Sixteen charged in $175M compounded pharmaceutical scam

Sixteen individuals are facing criminal charges for fraudulently billing insurers as much as $175 million for mass-produced medications sold to patients solicited through call centers and prescribed by physicians over the phone.

A dozen of the defendants hail from Florida, according to an announcement from the U.S. Attorney’s Office for the Southern District of Florida.  However, the defendants collaborated with physicians in Pennsylvania, as well as a compounding pharmacy in Texas.

Prosecutors allege that Clifford Carroll, CEO of NuMedCare LLC, oversaw a scheme in which compounded drugs were manufactured in mass quantities by two pharmacies and provided to patients regardless of medical necessity. The company claims that it provides managed services for pharmacies. According to court documents, the defendants frequently altered the formula of compound creams in order to maximize reimbursement and “test billed” insurance companies and Tricare before providing physicians with pre-filled prescription pads.

In order to prescribe the creams, the defendants allegedly disguised kickbacks to physicians as data collection payments to help facilitate the transition from ICD 9 to ICD 10 codes. Instead, the physicians were provided pre-printed prescription pads and instructed to conduct telephone consultation with patients that had been recruited through a call center. The call centers targeted veterans and patients that had previously purchased medical equipment and were covered under insurance plans that were known to reimburse compounded creams. The creams were often reimbursed for as much as $31,000 per tube.

In a separate case, investigators allege Jose Morales served as an “enforcer” for NuMedCare LLC, intimidating employees and business associates. According to an affidavit submitted by a Drug Enforcement Agency investigator, a cooperating witnessed offered recordings of Morales discussing his intent to destroy documents tied to the compounding conspiracy and his plan to confront and kill law enforcement officials if they attempted to arrest him. Morales pleaded not guilty to the charges.

Federal agents have been targeting fraud schemes involving compounded medications following an explosion of claims paid out by Tricare. Earlier this year, agents raided nine pharmacies in four different states, and earlier this month, eight Florida residents were arrested for billing $633 million for compounded drugs.