HATTIESBURG, MS (WDAM) - Two people have been criminally charged in connection to a federal investigation that allegedly defrauded the federal government in hundreds of millions of dollars.
Jason May, of Lamar County, and Gerald Jay Schaar, of Biloxi were the first two to be criminally charged according to federal court records in the investigation.
The two have been charged according to a "Bill of Information" filed in federal court, meaning they have waived their right to an indictment, in an agreement of prosecution in court.
May, was charged on one count of conspiracy to defraud the U.S. Government, according to the federal court filings.
May, who was listed as the "pharmacist in charge" of Advantage Medical and Pharmacy, which was raided by multiple federal and state agencies in January 2016.
According to complaints filed from the government, federal agencies claim three Mississippi pharmacies, including multiple individuals and entities, defrauded more than $400 million from public and private health insurance providers.
"In total, the pharmacies in this case were paid more than $400 million in fraud proceeds, most of it over just two or three years," according to a complaint filed by the U.S. government.
May's "Bill of Information" lists 19 paragraphs of information/ allegations regarding his role at Advantage Pharmacy.
"Advantage Pharmacy was formed in 2008 and located in Lamar County, and was initially an open door, retail pharmacy. In or around 2013, Advantage Pharmacy entered into a contract with a local marketing company (Marketing Company 1) and shifted its primary business focus to the production of compounded medication."
"Beginning in or around Jan. 2012, and continuing through in or around Dec. 2015, in Lamar County, Jason May did knowingly and willfully, that is, with the intent to further the objects of the conspiracy, combine, conspire, confederate, and agree with co-conspirator 1, and other persons known and unknown to the U.S. Attorney, to commit offenses against the United States."
According to the filing, May, executed a scheme to defraud a health care benefit program affecting commerce, which is TRICARE, and other health care benefits programs.
The filing details that the purpose of the conspiracy, of May, co-conspirator 1, and their co-conspirators to unlawfully enrich themselves by submitting and causing the submission of false and fraudulent claims to TRICARE and other health care benefit programs. Concealing the submission of false and fraudulent claims to TRICARE and other health care benefit programs. Diverting proceeds of the fraud for personal use and benefit, and depositing, withdrawing, and transferring the proceeds of the fraud into and between bank accounts for personal use and benefit.
Gerald Jay Schaar:
Schaar was charged with one felony count of attempt and conspiracy according to the federal court filings.
According to the court filings, Schaar, marketed compound medications formulated and dispensed by Pharmacy 1, and reimbursed by TRICARE.
"It was a purpose of the conspiracy for the defendant and his co-conspirators to unlawfully enrich themselves by, among other things, submitting and causing the submission of false and fraudulent claims to TRICARE, submitting and causing the submission of claims to TRICARE based upon materially false and fraudulent pretenses, representations and promises, and concealing the submission of false and fraudulent claims to TRICARE."
The filing lists that just for "Pharmacy 1" TRICARE reimbursed approximately $2.3 million.
"Key" names listed in investigation:
The court filing lists four "key" names involved in the investigation: Wade Walters, Hope Thomley, both of Hattiesburg, Mitchell "Chad" Barrett of Clinton, and Thomas E. "Tommy" Spell, Jr., of Ridgeland.
"Barrett, Walters, Hope Thomley, and Spell were all the central architects of one of the comprehensive health care fraud, kickback, and money laundering scheme that threated the solvency of some health care benefit programs and operated between Jan. 2012 and Dec. 2015," according to the federal documents. "Others also participated in and benefited from the frauds."
Wade Walters: Walters is a resident of Hattiesburg, Mississippi. Walters founded and was a member of Prime Care Marketing, LLC ("Prime Care Marketing"). Walters was also one of the members of Total Care Marketing, LLC ("Total Care Marketing"), the exclusive marketer for Advantage Pharmacy. Walters became a member of Advantage Pharmacy in or about January 2013. Walters also controlled the ownership interest of his wife, Dorothy Walters, in Medworx.
Mitchell "Chad" Barrett ("Barrett") is a resident of Clinton, Mississippi. From approximately December 2012 until or about March 10, 2015, Barrett was a member of World Health. On or about March 10, 2015, World Health Industries split into two entities, World Health Industries (later AspireRx) and OpusRx, LLC. As part of this split, Barrett left World Health Industries and became a managing member of OpusRx.
Hope Thomley is a resident of Hattiesburg, Mississippi. Hope Thomley was a member, along with Walters, of Prime Care Marketing. Hope Thomley was also a member of Total Care Marketing, along with Walters.
Thomas E. "Tommy" Spell, Jr. ("Spell"), is a resident of Ridgeland, Mississippi. Spell is a pharmacist licensed by the state of Mississippi. Beginning in or about July 2014, Spell became a managing member of Medworx.
Overview of the scheme, according to Civil filings:
"Beginning in 2012, World Health, Advantage Pharmacy, and related pharmacies, and in 2014, Medworx and related pharmacies, (collectively "the pharmacies"), by and through their agents and representatives, conspired to commit health care fraud, mail fraud and wire fraud associated with the marketing and sale of compounded medications. Compounded medications are specialized medicines designed to meet unique needs of patients and because of their complexity, yield a high profit margin for the pharmacies that provide them," according to the federal documents.
The billing practices are said to be related to compounded medications and illegal kickbacks paid to marketers. The investigation alleges it was a "widespread scheme" to defraud the Defense Health Agency or (Tricare) and other federal health care programs including Medicare and Medicaid and other private companies.
"To maximize profits from the fraud scheme, the pharmacies created their own demand for compounded medications. The pharmacies illegally engaged a series of marketers to provide incentives to doctors to write prescriptions for compounded medications and divert patients to the pharmacies," according to the documents. "The pharmacies also used the marketers to identify complicit doctors willing to write prescriptions for compounded medications for patients whom they never saw and where there was no determination of medical need."
The pharmacies allegedly used the marketers to execute an illegal kickback scheme to compensate the participating doctors involved in the investigation.
"To conceal the kickback scheme and fraudulent billing for compounded medications, the pharmacies also engaged in other fraudulent billing practices, such as automatically refilling prescriptions despite patient requests to stop and structuring billing for prescriptions in smaller amounts multiples times to avoid price caps built into the insurer's claims adjudication system," according to the federal documents.
"The concept of using the fraudulent billing practices and marketers to support an illegal kickback scheme to enhance profits began at World Health with Barrett and the other principals there. World Health engaged, among others, Prime Care Marketing, which was owned and operated by Walters and Hope Thomley, to recruit doctors and beneficiaries so World Health could bill government and private insurers for compounded prescriptions. For their part in executing the fraud scheme, Walters and Hope Thomley, through Prime Care Marketing, were paid a kickback for each compounded prescription they referred to World Health.
Eager to increase their control over the process and the profitability of the scheme, Walters and Hope Thomley acquired an interest in Advantage Pharmacy, a pharmacy already operating in the Southern District of Mississippi. Walters and Hope Thomley maintained their positions at Prime Care Marketing, but also formed Total Care Marketing. Total Care Marketing was the exclusive marketer for Advantage Pharmacy and earned approximately 50% of the amount reimbursed every compounded prescription that was adjudicated."