Fueled by a Mississippi compounding pharmacy's incentives for recruiting patients covered by Tricare, the U.S. military's health insurer, a Little Rock man concocted a get-rich-quick scheme that generated more than $10 million in prescriptions for compounded drugs in a year's time, the U.S. attorney's office said Thursday.
In a case that is ongoing, 43-year-old Brad Duke of Little Rock, a former medical sales representative, was identified as the ringleader of a central Arkansas-based conspiracy to defraud taxpayers.
Duke, who did business as Medsurg Inc., pleaded guilty Oct. 3 in a Little Rock federal courtroom to a charge of conspiring to violate the federal Anti-Kickback Statute. He admitted that from about December 2014 to about July 2015, he conspired with others to generate Tricare-covered prescriptions for compounded drugs so he and they could benefit financially.
On Wednesday, three more people pleaded guilty to the same charge, admitting to being part of the conspiracy. They are Charlotte Leija, 38, of Conway; Michael "Chance" Beeman, 48, of Maumelle; and Michael Sean Brady, 50, of Little Rock.
According to court documents, Leija was a medical assistant at the Little Rock clinic of an unnamed doctor, while Beeman was a medical sales representative in Maumelle and Brady was a medical sales representative in Little Rock.
They and three others who are identified only as medical sales representatives in Nashville, Tenn., Fort Smith and McKinney, Texas, are accused of conspiring to unlawfully enrich themselves through kickbacks and bribes in exchange for referring Tricare beneficiaries to receive prescriptions for compounded medications issued under the name of the unsuspecting physician for whom Leija worked.
Documents say that before November 2014, an unnamed salesman in Tennessee who owned a medical sales company formed an agreement with the Mississippi pharmacy to market its compounded medications as an independent contractor. His pay was a fixed percentage of the sales he generated for the pharmacy.
In November 2014, the documents say, the salesman "engaged" Duke to market compounded medications produced by the pharmacy, with Duke's compensation equaling 35 percent of the sales he generated for the pharmacy.
The salesman told Duke that marketing for the pharmacy "was lucrative because TRICARE paid vast sums (tens of thousands per month, per patient) for its products, [the pharmacy] issued monthly refills automatically, and [the pharmacy] did not enforce co-payment collection," allowing Tricare beneficiaries to continue to receive monthly shipments of prescriptions at no cost to themselves, according to the charging document. It said the salesman thus suggested that Duke focus on Tricare.
The following month, it said, Duke visited the medical clinic where Leija worked to promote the Mississippi pharmacy's products to the doctor and his staff, including Leija. It says he later approached Leija with a proposition: He would supply her with Tricare beneficiary information and she would use it to issue prescriptions for medications compounded by the Mississippi pharmacy under the doctor's name. Duke would pay her $1,000 each time the prescription went through, including $1,000 for every refill.
Duke also offered to pay Leija 10 percent of the amount Tricare reimbursed if she supplied the beneficiary for such a prescription herself, it says.
Duke then persuaded other medical sales representatives to recruit Tricare beneficiaries, for whom prescriptions were drawn up without the doctor's knowledge, using the doctor's pre-printed prescription pad, it says. It says Duke explained to his co-conspirators that Tricare covered up to three compounds per month per patient, and the most lucrative three-prescription combination included pain cream, scar cream and supplements.
The charging document says Duke told the "patient recruiters" that the doctor would sign the prescriptions for the Tricare beneficiaries without consulting them, even if they lived outside Arkansas, and in return the recruiters would receive 20 percent of whatever Tricare paid the Mississippi pharmacy.
The scheme grew after the patient recruiters engaged others, particularly those with military ties, to recruit still more Tricare beneficiaries, according to the document.
It says, "Regardless of who pre-filled a prescription, the process ended with Duke forwarding the pre-filled prescription to Medical Assistant 1 [Leija]. She then entered the amount of refills (typically 11, the maximum), added Doctor 1's signature, and then faxed the prescription to [the pharmacy] -- all unbeknownst to Doctor 1," who wasn't licensed to practice medicine outside Arkansas.
Every beneficiary recruited received a prescription under the doctor's name, it said.
It said that the pharmacy then submitted the prescription drug claims to Tricare for reimbursement, and upon receiving payment, paid the salesman in Tennessee, who in turn paid Duke his 35 percent share. Duke used the reports accompanying the payments to generate his own reports to determine how much he owed Leija and the patient recruiters, it says, noting that all were paid on a monthly basis.
According to court documents, Duke paid Leija $250,000 for issuing prescriptions under the doctor's name, and he paid more than $2 million to the five patient recruiters for referring more than 100 Tricare beneficiaries for whom Tricare paid more than $10 million.
More than 70 percent of the prescriptions issued under the name of the unidentified doctor were for Tricare beneficiaries outside Arkansas, according to the charging document. It notes, "They lived in 24 different states -- as far west as Chula Vista, Calif., and as far east as Foxborough, Mass."
A news release from U.S. Attorney Cody Hiland and officials with the FBI and the U.S. Department of Health and Human Services notes that investigations began across the country after Tricare paid nearly $2 billion for compound prescriptions in 2015 -- which was an 18-fold increase over previous years.
Under the terms of their plea agreements, Duke, Leija, Beeman and Brady each face up to five years in federal prison and together will forfeit nearly $1.9 million in illicit proceeds, according to the news release.
Metro on 10/19/2018