HATTIESBURG, MS (WDAM) - Jay Schaar, a former pharmaceutical sales representative, took the stand Tuesday in the federal trial against Albert Diaz, alleging the doctor knowingly prescribed medications to patients he didn't evaluate prior to. This was the second day of testimonies in the multi-million-dollar pharmacy fraud scheme at the William M. Colmer Federal Building with District Judge Keith Starrett presiding.
Schaar pleaded guilty on July 25, 2017 to conspiracy to commit health care fraud in a scheme to defraud TRICARE--- a health care program for uniformed service members and their families--- of more than $2.3 million. Schaar, a witness for the prosecution, testified that he met Diaz in 2008 as a sales rep. He went on to say that Randy Thomley, who also allegedly received funds from the scheme, asked him if he knew a doctor who would be willing to write prescriptions for individuals in Hattiesburg whose doctor was no longer prescribing them medicine.
"I asked if he would write the prescriptions for patients," said Schaar referring to Diaz adding that he agreed to do so with a couple stipulations including he needed to see patient's charts and visit with them.
According to the Department of Justice, Diaz took part in a scheme to defraud TRICARE by "prescribing medically unnecessary compounded medications, some of which included Ketamine, a controlled substance, to individuals without first examining the individuals for the purpose of having a Hattiesburg-based compounding pharmacy dispense the medically unnecessary compounded medications and to have TRICARE reimburse the compounding pharmacy for dispensing the medications." The federal indictment states that between Oct. 2014 and Dec. 2015, TRICARE reimbursed the pharmacy over $2.3 million for medications prescribed by Diaz. The indictment also says he falsified patient records by indicating that he examined individuals before prescribing them compounded medications.
The Food Drug and Administration describes compounding as a combination, mix or alteration of ingredients of a drug to make a medication to fit the needs of a specific patient.
Back on Oct. 18, 2017, Diaz, was charged for his role in the scheme. He is charged with 16 counts including one count of conspiracy to commit health care fraud and wire fraud, four counts of wire fraud, one count of conspiracy to distribute and dispense a controlled substance, four counts of distributing and dispensing of a controlled substance, one count of conspiracy to falsify records in a federal investigation and five counts of falsification of records in a federal investigation.
A jury made up of seven women and six men looked on as the defense called several witnesses while jotting down notes about each. Jason May, who pleaded guilty to conspiracy to commit health care fraud and money laundering in a scheme to defraud health care benefit programs including TRICARE of more than $190 million on July 25, 2017, opened up testimony for the prosecution.
May, who was the pharmacist at Hattiesburg's Advantage Pharmacy, said he received over $4 million in kickbacks with $400, 000 being one of the largest disbursements.
"The profit margin was very, very high," said May.
In Jan. 2016, the Federal Bureau of Investigation raided nine pharmacies in Mississippi including Advantage Pharmacy. Approximately $396, 000 in assets was seized from May following the raid.
After being notified of the audit by TRICARE, Schaar testified that Diaz--- a Biloxi-based OB/GYN--- made a trip to Hattiesburg to visit various families to finish filling out patient charts. In an effort to complete patient charts, Schaar told jurors that Thomley filled them out as well.
"He was upset," said Schaar describing Diaz's reaction to the audit. "He said he needed to see the charts and the patients."
Despite documents showing Diaz met with patients, Schaar stated that visits with families didn't happen until after they found out about the audit. A house call to the Clinton's was just one visit that was documented on Oct. 23, 2014. However, Schaar said Diaz didn't meet with them until Jan. 2016.
"I saw that meeting from a distance," said Schaar of Diaz's meeting with the Clinton's.
Samuel Clinton, Thomley's step-father, complained to his wife about the volume of medications they were receiving. He described getting what seemed like a "five or six-year supply" with three bottles at a time roughly around six times a month.
"I couldn't keep up with the uses to the supply," he said.
When Diaz finally made a trip to see the Clinton's, Samuel thought it was unusual.
"I thought he was covering his behind," he said.
Jonah McCleary was one of four witnesses who testified to receiving medications including creams without initially being seen by Diaz.
"I've never seen Diaz," said McCleary adding that he didn't have a need to visit an OB/GYN.
Nineteen-year-old McCleary and his dad, Damon McCleary, used to work with Thomley on Thomley's Christmas Tree Farm as farm hands. He went on to say that his father worked at Forrest General Hospital to recruit drug reps to help sell compounding creams.
"My dad got paid six percent of what reps sold," he said.
At one point, McCleary said his family received about two to three milk carton crates worth of compounded medications ranging from creams to pills to vitamins.
"We kept them in cabinets," said McCleary of how his family stored the excess meds.
Unlike the McCleary's, Albert James Hardwick Jr. was told by Thomley that he would get paid if he participated in a study to try the creams and pills. During his testimony, Albert said he signed up his wife, LeAnn Hardwick, and their daughter, Mica.
"I was approached with the concept of a survey to experiment with different creams and medications," Hardwick said. "I agreed to be a part of the study."
LeAnn Hardwick says she didn't know about the medications until they arrived on her doorstep and after receiving an influx of them she called to stop the order.
"They told me they couldn't stop them, (because) they were on an automatic shipment," said LeAnn Hardwick.
Over the course of three years starting in 2013 and ending in 2016, the McCleary's said they received over $35, 000 for the alleged study.
"We are absolutely sick to realize this," said LeAnn Hardwick. "I'm sick to be (in) any part of this."
If Diaz is convicted, he faces 305 years in jail and fines up to $7.5 million.
The trial resumes at 8:30 on Wednesday.