Health care fraud: DOJ charges 78 people with $2.5 billion in false billings

Federal and state law enforcement officials brought criminal charges against 78 people for their alleged participation in health care fraud and opioid abuse schemes that included over $2.5 billion in alleged fraud against the elderly, disabled, pregnant women and those with HIV, the Justice Department announced yesterday.

In total, 24 doctors, nurses and other medical professionals, as well as pharmaceutical wholesale distribution company executives and telemedicine businesses, were among those charged across a total of 16 states, the DOJ said.

The defendants allegedly defrauded programs entrusted for the care of the elderly and disabled, and, in some cases, used the proceeds of the schemes to purchase luxury items, including exotic automobiles, jewelry, and yachts. In connection with the enforcement action, the Department seized or restrained millions of dollars in cash, automobiles, and real estate.

“This nationwide enforcement action demonstrates that the Criminal Division is committed to fighting health care fraud and opioid abuse by prosecuting those who allegedly exploit patients and health care benefit programs for personal gain,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “Today’s announcement includes some of the largest and most complex cases that the Department has prosecuted.”

Telemedicine fraud

The arrests included charges against 11 defendants in connection with the submission of over $2 billion in fraudulent claims resulting from telemedicine schemes. In a case involving the alleged organizers of one of the largest health care fraud schemes ever prosecuted, an indictment in the Southern District of Florida alleges that the chief executive officer (CEO), former CEO, and Vice President of Business Development of DMERx, an online software platform, created and sold fake and fraudulent templates of doctors’ orders for orthotic braces and pain creams in exchange for kickbacks and bribes.

The conspiracy allegedly resulted in the submission of $1.9 billion in false and fraudulent claims to Medicare and other government insurers for orthotic braces, prescription skin creams, and other items that were medically unnecessary and ineligible for Medicare reimbursement.

Related: Unmasking the health care fraud epidemic: 3 steps to a revolution

As part of the alleged conspiracy, individuals in a massive telemarketing operation targeted the elderly and disabled with direct mail, television advertisements, and other forms of advertising to induce them to contact offshore boiler-rooms staffed by individuals who “up-sold” the elderly and disabled on unnecessary medical equipment and prescriptions.

According to the indictment, DMERx was actually a conduit for these telemarketers to coordinate the payment of illegal kickbacks and bribes to telemedicine companies to obtain doctors’ orders for Medicare beneficiaries. The defendants allegedly programmed the software platform to generate false and fraudulent orders for telemedicine practitioners to sign and obstruct Medicare investigations by concealing that the interactions with beneficiaries had occurred remotely using telemedicine. The program-generated orders falsified certifications that the telemedicine doctors had examined the beneficiaries in person, and falsified diagnostic testing that Medicare required for brace orders.

In another telemedicine fraud case, in the Eastern District of Washington, a licensed physician was charged for signing more than 2,800 fraudulent orders for orthotic braces, including for patients whose limbs had already been amputated. As alleged, the physician took less than 40 seconds to review and sign each order.

Pharmaceutical fraud

The arrests also included charges against 10 defendants in connection with the submission of over $370 million in fraudulent claims submitted in connection with prescription drugs.

In one case, the owner and corporate officer of Scripts Wholesale, a pharmaceutical wholesale distribution company, was charged for an alleged $150 million fraud scheme in which the company purchased illegally diverted prescription HIV medication, and then marketed and resold the medication by falsely representing that the company acquired it through legitimate channels. The defendant allegedly purchased the diverted medication at a substantial discount from individuals who obtained the drugs primarily through illegal “buyback” schemes in which they paid HIV patients cash for their expensive HIV medication and repackaged those pills for resale. To cover up their scheme, the defendant and others falsified labeling and product tracing documentation to make it appear legitimate.

Pharmacies purchased the misbranded medications, dispensed them to patients, and billed them to health care benefit programs, all while the defendants reaped substantial illegal profits.

In a related case, on June 15, an individual in the Southern District of Florida was sentenced to 15 years in prison for his role in this nationwide scheme. According to court documents, the defendant illegally acquired large quantities of prescription drugs from patients for whom the drugs had been prescribed but not yet consumed. The defendant and others then repackaged the drugs and sold them to wholesale companies. In some instances, the medication that the defendant sold contained the wrong medication, broken pills, and even pebbles, leading to complaints by pharmacies. The defendant used his share of the proceeds to purchase luxury goods, including a $280,000 Lamborghini, a $220,000 Mercedes, and three boats.

Opioid distribution and other types of health care fraud

The charges also targeted over $150 million in false billings submitted in connection with other types of health care fraud, including the illegal distribution of opioids and clinical laboratory testing fraud, as well as cases where health care companies, physicians, and other providers paid cash kickbacks to patient recruiters and beneficiaries in return for patient information, so that the providers could submit fraudulent bills for Medicare reimbursement.