Two doctors were the latest to plead guilty in connection with a $100M fraud scheme against TRICARE. On the eve of their retrial, the doctors admitted to wrongful use of a unique health identifier to write prescriptions and agreed to pay a total of $851,000 in restitution for their part in the massive scheme, which involved pharmaceutical marketers, pharmacies, and doctors, primarily based in Texas.
Background
Thirteen individuals were charged in the alleged fraud that occurred from 2014 to 2016 against TRICARE, the health care program for uniformed service members, retirees, and their families. Each defendant was charged with one count of conspiracy to commit health care fraud, a maximum penalty of 10 years in federal prison, and a $250,000 fine. Some defendants had additional charges. Seven of the thirteen pleaded guilty to lesser charges before a 2019 trial, during which the jury convicted pharmaceutical marketing executive John Paul Cooper, acquitted three defendants, and remained undecided for the two aforementioned doctors, Dr. Walter Simmons and William Elder-Quintana.
In July 2020, Cooper was sentenced to 20 years in federal prison after conviction for one count of conspiracy to commit health care fraud, one count of receipt of illegal kickbacks, and six counts of payment of illegal kickbacks.
Cooper was President and Co-owner of CMGRX (Compound Marketing Group RX), a Texas-based company that primarily marketed compounded pain and scar creams to military members and their families on behalf of various pharmacies.
According to evidence presented at trial, Cooper conspired with CMGRX CEO and Co-owner Richard Robert Cesario on an elaborate scheme in which they hired marketers to recruit more than 2,300 patients, many of whom were on active duty at the Fort Hood military base in Texas. The marketers incentivized the servicemembers and their family members to obtain and fill costly and unnecessary pain and scar cream prescriptions with their TRICARE benefits. The patients, unaware of the scheme, were given $250 per prescription and falsely told it was a grant for participation in a medical study, a complete fabrication. The kickbacks were funneled through the “Freedom from Pain Foundation,” a sham charity controlled by Cooper and Cesario.
Evidence also showed that CMGRX paid doctors to write prescriptions after only a brief telephone call with patients with whom they had no prior relationship. The doctors were then instructed to send the signed prescriptions back to CMGRX, who forwarded them to partner pharmacies. In exchange for those prescription referrals, the pharmacies, who billed TRICARE for the drugs, gave a percentage of the reimbursement to CMGRX.
From September 2014 through May 2015, CMGRX was responsible for more than $124M in billable claims to TRICARE, $70 million of which were paid, according to the U.S. Attorney’s Office for the Northern District of Texas.
Other parties involved
To date, Cooper has, by far, received the longest sentence of the defendants. His business partner, Cesario, plead guilty to conspiracy to commit health care fraud and receipt of illegal remuneration before trial and is expected to be sentenced in May 2021. CMGRX marketers Joe Straw and Luis Rios also pleaded guilty.
Owners and other personnel from four of CMGRX’s partner pharmacies were also charged in the scheme. While some were acquitted at trial, Jeff Fuller and Andrew Baumiller, owners of the Trilogy Pharmacy, and one of their employees, Liz Valdez, plead guilty before trial. Fuller has been sentenced to five years. Ravi Morisetty, owner of Alpha Pharmacy, also plead guilty and was sentenced to two years.
Doctor was a whistleblower
In May 2015, about 17 months before he was charged with helping to perpetrate the fraud, Dr. Simmons reported the scheme to the federal government as a whistleblower. He filed a civil whistleblower action under the False Claims Act’s qui tam provision, which allows civilians who come forward to report fraud to share in any proceeds that the government recovers from prosecuting the case.
It is rare for a whistleblower to be charged criminally after reporting fraud in a qui tam lawsuit. Erin Dooley, spokesperson for the U.S. Attorney’s Office in Dallas, told the Dallas Morning News that the criminal investigation began more than a month before Dr. Simmons filed his whistleblower lawsuit.
As part of his plea deal, Dr. Simmons agreed to removal from the civil whistleblower lawsuit and relinquish any right to a share of potential proceeds.
