FBI comments on multi-million dollar compounding pharmacy fraud scheme

Christopher Freeze. Source: WDAM
Christopher Freeze. Source: WDAM
Published: Jul. 28, 2017 at 3:38 PM CDT|Updated: Feb. 26, 2018 at 11:26 AM CST
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Advantage Pharmacy. Source: WDAM
Advantage Pharmacy. Source: WDAM

HATTIESBURG, MS (WDAM) - Two people involved in a multi-million-dollar compounding pharmacy healthcare fraud scheme that involves hundreds of additional defendants, pleaded guilty to federal charges earlier this week.

According to the Department of Justice, there are 412 charged defendants in 41 federal districts across the country, targeting schemes which involved billing Medicare, Medicaid, and TRICARE for medically unnecessary prescription drugs and compounded medications that often were never even purchased and/or distributed to beneficiaries.

Special Agent in Charge of the Federal Bureau of Investigation for Mississippi Christopher Freeze said the majority of the investigation is centered around the Hub City.

"In the State of Mississippi, the FBI has ranked healthcare fraud in the top three of the criminal violations that we're addressing," said Freeze. "Number one public corruption, number two violent crime, number three health care fraud, and that's because it's so pervasive…a lot of that centers here in Hattiesburg."

Jason May and Gerald Jay Schaar both pleaded guilty Tuesday, July 25th, 2017 in federal court before U.S. District Judge Keith Starrett as a result of the largest ever national health care fraud enforcement action by the Medicare Fraud Strike Force.

"The people who are involved in committing this type of crime, the health care fraud crime are bilking private and public insurance companies out of hundreds of millions of dollars, money that directly is tied to the citizens of Mississippi's pocket book," said Freeze.

May, 40, of Lamar County, pleaded guilty to conspiracy to commit health care fraud and money laundering Tuesday afternoon in Hattiesburg in connection with his role as co-owner and pharmacist in charge of Advantage Pharmacy, which received approximately $192 million in reimbursements from TRICARE and other health care benefit programs for compound topical creams.

According to the Criminal Information, May selected formulas for the compound creams based on reimbursement rates as opposed to medical efficacy. In order to facilitate the scheme to defraud, May and Advantage Pharmacy either did not collect patient co-payments for the compound topical creams or paid co-payments on behalf of beneficiaries. As a co-owner of Advantage Pharmacy, May received a portion of the reimbursements associated with the fraudulently obtained compound creams and transferred certain of those proceeds from the fraud – in transactions greater than $10,000 - into a money market account held in his name.

Schaar, 47, of Biloxi, pleaded guilty to conspiracy to commit health care fraud for his role in a fraudulent scene in which he, acting as a marketer for a pharmacy located in Lamar County, solicited physicians and other medical professionals to write prescriptions without seeing patients for compound topical creams dispensed by the pharmacy.

According to the Criminal Information, Schaar, together with others, later falsified patient records to make it seem as though medical professionals had examined the patients who received prescriptions for the compound creams. In total, the pharmacy received $2.3 million in reimbursements for the prescriptions solicited by Schaar.

"We look at going after the health care fraud, those who are committing this crime, in a way that again goes back to how the FBI does business, go after the group of individuals who are involved in committing the crimes," said Freeze. "Put them all together, show that the conspiracy was pervasive and that there is no escape from hopefully the long arm of the law, even if you are in Hattiesburg Mississippi."

Freeze said that a large part of the investigation is being handled through the Jackson, Mississippi field office, but other states are included as well.

"Many of them will be spearheaded from the Jackson field office, from what we're doing here in Mississippi, they do stretch out in to multiple states," said Freeze. "Sometimes we just provide information to the other field offices so they can go out and start their own investigation, but we know that it's tied to a lot of the work that was going on here, defrauding individuals."

Currently no other criminal cases have been filed in federal court, only civil filings outside of the two defendants that pleaded guilty and are awaiting sentencing.

The two will remain free on a $25,000 personal security bond and are set to be sentenced on Oct. 17, 2017 at the William M. Colmer Federal Building & United States Courthouse in Hattiesburg.

"I've been in the bureau for over 20 years, and I've never seen healthcare fraud this pervasive," said Freeze.

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