owner of his company remain in custody pending sentencing because they were both deemed a flight risk.) The other 10 co-defendants will each have their day in court this year.

While this fraudster was one of many behind a bogus medical study, this legitimate research can shed some light on the common traits of a fraudster so you can recognize one when you see one. Congrats to the government for doing their research and intervening in the fraudulent efforts of this dirty dozen.

Today’s “Fraud of the Day” is based on an article entitled, “Dallas pharmacy exec admits to selling soldiers unneeded scripts in $50 million kickback fraud,” published by The Dallas Morning News on October 23, 2017.

A Dallas pharmacy executive has pleaded guilty to taking part in a massive kickback scheme that scammed the military’s insurance program out of more than $100 million, authorities said.

Andrew Joseph Baumiller, 38, of Dallas, pleaded guilty last week to conspiracy to commit health care fraud in connection with Trilogy Pharmacy. He faces up to 10 years in federal prison and a maximum fine of $250,000.

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Larry Benson, Senior Director of Strategic Alliances, LexisNexis Risk Solutions - Government

Larry Benson is responsible for developing strategic partnerships and solutions for the government vertical. His expertise focuses on how government programs are defrauded by criminal groups, and the approaches necessary to prevent them from succeeding.

Mr. Benson has 30 years of experience in sales and business development. Before joining LexisNexis® Risk Solutions, he spent 12 years founding and managing two software technology startups. During the 1990s he spent 10 years as a Regional Director helping to grow a New England-based technology company from 300 employees to 7,000. He started his career with Martin Marietta Aerospace working on laser guided weapons and day/night vision systems.

A sought-after speaker and accomplished writer, Mr. Benson is the principal author of “Fraud of the Day,” a website dedicated to educating government officials about how criminals are defrauding government programs. He has co-authored WTF? Where’s the Fraud? How to Unmask and Stop Identity Fraud’s Drain on Our Government, and Data Personified, How Fraud is Changing the Meaning of Identity.

Benson holds a Bachelor of Science in Physics from Albright College, and earned two graduate degrees – a Master of Business Administration from Florida Institute of Technology, and a Master of Science in Engineering from Lehigh University.