DOJ charges 78 in sweeping $2.5B healthcare fraud takedown

The Department of Justice (DOJ) uncorked healthcare fraud charges against 78 defendants whose alleged telemedicine, prescription drug, opioid distribution and clinical lab testing schemes billed for $2.5 billion.

The charges were unsealed in recent weeks and formally announced by the DOJ on Wednesday. The department worked with numerous federal agencies and state law enforcement agencies on the operation, which also included the seizure or restraint of millions of dollars in cash, automobiles and real estate, DOJ said.

“These enforcement actions, including against one of the largest healthcare fraud schemes ever prosecuted by the Justice Department, represent our intensified efforts to combat fraud and prosecute the individuals who profit from it,” Attorney General Merrick Garland said in a statement. “The Justice Department will find and bring to justice criminals who seek to defraud Americans and steal from taxpayer-funded programs.”

That large scheme involved the alleged submission of nearly $2 billion in false and fraudulent claims to Medicare and other government payers by current and former top executives of software and services company DMERx.

Those charged allegedly “conspired to generate and sell templated doctors’ orders for orthotic braces and pain creams in exchange for kickbacks and bribes,” DOJ said. To fuel the effort, the department said that the defendants orchestrated “a massive telemarketing operation” that targeted seniors and directed them to “offshore boiler-rooms staffed by individuals who ‘up-sold’ the elderly and disabled on unnecessary medical equipment and prescriptions.”

Key to the scheme was a software platform that was allegedly programmed to generate fake orders for telemedicine practitioners to sign and conceal that the beneficiary interactions had occurred remotely, DOJ said. The scheme continued even after the company was sold to new ownership, DOJ said, leading to charges against both former and current corporate leadership.

“Today’s announcement includes some of the largest and most complex cases that the department has prosecuted, and demonstrates the department’s commitment to seeking justice for those at all levels of the healthcare industry who put profits above patient care, from professionals in doctors’ offices to executives in corporate boardrooms,” Assistant Attorney General Kenneth A. Polite Jr., of the DOJ’s Criminal Division, said in a statement.

The DOJ’s announcement also outlined charges against 10 defendants related to more than $370 million in fraudulent claims for prescription drugs. Chief among those, the owner and corporate officer of a pharmaceutical wholesale distribution company were charged in an alleged $150 million scheme where the company purchased discounted HIV drugs that were illegally repurchased from patients and then resold them under falsified labeling.

The department said it also charged 24 physicians and other licensed medical professionals for more than $150 million in alleged false billings. Some of these involved alleged schemes where defendants illegally provided patients with unnecessary opioids as well as cash kickbacks to patient recruiters and beneficiaries in return for patient information used to bill Medicare.

“Patients trust federal healthcare programs to provide high-quality care. When bad actors steal from these programs, they hurt patients,” Christi A. Grimm, inspector general for the Department of Health and Human Services' Office of Inspector General, said in a statement.

Since March 2007, the DOJ’s Health Care Fraud Strike Force Program has charged more than 5,000 defendants who collectively billed federal and private health insurers for more than $24 billion.

These cases often comprise the majority of the False Claims Act settlements and judgments secured by federal law enforcement. During the government’s 2022 fiscal year, for instance, healthcare settlements represented over $1.7 billion of the $2.2 billion secured that year, which was down from fiscal 2021’s respective $5 billion and $5.6 billion.

Alongside telehealth, a key focus area for healthcare fraud takedowns in recent years has been schemes that took advantage of the COVID-19 pandemic. In April, 18 people including practicing medical doctors were charged in schemes that allegedly pulled in $490 million via false billings to federal insurance programs and theft from federally funded pandemic programs.